BUSINESS MAHARAJAS by Gita Piramal A freelance journalist with a Ph.D. in business history, GitaPiramal is the author of the best-selling Business Legends and the co-author of a pioneering work on business history, India's Industrialists. She has also contributed to the seminal volume Business and Politics in India-A Historical Perspective, edited by Dr. Dwijendra Tripathi and published by the Indian Institute of Management, Ahmedabad. She has been writing and commenting on the corporate sector for over eighteen years for leading Indian and international newspapers such as the UK's Financial Times and Economic Times. Piramal has been involved in the making of television programmes on Indian business for the BBC and for Plus Channel. She is married to industrialist Dilip G. Piramal and they have two daughters, Aparna and Radhika. Piramal divides her time between Mumbai and London. Ess MAHARAJAS PENGUIN BOOKS . Penguin Books India (P) Ltd." 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New Zealand First published in Viking by Penguin Books India (P) Ltd. 1996 First published by Penguin Books India (P) Ltd. 1997 Copyright Gita Pirama11996 All rights reserved Typeset in Times by Digital Technologies and Printing Solutions, New Delhi This book is sold subject to the condition that it shall not, by way of trade or otherwise. be lent, resold, hired out, or otherwise circulated without the publisher's prior written consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser and without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the above mentioned publisher of this book. For Aparna and Radhika my two little gurus Acknowledgements The maharajas for their time Dilip for his confidence in me Khozem Merchant, Nishit Kotecha, Subniv Babuta and Sailesh Kottary for their suggestions David Davidar for his encouragement Krishan Chopra for his constructive criticism Sindhu Sabale for my data bank my parents for their support Harsh Goenka for the title Contents Introduction ix Dhirubhai Ambani 1 Rahul Kumar Bajaj 85 Aditya Vikram Birla 135 Rama Prasad Goenka 211 Brij Mohan Khaitan 261 Bharat and Vijay Shah 313 Ratan Tata 363 Appendix 408 A Note on Sources 411 Select Bibliography 415 Index 462 Introduction Like the territorial rajas of the past, businessmen today rule vast empires, maintain a watchful eye inside and outside their boundaries, and protect their turf against invaders. The eight featured here are among India's most powerful men. Between them, they control sales of roughly Rs 550bn through over 500 companies and directly employ at least 650,000 people. Switch on a light, sip a cup of tea, have a shave, listen to music, drive to work, see a movie, snuggle into a pillow and you'll find yourself using their products through the day and into the night. They are a study in contrasts. Their businesses are distinct and varied. Some are highly educated, others are college drop-outs. Some are inheritors, others self-made. Some topped their chosen field in their thirties, others didn't approach the starting line until their fifties. Some dominate a particular business, others control more than one industry. What they do,. what they think, how they react impacts the entire economy, not just their customers, shareholders, employees, and bank managers. So how do they think? How do they conduct their businesses, arrive at complex investment decisions involving * Sums have mostly been expressed in millkm,lkm. The equivalents in of iakh/crore arc: ten lakhs: one million; ten million: one crc; 100 cro: of billion (1,000 million). x / Business Maharajas billions of rupees, or hire and fire the executives who manage their dominions? For me, the challenge has always been to find out why a company behaves the way it does, to understand the people and the compulsions behind business events. Inevitably, therefore, this is a book about business personalities. Management gurus love to talk about strategy and strategic decisions, but the. more I learn about business, the more I'm convinced that management decisions are based on the personal experiences, aims and vision of one person. Usually it's the head of a business house or the chairman of a company, but sometimes crucial decisions can be taken by unexpected people, as I found to my surprise while researching this book. I learnt, for example, that the Williamson Magor group's Rs 2.9bn decision to acquire Union Carbide India was not taken by blue-ribboned directors in its boardroom at 4 Mangoe Lane but in the tranquil drawing room of Shanti Khaitan. In 1994, every financial journal covered the sale, billed as the biggest takeover in Indian corporate history. Discussing the deal with the Khaitans, I found that their bid was based not so much on the advice of bean counters but on human factors. Worried that their son Deepak was spending too much time in their stable of three hundred horses and not enough in his garage of engineering companies, Shanti persuaded her husband, Brij Mohan, to make an offer for the famous battery maker. Deepak needed to settle down, and she was convinced that a big company like Union Carbide would be just the right ticket. At one time, Bhiki Shah was a far more worried mother than Shanti. In the late '70s,her younger son Vijay had established a tiny office and :a state-of-the-art factory at Saphadz, outside Tel Aviv. It did so well that in 1981 it received the Israeli government's highest export award and the Business Maharajas / xi next year, sales surged from $2m to $21m. Persuaded that the future for him lay in Israel, Vijay who speaks fluent Hebrew wanted to settle there but Bhiki protested. "My mother used to hear about bomb scares an dall those things on television. So we thought we hhd better settle down in Antwerp," says Vijay. Thereby he altered the course of B. Vija3'kumar & Company. I doubt if there's a more fascinating businessman than Dhirubhai Ambani. As a petrol station attendant, he used to dream of heading a huge company, maybe a global multinational like his first and only employer, Burmah Shelll All teenagers dream but how many have the ability and doggedness to turn fantasy into reality? Ambani founded a brash, upstart company which challenged the established business houses and their way of conducting business. He fought for and seized paper liscence, converting them into large textile mills and huge petrochemical complexes. Through the process of building Reliance Industries into a corporate behemoth, he rewrote management theories, fought with India's most fearsome newspaper, made friends with prime mitaisters, became the only businessman to be lampooned as often as Rajiv Gandhi. He nailed his nameplate onto an office door in 1966: From next to nothing, within two decades, sales had ballooned to Rs 9bn, making Reliance one of India's top ten companies, but Ambani wasn't satisfied. Sitting at his desk one day in 1984, he drew up a flow chart. If he built such-and-such factory, added a division here and a unit there, ten years down the road, Reliance could become a Rs 80bn company. Sceptics laughed when he announced his plans, but he proved them wrong. In 1995, sales nudged Rs 78bn. Some say Ambani is an acronym for ambition and money. It's probably true. In the '80s, Reliance grew at an astonishing 1,100 per cent, s with sales moving up from Rs 2bn to Rs 18.4bn, but it wasn't India's fastest growing company. Its expansion trailed behind Bajaj Auto's incredible growth rate of 1,852 per cent. Under Rahul Bajaj, the Pune-based scooter company's sales swelled from Rs 519m to Rs 18.5bn during the same decade. Both Reliance and Bajaj Auto are lean and owner-driven corporations, yet in terms of character, style, background every parameter that countsmthere couldn't be two more dissimilar chairmen than Dhirubhai Ambani and Rahul Bajaj. Ambani is a first generation entrepreneur, the Bajajs were rich long before Ambani was born. Ambani hustled in Bombay's teeming markets selling yarn and later fabrics. Bajaj didn't have to hustlemthere were long queues of people outside his airconditioned office patiently waiting to be allotted scooters. Ambani Cultivated political contacts, Bajaj was born into a family of patriots. Mahatma Gandhi referred to Rahul's grandfather as his fifth son; Rahul's father was a Congress member of Parliament. Yet the government raided Rahul Bajaj twice, stalled his repeated applications to build new factories and expand production, and wouldn't let him diversify. In 1987 he wanted to buy into Ashok Leyland, a truck maker, but to clinch the deal, he needed dollars. The government wouldn't exchange his rupees and he lost the opportunity. Despite the difficult conditions he worked under, Bajaj established Bajaj Auto as one of India's rare world-class organizations. The late Aditya Birla came from a family with as rich a political legacy as Rahul Bajaj. Birla had an appetite as voracious or morem if that's possible for empire-building as Dhirubhai Ambani. To feed it, Birla built 2.3 factories annually, on time and within budget, for thirty consecutive years. His corporate feats were so awesome that every [...]... and much to be gained by joining up with others "We're too concerned about our individual sovereignty whereas we should be looking at alliances and aggregation of companies as it so often happens abroad Wh.ere partnerships are based on human chemistry and there is a business case, then the two partners really begin to work as one." Each of the eight businessmen featured in Business Maharajas has hacked... rise to meet these challenges Virtually all eight businessmen profiled here have either already initiated or are about to initiate far-reaching changes in their organizations, and an attempt has been made to outline their strategies and to explain the rationale behind the individual responses Business Maharajas doesn't limit itself to the top five or ten business houses but profiles India's most fascinating... priorities Ratan Tata, the head of India's biggest business house, has set for himself The group is at a watershed in its 125-year-old history and Tata knows he has to take urgent steps to prevent the group from plummeting into terminal decline It's hard being a Tara The surname doesn't permit failure and the early years of his business career were distinguished more by losses than profits In the five years... pages or three hundred? Business Maharajas tries to capture snapshots of critical or illustrative episodes in the action-packed careers of eight extremely busy people It doesn't claim to be definitive or a Ph.D thesis G.D Birla, no mean writer himself, used to say that no Indian can write biography Be that as it may, there is so much that is of interest in the lives of these 'maharajas' that one was... panic, starting at 1.35 p.m." the price of blue-chips like Century and Tisco crashed by ten per cent They fell like dominoes on the back of Ambani's Reliance Textile Industries which fell from Rs 131 to Rs 121 as 350,000 of its shares hit the market The free fall had been engineered by a Calcutta-based bear synd|cate led by a Marwari industrialist, perhaps a member of the powerful Birla clan Using the... today, he believes Reliance can be a Rs 300bn company by the end of the century In 1995, the petrochemical, oil and textile manufacturer was India's biggest non-government company by almost every yardstick including sales, profits, net worth, and asset base Its market capitalization that year was Rs 96bn The previous year, it was the only Indian entrant in Business Week's list of the fifty largest companies... advantages, but high achievers are usually good at most tasks they take up, even those unrelated to business However, all eight partly owe their remarkable success to two external factors, two elements totally outside their control, and completely unconnected to their personal abilities However talented, a businessman may still not achieve his individual s / xxi pinnacle unless these two outside forces... short selling whe're a speculator believes that prices will fall, sells shares he doesn't have, and covers the sale by buying them at lower prices laterwthe bear syndicate sold 1.1 million Reliance shares worth over Rs 160m They planned to later pick up these same shares very cheaply and thereby make a tidy profit on the difference For the plan to succeed, it was important that there should be no big buyers... the Marwari In an obvious attempt to teach the bear syndicate ales son for battering at his share price, Ambani delivered the coup de grace on that fateful Friday by demanding delivery Meticulously knowledgeable about every aspect of his business, Ambani knew that the sellers couldn't possibly have the shares they had sold Caught with their pants down, the panic-stricken bears bid for every Reliance... facility represented a major departure from the "normal" Indian business practice of the time Instead of creating a "safe" capacity based on reasonable projection of demand, Ambani applied for world scale capacity that could meet the cost and quality standards on a global basis," says Sumantra Ghoshal, head of strategic planning at the London Business School and author of a major case study oft Reliance . BUSINESS MAHARAJAS by Gita Piramal A freelance journalist with a Ph.D. in business history, GitaPiramal is the author of the best-selling Business Legends and the co-author. published in Viking by Penguin Books India (P) Ltd. 1996 First published by Penguin Books India (P) Ltd. 1997 Copyright Gita Pirama11996 All rights reserved Typeset in Times by Digital Technologies. on human chemistry and there is a business case, then the two partners really begin to work as one." Each of the eight businessmen featured in Business Maharajas has hacked an individual