Business maharajas


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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.
Penguin Books India (P) Ltd." II Community Centre, Panchsheel Park,

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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

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Aparna and Radhika my two little gurus
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
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
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

lakh/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 had better settle down in Antwerp," says Vijay. Thereby he altered the course of B. Vijay 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 license, 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 ministers, and 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 9 bn, 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, 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 counts is there 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 entrepreneur worth his red ledger and Excel spreadsheet wanted to know how Aditya Birla ran his operations. How could he pack in so much in such a short time? Could Birla's trade seci'cts be taught and replicated? Yet at the end of the day, his wife of thirty years wondered:' "He used to say "I do this for getting more power", but I don't think that was the case because he never made use of that power. So what good was ". Like Ambani and Bajaj, Aditya Birla was a green field man, preferring to build his own companies rather than buy what others had erected. Once they were up and running, he would guard them jealously, fending off marauders. Some of the attackers were his own cousins, which made the battles within the Birla clan even more exciting for those watching from the sidelines.
In terms of sheer drama, there's little to beat takeovers and buy-outs. That's why acquisition stories are couched in military terminology. Cloak-and-dagger secrecy is what makes Rama Prasad Goenka, India's

buy-out specialist, so interesting. Who's selling and at what price, who's buying and at what price? Much can go wrong in deals where political strings have to be pulled and mega bucks change hands, but Goenka usually gets what he wants without too many glitches. There were only a few ripples when he silently picked up Ceat, a tyre maker, and later CESC, a power generator and distributor. In contrast, reams of newsprint forced Dhirubhai Ambani to abort his bid for Larsen & Toubro.

The first company Goenka bought was the Calcutta-based Duncan Brothers. His father had managed to wrangle him a job in the prestigious managing agency firm as a covenanted assistant on the princely salary of Rs 350 per month, but within a week RP tendered his resignation in protest against the racism rampant in the Scottish firm. The Raj was at its pinnacle, it was RP's first job, and his father was furious. RP was forced to swallow his pride and return--which made the acquisition all the sweeter when it came through in 1963. A dozen buy outs later, Goenka entered the top twenty leagues but he would become a cover boy only in 1989 when he shot up the corporate ladder to fourth place from thirteenth.

One of Goenka's closest friends is Briju Babu, the tea baron. Once, when he was shopping in London, a bomb hurled Khaitan twenty yards from the doorway of Harrods. Nineteen people died. He survived. Brij

Mohan Khaitan survived also the riots of pre-Independence Calcutta when Mahatma Gandhi prayed nightly for peace in the has tis of a city described as a 'hell-hole'. He survived too the Naxalite movement, staying on in Calcutta when other Marwaris abandoned the city for New Delhi and Bombay. Khaitan is the only businessman in this book who employs a private army. It patrols his tea gardens day and night.

Bodyguards and guns are a way of life for this intensely private and

deeply religious man. He doesn't like them, but he doesn't have a

choice. How else will he deal with terrorist groups such as ULFA and

Bodo militants in Assam? After every murder, Khaitan has to keep high

not only his own morale but also that of those who depend on him. The

life of this tea maharaja provides an insight into a shadowy world far

removed from glossily printed profit and loss statements, the Calcutta

Stock Exchange and high profile tea auctions.

The world of diamonds is almost as shadowy and dangerous as that of the

tea gardens. Security cameras unblinkingly eye visitors to the offices

of Bharat and Vijay Shah, and armed guards swing their firearms

warningly in front of massive vaults housing millions of rupees worth

of glittering carbon. It's a far cry from the clever videos of

gorgeous women clad in little more than a necklace and earrings.

s / xv

Bharat and Vijay, both college drop-outs, started from scratch like

Dhirubhai Ambani, a fellow Gujarati. In ten years, the brothers built

a Rs 35bn international empire selling an Indian product which is

globally competitive. To get to where they are they had to break the

hold of a group of Hasidic Jews, identifiable in diamond markets by

their long flapping black overcoats, curly forelocks and wide-brimmed

dark wool hats. The tentacles of this trade used to stretch from De

Beers' legendary mines in South Africa and Australia to the auction

rooms of New York and Tel Aviv, Antwerp and London. The Shahs and

other Palanpuri Jains brought the business to Surat and Bombay, where

nimble diamond cutters cut and polish tiny brown stones, turning dross

into gold. How did they do it?

To make the Tata group globally competitive is one of the 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 since

he's been in the addle, Tara has come a long way. Under his

leadership, Telco and Tisco, the group's two biggest companies which

between them contribute over half the group's sales and profits, are

performing better than they have ever done before. The other

eighty-two companies are being spruced up and with every little

improvement, Tata brings the group closer to his goal of 'living in

today's world'.

Restructuring, in fact, is a recurring theme in all seven of this

book's chapters, reflecting the concern of these businessmen about the

future. The end of the Licence Raj with its corollary of greater

industrial opportunity, stiffer competition from domestic and

international rivals, the financial revolution, the lure of foreign

markets, the shaky promise of globalization, and various aspects of the

liberalization programme have generated considerable debate about the

direction of change and how Indian industry should 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


Business Maharajas doesn't limit itself to the top five or ten business

houses but profiles India's most fascinating tycoons. How were they

chosen? One guiding principle used was to look both into the past and

the future in order :o make a selection. They had to be men who

controlled business empires which were established in the twentieth

century and which will flourish in the twenty-first century. There's

no point picking shooting stars: yesterday's heroes shouldn't turn out

to be tomorrow's nonentities..

There are many superstars who are equally--if not more--interesting,

such as Vijay Mallya, the jet-setting liquor king, or Subhash Chandra

of Zee TV. There's a whole new crop of steel tycoons s ch as the

Ruias, the Mittals and the Jindals, besides a band of electronic

products magnates led by Venugopal Dhoot of Videocon, the Mirchandani

brothers of Onida and T.P.G. Nambiar of BPL. India is becoming a major

pharmaceutical player in world markets because of the efforts of men

like Bhai Mohan Singh of Ranbaxy. These men require a book to

themselves, a book which doesn't look both at the past and the future

as does this one.

Another guiding principle used in the selection was the concept of

territorial dominance. The profiled businessmen had to be leaders in

their chosen area of activity. B.M. Khaitan grows 65m kg of tea

annually, which translates into roughly

s / xvii

50 per cent of the Indian market and five per cent of global tea

production. According to De Beers, the South African diamond giant,

Bharat and Vijay Shah are the world's biggest diamantaires, annually

cutting, polishing and marketing several billion diamonds. Producing

over a million vehicles a year, Rahul Bajaj has built the world's

fourth largest two-wheeler company in western India. For a moment, in

history, R.P. Goenka controlled a massive 35 per cent of India's total

tyre production, though he lost this position and is now in the process

of carving out a place for himself in the power sector. Before his

tragic death at an early age, Aditya Birla had established himself as

the world's leading producer of viscose staple fibre and palm oil, the

third largest producer of insulators and the sixth largest of carbon

black. Within India, he was the largest producer of cement, rayon

filament yarn, flax and caustic soda. From his high-rise office in

Bombay, Dhirubhai Ambani dominates textiles and petrochemicals and

dreams of becoming India's Arco, while Ratan Tara heads India's biggest

business house and is the number one truck and private sector steel


And what about men like Kistian L. Chugh of ITC or Sushim M. Datta of

Unilever? Surely their lives and achievements are quite as

extraordinary as those of Ratan Tata or Aditya Birla? Don't these

outstanding chieftains rule huge corporate empires? Yes, but the third

guiding principle of this volume is a focus not on the ranks of

professional managers but on picking the best talent from family


After so many years of research on entrepreneurship, many ask whether I

have gleaned any ideas on why some people are winners and others are

losers. Can the elements of success be identified? I'm as puzzled

today as the day I started out fifteen years ago.

Of the seven profiles drawn in these pages, three are
s rags-to-riches stories (Ambani, Khaitan, And the two Shah brothers)

and three are about inheritors who have added to their legacies (Birla,

Bajaj, and Goenka). As a chairman who's been less than five years in

the hot seat, the jury's still out where Tata is concerned.

Only two hold postgraduate degrees: Bajaj is an MBA from the Harvard

Business School and Goenka is an MA from Calcutta University. Birla

studied at Boston's prestigious MIT and Tata graduated from the equally

famous Cornell, but the matriculate Ambani rolled up his sleeves and

got a job at seventeen, Vijay Shah dropped out of the London School of

Economics when his father died, and Khaitan completed his undergraduate

studies in an undistinguished morning college.

In building their jagirs, each has developed a unique set of tenets

which stems from his character, background and experiences. Inevitably

the corporate culture of the companies they head is grounded in these

tenets and reflects the personalities of their chiefs.

Take, for example, the measured growth of Grasim and Hindalco. In his

twenties, soon after taking over the reins of Indian Rayon, the young

Birla discovered that profitability improved dramatically if he ensured

that the small spinning mill ran to rated capacity and if he kept

adding new machinery in driblets. This strategy would become the

essence of Birla's corporate philosophy. "To keep on modernizing,

updating, debottlenecking, cost cutting, increasing production

(including capacities) by technological improvements, this is what we

enjoy. Running a plant day in and day out in the same manner gives one

no joy. The basic aim of technological advance should be to reduce the

cost of productionbnot technology for technology's sake," he once

explained. Today his factories are the cheapest per unit manufacturers

of their given products.
s xix

Ambani's corporate attitude is radically different from that of Birla.

Instead of creating a 'safe' capacity based on conservative demand

projections, Ambani planned huge factories which from the beginning

would be world-scale in capacity, cost and quality standards---ven if

local demand didn't match or hadn't yet reached such volumes. Thus,

for example, when he decided to manufacture polyester staple fibre in

1984, he didn't plan a medium size unit with the option to expand if

the company did well. On the contrary, when local PSF production was

37,000 tpa and another 10,000 tonnes was being imported, Reliance

applied for a licence of 45,000 tonnes, i.e. the total current

production or 4.5 times the current import, knowing full well that half

a dozen PSF licences, albeit smaller ones, had been awarded to other

industrialists. Dhirubhai once said, "I consider myself a pathfinder.

I have been excavating the jungle and making the road for others to

walk. I like to be the first in everything I do. Making money does

not excite me, though I have to make it for my shareholders. What

excites me is achievement. I could never do a normal job. In this

room, extraordinary things must happen." Birla was cut from quite a

different cloth.

If there's little in common between Ambani and Birla about the road to

success, the viewpoints of Bajaj and Tara are even more divergent.

Both like to be hands-on managers, well-informed about nitty-gritty

details of their companies, but the similarities end there. Their

attitude towards partners and strategic alliances symbolizes the

polarity between the two tall, sophisticated, American-educated heads

of giant engineering concerns. Bajaj is a loner but Tara has over half

a dozen joint ventures.

Defending his position, Bajaj once said, "I do not want in my own country to share power, authority taking and ownership with a foreigner. I have nothing against foreigners. That is not the point. But General motors do not have foreign equity. Nor does Sorry or IBM. The weak do." Tata, on the other hand, feels that there's nothing to be lost 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. Where 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

an individual path to his personal throne. As the profiles reveal, no

two routes resemble each other. Yet, tangled in the disparities, are a

few skeins which are common to each.

All eight follow two fundamental and simple management rules. Hire good people, treat them well and delegate responsibility. Secondly, when building factories, try to get them up and running as quickly as possible.

All eight share three common characteristics: they are highly focused, they possess a high level of energy, and they are obsessed. Totally committed to their ambitions, they work relentless hours. You could call them stubborn, even bullheaded, and once an idea has germinated in their mind, they won't give it up easily.

Indubitably, all eight are bright and talented. As such, one would

expect them to shine in virtually any economy. A suitable background

and appropriate training are clearly major 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

pinnacle unless these two outside forces come to his aid. As

far as these men are concerned, each at some point had a mentor who

helped kick him upstairs. And at the first turning point in each of

their careers, a piece of luck has come their way. In hindsight, often

the lucky event seems trifling, of no major significance, but had it

not been there, had they missed seeing opportunity and building on it,

none of them would have got the jump-start enabling them to draw ahead

of the crowd.

Without J.R.D. Tata's help, Ratan couldn't have become head of the Tara Group, and if his chief rival to the post, Russi Mody, had not given an unguarded interview to the Hindu, Mody and not Ratan might today be restructuring the Rs 240bn group. While strolling through Antwerp's Kring, had Monty Charles, a director of the London-based Diamond Trading Company, not spotted the potential in young Vijay Shah, the young Shah brothers might not today be the world's carat czars, and if the Shahs hadn't been offered diamond cutting factories in Surat at fire-sale prices in the '70s, they might not have been able to establish India's biggest privately held empire. In Calcutta, soon after the collapse of the British Raj, there were hundreds of budding tea planters but it was his friendship with Richard Magor which allowed Khaitan to become a burra sahib while other Marwari ban was remained small-time suppliers. And it was a fluke that a slight connection with John Guthrie led to Khaitan's acquisition of McLeod Russell, a purchase which overnight made him India's leading tea producer.

While writing this book, have I been subjective? Yes, I have. I don't see how any biography can be objective. Objectivity can, in fact, be counterproductive. For one, it's impossible to be totally detached, impartial and completely well-informed. Secondly, how much detail should be included? How big should a biography be before it becomes useful? is it thirty 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 still tempted to try.

Chapter 1

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