THE UNCANNY KNACK
Of this Marwari businessman led him to identify companies that lent for takeover, turning them around and expand rapidly. Each of his acquisitions lent strength to the RPG group. The base laid was so strong that even after the split of the RPG group between his two sons, Harsh and Sanjiv, revenues have been zooming and are today close to Rs 31,000 crore.
Facile acquisition of Spencer & Co
I remember the ease, the speed and the felicity with which RPG acquired the prestigious Spencer and Company. Remember, Spencer had a strong brand image and owned three rich hotel properties, the Connemara in Chennai, the West End in Bengaluru and Savoy in Ooty. For decades, Spencer has been a household name. With its heritage building, Spencer was a prestigious departmental store visited by high-end customers and had the only pharmacy that was open 24x7.
Alas, RPG was no respecter of sentiments. He razed the heritage structure, used every inch of the precious space at the heart of the metro and created in quick time, the sprawling Spencer Plaza. The traditional management gave way to professionals drawn from across India. Pradipto Mohapatra took charge as the Regional Director and helped expand the activities manifold. The management of the Connemara Hotel was continued with the Taj Group and has since undergone massive changes. In line with the boom in consumer spending, Spencer expanded into retailing, using every bit of its brand image.
I have often wondered why southern entrepreneurs could not identify the rich potential offered by Spencer that attracted Goenka. It cost him (the 1989) just a little over Rs 5 crore to acquire 73 per cent stake! After all, Spencer had large real estate, a steady and good business, besides brand image that should have been the envy of any marketer. I remember for years, quality (as also price!) used to be benchmarked with Spencer.
RPG forayed into cellular telecom services by setting up the RPG Cellular Limited. In the initial years of evolution, this company did make an impact but later was sold off.
To buy up all property in Mount Road...
Chennai did have business leaders who expanded through acquisitions. Simpson’s Anantharamakrishnan built his industrial empire initially through acquisitions: Simpsons through Addison and Co, Higginbothams, Associated Printers, George Oakes, T Stanes & Co, The Mail, Stanes Tyre and Rubber, et al. In his address at the farewell to the renowned editor of The Mail, Alan Taylor, Anantharamakrishnan said that his ambition was to buy up all the property in Mount Road that was put up for sale by the departing British. And he almost lived up to his promise. Acquiring Spencer could have helped the continuum.
Sivasailam, who took control of the Amalgamations group, had to cope with a huge estate duty demand and did not continue with his father’s spree of acquisitions. Much later his daughter Mallika Srinivasan, who heads Tractors and Farm Equipment Limited, acquired the tractor business of Eicher.
The Murugappa group of Chennai perhaps took on where Simpsons left. From the initial concentration on light engineering units that included Tube Investments and Carborundum Universal, this group expanded massively through acquisitions. EID-Parry is of course the most precious, which in turn paved the way for acquiring Coromandel Fertilizers. These lent the group great strengths in agri business including fertilizers and sugar. The company has such acquisitions in Russia too. For CUMI, the first major acquisition was Wendt India; later Cutfast Abrasives, a Chennai-based company, was acquired. CUMI also took over a ceramic unit at Aurangabad and a refractory unit at Jabalpur.
EID-Parry acquired sugar factories at Pugalur (Navbharat Industries), Pettavaithalai (Cauvery Sugars), Karnataka (Sadashiva Sugars) and Andhra Pradesh (GMR Industries). It also diversified into neutraceutical bio products and hytochemicals through acquisitions.
Tube Investments acquired an industrial and automotive chain unit in France. TI also acquired Press Metal Corporation from a Mumbai-based industrial group, which was later sold to Ashok Leyland. Steel Tubes of India at Indore was another major acquisition.
Tippler tycoon Vijay Mallya also attempted to expand his empire through acquisitions.These included Best & Crompton Engineering, Manali Petrochemicals (from SPIC Group), Reichhold Petrochemicals (from Amalgamations), Mangalore Chemicals and Fertilisers, Garware Paints, Deccan Airways to name a few. Disappointingly none of these flourished. In fact, the century old Best & Crompton professionally managed under the lead of M K Kumar did register handsome growth in the 1970s and 1980s but turned sick due to poor management.
Another notable acquisition of a prestigious Chennai-based company was South India Shipping Corporation. T S Narayanaswamy, inspired by Dr Jayanti Dharma Teja, persuaded J H Tarapore and C S Loganatha Mudaliar to set up this large shipping company. On the lines of Dharma Teja, Narayanaswamy used the slump in the shipping business and negotiated with the German shipyard in Bremen to sell six ships with no margin money and largely on guarantees by the Tamil Nadu government.
SISCO was a joint sector project with Tamil Nadu Industrial Investment Corporation as an equity partner. R Venkataraman, then Industry Minister later recounted to me about the sovereign guarantee furnished by the Tamil Nadu government for the interim period when TIIC amended its Memorandum and Articles of Association to include shipping as an industry to be eligible for extending equity support. RV mentioned that this was the first and only time such a sovereign guarantee was provided for a private corporate unit! With the demise of the original promoters, Loganatha Mudaliar, TSN and the Tarapore family not too keen to manage, SISCO was a sitting duck. Strangely, India Cements and Chemplast that forayed into shipping, did not acquire SISCO. Thus the first and major attempt to float a large shipping company in Tamil Nadu ended with Essar Shipping, Mumbai acquiring the promoters’ and TIIC’s shares.
With the Chennai-based entrepreneurs largely content with sticking to knitting, the largely family - owned businesses of the region have not been too keen to acquire large businesses outside their current interests. Thus R P Goenka type acquisitions have become rare in this region.