The rise of Ethiraj and his associates to the class of super rich is a story of governments’ and financial institutions’ colossal failure on the resurrection of sick industrial units.
Ethiraj died as Chairman, Binny Ltd which, for decades, was a great name in textiles. For over 50 years from 1969 the company had been driven by industrial strifes, calamities and devastating floods. A redeeming feature was the hundreds of acres of prime property the company had accumulated over a century and a half of its existence. Like gold, land has been appreciating making land owners multi billionaires even while the company was falling sick beyond redemption.
It also produced textiles…
Binny had its origins in 1799 and was a typical example of the flourish of East India Company foot soldiers. A benign British government helped the evolution of the company expanding into a vast range of connected and non-connected activities; it cultivated indigo, refined sugar, produced coffee, mined mica and was engaged in shipping and travel; fabricated equipment for sugar, chemical, cement industries and rice milling; designed, fabricated and supplied distilleries; repaired and built ships…
Widest range of textiles…
For several years the group of companies under Binny was among the largest producers of textiles and allied products. Its products commanded great custom as uniforms for services and for school children. It also had great reputation for the quality of its products (the drills, the kakhis, the poplins, casement fabric for school uniforms, suitings and shirtings made of cotton, woollen and terrene blends; dyed drills, terry towels, canvas …). It had five divisions: B & C Co Ltd, Bangalore Woollen, Cotton and Silk Mills Co Ltd, Binny and Co, Ganges Transport and Trading Co Ltd and the Madura Co P Ltd. Until the 1960s ownership and control was with the British promoters, the Inchcape Group.
Employed over 13,000…
Binny had also seen the evolution of the trade union movement in this part of the country. At the peak it employed around 13,000. The deterioration set in with the failure to modernise the mills and the union’s failure to keep up with increased productivity norms.
This was in line with the deterioration of the textile industry caused mainly by the government’s tax policies weighed heavily against the organised sector. In the decades of protection of the handloom sector for its large, dispersed employment, hefty taxes on the organised sector made the mill sector unviable; added with militant trade unionism, there was widespread sickness. Remember, in their evolution, all large industrial houses had interest in the textile sector – Lalbhais, Sarabhais, Tatas, Birlas, Mafatlals, Wadias and the Anglo French Textiles (Pondicherry), Harvey Mills, (Madura Coats), Lakshmi Mills… in the south. These flourished for decades; and most of these perished.
The deterioration continued and in the early 1970s during Indira Gandhi’s wave of nationalisation, 103 sick textile mills were taken over by the Central government.
In 1969 Binny Ltd was formed as a single entity bringing together the five different companies. Unfortunately, lack of proper management and severe cash crunch resulted in a steep decline in the performance of the company. Temporary, makeshift arrangements were made to set matters right. These were attempted through substantial support by financial institutions like IDBI and State Bank. In fact, with their huge funding, financial institutions invited captains of industry from flourishing family groups. These efforts were not successful in most cases. eg. H C Kothari was put in charge of Madras Fertilizers and A M M Arunachalam, with little experience/knowledge in the textile sector, was appointed chairman of Binny Ltd. Even the earlier attempt of inviting a highly successful G K Devarajulu and his nephew V Jagannathan of the Lakshmi Group of companies, Coimbatore, was not a success. In fact, Lakshmi Mills that celebrated its diamond jubilee in 1970 with great elan, declined and folded up.
To make matters worse Binny was devastated by floods notably in 1976 and 1996. There was also the contribution of the election eve populism: during end 1976 the recalcitrant trade unions agreed to fall in line with improved productivity norms as a condition for fresh infusion of funds; elections for the Lok Sabha in January and for the state assembly in May 1977 threw to winds the negotiated settlements arrived at earlier.
Take over…
With no large private industrial units with experience in textile management interested in bidding for Binny, it was a field day for real estate operators with political clout attracted by the enormous land bank of Binny. It was thus that N V Ramasamy Udayar, Ethiraj and Nandagopal pitched in modest sums to take over Binny. At that point of time these were largely involved in running rice mills. But then they had enough clout with AIADMK’s MGR.
These were indeed babes in the wood trying to grapple with the enormous problem of managing the large textile and engineering conglomerate. They tried to bring more infusion of funds from real estate barons from Mumbai. The latter walked out with the prized properties in Karnataka. The dissensions among the four – N V Ramasamy Udayar, Ethiraj, Nandagopal and chartered accountant S Natarajan – further contributed to the impasse of Binny for long. The great name in textiles turned into a great name in real estate. What rich properties it had! A couple of hundred acres of land in Perambur; prized high value residential property at Adyar Gate; the property of Binny Engineering Works at Meenambakkam, over a hundred acres in Porur, the stately head office building, Binny House in George Town, to mention a few. So their modest investments grew into several hundred crores of rupees! – SV
