14 WEDNESDAY 27 JUNE 2007 NEW DELHI Business Standard

INDEPENDENCE SPECIAL BUSINESS BARONS

KNOWN AND UNKNOWN
KEEPING IT LOW...
In 1939, the Tatas were the largest business
group in India, foreigners and locals
included, with assets worth Rs 62 crore.
Martin Burn was a distant second with an
asset size of Rs 18 crore. The Birla clan was
ranked 13th and had assets worth just
Rs 4.85 crore. By 1978, the Birlas had
emerged on top with their asset base rising
to Rs 1,171 crore as compared to the Tatas’s
Rs 1,102 crore. When the numbers came
out, there was speculation that the Tatas
had deliberately under-reported the
numbers to escape the clutches of the
dreaded Monopolies and Restrictive Trade
Practices Commission. In 1979, the
government had estimated the Tata assets
at Rs 1,309 crore but an advertisement put
out by the group in the International
Herald Tribune claimed assets
of Rs 2,340 crore. After
the domestic uproar,
the group put out a
subsequent
advertisement in
The Economist
claiming assets of
Rs 1,000 crore.
...ON LARGESSE
Right through the 1960s and the
1970s, the Birlas were under
attack in Parliament and outside
for currying government bigger error in judgement. In 1966, in its
favours from the abolished the very first year of operation, the mill turned
government. The managing agency in a profit of Rs 13 lakh on sales of Rs 9
Monopoly Inquiry system, robbing crore. Ambani went on to set up the biggest
Commission Indian business corporate dynasty the country would ever
reported in 1965 houses of a steady get to know.
that financial and assured
institutions had source of income. BAILED OUT
lent 56 per cent to The Tatas were the earliest to professionalise As many as 82 per After showing Coca-Cola and IBM the door,
large business cent of the Birla George Fernandes (in the picture at bottom
houses and a quarter of that money had companies, 74 per cent of the Tata right), the industry minister during the
gone to the Birlas alone. The Hazari report companies, 58 per cent of the Thapar Janata Party regime (1977-79), wanted to
said the Birlas hadn’t implemented even 50 companies and 45 per cent of the Bangur nationalise
per cent of the licences handed out to them. companies were run by managing agencies Tisco (now
And the Industrial Licensing Policy Inquiry at that time. While some like the Tatas used Tata Steel) at
Committee noted that the Birlas were the opportunity to appoint professionals on the instigation
sitting on 166 unutilised licences. top, most others responded by putting of Biju Patnaik,
Interestingly, Ghanshyam Das Birla chose family members on key managerial posts. the fiery
to publish his autobiography, In the businessman-
Shadow of the Mahatma, ...AND OMISSIONS politician from
which detailed the In the mid-1960s, Dhirubhai Ambani, a Orissa and then
financial aid he gave to young yarn trader in Mumbai, approached steel minister.
Mahatma Gandhi, in businessman Viren Shah for a loan of J R D Tata, still
1968 just before the Rs 4 lakh for a spinning mill at Naroda near smarting from
MRTP Commission Ahmedabad. There weren’t many people the nationalisation of Air-India in 1953,
was set up. In 1977, around to invest in the proposed unit. didn’t take kindly to the proposal. Workers
shortly after the Ambani went to Shah because he came at the Jamshedpur plant rose in protest.
Hazari report came out, from the largest landowner family of his Morarji Desai intervened and the move was
he wrote Bapu, A Unique native village of Chorwad in Gujarat and scuttled. Fernandes also had plans to
Association. was, therefore, likely to look at his project nationalise the country’s automobile
The Birla factory favourably. But the young trader failed to industry and had offered the chairmanship
for Ambassador COMMISSIONS ... make an impact and Shah refused to lend of the entity to Rahul Bajaj. Fortunately for
cars in Calcutta In 1970, the Indira Gandhi him the money. Shah couldn’t have made a Bajaj, the whole exercise came to naught.

Profit in the time of R P GOENKA REMINISCES ABOUT PAYING THE PRICE FOR POWER
Fabian socialism
Or why politicians thought making money was
a bad thing and ought to be penalised
Takeovers from back then
n 3 October 1977, Rama days but what could I have done?” he

I
hate the very mention of the word prof-
it,” Jawaharlal Nehru, India’s first
prime minister (1947-64), once told
J R D Tata. Impressed by the rapid in-
control raj was finally dismantled by the
P V Narasimha Rao government.
In the early-1980s, the soft underbelly
of Indian business was first exposed
O Prasad Goenka was arrested
by the police in Nainital.
The Janata Party
government had launched a witch-
hunt to nail Indira Gandhi and it
asks. Still, he had to pay a heavy price
for his loyalty to Gandhi once the
Morarji Desai-led government came
to power in 1977.
In 1979, Goenka split from his two
dustrial strides made by the Soviet Union when Swraj Paul of London mounted an suspected Goenka had helped her brothers, Jagdish Prasad and Gouri
in the 1930s when the rest of the world unsuccessful raid on Escorts Ltd and Del- stash away misappropriated money. Prasad. Was it because his closeness
was reeling under the Great Depression, hi Cloth Mills Ltd. “Mahindra is an in- Accordingly, it had taken Gandhi as to Gandhi had become a liability for
Nehru had become a socialist to the core teresting company to take over. And bet- well as Goenka into custody. the other two? “It had nothing to do
when Independence came in 1947, ter even is Tisco,” Paul was quoted in the Both were released within 24 with the raids,” says Goenka, adding:
though of the Fabian variety. His strong media as saying. Long used to running hours and the charges did not stick. “I told my brothers that I wanted to
views guided govern- their businesses with a But for Goenka, it was just the move out as I didn’t see a future for
ment policy on business small stake, businessmen beginning of a nightmare. my two sons (Harsh and Sanjiv) in the
right up to 1991. were comfortable with the “Those were my most troublesome joint family. I was the bad boy.”
The 1948 Industrial large stakes held by gov- years. Between 1977 and 1980, I had In 1980, Gandhi returned to
Policy Resolution (rein- ernment-owned financial become an untouchable in Delhi. power triumphantly and Goenka was
forced by a more re- institutions which could Businessmen from Mumbai refrained back in favour. The same bankers
strictive edition in 1956) be controlled through po- from talking to me,” remembers who had avoided Goenka like the
and the draconian In- litical connections — the Goenka sitting in his spacious Alipore plague were now willing to open
dustries (Development Birlas, at that time, owned residence in Kolkata. The family’s their purse strings for him — in 1983,
and Regulation) Act, more of Tisco than the awesome art collection hangs from he was even co-opted on the board of
1951 firmly established Tatas! But when the insti- every possible wall in the house. the Reserve Bank of India. Over the
the licence-permit-quo- tutions turned out in Books on Hinduism are neatly next nine years, till V P Singh ousted
ta raj in the country. Paul’s support, business- arranged in the room, a channel on a Rajiv Gandhi to become the country’s
Businessmen came to be men went scurrying to giant TV plays a religious discourse. prime minister, Goenka did a series
known better for the save their empires. of high-profile acquisitions, earning
politicians and bureau- By the mid-1980s, the him the reputation of being the
crats in their pockets country’s leading busi- “WHEN I ACQUIRED country’s top takeover tycoon.
than for their strategic ness families started “Those were my most exciting
acumen. falling apart, often bitter-
DUNLOP, I HADN’T EVEN years,” says Goenka.
Still, Ghanshyam
Das Birla, his closeness
ly. The Birlas, Modis,
Singhs of Ranbaxy and
SEEN THE COMPANY'S He started out with CEAT in 1981
— it took him 12 visits to Turin to
to Mahatma Gandhi and DHIRUBHAI the Shrirams all decided BALANCE SHEET. BUT I convince the Italian promoters to sell
other prominent Con- to divide the family assets their interest in the Indian tyre
AMBANI REWROTE KNEW ITS GOODWILL
ILLUSTRATION: BINAY SINHA

gress leaders notwith-
standing, could not get
his ambitious Durgapur
steel project off the
ground in the early
1950s. Har Prasad Nan-
da of Escorts was pe-
nalised for not keeping
earthen water jars in his
factory, though he had electric water dis-
pensers.
The 1950s saw protracted investiga-
tion into alleged income tax violation by
leading business houses. Ramakrishna
Dalmia, the maverick Marwari with six
wives, was sent to jail in 1962 for finan-
cial impropriety. Few businessman, nat-
urally, had any love lost for Nehru.
More was to come. Banks were na-
tionalised in 1970, coal mines in 1971.
(Tisco mines were left untouched as these
were “efficiently managed”.) Legisla-
tion kept piling up to clip the wings of
businessmen: the Monopolies & Re-
strictive Trade Practices Act came in
1970 and the Foreign Exchange Regu-
lation Act in 1973.
The first whiff of change came when
Rajiv Gandhi came to power in 1984.
Businessmen started finding that their
applications were getting processed
speedily. It had to wait till 1991 when the
between the various fac- company to him. KEC (1982), Searle
tions. Families were mul- India (1983), Dunlop (1984) and HMV
THE RULES OF tiplying faster than the
WAS VERY VALUABLE” (1988) were the next to fall to Goenka.
INDIAN BUSINESS businesses, making it The big year was 1989 when Goenka
hard for the members to Goenka, now 77, says that his acquired CESC, Harrisons Malyalam,
WITH HIS pull together. house and offices were raided no less Spencer & Co and ICIM.
Around the same time, than 44 times during those years by Goenka does not remember how
AUDACIOUS GOALS a new dynasty was in the sleuths from the departments of much these acquisitions cost him. And
making. Dhirubhai Am- income tax and customs as well as the all that he is willing to say about his
bani re-wrote the rules of Indian busi- Enforcement Directorate. No bank tactics is: “I knew all the gimmicks
ness. He was the first to show that there would lend him any money. and used every possible mean. But I
was serious money to be made by work- A grandson of Sir Badridas was never hostile and refrained from
ing your way through the maze of gov- Goenka, the first Indian chairman of changing the top management of the
ernment rules and regulations. Unable the Imperial Bank of India (now the companies I acquired.”
to get funds from banks and financial in- State Bank of India), and the first son All his acquisitions, Goenka says,
stitutions, he started courting the stock of Keshav Prasad Goenka, Goenka were driven by god’s blessings and
markets like nobody else before him. had become a member of the gut feeling. “When I acquired Dunlop,
The capacities he planned were always Congress as early as in 1950 when he I hadn’t even seen the company’s
large scale, his goals audacious. Mobile was studying at Presidency College, balance sheet. But I knew that
telephone services will work only if a Kolkata. He was introduced to Gandhi Dunlop’s goodwill was very valuable.”
long distance call costs less than a post- in the late-1960s and she left a distinct In 1989, Goenka, however, lost
card, he advised his older son, Mukesh, impression on him. “She was the Dunlop to Manohar Rajaram “Manu”
when he was getting into telecommuni- greatest leader of all times,” Goenka Chhabria. “I didn’t have the money to
cations in the 1990s. says without a moment’s hesitation, buy him out, though I still have some
Post-liberalisation, India saw an un- notwithstanding her anti-business affection left for him,” admits Goenka.
precedented burst of entrepreneurship. policies. Balmer Lawrie, a Goenka That was the year that Rajiv Gandhi
Sunil Mittal, who had started life by sell- company, was nationalised during her was voted out of power. Next year, he
ing generator sets in Ludhiana, quickly reign — the family’s 51 per cent stake handed over the reins of his business
became the country’s uncrowned tele- in the firm was acquired by the to his two sons. The two now run the
com czar. Infosys spawned an army of RPG’s loyalty to Indira Gandhi led to his ostracisation by colleagues government at par. “I felt bad for two Rs 11,500-crore RPG group.
billionaires. The stranglehold of the fam-
ilies on Indian business was gone.

1947 was a watershed year for the clutch of businesses launched then

Midnight’s companies
ndhra Sugars was born less than ny was set up the previous year after southern cement market.

A 100 hours before independent S N N Sankaralinga Iyer, a banker from If India Cements was born out of ce-
PHOTOS COURTESY: INDIAN BUSINESS THROUGH THE AGES/FICCI

India. The Congress had said
that it would abolish the zamindari
system as soon as the British left In-
dia and it came to power. So Mullapudi
Harishchandra Prasad, the scion of
a zamindar family from the West
Godavari delta, floated Andhra Sug-
ars four days before Independence
— he had seen farmers in the region
cultivate sugarcane to make jag-
gery, though there was no sugar
mill in the whole of south India. The
company is now a Rs 632-crore con-
cern, making chemicals and fertilis-
ers in addition to sugar.
India Cements floated the first
initial public offering (of Rs 1 crore)
of independent India in 1947 to build
its plant in Tamil Nadu. The compa-
Thanjavur, had stumbled across lime-
stone deposits on agricultural land
he had bought in the Tirunelveli dis-
SOME HAVE SURVIVED
SUCCESSFULLY, OTHERS
HAVE ENDED UP SICK OR
LOSING MONEY
trict. Iyer made up his mind after the
government said there was going to be
a shortage of one million tonnes of
cement in the country. After surviv-
ing a raid from ITC in the early 1980s,
the company did a string of acquisitions
in the 1990s to become the leader in the
ment scarcity, Ghanshyam Das Birla set
up Gwalior Rayon Silk Manufactur-
ing (Weaving) Co Ltd, now known as
just Grasim, in August 1947 after
large parts of cotton-growing fields went
to Pakistan after Partition. Birla mar-
shalled his best executives to set up a
rayon plant at Nagda near Ujjain. It Leading industrialists at a conclave, among them B M Birla, G M Modi,
turned out to be the most successful Ramnath Poddar and Lala Shriram; Left, Gujar Lal Modi
of all “midnight’s companies” with
interests in viscose staple fibre, cement, where several people died, the factory munication equipment near Bangalore,
sponge iron, chemicals and textiles. had to be shut for a long period, re- the company made money till the
While Birla was busy putting sulting in the company ending up in mid-1990s, when the sector was thrown
up the Nagda facility, Gujar Mal Board for Industrial and Financial open to the private sector. Forced to open
Modi started Modi Spinning & Weav- Reconstruction. factories in Uttar Pradesh and Kerala
ing Mills Ltd at Modinagar in Uttar A somewhat similar fate was await- in the 1970s for purely electoral reasons,
Pradesh. All was going well till the mid- ing Indian Telephone Industries, set up the company reported a loss of
1970s when labour trouble disrupted by the government in 1948. Set up to as- Rs 412 crore in 2006-07.
operations. After belligerent clashes, semble phones and make telecom- — Text by BHUPESH BHANDARI