Sanjiv Goenka has consolidated his patrimony and is now growing fast

RNI No.35850/80; Reg. No. MCS-123/2015-17; Published on: Every alternate Monday; Posted at Patrika Channel Sorting office, Mumbai-400001 on every alternate Wednesday-Thursday
November 23-December 6, 2015
Shashwat Goenka
Sector Head
Spencer’s Retail
n
Modi’s UK Visit
n
bengal’s tea gardens
n
trivitron
n
Garware Wall Ropes
`40
Sanjiv Goenka
Chairman
RP-Sanjiv Goenka group
Powering
Ahead
Sanjiv Goenka has consolidated his patrimony
and is now growing fast
Cover Feature
B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
Photos: sajal bose
Sanjiv and Shashwat Goenka:
smiles of success
Powering ahead
A
fter making a big splash
across Indian media in
the 1970s and ’80s, rpg
Enterprise
quietened
down and carried on
as a well-known business group. In
2010, things changed in Kolkata,
when the late Rama Prasad Goenka’s (fondly known as rpg) business
empire was split between his two
sons Harsh Goenka (of Ceat House)
Sanjiv Goenka has
consolidated his
patrimony and is now
growing fast
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n ov e m b e r 2 3 - d e c e m b e r 6 , 2 015
and Sanjiv Goenka (of cesc Victoria
House). By the terms of the amicable
split, Harsh retained Ceat as his flagship, along with power equipment
maker kec International, it company Zenser Technology and pharma
firm rpg Life Science, while Sanjiv
Goenka received power generation
and distribution major cesc, carbon
black manufacturer Philips Carbon
Black (pcbl), retail chain Spencers’
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B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
and Saregama, the music and television production company. The latter
branch is now called the rp-Sanjiv
Goenka group (rpsg).
“It is a natural way of progression
of life,” says Sanjiv Goenka, talking
about the separation. “The separation was inevitable; it is good that
it has happened. Now, our group is
a lot more focussed on business and
driven by operational excellence than
in the past,” pointing to the 80-90
per cent perking up of his group’s
financial highlights in a 50,000
employee company, with gross assets
of `31,000 crore. There were staffing
and managerial accountability issues
that Sanjiv had to take head on. “The
changes in management style did
not go well with some top management people, who hardly had any
knowledge of the company’s dayto-day operations,” Sanjiv recalls.
“And so, they reacted adversely initially. One of them even told me that
now I am acting like an owner. But
I have told them in a review meeting that accountability and expectations have been defined and no one
is above that.”
It took him a few years to get the
house in order, making many changes
at the top level. He also hired Mckinsey to review and advise on his stable, as also chalk out a growth plan.
Sanjiv has been joined by his 25-yearold Wharton graduate son Shashwat
since 2012. He now runs Spencer’s.
He was close to his grandfather.
Shashwat is also the vice-president,
Indian Chamber of Commerce.
“The split was the best thing to
have happened for both the brothers,”
says G.P. Goenka, chairman, Duncan
Goenka group, rpg’s younger brother
and uncle of Sanjiv and Harsh. “Both
are diametrically opposite in nature,
which could have hampered business
decisions. Also, the next generation
has come to play their roles in the
business. And they needed free hands
to explore the new business opportunities, which cause barriers sometimes in joint family businesses.”
“There is a paradigm shift in the
approach of the company now,” says
R.K. Jha, president, corporate, who
oversees the group finance. “People
are now more growth-oriented than
previously. The group’s sustainable
growth for the last five years has created shareholders’ value,” (see table:
Group level financials).
Positive interest
“The group has demonstrated good
performance and healthier corporate
governance in the last few years,”
concurs Alok Ranjan, head, portfolio
management, Way 2 Wealth Securities. “And the investment community is now showing positive interest
in them.”
The flagship of the group, cesc,
has the sole licence to provide power
to Kolkata and the industrial suburbs.
Group level financials
(` crores)
FY11
FY15
16,267
30,725
Gross revenue
8,342
15,511
EBITDA
1,428
2,547
PBTD
1,026
1,700
617
1,070
Gross assets
PBT
Group’s gross revenue
(` crores)
FY15
CESC
6,274
Philips Carbon
2,687
Saregama
189
Firstsource
3,041
Harrisons Malayalam
Spencer’s
167
1,672
Others (Pvt. Cos) – non-listed
Total
1,480
15,510
It also has a transmission and distribution network. “Do you remember
hours of load shedding in the 1970s
and 80s, for which Calcutta had
become infamous,” queries Sanjiv.
But, after the commissioning of the
500 mw plant at Budge Budge in 1997
(which was later enhanced to 750
mw), Calcutta has never had loadshedding again. cesc, India’s fourth
largest private power utility, along
with its subsidiaries Haldia Energy
and Dhariwal Infrastructure, today
generates a total of 2,325 mw thermal power and 60 mw of renewable
power. cesc services almost 3 million consumers in an area of 567 sq
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km of Kolkata, Howrah, Hooghly. It
operates three thermal power plants
generating 1,125 mw of power in the
licence area – Budge Budge Generating Station (750 mw), Southern Generating Station (135 mw) and Titagarh
Generating Station (240 mw), with
50 per cent of the coal procured from
its own captive mines.
As part expansion, cesc has set up
a new 600 mw power plant in January this year at a cost of `4,600 crore
in Haldia near Kolkata under a subsidiary named Haldia Energy Limited
“Setting up a new plant was necessary, with peak summer demand
growing to 2,035 mw,” says Aniruddha Basu, managing director, cesc.
“Apart from Budge Budge, cesc has
two other power plants, which are
old, located within the city with no
place to expand and will have to be
shut down.” The Halida plant uses
the Shanghai Electric Boiler-Turbine
generator package. For the BoP (balance of plant), the contract has been
given to Punj Lloyd.
Haldia Energy has signed a fuel
supply agreement for its coal requirement with Mahanadi Coalfields,
about 500 km away in Orissa, which
is a subsidiary of Coal India. Water
for the plant is being taken through a
14 km long pipeline and stored in two
reservoirs located inside the plant.
“It is a state-of-the-art technology
power plant,” says Sudipta Mukherjee, general manager, Haldia Plant.
“Its boiler can burn a wide variety
of coal efficiently and can meet the
environmental standard too. It has
got an eco-friendly dry ash handling
system; and compatible materials are
used to purify the saline water. Last
month, our plf was 93.5 per cent.”
A unique feature of the power
plant is the 400 kV transmission line
from the plant going over the Ganga
to its distribution substation at Subhasgram near Kolkata. The transmission towers at the river crossing are
India’s tallest (236 metres) and the
heaviest (1,800 tonnes), spanning
(1.5 km) a busy shipping lane and
designed to withstand hurricanes.
They were designed by Elias Ghannoum at a cost of `500 crore. Simplex
Infrastructure did the deep foundation in the silt filled river, while kec
Cover Feature
has erected the towers.
In 2009, the undivided rpg group,
for the first time, had ventured out
of Bengal for power generation, with
cesc acquiring a 600 mw power plant
in Chandrapur, Maharashtra, for
`4,000 crore. It was built by Dhariwal
Infrastructure of the Manikchand
group; however, the project has not
been generating power due to the fuel
supply agreement (fsa) still pending
and the acquisition has been mired
down in red tape ever since. As per
the norm, any change in ownership
will have to be disclosed to the coal
ministry for fuel linkage, which was
not done in this case. So, the ministry
has asked cesc to apply afresh.
The matter has gone to court. And,
cesc is losing about `350 crore in
interest costs each year. The Chandrapur project has suffered mainly due
to changes in the government policy.
“We expect things will be resolved
soon,” says Basu. Some reprieve
was felt when the Standing Linkage
Committee cleared the coal linkage.
Now, the company is waiting for the
approval from the ministry for the fsa
soon and will supply power to Tamil
Nadu Generation & Distribution Corporation, among others.
Cool journey
rpg’s journey with cesc since 1989
was not always smooth. In the late
1990s, the company was struggling
to get the power tariff revised from
the government. The power ministry of Bengal headed by Sankar Sen
sat on the revision for a long time,
because the ministry thought cesc’s
claim for revision was illegitimate.
People in the industry feel that the
erstwhile West Bengal chief minister Jyoti Basu, who got on well with
rpg, intervened in this matter to
make peace between the power minister and rpg. But, with the input
cost increasing and no corresponding tariff revision for years, cesc
suffered losses for a few years till
early 2000.
Also, the power regulatory body,
which was formed in 1999 to decide
on the power tariff, raised the tariff
by 4 paise only, without bothering
to get into an in-depth analysis. The
company then went to the Supreme
B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
Subramaniam: aiming for rapid growth
Court and, after two years of waiting, the court set the tariff right –
raising it by 30 paise a unit in 2003.
This resulted in a recovery of `520
crore over 60 months and brought a
sharp upswing in the company’s fortune. It never faced a major problem
from the regulatory body thereafter.
It has also initiated an efficient cost
structure mechanism and increased
power generations substantially.
Also, the introduction of an antipower theft bill helped cesc to reduce
the t&d losses. Today, it is running
the services efficiently in the city. In
Firstsource’s financial results
(` crores)
FY12 FY 13 FY 14 FY 15
Gross revenues2,294 2,865 3,1083,041
EBITA
223 325 364 387
PBTD
165
247 279 316
PBT
76
159
203 244
PAT
62
146
192 234
CESC stand-alone financial
result
(` crores) FY11 FY12 FY13 FY14FY 15
Gross
revenues 4,2474,7825,4105,6096,274
PBT
614 693 773 825 883
PAT
488 554 618 652 698
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2013, the government also renewed
its licence for a further 25 years.
cesc has always bettered the
national average in most data. Its
plant load factor (plf) is 86.52 per
cent, as against a national average of
64.5 per cent for thermal plants. ntpc
comes next, with a plf of 85 per cent,
claims the company. It is also proud
that its Budge Budge plant has a plf
of 89.08 per cent. “We are planning
to become a centre of excellence and
a model for other players,” Basu says.
Boston Consulting Group is striving to reduce generation costs and
increase the efficiency of the Budge
Budge plant.
Energy conservation goes beyond
the plant level for cesc. The group’s
headquarters at the 80-year-old Victoria House has received gold certification under the leed rating system
for existing buildings this year from
the US Green Building Council for
demonstrating
its
commitment
towards environment sustainability.
“Ours is the first heritage building in India to get a leed Gold rating. We have improved significant
savings on electricity, water and
air quality here. Now, we will try
and repeat this achievement in our
other buildings and also in Quest
Mall,” says B.L. Chandak, executive
director, cesc. Personal collections
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B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
of paintings and sculptures by
Indian and international famous
artists adorn the chairman’s floor.
cesc had lost the coal block in
September 2014, when the Supreme
Court cancelled all coal block allocated by the government since 1993
in the country. However, it managed
to take back the control over the Sarisatolli coal mine in Asansol in May
2015, with an aggressive bidding of
`470 per tonne through an e-auction process. The Sarisatolli mine has
a rated capacity of 3 million tonnes.
“The whole city would have gone
through 8-9 hours power cut each
day, if we had not got the mine back,
since it supplies 50 per cent of our
needs,” says Sanjiv, justifying cesc’s
aggressive bidding.
Facts and figures
As the coal linkage and fosil fuel are
likely to create problems in future
for power generation, cesc has been
planning big on renewal power. “We
are planning to invest `3,000 crore in
renewable wind and solar energy in
the next two years, when and wherever we find a viable project. What
we are looking for is a commercially
viable proposition, which offers a
reasonable margin between generation cost and selling price,” says
Sanjiv. The group is looking at Rajasthan, Gujarat, Karnataka, MP and
Tamil Nadu.
The company caters to its 3 million consumers through its own
transmission & distribution system, comprising 615 km of transmission lines, 106 distribution stations.
With 8,211 km of high-tension circuits and 12,269 km of low-tension
circuits, the t&d loss is below 12 per
cent, as against the national average of 26 per cent. The investment
in infrastructure has touched `7,000
crore since 2008-09. “We are creating a land bank for our future substations. The company has participated
in the auction for Calcutta Tramways
depots and bought four such depots
for `23 crore,” says Basu.
“The high level of customer service and satisfaction is the big thrust
area for us,” says Sanjiv. “Today, we
can offer new connections within 24
hours, as against 3-4 days earlier.”
Mehra: charting out a revenue model
The company has hired DuPont as
consultant for the safety issues since
last year. It is introducing a unique
cutting-edge metering system called
smart meter, which has a sim card
that allows consumers to track their
daily power consumption online. It
automatically sends alerts to the customer care during any power failure. cesc has started installing smart
meters at hospitals, pumping stations, government offices and street
lights. For the first time since 1889,
cesc has introduced electricity bills
PCBL Financials
(` crores)FY11 FY12 FY 13 FY 14 FY 15
Gross
revenue 1,8782,421 2,541 2,5512,687
PBT
164 103 ( -) 40 ( -)88
PAT
116
87
14
20 ( -)8612.64
in Bengali and Hindi too. As the profile of the consumer is changing, he/
she is given an option of getting a
monthly consumption bill in a vernacular language, adds Sanjiv. The
company’s average tariff of `6.97
per unit is the cheapest amongst the
private players operating in Mumbai,
Delhi and Ahmadabad.
India’s power sector has added
24.6 gw in 2014-15, taking the
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generation capacity to 268 gw, of
which coal-based generation stands
at 62 per cent. But India faces a shortfall of 4.7 per cent in power, which
is likely to grow. The XIIth Five Year
Plan (2012-17) estimates an additional capacity requirement of 88.5
gw, 55 per cent of which is expected
to come from the private sector.
Noida Power Co, a joint venture
between the rpsg and the Greater
Noida
Industrial
Development
Authority, marked the group’s foray
into private distribution in North
India. It started operations in 1993,
under a 30-year licence from the UP
government. Today, it distributes
over 1,100 million units of power to
700,000 consumers, mostly industrial, in the periphery of 330 sq km
in greater Noida. The company serves
a pick load of 350 mw. “Our t&d
loss is only 8 per cent, as against 26
per cent nationally, which is a commendable achievement,” says R.C.
Agarwal, managing director & ceo,
cesc. The company has a turnover of
` 850 crore, with a profit of `50 crore,
and is growing at 18-20 per cent.
In the last five years, cesc has
been maintaining a cagr of 8.12
per cent. Its stand-alone revenue has
grown from `4,247 crore in 2010-11
to `6,274 crore in 2014-15. Similarly,
its net profit has risen from `488 crore
Cover Feature
(2010-11) to `698 crore (2014-15). The
company’s share price has been hovering at `540. Its current market cap
amounts to `7,178 crore. The promoters hold 49.92 per cent of the shares of
the company. During the six month
ended September 2015, the company
has achieved a profit of `347 crore – a
marginal increase from the previous
corresponding year of `343 crore.
“Despite the adversity in the
power sector in the country for the
last few years, cesc has continued
to grow and become strong, with
many trying to replicate the company’s model,” says Harsh Dole, vicepresident, iifl .
cesc has a number of subsidiaries
– in power, retail, property and business outsourcing. On a consolidated
basis, it has earned a revenue of over
`11,000 crore as on March 2015.
Sanjiv Goenka, a spry 54-year-old,
has quickly moved in the it space.
Though he had inherited nothing in
this sector, he has found a foothold
by acquiring controlling stakes in
Firstsource Solutions, a debt-ridden,
Bangalore-based bpo firm. The deal
was made for `455 crore, through its
flagship company cesc, in November 2012 from icici, with Mckinsey as advisor. And it has become a
major turnaround story scripted by
the rpsg group. “Acquisition of Firstsource was a conscious decision,”
says Sanjiv. “We have been watching it for sometimes and found that
it has immense potential for growth
and was stuck for funds. The opportunity came our way when icici
wanted to exit the business.”
Firstsource reinvented
Firstsource was set up in 2001 by
icici, Teamasek and Metavante, to
provide customer-centric business
process management services. With
47 delivery centres, its service offerings include transaction processing, crm, collections and receivables
management, in healthcare, telecom
& media and the bfsi space. Listed
in India, it over-leveraged its balance sheet while acquiring Medassist
Solutions USA in 2007 for $330 million, using fccb (foreign currency
convertible bonds). Rajesh Subramaniam, the company’s managing
B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
Basu: a role model for others
director, was brought back into the
company’s fold to bring it back into
the black and was reinstated as managing director in 2012. He managed to achieve a profit figure of `62
crore in 2012 by defining focus areas
and realigning the company with
market realities.
However, the company’s debt had
accumulated to $275 million by then,
because of which icici wanted to exit
the business, while the other investors wanted to sell their stakes. “It
was at this point of time that Goenka
found Firstsource’s immense potential and finally bought the company
in November 2012,” says Subramanium. “He infused the required
capital and cleared the debts.”
Firstsource was reinvented, with
lots of internal changes, focussing
on efficiency. The company got
rid of customers who did not align
with the business and reduced manpower to about 7,000 (from a total of
32,000 across the world). The strategy worked, with the net profit growing by 21 per cent to `234 crore in
2014-15, from `192 crore in 2013-14.
However, the revenue remained
almost flat at `3,041 crore in 2014-15,
as against `3,100 crore in 2013-14.
Goenka, who holds a 57 per cent
stake in the company, bought the
shares at `12.10 apiece in 2012, as
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against today’s `29, on a market cap of
`1,820 crore. The company is almost
debt-free and is listed by nasscom as
one among the top 10 bpo companies in 2014. Firstsource has a presence in the Philipines, Sri Lanka, the
UK and the US. While 49 per cent of
its revenue is contributed by the US;
the UK comes in with 36 per cent;
India, 9 per cent; and the rest of the
world, 6 per cent. The company has
more than 20 Fortune 500 clients in
its three verticals – healthcare, telecom & media, as also banking, financial services & insurance ( bfsi) – and
its services are mainly in customer
management, transaction processing
and collections. Telecom & media is
the major revenue earner at 44 per
cent, but there is enough potential
for growth seen in the healthcare
business too.
“We entered into the healthcare
business in 2015,” says Subramaniam. “The segment is growing at
20 per cent year on year – the highest for any of our verticals”. The five
top health insurance companies and
about 700 hospitals in the US are
served by Firstsource, in competition with Capita, Serco, Wipro, Dell,
MDion and many others in different
segments of business.
“Our strategic partnership with
Firstsource has been a key element in
Cover Feature
B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
the successful launch of many of our
core products, along with subsequent
expansion of other value-added services,” says Jay Duffy, director, sales
operations, BskyB. “The members of
the staff at Firstsource, with extreme
professionalism and diligence, have
displayed immense flexibility in
their partnership, which has been
the key for Sky in the development
and execution of our sales and marketing strategy. Firstsource’s commitment to the partnership and their
ongoing performance has driven significant RoI from the partnership.”
Subramaniam is aiming for a billion dollar market cap in the next
three years.
Strategic changes
Spencer’s is an old name in the
department store business in India. It
has a turnover of `1,672 crore but has
also run up losses of `114 crore. “We
have achieved sales of `1,470 per sq
ft for the first quarter of the current
financial year, as against `1,350 in
the corresponding quarter last year,”
says Shashwat, sector head, Spencer’s
Retail, who has taken up the challenge to turn the unit around. “We
are taking adequate strategic measurements to make the company
profitable.” It is planning to close
I
n 1897, Kilburn & Co
secured the Calcutta electric lighting licence as agents
of The Indian Electric Co,
which was registered in London on 15 January 1897 with
a capital of £1,000. A month
later, the company changed
its name to The Calcutta Electric Supply Corporation Limited and enhanced its capital
to £100,000. The issue was
over-subscribed the very first
day it was opened.
The first generating station
was erected at Emambagh
Lane, near Princep Street,
which was commissioned on
17 April 1899, heralding the
beginning of thermal power
generation in India. The electrification of Calcutta took
place 17 years after New York,
Roy: market leader
Jha: creating shareholder value
down loss-making stores and focus
on the hyper market to reduce costs.
It is also refurbishing the stores, with
a new focus on apparel and general
merchandise. The company will now
tie up with popular brands of apparel,
to improve the shopping experience
for customers. We are planning to
add 15 stores at an investment of `70
crore by next year. The company is
also working on e-commerce strategy
to be introduced by 2016,” Shashwat
adds. Avarna Jain, Sanjiv’s younger
daughter, has set up a café-cum-bakery, Au Bon Pain, which has 23 outlets in Bangalore and Kolkata.
Spencers’ has been part of the
Indian retail landscape since 1863.
rpg acquired the company from
Homi Bhabha in end 1988. After the
History of CESC
which boasted of electricity in
1882 and eleven years after
London, which was electrified
in 1888. In Calcutta, the initial rate per unit of power was
`1, the price being the same
as in London.
The Calcutta Tramways
Co switched to electricity
from horse-drawn carriages
in 1902. Three new power
generating stations were
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started by 1906. The company was shifted to the Victoria House in Dharmatala,
Calcutta in 1933, and still
operates from this address. In
1970, the control of the company was transferred from
London to Calcutta. In 1978,
it was christened The Calcutta Electric Supply Corporation (India) Ltd. The rpg
group was associated with
The Calcutta Electric Supply
Corporation (India) Limited
from 1989, and the name was
changed from The Calcutta
Electric Supply Corporation
(India) Limited to cesc Limited. Beginning with 6,000
in 1912, cesc has reached a
tally of 2.9 million consumers
today. cesc and the city have
grown together.
u
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B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
CESC’s new plant at Haldia
takeover, rpg had commented that
Spencers’ is a sleeping giant. With
Spencers’, rpg has got his hands
on three heritage hotels – the West
End in Bengaluru, Savoy in Ooty
and Connemara in Chennai. But all
these hotels had been leased to the
Taj group for 50 years till 2034 by
Bhabha and the Taj group continues
to run them successfully for Spencers’. It is said that, 15 years back, Taj
had wanted to acquire these hotels
from rpg, but its plans fell through
because of the parties’ inability
to reach the right price. Spencer
T
he Goenkas are Marwaris from Rajasthan and
their journey to modern India
began with Ram Dutt Goenka
coming to Calcutta, the erstwhile capital of India and a
commercial hub of the British
Empire. Ram Dutt prospered
in facilitating hinterland commerce through trading and
trade finance activity of two
large British managing agencies, Kettlewell Bullen and Ralli
Brothers. The original family trading ‘gaddi’ Ramdutt
Ramkissendas was one of the
three largest ‘native’ firms and
rpg’s grandfather Sir Badridas
International Hotels, which owns
these three hotels, receives only rent
for the properties from the Taj group.
It is the only company under the
joint ownership of the two brothers
– Harsh and Sanjiv.
Turning companies around
Spencers’ retail at present has 120
stores, including 34 hyper-marts, in
42 cities across India. It caters to groceries, home & personal care products, apparel & accessories, consumer
durables and lifestyle products; and
operates in two retail formats – while
‘convenience’ units are neighbourhood stores of 1,500-15,000 sq ft
in size, hypermarkets, as megastores, combine a supermarket with
a department store at 15,000-50,000
sq ft. They stock a wide and deep
assortment of food, fashion, home &
personal care, general merchandise,
electrical & electronics, staples, frozen foods, and specialty sections – all
under one roof.
“Interestingly,
Spencer’s
has
attempted to glamourise grocery
sales,” says Rakesh Biyani, joint managing director, Futute Retail, the largest retailer in the country. “But, for
the other merchandise, it is yet to
find the right strategy. Also, retail is
all about scale within the territory,
to get the benefit of the supply chain
and, perhaps, Spencer’s is spread a bit
too thin.”
“When Spencer’s turns around
financially, we will unlock its value
by demerging it from cesc,” says
Sanjiv Goenka. cesc shareholders
have been hostile to the loss-making
Spencer’s. It is good idea to demerge
Spencer’s from cesc and unlock the
enterprise value. This will help the
investors to choose the segment they
want to investment in,” says Ranjan.
cesc Proprieties, a subsidiary of
cesc, had set up Kolkata’s first luxary mall in 2013, at an investment of
`375 crore. The Quest, a mall spread
over 3.5 acres in central Kolkata, is
a happening destination of the city
for all ages. This large piece of land,
A notable role
Goenka was perhaps the first
Marwari to graduate from
Presidency College before
taking the family firm to new
heights. He became the first
Indian chairman of the Imperial Bank (now State Bank of
India). Son Keshav took the
firm from trade to industry
when he acquired two major
British agencies, Duncan
Brothers and Octavius Steel.
rpg was born in 1930,
educated at Presidency College and Harvard, the eldest
among brothers – Jagdish
Prasad and Gouri Prasad. In
1979 rpg split with his brothers and began brilliant acquisitions of companies in their
death throes due to the stoppage of imports and the
‘Licence Raj. He quickly took
control over companies like
Dunlop India and cesc in
1980, ceat Tyres in 1982,
rpg Life Sciences (then Searle
India) and kec International
in 1985, the Gramophone Co
of India (now Saregama) in
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1986, Spencer’s and Harrisons
Malayalam in 1988, Bayer
India. rpg was known as the
‘takeover king’ in his heyday.
rpg become a Rajya Sabha
mp and was also trustee of
the Jawaharlal Nehru Memorial Fund, the Indira Gandhi
Memorial Trust and the Rajiv
Gandhi Foundation. He was a
former president of the ficci
and the past chairman of the
board of governors of the
Indian Institute of Technology in Kharagpur. He passed
away in April 2013, after overseeing the split between his
two sons in 2010.
u
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CESC improving efficiency
owned by cesc, offers 385,000 sq
ft of retail area and multi-level car
parking for 900 vehicles. The mall
is designed by British architectural
firm rtk and built by l& t. Quest is a
first-of-its-kind unit in eastern India
and caters to fine dining as also
to luxury. It strives to convey a
modern and energetic atmosphere
architecturally and graphically.
Solar panels have been used here
for the exterior lighting. While Spencer’s hypermarket is the anchor,
over 100 major foreign brands figure among prominent tenants – such
as fcuk, Burberry, Gucci, Canali,
Omega, Bretling, Jimmy Choo,
Armani, Tommy Hilfiger, Nautica
and Lacoste. It also has an entertainment zone, six multiplexes of Inox,
a food court and a fine dining area.
It accounts for over 12 million footfall a year. “The break even for the
investment will take five years,” says
Sanjeev Mehra, vice-president of the
property. “Meanwhile, we are planning one more mall in the city in the
next year.”
The group owns the oldest music
company in the country – Saregama,
formerly hmv – which has an
archive of over 315,000 tracks. It
is the custodian of over half of all
the music ever recorded in India,
including the region’s musical heritage in 15 languages. However, the
company had failed to adapt to the
changes that have been taking place
in the music industry for over 15
years by way of digitisation. It has
also barely acquired rights for new
songs. As a result, it has remained
a company of only nostalgic value.
When Saregama became part of the
rpsg group, Sanjiv took up the challenge to bring it back to its glory.
“We have to offer nostalgia for the
public through a new mechanism,”
he says. Last year, Vikram Mehra,
former chief commercial officer,
Tata Sky, was inducted in as managing director, to implement the
revenue models.
Missed opportunity
Saregama is a treasure trove of
music,” says Mehra. “Sadly, we
missed the opportunity to leverage
its brand in time, by entering late in
the new-age emerging market.” He
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has been instrumental in taking new
initiatives. The company launched
an online music purchase store this
year. Music lovers can now login to
the company’s Website and listen to
and purchase songs, with payments
made through plastic cards or via net
banking. It has made 117,000 digitised songs in eight different languages available for customers in its
library. Through this process, the
company is reaching directly to the
customer – which will help better
monitisation of its digitised collections. “The progress is encouraging,”
says Mehra. “We are also in the process of creating mobile apps called
‘Saregama Classical App’, which can
be downloaded across the Android
and iOS platforms. Arrangements
are in place with all major Telcos for
offering its catalogue.”
The advertisers are major customers of the company. Often they
are keen to play old hit songs in the
advertisements to help them easily connect to the customers. The
company, which once pioneered in
acquiring new film music, is now
looking at the area again seriously.
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in revenue and `12 crore as profit
last year.
Philips Carbon Black (pcbl), the
other major industrial unit of the
group, has gone through a major
reformation process internally. The
largest carbon black manufacturer
in the country has been tackling
high import costs, currency depreciation and competition from Chinese imports during the last three
years and it had lost the leadership
position to Birla Carbon. After the
management team overhaul, the
leadership now rests with Kaushik
Roy (formerly managing director,
Apollo’s Rubber plantation), who
has been appointed managing director. “The company has been dependent on imported raw material and
it had only one supplier, from US,”
says Roy. “We have added many suppliers in the last few years and now
we have multiple suppliers.”
Tallest transmission towers in the country
PCBL’s Mundra plant mostly exported
But they are expansive, with T Series,
Sony Music, Zee Music being some
of the key players acquiring right for
film music.
While music contributes 65 per
cent of the company’s turnover from
sales, licensing fees and royalty, television serials contribute the remaining 35 per cent. Saregama is working
with Sun tv, Life ok and Doordarshan
and some of the popular national
television shows, produced by Saregama, are Savdhan: India Fights Back,
Jab Jab Bahar Aaye, Stree Shakti and
Police Files. “Building out direct consumers’ services was a good move. In
the new digital platform, the company’s massive catalogue will create a
special position,” says Sridhar Subramanium, president, Sony Music.
Mehra plans to use the power of
technology and reach Saregama’s
music to every corner of India’s hinterland and even to Indians overseas, through apps. The company
has reported gross revenue of `188
crore with a net profit of `15.60 crore
for 2014-15, as against `173 crore
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Coveted customers for PCBL
Roy is focussing on the internal efficiency and cost management mechanism that includes cutting currency
hedging cost to half (from `105 crore
to `50 crore) in 2014-15 on a market capitalisation of `465 crore and
a profit of `12.64 crore – up from a
` 86 crore loss the previous year. “We
have got back to our number one
position in the carbon black industry again and control 35 per cent of
the `6,000 crore carbon black market
today,” Roy adds.
Currently, pcbl has a production
capacity of 472,000 tpa across four
plants – at Durgapur in West Bengal; Kochi in Kerala; as also Palej and
Mundra in Gujarat. It generates captive power at each location, totalling
76 mw. The company has more than
17 variants of products – for rubber
grades, as also for non-rubber applications, such as paints, plastics, inks
and a few food grades.
Carbon black, an essential chemical used in rubber compounds,
also gives tyres their colour. Almost
80 per cent of carbon black production is used in the tyre industry. Ceat, mrf, Birla Tyres, jk
Tyre, Goodyear, Bridgestone, etc,
are among the biggest coveted
customers of the company.
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Plantation has no synergy with the group
“pcbl is the largest producer of
carbon black in the country,” says
Anurag Choudhary, ceo, Himadri
Chemical. “It has a presence in multiple locations and also produces speciality carbon that gives it an edge
over others”. Himadri Chemical, the
third largest manufacturer in the
country, produces 120,000 tpa of
carbon black.
pcbl’s Mundra plant is its biggest and newest unit, spread across
72 acres and making 140,000 tpa of
black. It is the highest yield plant of
the company, with a capacity utilisation of 85 per cent. And 70 per cent
of its product is exported. “We generate 22 mw of power, of which 16 mw
is from waste heat recovery,” says
Milind Sawant, unit head.
“pcbl produces super quality
black, using the latest technology,”
says Akash Taware, vice-president,
materials, Ceat Tyres, a Harsh Goenka
company. “The company has a high
degree of customer orientation focus.
It also has the ability to address and
solve issues raised by customers.”
“pcbl is our preferred global supplier,” concurs Tejpal Garhwal, head,
purchase, Goodyear India. “The
company employs a good team to
take care of its domestic and export
markets. Quality has never been an
issue with it.”
Carbon black feed stock from
crude oil is the basic raw material
for pcbl, whereas China uses mainly
coal-based oil, which makes a huge
cost difference. With the crude oil
prices having reduced in recent
times, there is now hardly any price
difference from China’s products.
However, China controls almost 42
per cent of the global carbon black
production. So, it is important for
pcbl to look beyond India. “We were
busy with consolidation this year.
Now that it has been done, we plan
to look for expansion in the domestic market and overseas. A facility in China is also on the radar,”
Roy says.
Internal split
The Kochi-based `385 crore plantation company, Harrisons Malayalam ( hml), a listed entity, is still
jointly owned by the two brothers.
The company, which has 10 rubber and 13 tea estates, has been vertically split among the two brothers
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internally, each as a strategic business unit (sbu). Both have separate
teams looking after the individual
business interest.
A legal separation procedure of
the company is in the court and may
take some time. Meanwhile, Sanjiv Goenka has resigned as chairman from the board in February, to
be replaced by pcbl’s Kaushik Roy as
director, hml . Roy now functions as
ceo, hml - sbu a, which is the rpsg
unit. The group has got six tea gardens, covering an area of 2,760 hectors, which produces 6 million kg tea
and 3,000 tpa rubber from five rubber
estates. These are mostly sold to makers of tyres, tubes, etc. It also makes
ctc and orthodox tea, 50 per cent
of which is packed and sold to the
domestic and export market, while
the rest is sold through auction. The
company owns brand like Harrisons
Gold, Mountain Mist, Surya, Lockhart, etc, which are mixes of black,
white and green teas. Besides tea
and rubber, the company also produces pineapples and a wide variety
of spices.
This plantation is important for
Harsh Goenka too, for procuring
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B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
Quest, the first luxury mall in Kolkata
rubber for Ceat Tyre, but it does not
have the synergy evidenced in rpsg
group’s business profile. The investor community has to wait to know
the future of the company but not
before it is formally separated by
the court.
The group’s growth in the last five
years has given Sanjiv Goenka enough
cash flow, which can be leveraged for
charting out plans and ramping up
the group’s business through acquisitions. “We are planning to expand in
non-capital-intensive and less-government intervention-businesses, to
strengthen our bottom-line further,”
says Sanjiv.
“As a businessman, Sanjiv is
highly intelligent and intuitive,” says
Harshavardhan Neotia, chairman,
Ambuja Neotia group. “He exhibits good leadership skills too. He is
able to spot opportunities and work
towards them. As a friend, I found
him caring and helpful.”
“Sanjiv became the youngest president of cii at the age of 39. During his tenure,” adds Sanjay Budhia,
managing director, Patton International, who has observed Goenka
closely during his cii days. “cii passed
many benchmarks in those days – be
they national or international.”
Sports, too
A keen sports enthusiast, Sanjiv
bought Atletico de Kolkata of Indian
Super League (isl), partnering Spanish club Atletico de Madrid, Harshavardhan Neotia, Utsav Parikh
and sports icon Sourav Ganguli last
year. He is the principal owner of
the team. The team won the inaugural isl title, beating Kerala Blasters in
Mumbai last year.
img-Reliance announced plans
for the isl, a franchise-based league
modelled on the Indian Premier
League (ipl) T20. The tournament
started in September 2014. “I wanted
to be associated with sports. I tried to
get Kolkata ipl team through auction,
but Shah Rukh Khan’s bid was higher
and, so, I lost it. Kolkata is typically
associated with football; so, when
the isl opportunity came last year,
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I went for it,” says Sanjiv proudly.
But break even for the investment is
likely to be 5-6 years.
Sanjiv socialises with a close group
of friends and families. He loves
watching Hindi movies and listen to
music to de-stress himself. Passionate
about cooking, he loves to make Italian dishes for his family and friends.
When in the city, Sanjiv likes to
spend time with his family. Preeti,
his wife, organises Stylefile, a fashion
extravaganza, to promote new artists.
His son Shashwat will soon marry
long-time fiancee Shivika Jhunjhunwala, while daughter Avarna
is married into the Jain family of
the Inox group.
Sanjiv has taken the group a long
way. If he continues in this fashion, the company is likely to reach
great heights during the next decade
or more. Only then will the quality
of the next generation be tested, as
the old generation fades away and
Shashwat comes to the fore.
u SAJAL BOSE
[email protected]