I’ll share an anecdote with you. A boy has a dream in which he sees two people walking on a beach — an old man and a child. Intermittently, though, there is only one set of footprints. The boy finds this happens every time he goes through a rough patch in life. In his dream, he sees the old man as God and turns to Him in anger: “You forsook me during the most difficult periods of my life. Why?”God replies, “I lifted and carried you every time you suffered. So you see only one set of footprints then. When all was well, I walked by your side.” This is something I have always believed in my life and this has given me the courage to take the untrodden paths.
I entered business in 1977. We were together as a family at that time [the division with my brother Dilip came about in January 1982]. We had the textile business as well as VIP Industries, and a branded generics pharma business called Kemp & Co. We also had a retail shop in Mumbai — which is how Kemps Corner got its monicker.
Textiles was a difficult business because you could never predict whether the monsoon would be good enough, or if cotton prices would go up. There were too many variables that were not in your control. Then, in 1978, my father acquired a cutting tools business and gave me charge of it — I was pretty young, just out of B-school. Soon after this, he passed away.
After the family division in 1982, the textiles and tools business came to my brother Ashok and to me, and the rest went to my brother Dilip. The textile strike of the same year went on for 18 months and there were continuous losses afterward. Then my brother died of cancer in 1984. It was, perhaps, the most difficult period of my life.
I made my first business decision around that time — I decided to get into glass and we acquired Gujarat Glass in 1984. Until then, I was not the face of the company and was known to be a mild fellow. To enter a new industry and invest at a time when everything was totally at a loss was a bold decision. Many people warned me that I would regret it but I stuck to it. If you really believe in something, and you have the courage and conviction for it, then, once you have decided on a course of action, take it through to its completion, irrespective of what others might say. You have to take both good and bad times in your stride. It can never be all good or all bad. So, you have to keep yourself detached.
After the glass acquisition, we also acquired a textile company in Karnataka. But by 1987, I had decided to move into pharmaceuticals. Aspro Nicholas was up for sale. It was a multinational and at the time, if you had to pay in foreign exchange, you needed several approvals from the ministry of finance. There was also a Controller of Capital Issues (CCI) who would determine how much you could pay for a share. That valuation was always skewed in favour of the buyer and it was also a very conservative valuation. There was a way in which people would compensate for that: you could pay something, which was the official price, and you could pay something beyond that abroad. But I did not have the resources to pay abroad. Therefore, we had the challenging job of convincing the CCI to actually give a higher price than they would have normally. It was a rare achievement at the time, but we did it. We convinced the seller that this was the best method, and that it was cleaner and safer.
What worked for us — and what I believe in — is integrity. The seller thought that here was someone who was passionate, was continuously following up on a regular basis and, I guess, they also detected integrity. The seller was a senior director, an old man nearing retirement. He was convinced that we would take good care of the brand and his people, so even if we paid less, it was fine. I think the CCI and the Reserve Bank also felt they should encourage a young person and not always go by established names — it’s the goodness of all these people that helped us.
The contrarian approach
At that time, in the 1980s, all the multinational companies felt that India was not the right place to be for pharmaceuticals. That’s because Indian companies were getting stronger. Till the early 1980s, all the MNCs were the leaders in the industry. Then, Indian companies like Ranbaxy and Cipla started coming in as reverse engineering was allowed. Global companies felt threatened by the lack of patent property and wanted to exit. That is when we took the contrarian approach that this was a good industry.
There are no two businesses more diverse than pharma and textiles, but we took that call. And after we got into pharma, we decided to do something very different from what other pharma companies were doing. If I had grown up as a pharma guy, I would have done what other pharmaceutical companies had done. Their model of growth was reverse engineering, and invest in field force and grow. Our model was to acquire brands. We didn’t have any competition from existing pharma companies in these acquisitions — they felt MNCs were high cost, bureaucratic and not worth acquiring.
In 1993, we acquired Roche. Why did Roche sell to us at a cheaper price than anyone else? When we acquired Aspro Nicholas in India, we said we would not export. If they give you global brands, they don’t want you to export because prices in India are lower, and they also want the quality to be maintained. We did that. We invested in a huge plant to upgrade quality, which was also contrarian. Nobody in the pharma business invests much in fixed assets, but we did. In 1990, we set up a plant that cost as much as the turnover of the company just to bring it up to international standards. When Roche wanted to exit, this played to our advantage. Our next acquisition, of Boehringer, was for free. In fact, they paid us. The reason was that they had some troubles with quality and some huge regulatory issues, and they knew we could resolve both.
Model code of conduct
While I have employed a lot of people, I have also closed down four textile plants employing 7,000-8,000 people, and several pharma plants. In every case, workers have gone happily. Today, you still find pockets of former textile workers raising issues. Ours was the first mill that created an organised business park. We didn’t have a single issue with a single worker. Even in our most difficult times, we paid every worker his due. We also paid all the bankers their full due. So, most times, people used to call us stupid because we did not have to do this.
Some of these values — integrity, humility and fair play — were ingrained in me by seeing my father during my growing-up years.
Also, when you adopt an acquisition-led strategy like we did, you have to keep your ego aside. I think many people overpay because when you make acquisitions, you hog the limelight. Across the world, most acquisitions don’t succeed because the CEO’s ego comes in the way — I have to do this and become numero uno. You have to be objective. If I lose an acquisition, I don’t lose sleep. If I gain one, I don’t go over the moon. Then, acquisitions don’t succeed if you don’t have a deep understanding of the industries, how this acquisition fits into your plan, and how can it create value for you. More importantly, when you have expertise in a particular industry, you know how to value things better than an outsider does. So, you don’t need bankers. Still, that doesn’t mean you will always succeed.
Even during our Abbott deal, my thinking was that I am a trustee for my stakeholders. The definition of a trustee is that you have to do what is in the best interest of your beneficiaries, without looking at your own benefit. I may say that I built up this business but that is my job. I could not justify not doing the deal because we made a calculation: if, for the next 15 years, my business grew at a 20% CAGR of the topline and had an operating profit in excess of 30%, then I would have been equal in value to what Abbott was offering. But that was not going to happen. So, I felt that it was my obligation as a trustee of my shareholders and even employees to sell. When you have that detachment, you actually have a lot of strength.
I can say with some sense of satisfaction that my bold moves have played out quite well. The first was our decision to venture into pharma. The second was our decision to move out of the Roche factory from Tardeo in Mumbai and develop Crossroads, which gave us the confidence that we could be in real estate. The third one, which will unfold in the future, is our acquisition of the R&D unit of Hoechst in the 1990s. Till now, we haven’t seen the effect but, in the big picture, that will change things. The fourth defining move was the sale to Abbott.
I used to be passionate about horse-riding, but I no longer do it — I think I should lose some weight because I feel sorry for the horse. Horse-riding is about teamwork between you and the horse, and this is applicable to business as well. If the horse is in a sour mood, it can bring you to your knees, which happens in life as well. If you are not confident on the horse, the horse knows it; but if you are confident, the horse responds to that as well.
To sum up, I would say, if you believe in something, have the courage to take that decision. Have equanimity in good and bad times. Take the road less travelled. Have the humility to believe in a higher power. You can’t do it all by yourself. You are just an instrument. Have faith in God. Ultimately, there will be somebody to look after you.