Big business families: New generation seems poised to embrace far wider corporate horizons

The gleaming Chevrolet Impala glides into the driveway of the brown and beige villa-type house in New Delhi's plush Maharani Bagh colony. A liveried and appropriately mustachioed flunkey opens the rear door and the dapper young man eases his stocky frame out of the car. The house is in keeping with the car - and its owner. The huge front garden is dominated by a construction unusual in India - an elaborate hothouse. The expensively landscaped garden starts off near the front gate and then marches impressively up to the roof of the three-storeyed house.The effect is like a three-tiered wedding-cake but nonetheless could easily find a place on the cover of Belter Homes & Gardens. The interior of the house is an exaggerated extension of the outside. Huge indoor plants tower over marble statues and ivory-topped tables as if in benevolent benediction. The billiard table-like rear lawn sparkles under the cooling ministrations of a bank of sprinklers. Compared to the overpowering effect of the house, the name on the front gate is barely discernible, K.K. Modi. Currently a cherubic 41, Krishna Kumar Modi is vice-chairman of Modi Enterprises, the sprawling conglomerate (assets: Rs 135 crore in 1978) that is the fastest-growing family-controlled business house in the country. Barely a kilometre away is another flower-lined mansion in the neighbouring and equally exclusive Friends Colony. The occupant, a young well-built man with tinted glasses and a prominent shock of prematurely grey hair, strides purposefully to a chauffeur-driven, air-conditioned, wine-coloured, 1980 Toyota, fitted with a fridge and the latest stereo system, and is rapidly transported to the industrial suburb of Faridabad. Inside his elegantly designed and spacious office, he lights up a State Express cigarette. Talking to his managers on the phone, he is almost military-like: quick, decisive, even brusque, but at the same time, obsessively professional. In the comparatively short span of time since he got his first job responsibility as purchase manager, Rajan Nanda, 36, heir apparent to the Escorts empire (sales: Rs 200 crore in 1980) has indelibly stamped his characteristic no-nonsense style on the workings of what is considered a top blue chip company of the north-a company that has been consistently racking up an astonishing growth rate of around 25 per cent a year.In Bombay's imposing Industry House, another young man nattily clad in a pinstripe suit starts his long working day. A Hussain, from the artist's 'Horse' series, dominates the room. On the shelves are pictures of the young man posing with royalty -the King of Thailand and President Marcos of the Philippines. His presence in the office is a rare occasion. Most of the time, he is buying machinery in Europe or overseeing projects in South East Asia. At 38, Aditya Birla, the taciturn favourite grandson of "GD", the patriarch of the Birla empire (assets: Rs 1,170 crore in 1978), is making his own corporate waves, spearheading a Birla onslaught into new and uncharted seas. In India, he rapidly restored the sagging fortune of a number of Birla concerns and currently is chief executive of Gwalior Rayon (sales turnover in 1978-79: 186 crore) and Indian Rayon (sales turnover in 1978-79: 35 crore), though most of his corporate efforts are concentrated in the 12 enterprises he has launched in South East Asia.New Breed: Apart from the considerable corporate clout they collectively wield, the three young men have one thing in common: together they symbolise the new breed of business barons, in their 30s or early 40s, who are orchestrating a far-reaching generational change in the hallowed boardrooms of big family-controlled business. Born with the proverbial silver spoon in their mouths, nurtured more often than not in the high-pressure breeding grounds of Harvard and the Massachusetts Institute of Technology (MIT), the young inheritors are the harbingers of a still unobtrusive but potentially far-reaching corporate revolution in India's private enterprise and entrepreneurship.A quick look at the figures shows the vast potential of this generational change. According to the latest estimates, the top 20 business houses, a majority of them family-controlled, accounted for nearly 35 per cent of the total assets of the private sector. Their combined assets spiralled from Rs 1,319 crore in 1964 to Rs 5,119 crore in 1978, an annual growth rate of a steep 20.7 per cent. Of the total assets of the top 80 business houses, family-controlled business - barring the Tata group - comprise about 55 per cent. In large measure, it is the new dynamism injected by the new generation of business barons, operating in a totally different business environment, that is responsible for that growth.Aditya Birla is fast spreading his corporate wings in South East Asia, K.K. Modi is concentrating his efforts on an all-out assault on the vast Indian consumer market, while Rajan Nanda has ambitious plans for matching Escorts' phenomenal success in the engineering field with a similar coup in the fledgling but potentially lucrative energy field. The examples are endless but the message, and the motivation is essentially the same-a driving desire to prove that they are pioneers in their own right, and that whatever they have achieved has been on their own merit and not because of their family antecedents. Basant Kumar Birla, 59, GD's youngest son, insists that being a Birla is not an automatic passport to corporate success: "You can't say you are a Birla and take over a company and run it. You have to prove first that you can do it, and then, like any other executive, you make your own way up."Expansion: The rapidly-expanding Modi group, however, offers perhaps the best example of the effect of the generational change. Since the younger Modis took over, the group has diversified dramatically. The take-off point was in 1964, when the younger members, mainly the late founder Gujarmal Modi's five sons, all in their thirties (the eldest being K.K. Modi) and the founder's younger brother, Kedar Nath Modi, 60, and his three sons, realised the need for importing sophisticated machinery and went in for large-scale technological collaboration with multinationals. In 1964, the combined turnover of the Modi group was around Rs 12 crore. After the diversification process, which embraced new fields like synthetic fibres, chemicals, consumer goods and tyres, the combined turnover is expected to spiral to Rs 500 crore in the current year. They now have ambitious plans for expansion into cement, caustic soda, office equipment, special steel alloy billets (in collaboration with a Finnish firm) and many others for which they are awaiting government clearance.Despite the Monopoly and Restrictive Trade Practices (MRTP) act and the claustrophobic corporate climate created by government licencing and industrial restrictions, most of the younger generation of big business families are, like the Modis, going on for major expansion plans or have already done so. The JK group owned by the Singhania family (assets: Rs 300 crore in 1978) has, in recent years, diversified considerably. From its textile base, it has now gone into synthetic fibres, paper, tyres and tubes, cement, engineering goods, dry cell batteries, chemicals and business machines and spread its corporate tentacles into six separate states in the process.In Baroda, the Alembic group, where Chirayu Amin, 34, a management graduate from New Jersey, United States, has virtually taken over from his father, Ramanbhai Amin, 69, has rapidly expanded its pharmaceutical base into chemicals, glass, textiles, fertilisers and synthetic fibres. The group's Rs 4 crore sales turnover in 1960 jumped to Rs 19 crore in 1970 and is likely to hit Rs 50 crore in 1979. Says Ramanbhai: "Where I used to take blind risks, Chirayu has a more scientific grounding and takes calculated risks."In Delhi, the Shriram group (assets: Rs 220 crore in 1978-79) where Dr Bharat Ram's three US-educated sons, Vinay, Vivek and Arun, have solidly entrenched themselves in the business, is making a major impact in the field of business machines and mini-computers. Vivek Bharat Ram, 34, has just returned from Japan where he has been negotiating a Rs 60 crore joint venture with a Japanese firm for the manufacture of light commercial vehicles. (From left) K.K. Modi, Nusli Wadia. Rahul Rajaj. Vivek Bharat Ram and Vikram Thapar: a natural response to new challengesHis brother, Arun, 39, who looks after Shriram Fibres in Madras (sales in 1978-79: Rs 15.2 crore), is busy setting up a paper plant factory with a 50 tonne a day output. The eldest brother, Vinay, 44, the effective director-in-charge, is negotiating collaboration deals with a US firm for manufacture of sophisticated electronic equipment. The group is also looking carefully at the possibility of exporting management expertise to synthetic fibre plants in developing countries-the first time that the group is venturing into the overseas market. "We are concentrating our efforts at moving into areas of high growth," said Vivek. In Pune, the Bajaj group (assets: Rs 124 crore in 1978) has benefited considerably from the induction of Rahul Bajaj, 42, grandson of Jamnalal Bajaj, the group's founder. Since Rahul took over as effective head of Bajaj Auto in 1968, it has grown into the second-largest scooter manufacturer in the world and Rahul has launched new joint-ventures in Indonesia and Taiwan. The company's Rs 100 share is now quoted at around Rs 1,600.Aditya is not the only Birla member of his generation carrying on the family tradition. Ashok Birla, his cousin and son of Gajanand Birla, controls and runs six companies (New Swadeshi Mills, Indian Tools, Dagger Frost, Zenith Steel Pipes, Tunga-bhadra Industries and Transasia Carpets) which have a combined turnover of Rs 143 crore. In addition, he has set up joint ventures abroad, mainly in Indonesia and Malaysia, and is currently planning a joint venture in Ceylon for a leather manufacturing enterprise. Another young Birla who has already made his mark is Sudarshan Kumar Birla, GD's grandson, who runs four companies (Universal Electric, Western Bengal Coal, OCM and he has recently taken over Shri Digvijay Woollen Mills). Chandrakant Birla, 26, B.M. Birla's grandson, is another Birla who is likely to go places. He is a director of Orient Paper and Hyderabad Asbestos (combined turnover: Rs 95 crore in 1978-79).In Bombay, Nusli Wadia, 36, the suave managing director of Bombay Dyeing, has taken the company from a turnover of Rs 26.6 crore in 1970, when he took over, to Rs 108 crore in 1978. Shashikant Garware, 48, the progressive member of the Bombay-based Garware group, has set up the only polyester film plant in Asia (apart from Japan, of course). When he joined Garware Plastics aged 18, the turnover was Rs 5 lakh. Today it is Rs 25 crore-a growth factor of 500 in 30 years. Garware has ambitious plans on the anvil for setting up joint ventures in Taiwan and Indonesia. Says he: "The younger generation seems to be in it more for the thrill and satisfaction of expansion and achievement. Once you start expanding, you can never stop." With that kind of motivation, the younger generation of business barons seem to have started off with the proverbial bang.Change: One reason for this of course, is that generations must change. The powerful thrust of private industry in the opening years of Independence and into the '50s was guided by men in their 30s and 40s. It is the next generation which is now moving across that mid-life threshold of a man's most productive years. The '70s have been a particularly remarkable period for the passing of executive control to the scions of business families, a trend that will be accelerated in the '80s. In some cases, like the Modis and Tube Investments, the patriarchal figures who launched the business decades ago, have died. In others, like the Birlas and Bombay Dyeing, they have either retired or relinquished day-to-day charge. In most other family-controlled groups, like Delhi Cloth Mills (DCM), Goenkas of Calcutta, Escorts and Kirloskars (assets in 1978: Rs 176 crore) the process is a deliberate one, to groom the upcoming generation for eventual inheritance.But much more important is that the young inheritors are also a natural response to the new challenges of a fast-changing business environment. Ever since the Government, starting back in 1964, began to move against large private business through inquiries into so-called monopoly houses culminating in the MRTP act in 1969, there has been a lively controversy over the roles and merits of family-controlled and professionally managed business.In some groups like the Tatas, the debate was resolved decades ago with the induction of professional managers at the highest levels of decision-making: people who had little or nothing to do with the Tata family. In a contrasting example, the Birlas have remained an integrated family group, managed by members of the Birla family or people wholly, almost feudally, loyal to them. But in between, there is a whole range of responses which throw up a fundamental principle. "For the first time since they started business," says a corporate analyst, "family-controlled business is responding to the challenges by professionalising their own sons, giving them the greatest leeway to use modern, professional methods."Two Poles: The process is an inevitable one, if the corporate groups are to survive. After all, as Indian industry has grown, so has the challenge of the business environment. That single fact of corporate life is represented in an almost graphic way by the two cities of Ahmedabad and Baroda, barely two hours apart by car but separated by a gulf of business ethos which, at times, seems hardly possible in the same, homogeneous commercial soil. While Ahmedabad industry represents the old, the thrifty and the conservative generations which came into their success during the pre-Independence era, Baroda, with its more vibrant modernity, its relaxed attitudes and its obviously greater enjoyment of life, is the younger generation's answer to the contemporary business challenge.Where the older generation competed in a world of freer commerce, buying and selling or manufacture in much more limited markets but with relatively greater freedom of enterprise, the new generation must cope with greater competition, more restrictions, tighter control, fast changing technologies and, above all, rapid movement. "These are challenges which the new inheritors are probably far better placed to cope with than their pioneering forefathers," says a Bombay-based management consultant. No family business could prosper if it ignored the professional culture pioneered m India by multinationals, and did not meet professionalism on its own ground.Coincidentally, the generational change is occurring at a time when the private sector is once again coming into its own. The country's two-decade honeymoon with the public sector seems to be ending. Undoubtedly. approximately Rs 20.000 crore investment has helped transform the Indian economy, especially its infrastructure and basic sectors.But, there is also the undeniable fact that public investment has been cumbersome and inefficient, and has failed miserably to pay its way. Not surprisingly, the role of private industry in national development is slowly being reasserted with cautious reforms intended to improve conditions for businessmen. Minister of State for Industry Charanjit Chanana has already announced several concessions and there are reports that the Government, appalled at the continuing sluggishness of industry, may seek to recast the entire industrial policy resolution of 1956. The Sixth Plan itself has been turned sharply in favour of the private sector, which is now expected to pitch in with an outlay of Rs 75,000 crore, or almost 44 per cent of the total outlay. This is more than the entire outlay of the Fifth Plan and three times as large as the Fourth Plan outlay.Own Way: Contrary to the popular impression, getting to grips with running large corporate units hasn't been a cake walk for the new breed. Certainly, the financial backing they started with helped, but a majority of the young inheritors have charted their own corporate progress. "All I started with was a piece of paper, a licence to set up a textile company. I could easily have joined an existing Birla company but I preferred my own way," says Aditya Birla. He was 21 and fresh from MIT and, as he says: "I made mistakes but I learnt from them. After a while, the money does not matter as much as the prestige. And prestige is a great driving force."Rajan Nanda, who dropped out of college after a year, says he saw it as a challenge. "I knew I had to move fast on my feet and prove I was not just the SOB (son of the boss). I knew I had to get familiar to feel comfortable. Pretty soon, I realised I was ahead of my seniors and ahead of the job in terms of command, knowledge, perceptions and planning." M. V. Subbiah, 42, Harvard-educated managing director of Tube Investments and Murugappa Sales Ltd part of the Madras-based Murugappa group (assets: Rs 49 crore in 1978) is another member of the new breed. A grandson of A.M.M. Murugappa Chettiar, who founded the group, Subbiah is a studious looking young man who firmly believes that the new generation of big business families have achieved success purely on their own steam. "I firmly believe that if any of us went outside, our market value would be greater than what it is today," asserts Subbiah. "Being a family member does help to a certain extent because we grow up hearing business being discussed at the breakfast table. Today, we are professionals who are extremely well qualified."The younger generation in big business families is emphatic about the fact that they are adequately equipped to be where they are today. "We are where we are because we have a certain expertise in a certain field," says Vikram Thapar, 33, currently general manager of Ballarpur Industries and on the board of directors of other companies that comprise the powerful Thapar group (assets: Rs 244 crore in 1978). Vikram, a short, serious young man who favours safari suits and speaks in staccato sentences, is a chartered accountant and joined the business in 1971 as an accounts trainee in Calcutta at Karamchand Thapar, the former holding company of the group. He has been through various divisions in the group before taking up his present post. "Most of our companies are run by professionals, people whom I consider my seniors because I have worked under them, and most family-controlled businesses are operating on the same principle," he says. The Thapar group, which has experienced a phenomenal growth from Rs 136 crore (assets) in 1972 to Rs 244 crore in 1978 has been tightly managed for the last decade by the relatively young Lalit Mohan Thapar, 50, one of the younger sons of the group's founder, the late Karamchand Thapar. His brother, M.L. Thapar, head of Jagatjit Cotton Textiles (turnover in 1978-79: Rs 30 crore) is next in line.The widely-held belief that most of the scions of big business families start their corporate life at the top is largely a fallacy. Hari Shankar Singhania, 48, who has taken over the reins of the many-tent-acled JK group (assets: Rs 300 crore in 1978) joined the business at the age of 18 and recalls that he "was made to sit in the same hall as the clerks and junior officers". He was then rotated from department to department and given what he calls "functional training". Shashikant Garware joined the business right at the bottom on a salary of Rs 250. He worked as an apprentice in every department of Garware Plastics, then a fledging concern. Rahul Bajaj did four years of basic training with Bajaj Electricals and Mukand Iron & Steel at no salary except pocket money from home before leaving to do his MBA from Harvard.Singhania, like most other industrialists, both young and old, interviewed by India Today, affirms that the shift to professionalism is the most important ingredient of the generational change. Many of the tycoons of the older generation launched into business with little more than a brief schooling. The celebrated M. S. Oberoi, 80, of the world-wide hotel chain which bears his name, began as a lowly clerk. His son, Biki Oberoi, 51, was called to the Bar in London and is a Swiss-trained hotelier. Today's inheritors are usually trained in some of the most distinguished universities of the world and, like Vinay Bharat Ram of DCM, even have Ph.Ds. Where the older generation expected an almost feudal, traditional deference and loyalty, the new guard is more concerned with managerial performance. In the past, burgeoning business empires were looked after by hand-picked men, trusted lieutenants who would stand by their benefactors through thick and thin. Today's new chief executives prefer younger professionals like themselves who show results. The new breed are hardfiners in business and better prepared for corporate gambles. "I think we could have grown even faster if my father had been prepared to take more risks," says Shashikant Garware. "He did not like to delegate authority. In our generation, there is a tendency to trust your employees with more responsibility."Sometimes, these qualities add up to an overpowering sense of confidence. "Today, we are number two in the world. In five years time we will be number one," says Rahul Bajaj. "Since I took over, I have worked 18 hours a day, seven days a week. From the start, I decided we would treat the world as our market place."It is perhaps the rapidly-changing business environment that has prompted it, but the most significant generational difference is the approach to management. "My father was an entrepreneur. He started companies but he never ran them," says Rahul. "He was a thinking person but not inclined towards solving day to day problems. I am involved in the actual administration and management of my company. He has a very wide field of activity-political, social, industrial, and business was only one component of it. For me, however, it is the only one of any importance."(From left) G.D. Birla, H.P. Nanda, K.P. Goenka,Dr Bharat Ram and Ramanbhai Amin: overwhelming approval of the shift to professionalismWhat is more, another collective difference is the emphasis on turning away from politics and political patronage. Where the elder Birlas and Goenkas and Singhanias adorned their office walls with pictures of themselves posing with Nehru or Gandhi or others of that ilk. Their sons prefer to hang up trendy works of Hussain. "As far as I'm concerned, I'm totally uninvolved in politics," insists Aditya Birla. "I don't think political power is really necessary. It should only be to the extent that you should avoid being on the wrong side of the Government because, after all, you are looking after the interests of 100,000 shareholders."What does the older generation feel about this change? How do they view their progeny in corporate terms? First of all, there's an overwhelming approval of the shift to professionalism. "The new generation is certainly better equipped emotionally," says Dr Bharat Ram, the bearded chairman of DCM, one of the pillars of the Shriram group, "Their entry into the business has certainly made an impact in that they have new ideas and new projects." Bharat Ram cautions that youth needs to be tempered with experience and says that the independence of the younger generation leads to discussion and argument, even unpleasant arguments. But in some ways this could be a good thing.Singhania, whose sons and nephews are currently poised to take over in positions of responsibility, goes even further in his optimistic expectations from them: "I strongly feel that the younger generation will go even further than their elders have done. They have been exposed to a much more modern way of thinking so they are able to make significant contributions to the thought process and on policy matters."The elder generation also makes no effort to hide its obvious satisfaction at the apparent ease with which so many family businesses are able to make the transition from the old to the young in sharp contrast with, sav, politics where the old cling tenaciously to power. The pride in the voice of B. K. Birla, who heads Century Spinning,one of the brightest stars in the Birla firmament, is unmistakable when he talks about his son Aditya. "Aditya is an industrialist in his own right," he says."There are times when we disagree strongly with him but the decisions are his and so is the credit." Escorts' H. P. Nanda is candid when he says of his son, Rajan and his professional colleagues, "I come into the picture now only when they want me to come in. I operated on hunches, while Rajan has project reports and market surveys at his disposal. "Discordance: Not every large family business takes such an easy-going attitude. Indeed, with the break-up of some well-known corporate groups in recent months- the best-known being the Mafatlals and the Sarabhais- there's a growing discordance. In fact, Keshab Prasad Goenka, the 70-year-old patriarch of the Duncan group of companies (assets: Rs 62 crore in 1978), sketches an apocalyptic scenario as far as his three sons-Rama Prasad, Jagdish Prasad and Gouri Prasad-are concerned. "The day I am no more," says 'KP' sadly, "they will separate and go their own way."There are signs, however, that the family that stays together as a tightly knit group has done better than the ones where there are no direct heirs or where the older generation has not allowed their children to assume responsibility at an early age. The Birlas, for instance, are a close family and though they make their own individual corporate decisions and there are no formal family meetings, their discussions frequently turn to business.The Tata group, on the other hand, which is not so much a family as a large philanthropic trust- JRD, 75, has no children-is in any case owned by charitable institutions rather than family members. It is possible, says a senior Tata executive, that the lack of a strong family leadership has slowed Tata's growth in recent years. Similarly, the Walchand group (assets: Rs 136 crore in 1978), once a leading family business, seems to have got stuck somewhere between Bombay, its headquarters, and Walchandnagar, a small village near Pune. Walchand Hirachand's brother Lalchand, 78, now heads the group but his sons and nephews seem to have been kept firmly in their place.The group has not floated a new company since 1953 and is still heavily involved in Walchand Hirachand's first love, civil engineering contracts. The heads of all the companies meet every month in Bombay but the tight leash that the younger members have been kept on all these years has obviously handicapped growth. "We keep on asking ourselves why we have not grown as fast as we should have," shrugs Bahubali Gulabchand, Lalchand's nephew. Yet there is no getting away from the fact that when change comes, it will obviously put the younger generation in charge.Success: If there is a lesson in this, it must surely be that family groups which have planned for orderly change and then taken it to its logical conclusion by inducting younger professional managers from the outside have done better than those who have failed to move with the times. In the middle range of big family business, where growth has been possible, the Modis, for example, increased their assets no less than 13.2 times between 1964 and 1978-which, even allowing for inflation, is quite spectacular. Other high fliers have been Khatau (10 times), Kirloskar (9.3 times) and Mafatlal (five times).And, those that have broken free from tradition amply recognise the need not just to give responsibility to the next generation of the family, but also to professional managers. The corporations of the Modis, for example, have expanded so fast that there are now an average of six senior managers reporting to each family member at the top levels compared with one manager a few years ago. "We are now taking managers and putting them in charge of enterprises-a role that was originally being done by one of the family," says K. K. Modi.Dr Bharat Ram sees this process as a difficult one for family-controlled businesses. "If the business expands and there are not enough family members and you fail to realise that you have to protect your investment by getting managers from outside, there will be problems," he warns. Subbiah agrees wholeheartedly: "When these companies were started, even the day to day operations used to be managed by family members. That just does not happen anymore, mainly because of the growth of the companies. If there is a major problem in one particular area, one of the family members will go in and sort it out, but most of the time we are only interested in the overall results." And, judging by the results, the members of the new generation seem poised to embrace far wider corporate horizons than their fathers or uncles, and they are doing so with considerably more panache and style.Published By: AtMigration Published On: Nov 25, 2013 09:54 IST--- ENDS ---

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Big business families: New generation seems poised to embrace far wider corporate horizons

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