When radicalism was imperative...
...the group failed to acknowledge it, and is today paying the price for ignoring it

They came; they blossomed and then... just faded away! That has been the story of the Siyaram Poddar group. Once praised for its achievements in paper, rubber (tyres) and textile industries, the Poddars are now battling-out against the toughest competitors they could have ever faced. With a brand like Siyaram’s, the group had been a household name for every Indian during the 1980s, but with India opening up its markets to the global players, the Poddars are continuously under tremendous pressure of competition in the textile industry, and not only from global players, but from the Indian players as well, with global nexus. Although its BKT brand of tyres – made by the group company, Balkrishna Industries Ltd.– still enjoys a good reputation in the European markets, the overall picture (for their rubber and paper industries), when all markets are considered, does not paint a very rosy picture. Incorporated in June 29, 1978, and with 66 indigenous looms, Poddar group’s flagship company – Siyaram Silk Mills Ltd. took the group to new heights. The company managed to achieve a landmark turnover of Rs.1 crore in the very first year. In the year 1980, the company went public with an initial public offer of Rs.5 million, which was oversubscribed. The next decade also marked a dream-run for the group with newer plants, expansions of older ones and exports. But, liberalisation in the early 1990s and change in fashion trends towards ready-made garments spelt trouble for the company and the group as a whole.

Though the Siyaram group has consistently introduced newer brands like Oxemberg and brought in the foreign brand J. Hampstead to India, they all have failed to do the trick for the group. Even their most hyped-up brand ‘Mistair’, launched in 2002, seems to have succeded in creating minimal impact as the gross sales of Siyaram Silk Mills has dropped to Rs.3.40 billion for the financial year 2004-05, from Rs.3.54 billion during the previous year. The same problem is also faced by Govind Rubber Limited (GRL), another group company of the Siyaram-Poddar group. Founded in 1980, GRL manufactures tyres with the brand name International. The company lived its golden days till the liberalization of Indian markets and since then, it’s all about survival and not growth. Its financial data since 2000-01 only shows a deceleration in earnings with gross sales of the company falling to Rs.2.1 billion for the current financial year 2005-06.

Simply stated, the critical problem with the Rs.12 billion group was radicalism. They had traditional strategies but that was certainly not enough. However, at present, Balkrishna Industries Ltd. (which, being established in 1961, is actually one of the oldest companies in the group) is the only entity that’s fighting hard to keep the group’s flag flying. Also unlike other group companies, its financials have shown considerably high growth rates over the last few years. But pitiably, one above-average firm, does not a growing group make. Considering the Siyaram Poddar group as a whole, one can only say that the sharp competitive edges of modern market dynamics found a sitting duck.

Another one bites the dust...
Escorts could have ruled India's telecom industry; but they failed, and how

Here's to another classic example of how diversifycation, if not handled properly, can be disastrous. Yes, it’s the Escorts group we are talking about here, a group considered once as one of the great Indian business families that also had the knack of spreading wings into different sectors. Clearly, all this went off very well till the nineties, but somehow, everything the clan tried their hands thereon seemed to turn to dust. For instance, how could one even imagine that a foray into telecom sector could be non-profitable? Well, ask Escorts and they’ll show you precisely how they did it while others were making fortunes.

The group’s history dates back to the year 1944, when H. P. Nanda and his brother Yudhistir laid the foundations of the group by setting up Escorts (Agents) Limited in Lahore. Later, both of them moved-on to Delhi and under serious financial constraints set up Escorts Agricultural Machines Ltd., which dealt with the marketing of tractors and farm equipments. They got a franchise from the global giant Massey Fergusion and soon emerged as the leader in the Indian tractor industry. It was much later in the year 1954, when H. P. Nanda set up his first factory – Goetze (India) Ltd. – that marked the entry of the group into the manufacturing sector. In 1961, Escorts set up a manufacturing base to manufacture tractors with a technological collaboration with Ursus of Poland. During that decade, the group burgeoned into an industrial group with collaborations with Ford Motors of US and Yamaha of Japan; and in the year 1969, Escorts Tractors Limited came into being. The year 1983-84, H. P. Nanda denied Swaraj Paul’s attempt to takeover Escorts, a victory that he earned against formidable opposition from the Indira Ghandhi government and the Reserve Bank of India. But this was one spurt of patriotism of the Nandas towards the group and its businesses. Well, what followed later, only saw the company slip towards worse.

In the nineties, H. P. Nanda secluded himself from the day to day management of the company and the second generation of Nandas hit the scenes, with Rajan Nanda taking charge of the majority of the group. Rajan started the diversification spree and led the group into the telecommunication sector. Escotel, a joint venture with Hongkong’s First Pacific Company, got the license to operate in Western U.P., Haryana and Kerala. But without proper capital funding, this decision turned out to be a disaster. Moreover, the agri-business was going through a rough patch due to successive monsoon failures, thereby, leaving the company starving for funds. The entrance of Reliance with a more economical CDMA technology proved to be a death blow to the company. Finally, Escotel business was sold off to Idea cellular at a loss of Rs.1.76 billion. This took a heavy toll on the whole Escorts group. Today, the group is debt-ridden. From two-wheelers to capital goods divestment, from profitability to gasping for air, within business group, another one bites the dust.

Name one business they’re in...
...and we’ll tell you how they’ve failed in that; Dalmias flounder regrettably

Being the pioneer or a trend-setter is not always a matter of pride. Take a look at Dalmia Group and you’d vouch for the truth. Incorporating the group in 1932, founder Ram Krishna Dalmia sparked-off the trend of family feuds in Independent India by first splitting-off with the Jains in 1952. Then followed the all-critical split within the family where the kingdom was divided amongst Ram Krishna’s seven sons in 1983. Today, the only entity that has gained substantial proportion is the legacy that was passed on to his son Vishnu Hari Dalmia, which was further passed on to his sons Sanjay Dalmia and Anurag Dalmia. The group’s flagship businesses are GHCL Ltd. (which has textiles, retail and soda-ash production) and GTC Industries (which manufactures cigarettes). Besides these, the group has also forayed into sectors like ITeS, health, telecom, hardware & cement. Yes, but even this diversified business group is nothing but an entity that has failed to thrive post-liberalisation, lady luck and vision both seem to have abandoned this company and the overall Dalmia empire withered away from public gaze. Sanjay’s move to buy UP Cement Corporation from Mulayam Singh’s government in 1991, proved wrong as the succeeding Kalyan Singh snatched it back the following year. Dalmia sought restoration through politics, rather through business moves, and this in itself proved to be a step too far, as his concentration was diverted from becoming a successful corporate king to a politics ‘rent seeking’ activist! He stayed in active politics till 1998 when his business was nothing but dormant. By the time he returned to business, recession hit, and his group’s annual revenues had dried-up to just Rs.5 billion (1998-99). Furthermore, their ‘PageInfo’ business was rendered obsolete by mobile phones. Then came the year 2005 and more than a decade after the economy was liberalised, the group finally realised that it was time to go global, and so it happened that the Dalmia group acquired two companies overseas for a sum of $43 million – a textiles company in US and a soda-ash unit in UK. While many might call this a ‘turnaround strategy’, there’s still a lot to be desired. GHCL suffered a fall of 9.41% in annual revenues during 2005. Ailing Dalmia Healthcare, with its handful of ayurvedic formulations, cannot be expected to rock the world. Then there is the famed Rs.1.95 billion GTC Industries, which, after giving ITC a run for their money a decade back, is lying flat. In 2005, the company suffered a 9.12% fall in annual earnings indicating a downhill ride for the tobacco major. In response to anti-smoking regulations imposed by the policy makers, Sanjay’s only answer is that some alternatives are being test-marketed in India.

The major flaw when it comes to the Dalmia group is that its growth has always come in weak bursts. It’s surprising that despite being in textiles, retail, soda-ash, tobacco – industries that are considered cash cows and high growth, at least in India – the Dalmia group has shown very less gumption to become world-class. Will the group change the way they operate in the future? We don’t have the answers, they do, and they’ve not been talking... for quite a long time now...