The high growth recorded by the Indian economy today has vindicated the bold steps taken by Narasimha Rao and Manmohan Singh to end the licence- permit - quota era and set the country on a course of liberalisation. Of course there were apprehensions on the part of sizeable sections of industry over opening up the economy so fully for competition. Industry associations like ASSOCHAM, expressed apprehensions. I remember captains of industry like L M Thapar expressing concern over Indian companies' ability to face competition from global giants in different fields.
Many promises; but not all fulfilled...
There was of course considerable caution in calibrating the opening up. While the banking sector experienced a whiff of fresh air quite beneficial, similar opening up of the power and civil aviation sectors did not produce corresponding results. Remember the open air policy introduced in the 1990s witnessing the quick entry and equally quick exit of a number of private air lines? And also the initial enthusiasm of power utilities like Enron, Cogentrix,,Siemens - MAN Takraf, ABB and Hindujas rushing with impressive plans for setting up large capacity power plants? The loose policy framed by the bureaucrats with little knowledge and exposure to global power utilities led to prolonged negotiation on incentives and concessions, but ultimately produced little results. Enron won a major project, but it was not an experience worthy of emulation as a result of charges of extensive kickbacks.
Several companies that flourished under the controlled conditions could not adjust to the free market conditions. SPIC in the south provides an interesting example: in the 1980s under controlled conditions, SPIC expanded in several directions and emerged among the fastest growing industrial house in the south. A number of associate companies was promoted by SPIC. The activities ranged from fertilisers to a wide range of petrochemicals, electronics, shipping, plantations, logistics, sugar and alcohol, antibiotics… Within years of opening up, SPIC found the going tough and has lost much of its lustre.
One witnessed a similar difficulty experienced by a number of companies set up as joint ventures with well-known multinationals. The MNCs found it advantageous to have the Indian partners to deal with aspects of liaison work with the government, management and marketing. The limitations imposed on foreign direct investment by MNCs in Indian companies (40 per cent) was another major factor, but liberalisation removed much of these restrictions and allowed hundred per cent ownership by MNCs in several sectors. One witnessed several MNCs opting for full ownership rather than continuing as a minority JV partner. Godrej-P&G, Kinetic-Honda, Thapar-Du- Pont, TVS-Suzuki are some of the JVs that witnessed the end of the JV partnerships. In several sectors like automobiles, multinationals opted for full ownership: General Motors, Ford, Hyundai, Honda, Fiat, Suzuki are instances of this. One sees a similar development in white goods sector dominated by the Koreans. The dozens of smaller Indian companies exited this sector.
The few shining successes...
Reliance provided the most interesting example of a large corporate so adroitly adjusting to the new, vastly different era. There were many who pointed to Reliance registering massive growth by an adroit management of the controlled conditions of the pre-1991 era. By sheer audacity of building global-sized capacities for a range of products with strong technologies and brilliant capability of project implementation, the Ambanis emerged much stronger in the post-1991 years. Think of RIL conceiving 30 million tonne refineries, more than three times the size of the largest capacity refinery owned by the public sector and building it in record time! Think also of the ability of Ambanis to tide successfully over the partiality of the government to the public sector oil companies, supporting the latter with massive oil bonds and not deciding on increasing the prices of petroleum products in line with surging crude prices! And also think of Reliance building strong export markets for petroleum products thanks to its efficiency of converting crude into products with handsome conversion margins! This had enabled the country to witness a dramatic and welcome change: of petroleum products emerging the largest foreign exchange earner! The mega projects that come out of the Reliance group in torrent today cover not just the petroleum sector or textiles but extend to oil exploration, financial services, infrastructure, telecom, power...
Understandably the post-1991 era witnessed a number of companies folding up. In the south NEPC, Maxworth Orchards and Deve Sugars come to mind; in this even MNCs were no exceptions. Thapar-Du Pont became Dupont India; but the 300 year old chemical giant, after battling over fifteen years to establish production of nylon, sold the plant to competition and quit. Peugeot of France likewise opted to quit after spending handsome amounts on the establishment of its car production facility in the country.
In this background the emergence of a few business leaders - new generation entrepreneurs in new business sectors successfully meeting formidable competition from national and international giants provide for a lot of inspiration. IE has selected two of these and presents an account of their growth.
The rise and rise of Sunil Mittal
Bharti Enterprises (BE) headed by Sunil Bharti Mittal is among the most shining instances of corporate successes. Airtel, the Bharti brand has become familiar among rural and urban India. BE has a customer base of 60 million and is already one of the top ten telecom companies in the world. BE is fast expanding into retail. The Bharti FieldFresh farm in Ludhiana is busy experimenting with high productivity in a variety of vegetables. The group is fast gearing up to open a massive retail chain the back office of which will be managed by the global giant Wal-Mart. 
This is a crucial phase of inclusive growth. Sunil Mittal points to Bharti Foundation setting up 1000 village schools. It plans to focus on the education of the girl child in rural areas: at 200 children per school, the foundation plans to provide primary education to 200,000 children within three years and has been making handsome investments to achieve this objective.
Mittal established his first business in 1976. Bharti Airtel today is the largest private integrated telecom company and is one of the top five companies in India with market capitalisation of over $ 40 billion. Bharti is busy expanding into retail, financial and agricultural sectors.
Excerpts from the address of Sunil Mittal at the AIMA Foundation Day on receiving the JRD Tata Corporate Leadership Award:
I graduated from college at the age of 18. I was eager to do something on my own. The options were business or politics.
My family was politically aligned, with my father active in politics. With a small purse, entering business was difficult, but leadership quality comes in times of adversity. 
During my age of 18-23 I developed contacts with Brijmohan Munjal of Hero Cycles. I became a supplier of bicycle components.
Vision and willingness to realise that vision
I spent time in Japan and picked up the business of portable generators produced by Suzuki Motor Co. My stay in Japan enabled me to observe the strong development of leadership qualities of the Japanese. I was deeply impressed by the dedication and involvement of my Japanese guide: after being with me for the whole day, he continued his hard work after office hours. I asked him what made him work so hard. Pointing to the desk of the general manager he said: "I want to be in that desk." There is a strong vision and the willingness to work hard towards this vision.
That made a strong impression on me. I developed a taste for details. Just in time and other commitments helped take Bharti Enterprises to the next higher level.
Harrd work, dedication and vision contributed to the evolution of Japan as a strong economy. I have witnessed the Japanese yen getting strengthened from 280 yens to a dollar to less than 100 yens to a dollar today. This happened through people who worked hard, with commitment, loyalty and attachment to work.
In those times businesses lived or died by policy dictates. There was that big red book. There were trade barriers. I looked at the opportunities in that milieu. We came out with an innovative product: the push button telephone. We introduced this in 1987 and thus started my romance with telecom. It was a great idea to win telecom space. Beetel emerged the largest phone manufacturer after China.
The cell czar...
The second challenge came with mobile telecommunications. I was a rank outsider. We then had a modest turnover of just Rs.25 crore and profit of less than Rs.5 crore. Yet we decided to bid for a mobile telecom licence. I had to fight in the court and needed around Rs.300 crore to be paid as fees. We managed to put that money. Soon India's first mobile call was made by Bharti in Delhi.
I persuaded IIM and IIT graduates to work with us at a time when we did not even have a receptionist! But I had developed the art of persuading people to join us, with a dream and vision of the future. We convinced young graduates that Bharti should be the place of choice for top class professionals. We persuaded them on our cause and ethos,that our business was not just to make money but to take care of the good of the society. And remember the field was dominated by big boys – BSNL, Reliance and the Tatas.
When hell broke loose...
Six years ago hell broke loose. The question was 'when' it will collapse and not 'if'. The price of our share at the IPO of Rs.45 crashed to less than Rs.19. The market cap of Rs.2.5 billion crashed to less than Rs.0.5 billion.
At a crucial meeting at Agra there were two schools of thought. One, to fight with everything we had; or two, lie on the ground and wait for better times. Our survey showed that we would win in Bihar, Ranchi, Kolkata, Kerala and J&K.
Business is all about people. We must deliver the customer the element of joy. We did this with care. Ten months later the company started looking up. Today we have emerged among the top ten telecom companies in the world with a customer base of 60 million. We plan to expand this to 125 million. That would help us emerge as the largest telecom company outside China and the third largest in the world. We believe in enabling young businesses leaders to build global business. We are 40,000 strong and we nurture a professional management with entrepreneurial spirit. We believe in employee welfare as number one priority as happy employees generate happy customers. Shareholders are at the end of the chain. We have created value for all the stakeholders.
Society played an important role in our growth. We will continue to build strong world class businesses, but we believe we must work for some cause. Bharti Foundation has set up 1000 village schools. We focus on the education of rural girls. At 200 children per school we plan to provide primary education to 200,000 children within three years. We are making heavy investments to achieve this objective.
Money is no problem; lack of ideas is - CKR
I notice several traits common in the two business leaders - K Eswaran and, C K Ranganathan - modesty, a yen to experiment, self-made, humble, a hands-on feel of the market and, most importantly, the concern to develop human resources. CKR delivered the first K Eswaran endowment lecture on entrepreneurship under the aegis of MMA. The address was frank and straight from the heart with no attempt to gloss over wrong decisions and failures. 
Excerpts from CKR's address My father Chinni Krishnan was a maths teacher and my mother worked in the administration department of a school in Cuddalore. My father had a strong desire to start a business of his own and set up a small OTC pharma business. He pioneered the concept of packing in single use sachets. He developed a machine of his own for packing shampoo, honey, hair oil...
We are six siblings, four brothers and two sisters. Unlike my other siblings, I was weak in studies and had to take tuitions to catch up. I studied in the Tamil medium and could not speak good English. In contrast, my brothers and sisters were bright in studies and qualified as doctors, lawyer... I fumbled along and passed out of the school with difficulty.
Thank you SBI for forcing us to continue in business!
My father died of heart attack when I was in the second year of my undergraduate studies. My elder brothers were also studying. The family decided to close down the business for want of someone to manage. But we had taken a loan of Rs.2 lakh from SBI and had no money to pay it up. So we were forced to run the business!
Velvette shampoo soon became a popular brand. When I joined the business after graduation I took charge of manufacturing. Life was comfortable. We could afford a car.
I found the workers lethargic, wasting time reading magazines during working hours. I could not take them head on. I even felt business was not suitable for me; but my mother encouraged me saying that I can do it and I was going to do it. I gained confidence. My inferiority complex went away and I did not look back since. I was also convinced that there is a lot to enjoy giving work to many, creating employment rather than seeking a job.
A defining moment – I quit the family business!
I found it difficult to work with my brothers. We differed on principles. We had divergent views. I walked out of my family business when it was doing well. It was a defining moment.
It was not easy doing this. Sacrificing the comfort of an established business (graduating from driving a car to riding a bicycle)! Today CavinKare has nine major brands, distributed through 25 lakh outlets.
I admit none of these steps I took did come out right the first time. I continued to commit mistakes, but learnt from these.
In the order of priority of the stakeholders, I place the customer at the top followed by employees, suppliers, banks and financial institutions, government and shareholders in that order. I believe that businesses that follow ethical practices do well. Innovation and product differentiation are vital.
Chic shampoo, named after my father Chinni Krishnan, introduced by CavinKare in the initial months, had difficulty meeting competition. The market was then offering 7 ml sachet at 75 paise a piece. I attempted to offer 10 ml at 90 p but the customer did not accept it. I dropped the idea and reverted to the old scheme.
I released my first advertisement calling for distributors and stockists. My next ad came after three years!
Differentiate the product…
In a commoditised market we had to differentiate the product. In the initial stages our sales dropped from Rs.50,000 per month to Rs.30,000 and we heard the death knell. Our sales team suggested higher margins to trade which demanded up to 50 per cent. There was a suggestion to dilute the shampoo to afford such high margin. I was firm that quality was not negotiable, that we should continue to give better quality and better perfume.
We decided to offer one Chic shampoo sachet free for a dealer returning five used sachets. Likewise we offered one shampoo free for every 15 empty sachets returned by a customer. School children picked up empty sachets from roadside and dumped these to the dealer! Our salesmen complained that several dealers who never sold a single Chic shampoo sachet offered even a hundred empty sachets! But we persisted and soon found the scheme worked wonderfully well. In a matter of 8-9 months my shampoo was sold at 8 out of 10 outlets.
When sales soared….
We then started advertising over the radio. The script was all made in house. Sales jumped from around Rs.35,000 to Rs.9 lakh per month. Market research showed enormous potential: Shampoo penetration was low. Only fourteen per cent of the population was using shampoo. We felt there was scope for increasing it to eighty per cent. We reached villages in sales van and demonstrated how a shampoo wash gave smooth hair. We convinced users who routinely used soap for cleaning the hair, that it was bad and even costlier than using shampoo. 
We researched and deliberated upon offering a sachet at 25 p. each. That was not viable, but a 50 p sachet was. Some of my colleagues cautioned that sales of the Re 1 pack would suffer. Still we launched it. This product did extremely well. The better quality and higher quantity offered in the Re 1 pack also continued to attract customers. Both the brands grew by leaps and bounds. Chic shampoo today has a 25 per cent market share.
I learnt an important lesson: the importance of paying salaries to employees in time and rewarding them for performance. We added value to employees by investing in training.
We have negative working capital!
Likewise paying vendors in time also ensured getting priority in supplies by vendors as also in good rates. We maintained prompt payment to vendors even if it meant borrowing money at 52 per cent. Through this commitment we became more disciplined and far more efficient. Today we have just a week's inventory! When we get 45 days' credit on supplies, we enjoy negative working capital! From the state of less stock and more raw materials, we moved to getting more credit from vendors and generating surplus cash. Nobody has money problem; it is only a problem of lack of ideas. 
It was not easy to get credit from the banks. It took me three years to get my first loan of Rs.25,000.I could not offer collateral security, but prompt repayment enabled me to increase bank credit in quick time to a crore of rupees, without collateral.
Often an entrepreneur is afraid to keep intelligent men by his side. He fears that he could not send away his accountant because the latter knew all his secrets! Thus he becomes subservient to incompetent employees and shuns competent persons. This is a reason several businesses remain small.
Unconventional distributors...
Another innovation we tried was to appoint distributors away from our line of business. Distributors demand a 15 per cent margin and 30 day credit. The terms are rigid. We experimented with a cycle hirer. My sales team worked with him and ensured he made money; the business grew fast. Today Rajasthan Cycle Mart and Golden Cycle Mart are among such distributors who do well.
We also experimented with developing vendors, working closely with them, persuading them to invest and helping them take back the investment in quick time and invest more. 150 small scale industrial units are supplying to us regularly and everyone is expanding.
We computerised our business early and brought every transaction on record. This helped us tackle unjust demands by sales tax authorities. We strengthened our legal department. We keep our records clean and fight cases, when needed, to resist undue imposts.
The shareholder is the last in the pecking order, but the importance given to others ensures his interest.
I enjoyed challenges. And I believe innovation helps in blossoming businesses.
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