Category: BookReview

 

The Man Behind the Wheel by Tim Bouquet is a remarkable book-it traces the journey of the tyre company Apollo Tyres from the lens of three generations.

In narrating the story of Apollo Tyres, the author not only manages to tell the story of the Company but also about India and what it took to succeed in different generations.

The first generation belonged to Raunaq Singh. Raunaq was the rags to riches entrepreneur. He stared his career as a salesman for a steel pipe merchant in Lahore at just 8 rupees a month. His natural entrepeneurship and hustling skills saw him succeed and in a few years he would start his own steel pipe business.

Partition saw the family come to India with the proverbial “only the shirt on their backs”.

Raunaq Singh sold his wife’s jewellery to get into business and did so well that he eventually set up Bharat Steel Tubes Ltd which rode the Green Revoltion Wave and became a money gusher.

Raunaq was a great networker and became the head of all the business associations of that time-an unique feat not accomplished by any other person after that.

His aim was to become like the Tatas and the Birlas-enter various businesses,completely unrelated to each other, using bank funds for financing and political connections to get the license.

Since India was a shortage economy,anything you started did well

He used his political connections to get the license for Apollo Tyres for its first factory in Kerala

He asked his eldest son, Onkar Singh, to run it.

While Raunaq Singh was the “Know Who” generation, Onkar Singh was the “Know How” generation.

A technocrat and a professional,Onkar worked hard to make the business a success and despite union problems, political interference, poor technology etc was able to do a great job.

Eventually, as in most Indian business families, the “Aurangzeb Syndrome” happened.

Both father and son had a falling out- with each wanting to oust the other from the Company.

Things reached to a level that the father suspected that the son will try to drown him while the son suspected the father of wanting to poison his food !

Onkar prevailed and took sole charge of the company before handing over the baton to his son Neeraj Kanwar

Neeraj, the third generation to run the family business, belonged to the “Every Where” generation for whom the world is their playground.

He took Apollo global with international acquisitions etc and is known primarily for his failed bid to acquire Cooper International

That acquisition failed because the Chinese subsidiary in no event wanted to be owned by Indians.

I found the Kanwar family’s experience with Chairman Che, the CEO of the Chinese subsidiary quite instructive:

First Meeting:

Chairman Che: “I have been a good son and the father is good.Now the father is divorcing me and the step father is coming in”

Second Meeting:

Chairman Che: “I don’t care who the step father is; someone needs to tell me who is looking after me”

Third Meeting:

Chairman Che: “I don’t like the step father”

Fourth Meeting:

Chairman Che: “I want to you to buy me out for $550 Million”

As I write this, there are newspaper reports that Apollo continues its global journey (without the Chinese !) by building a greenfield tyre factory in Hungary.

If I have one complaint about this book, it is that the Harshad Mehta involvement in Apollo Tyres is glossed over.

Do read this book to understand Indian family businesses better.

The Book-Dream Big by Cristiane Correa- is about the richest man in Brazil Jorge Paulo Lemann and his remarkable story of entrepreneurship.

Jorge Paulo Lemann started an investment bank called Banco Garantia.He ran it very successfully based on 3 principles-Learn from the best worldwide,meritocracy and incentives.

He harnessed the “super power of incentives” to create the biggest investment bank in Brazil and later sold it to Credit Suissee for $675 Million.

As an investment banker, he started taking over companies and formed a receipe for success which works something like this:

• Buy a bloated company with a world famous brand
• Get your own people in there-incentivise them heavily with v high bonuses/equity for meeting targets
• Cut costs ruthlessly…get rid of 20-30% of the existing workforce
• Laugh your way to the Bank

His 3G Capital used this approach to create the largest brewer in the world-InBrev.Some of his other famous acquisitions are Heinz, Burger King etc

The book is full of characters,anecdotes,events etc from the Brazilian business world which may sound arcane to us Indians.

But some of the lessons I learnt (or relearnt)in this book are :

1. Networking counts. Jorge was an aggressive networker who used his education in Havard to build relationships. He would go out of his way to cultivate contacts. Sports- tennis/fishing etc – is a good way to network
2. Look at the sector, not just the Company. I found it very amusing how Jorge decided to get into the brewery business: “I was looking at Latin America and who was the richest guy in Venezuela?A brewer (The Mendoza family who owns Polar).The richest guy in Colombia? A brewer (the Santo Domingo group,the owner of Bavaria). The richest in Argentina?A brewer (the Bembergs,owners of Quilmes). These guys can’t all be geniuses…it’s the business that must be good.”
3. Look for companies that have frugality in-built in their DNA and focussed on business and market share…these companies are the ones who will decimate the competition
4. Look at how the senior management is incentivised….that will tell you how they will behave
5. Be non-flashy in your own personal behavior. Once Jorge was at a petrol pump when it got robbed.The robbers let Jorge go away, not knowing he’s Brazil’s richest man, as he was driving a 10 year old Passat !

Three examples from the Indian context came to my mind, while reading this book:

• The owners of the Paint Companies in India are all Billionaires….maybe it has less to do with them and more to do with the business !
• Laxmi Narayan Mittal used a similar approach to build his steel empire-used to takeover steel plants,fire the expensive expat managers there and get Indian technocrats from SAIL to run the show
• R K Damani of DMart is using the 3G approach-run a lean frugal operation, incentivize your top managers heavily (most of them are Crorepatis now) and aggressively take market share

Do buy this book to get an international perspective of a great business mind

The book ‘The Target’ – by Shantanu Guha Ray tells the story of the NSEL scam and how its fallout completely destroyed Jignesh Shah, the founder of NSEL,MCX and other exchanges

As readers are aware, the NSEL scam was unique in the annals of Indian markets.The exchange, as per the then FM, was “illegal from Day 1″

Many people lost monies, reputations and even lives in the fallout of the scam.

Would like readers to listen to this audio conversation (in Gujarati) which one of the victims had with Jignesh Shah in October 2013

 

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In the audio conversation,Jignesh Shah makes it clear that he is no way responsible for any defaults…in fact, he is a victim !

The book runs with this line of thinking and makes the startling case that the NSEL scam was a conspiracy to destroy Jignesh Shah.

The book is replete with allegations-feel the author just penned down whatever Jignesh bhai was telling him- such as:

• The NSEL crisis was used by three people-Chidambaram (then FM) , Dr. K P Krishnan (Additional Secy,MOF) and Ramesh Abhishek (Chairman, FMC)- to destroy Jignesh Shah
• The babus of the Finance Ministry wanted to see Jignesh Shah destroyed as he had single handedly challenged SEBI in the courts and NSE in the market place
• The real culprits of the NSEL scam were brokers who fraudulently sold NSEL products to their clients
• The clients were not deserving of any sympathy as they were indulging in “bogus trades”
• Kirit Somaiya led-Investor Grievances Forum- filed a complaint against NSEL but not against brokers because most of brokers belonged to Kirit’s Marwari fraternity
• Ramesh Abhishek,Chairman FMC, did not go after the defaulting brokers because he too is a Marwari

And so on and on.

The Book is one sided and gives Jignesh Shah a clean chit.Nay, it glorifies him by comparing him to John Galt, of Ayn Rand’s Atlas Shrugged (there is one entire chapter on this !)

The Book fails to grasp the simple point that the primary function of an Exchange is to guarantee settlements.If it can’t do so and if it is unable to understand that,it has no purpose being in the stock market business and nor do its promoters.

The author uses a Delhi term ‘Kaam Tamam’ to explain the fate of Jignesh Shah.

I have a Mumbai term for this-‘Encounter Kar Diya’

The Mumbai police used to be notorious for its “Encounters”-where dreaded criminals/underworld elements were bumped off. Sometimes, they used to “encounter” minor criminals in the belief that these criminals can create major problems in the future.

I believe something similar happened to Jignesh Shah.He had already received permissions after much effort, litigation etc to start an Equities Stock Exchange.The authorities believed that if not checked,with his recklessness,sharp business practices and management style, his Exchanges could create ‘systemic risk’ and imperil everyone.

So they used the NSEL scam to “Encounter ” him

Read this book if interested in the NSEL scam.

The term “Intelligent Fanatic” was first coined by Charlie Munger.

He said “If you get an opportunity to get into a wonderful business  that’s being run by an intelligent fanatic and if you don’t load up,it’s a big mistake.”

The term was picked up by Prof. Sanjay Bakshi who at a value investor conference spoke on “The Seven Intelligent Fanatics of India”

The Book –The Intelligent Fanatics Project by Sean Iddings & Ian Cassel-takes off from there and describes the business successes and challenges of eight business leaders from US/UK/Brazil.

In the Indian context,its obvious that betting on the right person early can lead to super results as illustrated by Anand Mahindra’s tweet:

1985. Young Uday Kotak enters my office&offers financing.He’s so smart,I ask if I can invest in him.My Best decision https://t.co/cCfntHkiih

— anand mahindra (@anandmahindra) March 25, 2017

The key question and the one that the Book attempts to answer is whether such intelligent fanatics can be identified early or is it just hindsight bias?

As per the Book,

• The only truly sustainable competitive advantage is a company’s human capital/culture. As the saying goes, “Culture eats Strategy for breakfast”
• A indicator of strong culture is paying employees well,attracting great talent and succession planning from within
• Having a Vision and a Mission which motivates and inspires employees
• Commitment to Integrity
• Commitment to Thrift
• Commitment to innovation-Doing things new in the industry/trade
• High “skin in the game” by owning significant part of the Company
• Keeping things simple…focus,focus,focus
• Dominate a small market before expanding

 

“An Era of Darkness-The British Empire in India” by Shashi Tharoor was inspired by his speech at the Oxford Union Debate which went viral and even got praise from PM Modi.

In the book,the author expands on his speech and explains with an array of facts and figures how the British looted India and how millions of Indians paid with their properties and lives for the enrichment of Britain.

The “Brutish Rule” worked at destroying India at many levels:

• The British Raj was different from the Mughals and other rulers was that they did not spend the collected tax revenues in India-what they could collect,loot and steal- they sent it back home.
• Indian manufacturing was decimated-be it textiles & industry goods-ensuring that India only supplied raw materials.The adage “India missed the Industrial Revolution” is just a myth-Indians were thru rules, laws, regulations, tariffs and brute force were kept outside it
• The British ruled India with only commercial interests in mind-how London could be benefited.As such,no money was spent on education,health etc.The British left India with a literacy rate of 16% and a female literacy rate of 8%
• By pursing a policy of explicit racism,Indians were excluded from high posts in the Civil Services,Judiciary,Army,Police,Railways etc.As Nehru put it, “the Indian Civil Service is neither Civil nor a Service nor Indian”
• By pursuing a policy of “Divide et Impera” (Divide & Rule), the British sowed divisions & exploited differences between Hindus & Muslims,Shias & Sunnis,Dalits & Upper Castes etc whose impact is still being suffered today and which directly lead to Partition
• By placing London’s interests over the populace,the British ensured famines and epidemics went unchecked killing millions of people.In fact, for Indians Churchill is a bigger war criminal than Hitler for causing the Bengal Famine of 1943 where he remarked “The famine was their own fault for breeding like rabbits”

The effects of the British Raj on India can be summed as:

“In 1600 when the East India Company was established,Britain was producing just 1.8% of the World’s GDP while India was generating some 23%.

By 1940, Britain accounted for 10% of the World’s GDP while India had been reduced to a poor,’third world’ country destitute and starving”

I ,for one, believe in Karma and look forward to the day when India takes her rightful place at the top of the table

I also feel tremendously lucky to be born in a free India.

Do read this book if interested in history.