Business Today

Acquisitions have been part of our DNA: Harsh Goenka

Harsh Goenka, chairman, RPG Enterprises, in a free-wheeling, nearly two-hour-long, chat with Business Today's Suman Layak and Geetanjali Shukla discusses his companies' overseas plans.

Suman Layakand Geetanjali Shukla | April 13, 2012 | Updated 17:19 IST

Harsh Goenka, chairman, RPG Enterprises, in a free-wheeling, nearly two-hour-long, chat with Business Today's Suman Layak and Geetanjali Shukla discusses his companies' overseas plans. Goenka, who at 23 headed Ceat, also talks about his business philosophy and how he is looking to "divorce" his companies of the need to have him lobby for them in the capital.

 VIDEO: Harsh Goenka on RPG's global expansion plan

On acquisitions and how they have always been a part of the RPG Group's DNA

We know that many Indian companies are shy of making acquisitions today, till the global economy improves and conditions get better. However, we think this is an opportunity because of the valuations, and there is lesser competition. But what is very important for us is the strategic fit. Acquisitions have very much been part of our DNA. During the 1980s we acquired Dunlop, Ceat, Bayer, and Harrisons Malayalam. But how we made acquisitions at that point in time was very different. I was involved in all of them starting from KEC. The only time I went to the Mumbai High Court and stood in an auction and raised my hands when the shares (of KEC) were being sold. I was also involved in the acquisition of Premier Automobiles that fell through.

When we were acquiring the Bayer shares from the Ghias…my father asked them how much they wanted, asked them for the company's turnover and profit and then said, "Done!" I was amazed. Normally, you'd do some kind of study and calculations. But my father had shaken hands. It was a strange deal. Both parties were unhappy. I was unhappy because we hadn't done any homework and Mr Ghia shocked. He had given a price which he thought we would negotiate, we didn't, and still he didn't look very happy. Many takeover deals came to us at that point of time because with us there were no hassles. That is why my father was given the sobriquet of 'Takeover King' at that point in time.

On growth, investment and overseas plans
Last year our turnover was around Rs 12,000 crore. This year we will be crossing Rs 15,000 crore. We are in the midst of large investments in each of our businesses. We have been investing over the last few years as well. We have invested in a new radial tyre plant in Baroda, which cost us about Rs 700 crore. We will be expanding capacity further. We have acquired land in Ambernath to put up a new tyre plant. We have put up a new cable plant near Baroda at a cost of nearly Rs 150 crore.

Going forward our strategy will be a judicious mix of organic and inorganic growth. Globalisation will continue to be an integral part of our business strategy. We are very seriously looking at a new tyre plant in Bangladesh. We are looking at plantations in Africa. We are growing in the water and railway infrastructure and power distribution businesses. We see these as global businesses. We have got some large orders in Kenya for power distribution. We've got orders for railway infrastructure in countries like Tajikistan.

South Africa is a country that looks interesting to us. We are increasing our presence there in IT and power transmission businesses. We are working towards becoming the number one player in South Africa as far as power transmission goes. We have grown in the infra management business in the US with the Akibia acquisition. We are now actively looking at Europe for infra management space. We are looking at acquiring a tower construction company in the US, which will allow us an entry into the EPC (engineering, procurement and construction) market. We believe that the US is a very strong market for power transmission because the grid is growing old and there is a need for replacement. We hope that in the next few years there will be large orders coming from the US in this space.

RPG Life Sciences is looking to enter the German market through two new customers -Stada and Medac. We have filed for marketing rights in Germany. We have also filed for registrations in other countries like Poland and Greece. Today we are not just looking for opportunities in India, but also in Europe, Japan, US, South Africa and also countries that we were earlier not looking at like South Africa. We found that in these countries a lot of private equity players were invested and they were willing to exit at moderate valuations.

Brazilian market has been very strong for us in terms of power transmission business. Africa is emerging as an interesting place to invest in. We are actively looking at how to grow our plantation business globally. We looked at Cambodia, Laos, and Vietnam earlier and we found that there were issues like good land which was more expensive and not enough workers were willing to stay on in the plantations. So we have now started looking at countries in Africa like Ghana and Cameroon. This is mainly for rubber. For tea we are looking at Kenya.

On Ceat and the acquisition of the brand name
One acquisition that will help us globally is the acquisition of the brand name of Ceat. We had the permission to use it for India, Bangladesh, Sri Lanka, Vietnam and six or seven other countries. But when we were exporting to our primary markets like US and Europe we had to do so under some other names. There is an agreement that Pirelli can use the brand with us for a year we can use it in certain areas, second year more areas will be added and third year it is entirely ours. Ceat is a well-known brand globally. It will give us access - especially with the radial tyres being made in our Baroda factory - to Europe and Latin America where Ceat is pretty well-known. We export to about 112 countries and we are the largest exporter of tyres.

On whether the global shift is more of a geographical hedge
In some businesses there is a limit to how much you can grow and so you move out of the country. For example, in tyres we are not looking for manufacturing in Europe because we don't have the wherewithal or the core competency to do that. We have technology for the developing world, so we are going to Sri Lanka and Bangladesh. The motivation is, for example, in infrastructure where there is a lot of government spending expected in some of the developed markets.

In IT we (India) continue to excel in the software development space, but certain services require near shoring or presence close to the client. Infra management is one such area and we want to be there to service our clients. But there is also a bit of frustration that is building up among all of us about doing business in India. There is a lot of corruption involved in setting up a new factory, acquiring land, getting permissions and etc. In contrast we do find that working in the developed markets is so much more of a pleasure. You have no issues in terms of permissions. More importantly, there is consistency in policy making. There is a limit to the lack of policy making and the lack of decision making, which frustrates and makes you want to say you want to get out.

On whether the RPG Group needs another brand ambassador after the split with brother Sanjiv Goenka
My brother has always played that role. He has always been the so-called ambassador of the Group. He has been the President of CII; he has been on so many committees. I have always spent my time on the operational part of the business, on softer fronts like the HR practices of the Group, which has been my personal passion. I have once been the president of the Indian Merchants Chamber and I felt that it did not give me as much of a kick. To me that was the precursor of being offered the post of the president of FICCI -which at that point would have made me the youngest FICCI president when I was being offered the post about 15 years back.

I found that it is not something that I enjoy. I am not a person who goes to Delhi often and meets politicians. What I want to do is divorce my companies of the need of me having to go to Delhi and lobby. What we want to do is work within the policy framework rather than get too involved in changing it. We don't want to be on the wrong side of the law, we don't want to change the law, and we don't want to influence changing of the laws. It is the group's policy to keep a low profile. If you look at any controversy in the last seven years, you will find that our name has not been dragged into any of it. I don't think that the group needs an ambassador. Look at Sun. It just won the award for the best company. Do I want to be a Sun and do my work quietly? Or do I want to be on every television interview? That is the choice that you have to make.

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