DCM has survived splits and a hostile takeover bid
Kushan Mitra June 27, 2011Sumant Bharat Ram's office is a nondescript room in Vikrant Tower, a commercial building a few minutes walk from the Rajendra Place Metro station in New Delhi. His office commands a view of the Bara Hindu Rao area, where his greatgrandfather established one of North India's largest cotton spinning mills more than a century ago. The mill has long disappeared, forced out of the city in the 1980s by pollution control laws. Today, cranes tower over the site, where a large multi-use realestate project is coming up. Bharat Ram's company, DCM, has a big stake in the venture, along with the Singapore-based Pure Earth. In a few months, another gleaming glass-andsteel structure will loom over the area, reminding Delhiites of the DCM name all over again, and the legacy behind it.
(Both have been repeatedly voted India's best college in Commerce and Arts respectively by our sister publication India Today, in its annual survey.) Besides, in the days of the controlled economy, DCM was to Delhi what Tata Sons was to Mumbai. But the past three decades have not been kind to DCM. The company was wracked by one of the earliest fraternal disputes of corporate India. It even faced a strong hostile bid for a takeover by UK-based businessman Lord Swraj Paul in the 1980s. The internal wranglings ended with the group splitting twice, once in 1990 into four separate companies, and again in 1999, when Shri Ram Fibres parted ways.
Today, however, Bharat Ram, who is in his early forties, proudly states that the mother company is back on its feet, having posted revenues of Rs 700 crore in 2010/11, and made a modest net profit to boot. "We missed the bus after economic liberalisation," he says. "My family found it anathema to use political contacts for business. People today do not have the scruples we did."
The problems are not all over yet. "We may have the legacy and the heritage, but believe me, we also have all the legal cases," jokes Bharat Ram. He cites the example of an income tax dispute the company is still engaged in that dates back to 1977. Asked to analyse the reasons for DCM's travails, Bharat Ram, an MBA from the University of Michigan, in the US, says the conglomerate had been poorly structured.
"Everything was owned by DCM Ltd," he says. "The holding structure was horribly planned, which made it difficult to raise funds, and damaged the equity structure of the holding company. Then, gradually, the promoters' holding declined." It was this reduced holding that encouraged Paul to make a hostile bid for the company in 1986.
Ironically, DCM was going through a resurgence at the time, after years of internecine battles, thanks to a tieup with Japanese auto major Toyota to make light and medium commercial vehicles. Staving off the takeover - which it succeeded at - proved, however, financially damaging for the company, leaving it heavily indebted. To make things worse, the next partnership with South Korean giant Daewoo to make passenger cars also floundered - despite the success of its models Cielo and Matiz - when Daewoo collapsed in 2000/01. DCM's finances were in tatters, and led to a number of defaults, particularly on a series of partially convertible debentures in the late 1990s.
Things looked bleak, and Bharat Ram, who had begun his career with Toyota in Japan and was working with his uncles and cousins at Shri Ram Fibres - now known simply as SRF - was brought back to the parent company by his father, Vinay Bharat Ram. "In another life, my father would never have been a businessman," he says. Vinay Bharat Ram, grandson of Sir Shri Ram, was academically inclined and taught at iit-Delhi for a while. "As for me, if I had the choice, I would have been a psychologist." He has told both his sons they are free to pursue any career they choose. One of them wants to be a chef.
"My vision for DCM is to make it a $1-billion company in the next decade," he adds. "Then I'll form a trust to run it." Differences in business, he says, do not impact personal relations in the family. "Whatever their differences in the boardroom, my grandfather and my greatuncle (Charat Ram) remained close till they died. Every Dussehra and Diwali, we still celebrate together. We're now around 80 of us."
Today, the fourth generation of the Shri Ram clan is waiting for the fifth one to come of age. Successive splits have led to different branches of the family competing in some sectors. DCM split for the second time in 1999, with one part under SRF now run by Arun Bharat Ram. DCM Shriram Consolidated is headed by Ajay and Vikram Shriram, DCM Shriram Industries by the family of Vivek Bharat Ram, and Siddharth Shriram runs Shriram Industrial Enterprises. Still, while DCM has been through tough times, if all the businesses of the empire Shri Ram founded are considered as one enterprise, their consolidated revenues run into billions of dollars.