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Surajeet Das Gupta |
April 17, 2004
Catch C Sivasankaran in one of his introspective moods and ask him whether he made money selling the ISP and broadband business of Dishnet DSL and pat comes the reply.
"It was a no profit-no loss deal. We invested over Rs 320 crore (Rs 3.20 billion) in the business. I sold it for Rs 270. I have no reason to complain."
Arch-rivals to this 40-plus maverick, Chennai-based businessman, however, insist that he has struck gold. In a cut-throat ISP market, where most other companies are going under, many of them have been forced to sell their business for a song. So Rs 270 crore (Rs 2.70 billion) is nothing to sniff at.
But that is deal-making, Siva Sankaran style. You make the big bucks in some, just about recover your money in another but rarely ever lose money (he once told a friend that he has never lost a deal except selling his 10 per cent equity stake in Sunil Mittal's Bharti Telecom back to him).
This week Sivasankaran was back in action as consummate deal maker -- he wrapped up a 65.4 per cent equity stake in Barista, the coffee chain from Turner Morrison, for around Rs 30 crore (Rs 300 million) (Turner Morrison is promoted by the Delhi-based Amit Judge).
|Siva's recent deals|
|Buys Turner Morrison's 65.4 per cent stake in Barista for Rs 25-30 crore|
|Sells DishnetDSL's broadband and ISP business to VSNL for Rs 270 crore|
|Agrees to sell 33 per cent stake in|
Tamil Nadu Mercantile Bank to the
Nadars for Rs 130 crore
|Buys 79 per cent equity stake in|
RPG Cellular for Rs 210 crore
On the anvil
|Open to selling its Tamil Nadu and|
Chennai cellular circles for over Rs 2,000 crore. Talking to Bharti, Hutch and Idea
The rest of Barista's equity is held by the Tatas, and Sivasankaran doesn't make any bones about the fact that Ratan Tata is a good friend. Indeed, industry insiders say the relationship goes much deeper -- Sivasankaran functions as an unofficial adviser and is helping Tata execute his ambitious telecom plans.
But if Sivasankaran barges into new businesses he is as ready to shed old businesses with equal elan. Close on the heels of Barista, Sivasankaran also announced last week that he is open to selling his GSM cellular business in Tamil Nadu and Chennai -- with a rider: he must get the right price.
As he points out, just before heading out to Frankfurt from Mumbai to attend a meeting: "If someone gives me over Rs 2,000 crore (Rs 20 billion) I will surely consider it. I want at least ten times of EBIDA. But the offers are only for Rs 1,000 crore (Rs 10 billion)."
He does, however, admit that he is talking to virtually all the top telcos for a deal: Bharti, Hutch and Idea.
For the time being, it's the coffee business that is attracting Sivasankaran's attention. So what plans is he brewing? It's simple: he wants to turn the Barista business strategy on its head.
Under financial strain owing to its expensive, mainly company-owned-outlet expansion strategy, the coffee chain has been shutting down unviable outlets, keeping a close tab on opening new stores and consolidating its business.
But Sivasankaran is preparing for a major expansion, this time through the franchise route. "I will make Barista the Starbucks of India," he says.
"I want to expand the number of Barista outlets from 100-odd currently to over 3,000 in the next 36 months. There will be a Barista even in Business Standard." He hopes to invest over Rs 120 crore (Rs 1.20 billion) to bankroll this reality.
He is also keen to turn Barista into an international brand to reckon with: plans are afoot to expand its international operations from three countries to over 100 in the next few months.
That is not the only change that he will bring to the Barista table -- he also is preparing a blueprint to expand its menu. Sivasankaran wants to offer a range of snacks that are available in five star hotels only. He sees no reason why falafal or sushi cannot be served at a reasonable price.
Sivasankaran also plans to leverage his coffee-vending business (through the Fresh & Honest brand) which has a large corporate clientele.
For instance, he says, Barista and Fresh & Honest can now make consolidated purchases of coffee beans and the bigger volumes will fetch a better price. And volumes he will surely get: he plans a massive expansion of his vending machines business too, from 1,300 to 6,000 in the next few years.
But he is clear: Barista will continue to be positioned at the upper end of the market (the guy who spends over Rs 100) while the cash generated from Fresh & Honest would be used -- well, believe it or not, for charity.
Says Sivasankaran: "We have a turnover of Rs 50 crore (Rs billion) from this business and make Rs 12 crore (Rs billion) as profit. But this money is for charity to run government schools in Tamil Nadu."
Whatever the plans, the Barista deal is a good example of Sivasankaran's business style. He has an uncanny ability to spot a new business (whether it is computers or telecom and coffee) and enter at a time when most others fear to tread.
He builds the business for a few years, creates value and sells it for a profit, moving on to other interests. As a former close associate of Sivasankaran says: "I am sure he already is thinking of a buyer to whom he can sell Barista at a premium."
Those who know him say that he has two potent weapons in his arsenal. One, he is a tough negotiator who can extract the cheapest price from his vendors or when he is buying a business. Two, he is a maverick who can think out-of-the- box while running his business (he once thought of developing an electronic data machine that would measure a person and send the data electronically to tailors like Saville Row).
Says Pramod Saxena, former head of Motorola India with whom Sivasankaran has undertaken many business deals: "He does his homework before coming to the table, knows the weakness of the guy with whom he is negotiating and is able to drive down prices by promising volumes."
Saxena says he prefers to pay cash upfront to vendors rather than go for credit lines so that he can negotiate with them from a position of strength.
For instance, Sivasankaran recently negotiated an over 50 per cent cut in equipment prices on behalf of a leading CDMA operator by successfully pitching a US multinational against a European giant.
Says an insider in the deal: "He figured out that the European company was new in the CDMA equipment business and was desperate for orders. So he promised them a large volume and a big entry into India provided they cut prices by more than 50 per cent." They did and the US multinational had no option but to follow suit in order to get some part of the pan-Indian order.
His ability to rewrite the rules of the game is again reflected in his new telecom venture. Sivasankaran wants to become a pan-Indian provider of Evolution Data Only (EVDO) services -- the 3G mobile phones based on CDMA technology that offer data speeds of up to 2 mbps, which is nearly 10 to 20 times faster than the GPRS phones.
That might sound unusual at a time when most mobile operators are concentrating on providing basic voice services. But Sivasankaran thinks that data-only phones can be a hot seller (though the phones will cost over Rs 30,000 a piece) among corporate customers who want to be enjoy the benefit of high data speeds on the move.
And no, he isn't worried about competing with Reliance which is also planning to offer EVDO. Executives in the company say Sivasankaran has offered to share 15 per cent of the revenue from EVDO services with the government -- if they allow him an all-India licence.
That's not all, incredible as it might sound last fortnight he also applied for GSM licences in eight circles. Wishful thinking, given the crowds in this market? Not for Sivasankaran.
Says K V P Bhaskar, CEO of Aircel, (the company that runs GSM services in Tamil Nadu and Chennai) "We have chosen only those circles where there is a vacuum and the third or fourth player does not exist -- like in West Bengal or Himachal Pradesh. So there is a market that can be tapped."
The investment tag for the project: Rs 1,800 crore (Rs 18 billion). Sivasankaran, of course, is unfazed by the project -- he might even go in for an IPO to finance it.
Whether he will be able to pull this one through only the next few months will tell. Telecom operators say the reason there are no third or fourth operators in these circles is that there are no subscribers to make the business viable.
But his ability to hit the jackpot is not new. From being a fabricator for Madras Refineries in Chennai Sivasankaran got his first break when he met Robert Amritraj -- father of tennis player Vijay Amritraj -- in the eighties and bought over their small computer company, Sterling Computers, and virtually changed the rules of the PC business forever.
The strategy was simple: Sivasankaran dropped PC prices by half and introduced his product in March -- the peak season for computer sales by companies wanting to take advantage of depreciation norms. He also offered a printer free -- a practice unheard-of in the PC business then.
Secondly, in a masterstroke Sivasankaran tied up with Computer Point, the country's first computer retail mart, to ensure he had an all-India distribution.
Sivasankaran's strategy catapulted him amongst the top three in the PC business. But he soon realised that competitors were also beginning to drop prices, so he decided to get out. As he said in an interview: "You are in the business to make money, if it doesn't, close it and get into a profitable venture."
It was this hunger that brought him into telecom. Sivasankaran sensed that the GSM cellular market would take off, so he shifted base to Delhi in the early nineties and bid for GSM licences that were being offered by the government. But after a protracted legal battle (initially he had won licences in Delhi, Mumbai and Chennai) he won the Delhi GSM licence. And in the second round of bidding he picked up three more licences.
But it was the Delhi licence that catapulted him into the big league. Sivasankaran approached an old-time acquaintance in Chennai, Shashi Ruia, and sold the Delhi licence for $150 million (according to telecom industry sources) and there was no looking back.
Says Shashi Ruia chairman of the Essar group: "He was sharp, well informed on telecom and a keen negotiator and a man of honour when the deal was done".
But many point out that Sivasankaran has singularly failed to develop business and many of his grandiose projects have fallen by the wayside. Says a close watcher: "He is not an organisational man and does not believe in nurturing one at all. He looks at each business for a maximum of five years. So the best talents don't join him."
Avers a senior executive of a telecom services company: "There are two views about him. One is that he is a great friend, the other is that he could be a dangerous enemy."
He also has a string of failed projects. There is, for instance, his aborted attempts to get into the broadcasting business (except as an investor in some channels). Sivasankaran tied the knot with Subhash Chandra's Essel group to set up a DTH platform -- but the project never got off the ground.
He also ventured into an ambitious $1 billion undersea cable project with US-based Tycom from Chennai to Guam. But Bharti had a similar project up and running before Sivasankaran could get in.
That's only for starters. Telecom analysts say Sivasankaran had also contemplated making a bid on VSNL but withdrew at the last moment. He worked on a project to set up a 2,500- apartment project in Chennai, set up a high-tech chemicals plant in Cuddalore and buy a tungsten manufacturing facility for the defence ministry. But, says a close Sivasankaran watcher, " all of them were abandoned".
Ask Sivasankaran and he is unfazed by such criticism. That is understandable for a man whose business philosophy which he shared with a close friend could make most other entrepreneurs sit up with amazement. "I have created wealth on my own and I must enjoy it in this life," he had said.
And his deals and his network of friends keep him on the move. One day it is Delhi, the next San Francisco, Frankfurt, Zurich. But whether he is in his swanky home in San Francisco (he bought rap singer C J Hammer's house) or at the presidential suite in the Ritz Carlton in Singapore he's the same: living life king size and striking king size deals.