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Family biz: Here come the young guns

May 30, 2005 08:50 IST

Earlier this month, liquor baron and UB group chairman Vijay Mallya announced the induction of his 18-year-old son, Sidhartha, on the board of United Breweries Holdings as additional director.

Simultaneously, Sidhartha was appointed on the boards of three investment companies controlled by the Mallya family. But is he ready for the responsibility? Or is his father merely pandering to his fondness for his son?

Already, there is some grumbling in corporate circles about the elitism of inheritance. "It is unusual for a business tycoon to induct his son in the company board at18, as there are larger issues like corporate governance, company laws, finances etc which a youngster will not understand at the start of his career," says HR consultant Anil Sachdev, founder  & CEO GrowTalent Company.

"Maybe Mr Mallya has given him the title to make him feel comfortable, and responsible, at the same time."

Not that it's unusual for the wealthy to pander to their children who, admittedly, are groomed to take over family-owned companies at a fairly tender age. From admissions in courses abroad to liberal doses of pocket money, plush rentals off campus, a garage of posh cars and the services of housekeepers ensures they're not deprived when away from home.

Agreed, these expenditures are part of their personal wealth -- yet how often companies show constricted bottomlines! Besides, the mismatch between personal wealth and that of their companies seems so often to be increasing.

Part of the process of pampering the younger generation has led to companies diversifying into businesses that don't last -- as happened when Videocon's Venugopal Dhoot's son Anirudh set out to plan entertainment complexes in smaller cities like Nashik, Aurangabad, Surat and Nagpur two years back.

Part of this agenda was sports bars, shopping complexes, art galleries, gymnasia and oxygen bars, besides multiplex theatres. He also started aggressive forays into an online lottery and 24-hour entertainment channel.

Success, however, proved elusive. The online lottery business, for which the company set aside Rs 50 crore {(Rs 500 million) half of which was already invested} and tied up with Reliance Infocomm to source 2,000-odd fixed wireless terminals, never took off.

The multiplex empire is still to take shape. Anirudh remained unavailable for comment, but a company source said the lottery business had been shelved.

"Mr Dhoot (Anirudh) is focusing on the group's export businesses and Hyundai's consumer durables, with which Videocon has a tie-up," he said.

Raaja Kanwar, the older son of Onkar Singh Kanwar of the Apollo group, also began with forays in an online lottery, Lottus, earmarking an initial investment of Rs 250 crore (Rs 2.5 billion) spread over three years. For this, Raaja had procured a licence from the state government of Arunachal Pradesh, since Delhi does not permit the lottery business to operate within its borders.

Raaja must have hoped Delhiites would not be averse to trying their luck in neighbouring suburbs Faridabad and Gurgaon (in Haryana). As it turned out, Dame Luck had other things in mind, and if market sources are to be believed, Raaja is now trying to extricate himself completely from the business.

Something Raaja himself denies, saying Lottus has emerged among the top three players in the online lottery biz, covering five states with over 1,000 terminals. What he will admit is that he is still far from his target of Rs 800-1,000 crore (Rs 8-10 billion) worth of business in the first year.

Raaja's other plans include digital talkies, where another corporate child, DLF's Pia Singh, has already burnt her fingers. Three years back, she wanted to start a series of digital talkies in the NCR. Pia has since turned to developing malls -- giving other developers a run for their money. However, she'd prefer not to talk about her projects just yet.

Sometimes, the flavour of the season backfires, and that is why one should not stray from the core business," says a Delhi-based management consultant. That probably explains the consistent growth Neeraj Kanwar, chief operating officer of Apollo Tyres, has experienced.

Neeraj familiarised himself with finance before joining Apollo Tyres as a manager. Earlier, he had done stints with American Express Bank, Global Finance Limited, and Apollo Finance. Sources close to the Kanwars say that despite being younger, Neeraj was picked to look after the group's core business because he is considered more responsible by senior family members.

Something Neeraj himself hastens to dismiss: "My brother's interest lay in international operations, so he took care of that." Then who decides whether the company should look at increasing exports or increasing sales in the domestic market?

"These are strategic decisions governed by profitability considerations, and not based on personal decisions," insists Neeraj. "I would say we are well co-ordinated in that."

Still others, like Sanjay Kapur of the Sona group, appear more interested in activities outside the company. Despite an impressive CV (Doon School; University of Buckingham; Wharton), his pictures are more likely to be found on Page 3 than in the pink papers, and it's dad Surinder Kapur who's most likely to talk about the future of the company, and of the auto components industry.

Sanjay is more enthusiastic about polo and the Young Entrepreneurs Organisation. "I am the first Indian to have become the president-elect of this global platform," he exclaims; "it provides opportunities to network with one's peers at an international level."

Nevertheless, he started his career as vice president, human resource and projects, Sona Koya Steering Ltd, the group flagship, nine years ago. Within the group, his interest is in IT -- Sona e-Design & Technologies, the engineering design and solutions company, is his baby. Still, as managing director of Sona Somic Lemforder Components, there is nothing substantial that can be called Sanjay's initiative.

Contrary to Sanjay, Vikram Lal's son Siddharth joined his father's company, Eicher Motors, on the shop floor, and now as group chief operating officer, he makes key decisions along with S Sandilya, the group chairman.

"Siddharth may be elevated to chairman after Sandilya retires. Vikram Lal has never been indulgent. I remember his children going to school in buses," says Anil Sachdev, also a former employee at Eicher.

Similarly, textile barons Jhunjhunwalas and Lohias have been brought up in conservative austerity. Riju Jhunjhunwala, for instance, joins his father and grandfather every morning for breakfast, discussing business with them daily.

Riju, now joint managing director, Rajasthan Spinning and Weaving Mills, toyed with the idea of starting a software company, but gave up because the family did not think much of it. He has since been concentrating on the textile business, making forays into readymade garments for exports -- trousers to begin with.

Riju works with three old-timer CEOs as business heads of different divisions. "These people have been working with LNJ Bhilwara for 20-30 years, and they have changed with time. And I will admit I have also changed and adapted to their way of functioning," admits Riju. He seems confident of handling things pretty much on his own.

His friend Vishal Lohia, CEO, Indo Rama Textiles, is more shy by comparison. Following his MBA in the US, Vishal too considered venturing into IT, particularly e-commerce, but was pushed into cost-cutting.

"Since cost-cutting was being effected across the company, I learnt about different divisions and arms," says Vishal. "This year, the bottomline should see a 50 per cent jump," he announces, and asserts that he has total freedom in the day-to-day business.

"That's only in name," says a former employee, adding that O P Lohia, chairman of the group and Vishal's father, remains hands-on.

However, not every corporate child is fortunate enough to be shown the ropes by professionals. Priya and Priti Paul of the Apeejay Surrendra group were left to fend for themselves after their father Surrendra Paul succumbed to a terrorist attack.

While Priya has added and given a new dimension to the Park Hotel chain, Priti started the group's London business and looked after shipping.

Today, Priti has moved on to the creative side, looking after the Oxford bookstore, the Cha Bar chain and the real estate division. Their brother Karan Paul was recently elevated to group chairman and handles the shipping, tea and finance businesses.

Another team of siblings that is managing a good show are the Kinetic group's Sulajja, Ajinkya and Vismaya Firodia, children of Arun Firodia. While Sulajja took a lot of strategic initiatives as joint managing director, Ajinkya is currently general manager, marketing.

"I have managed five major brand launches, including new initiatives such as the introduction of high-end motorcycles like Comet and Aquila," says Ajinkya. Currently, he is working on Kinetic's re-branding, in preparation for the launch of its Italian scooters.

Does this suggest that tycoon brats are more likely than most to have business in their blood? "No," insists Sachdev, "grooming and making them undergo the rigours of professionally managed companies is very important."

As examples, he says Adi Godrej's children were allowed to participate in key decision-making only after thorough training, and so were Rahul Bajaj's sons Rajiv and Sanjiv.

Shefali Munjal, deputy CEO, Hero Corporate Services and daughter of Sunil Kant Munjal, was inducted into the company to explore the group's greenfield projects. Where others have failed, she has not only kept the IT and ITES businesses afloat, but added new ones to the portfolio, a recent one being online insurance for two-wheelers.

There is a general perception that software businesses are lighter than manufacturing. I would say it is the opposite because it is a fast-moving business and one has to keep upgrading," she says.

Vineet Agarwal, executive director, Transport Corporation of India, too started out "at the godown level where we had to mark crates/cartons, load and unload trucks etc".

Sminu Jindal, (daughter of Prithviraj Jindal and granddaughter of O P Jindal), now managing director, Jindal Saw, started in administration, then moved on to finance and was elevated gradually to her current position.

And Pranav Ansal, chairman, Ansal Township and Land Development, the son of Sushil Ansal, was packed off to Russia to expand the company's overseas business. His first project involved the construction of hotels. Pranav was given no fancy designation at the time.

"If you become a top-level person right away, you will never understand the nitty gritty of the company and how it functions," says Pranav.

Clearly, while inheritance is vital in giving that initial leg up, neither attitude nor a chip on the shoulder will do much to enhance business skills -- or do the trick when it comes to attending university overseas, interacting with other professionals in the company, or running their businesses.

"I don't think Azim Premji or Narayana Murthy's children would ever do that," says a consultant. But then, everyone thinks differently. Right, Sidhartha Mallya?

Initiatives

Vishal Lohia: Cost-cutting, quality control, a business model for application of e-commerce to textile products. Partly successful

Ajinkya Firodia: Ten advertising campaigns and over 100 events, promotions and contests. Managing scooter sales in top 20 domestic markets. Still to prove his mettle

Shefali Munjal: Munjal eSystems, which delivers services for integrated business solutions. Up to the mark

Anirudh Dhoot: Online lottery, Hyundai's consumer durables distribution, entertainment multiplexes. Needs to buck up

Siddharth Lal: Began at the shopfloor level, and now calls the shots. Has gelled well with the company's professionals

Sangeeta Singh
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