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'I don't regret Shaw Wallace investment'

From the third floor of Al Salaam Towers, a glass and granite Dubai high-rise, non-resident Indian Manu Chhabria manages his Rs 75-billion empire - the Jumbo group. Twenty-seven years ago Chhabria moved from Bombay to Dubai with virtually nothing in his pocket.

Once he established himself in the consumer electronics business, he began to look towards India. Today 50 per cent of his business is based in India spread over seven companies - Shaw Wallace, Dunlop, Mather and Platt, Shaw Wallace Gelatines, Hindustan Dorr-Oliver, Falcon Tyres and Gordon Woodroffe. Despite this, Chhabria has not stepped into the country in the last five years.

In an exclusive interview with Payal Singh Mohanka, the usually media-shy, 55-year-old chairman of the Jumbo group, breaks his silence and speaks about the controversies that surround him.

The eighties saw you being hailed as a takeover tycoon, the nineties found you mired in controversy. According to you what really went wrong?

My dispute with my brother Kishore is the prime reason for all the controversies. He started talking negatively. Since it was Chhabria against Chhabria, people became interested and gave credence to what he was saying. He projected a very bad image, which the press lapped up. And when you get bad press, people form a negative perception. That is how I have become a victim of controversies.

Do you think some business houses in India were also working against you?

Considering Kishore's activities, it is logical that other business houses or our competitors should try to take advantage of this.

Some say your problems began after you started trying to increase your stake in Larsen & Toubro. Do you think there is any truth in that?

No, that was the perception then. But I don't think that is the situation now because my departure from L&T was normal. The press played it up.

Are the coming years going to see you as a fugitive… you have not stepped into India for five years. Is there something you fear?

No. There is nothing like fear. The way things were moving in Shaw Wallace, it was not in my interests.

First, it is wrong that an employees' federation should go against the management. It only happens in India and systems are such that they were given credence. The reality is that the federation has dubious elements in it.

We have proved time and again that it was funded by some other sources, some parties with vested interests. It was also proved that some elements of the federation were blackmailing the company. We have documentary evidence and a part of the executive team too was supporting it.

Then, there were 17,000 fixed deposit holders, who had invested Rs 5,000-10,000 with the company in fixed deposits and they had not been repaid.

Third, our inter-corporate deposits were not being paid. Inter-corporate deposits were taken because it was thought we would be in a position to go in for a rights issue, or a public issue or raise finance from some other sources, but that did not happen. It was never to happen.

Lots of forces were working against us -- employees' federation, my brother... Also, creditors and fixed deposit holders were not getting money. All this led to litigation. This means summons... appearances before the court.

Certain courts allow you not to appear, others insist on your appearances. And, if there were 17,000 Company Law Board complaints, it becomes a situation where every morning I get up and have only courts to visit.

So you feared harassment?

No. There was no harassment. Just these legalities… that I have to appear in the court for those amounts taken by the company.

While recovering the loans, they were hounding the company as well as me. But the loans were given to the company and they presumed that I was the borrower. In truth, it was the company that was borrowing. There is a difference between an individual and a company.

Instead of wasting my time going from one court to another all over India, it was better that I make arrangements to ensure that those payments were made. So, the first effort I made was to repay those 17,000 fixed deposit holders.

Today, I can proudly say that all 17,000 have been paid off and in the last three years, the company has not indulged in any further borrowings.

We also sold our consumer product division to honour our commitments. We then generated such strong cash flows internally that we could pay Rs 1.45 billion on January 31, 2001 to 106 inter-corporate deposit holders. So both our inter-corporate and fixed deposit debts have been settled.

The company's balance sheet is clean, it has no liabilities except for sundry creditors. Now it generates enough cash to meet all its commitments. On the other hand, we were on a winning streak on the employees' federation case.

The Supreme Court also understood and realised that the federation has been funded by 'unwarranted' people and it has given us an order protecting the management and the company's future. All these things took time.

For example, certain debts were bought over by UB to ensure that my entry is blocked. Now, that is not the correct way of doing things: it is these legal hassles that have kept me away.

Your critics say that endless allegations of FERA violations and siphoning off of funds have kept you away.

This is all bullshit! There is no FERA violation; there is no fund-siphoning. This is all what suits the competition. The fact is what I have told you.

You have an empire in India spread over seven companies. How do you manage it from here in Dubai?

They are all headed by chief executives and managing directors. They are publicly quoted companies and now I can proudly say they are run by committed people.

At any point did you feel you were not in control because you were not present?

No, I was not losing control. But at one point in Shaw Wallace the executives were taking advantage. They were trying to act against the interests of the company and the management. But things are fine now.

What would be the size of the empire in India - the collective size of the seven companies?

The companies would be worth Rs 30 billion today. However, with the plans we have for Dunlop, we expect to go up to Rs 40 billion soon.

You don't think Dunlop is a lost cause? The company has stopped operations, the state government is yet to release Rs 100 million in loans against the mortgage of two company buildings. You have put in over Rs 200 million...

We have put in Rs 260 million as per the BIFR scheme. And another Rs 70 million to keep the company's production going. We are now in the process of pumping in more money.

However, we realise that we have paid Rs 570 million to the workers in one year, so the only beneficiaries are the workers and yet they crib the most. And this is the real problem at Calcutta-based Dunlop.

The employees' federation doesn't take a realistic view of the situation. And it does not understand management philosophy.

And how would you describe the management philosophy?

Management philosophy is 'No work, no pay'. Which means they have to produce, which they are not doing. Also, the industry average for tyres is, say, Rs 6 a kg. Some manufacturers even produce at Rs 4.50 a kg. But our production cost is Rs 18 a kg. So to make Dunlop a successful company various approaches are required.

First, modernisation of equipment is needed. Second, we have to ensure that the quality of our products does not deteriorate and the Dunlop brand name remains intact. Third, we have to ensure that our production techniques improve. Fourth, labour force has to be pared with increased automation.

Automation has not been permitted because of want of funds. Labour force is not being downsized either: Rs 60 million every month is being paid as salaries and wages.

Nobody, leave aside me, will be in a position to make this company profitable. Yet, we have taken an initiative, but the high salaries and wages are killing the company.

I think the labour force must understand this and the government must appreciate this. It is not that Mr Chhabria is not doing his best.

Isn't the West Bengal Chief Minister Buddhadeb Bhattacharya pro-industry?

Yes. But what choice does he have? You see, there is a lot of power in truth and what we are saying is the truth. Rs 570 million have been paid in the last year - to Shahgunj and Ambattur. We have a total strength of 7,500 employees. So we are saying if we reduce staff strength by 2,000, the remaining 5,000 will survive.

I am only worried that by the time realisation dawns upon people, it might be too late. So far as my commitment, vision and targets are concerned, I am very optimistic that I will make Dunlop a success. God willing, everything will be all right.

You have denied reports that it might be sold to Sumitomo of Japan. Was there some kind of an alliance you were trying to work out?

We were talking to Sumitomo about giving us high technology for steel radials. All manufacturers are going in for steel radials, so I was talking to Sumitomo for upgradation of the factory and not for selling Dunlop.

Has there been any progress?

They are saying you first stabilise your production. And then you approach us for steel radial technology.

So is that still on the cards?

Yes, that is still on the cards.

Your daughter, Komal Wazir Chhabria, had mentioned at a press conference that the banks were not co-operating with Dunlop. Have things been sorted out on that front?

Banks sometimes act funny. One bank chief, who has now retired, made defamatory comments in the press and we have moved an injunction against him. His brother and his son were working for K R Chhabria.

He would protest against every scheme we propose to the BIFR. You see, there are wheels within wheels. The United Bank of India was acting a bit funny and when we realised this we brought it to the notice of other banks. Now, I think the bank consortium has realised what United Bank of India is up to.

What is the status of the litigation with your brother. There was a patch-up being worked out by your parents?

Yes, discussions with Kishore are on. I am very confident that it will be settled.

Is the litigation over?

The litigation is on hold. Various settlements have taken place; small matters have been amicably settled but not in totality. There are certain basic matters to be resolved, and that too will be done.

And these 'basic matters' are?

For example BDA, Officer's Choice and other brands… the issues that prompted the legal disputes.

You say those brands belong to you?

Those brands belong to Shaw Wallace, so they must be brought back to Shaw Wallace. Officer's Choice is one of the major ones.

You think you will get it?

He has consented in principle. I think he has realised that it is better that we settle this dispute and look to a progressive future.

Your rival UB has also made an offer for three of your popular brands. They have offered Rs 2.5 billion.

UB people cannot control their own company… Their Bagpiper with Herbertsons is under a threat. I don't know why Mr Mallya had this idea of giving a quote. He offered, but never demonstrated the capacity to pay money. Had he done that, I would have taken it up seriously! You see giving offers and not demonstrating money has no validity.

Regarding Shaw Wallace, I believe you are in negotiations with McKinsey and you have appointed them to work out a two-pronged strategy for globalisation and cost-control. What is the progress on that?

A committee has been formed to look into cost control, not only on expenses but also on purchase and production. So that exercise is on. They have found that the situation is favourable.

Globalisation is split in two stages. In the first stage, we must take superiority and control in domestic market. So we should be number one in India first before we embark upon globalisation, which I think is a proper strategy and suits us all. Various meetings and deliberations are taking place now and it is moving in the right direction.

It has been reported that Shaw Wallace has decided to concentrate on high margin brands rather than go for volumes.

No, this is not correct. We believe in mass distribution, mass marketing and volumes of scale. Besides, any company that is working as hard as Shaw Wallace must also have a good bottomline. So it is a two-pronged attack. While, on the one hand, we are talking about volumes, on the other, we are talking profits.

Despite competitors reducing prices you are confident of retaining your market share?

Wherever there is fair competition, price reduction has to be done. Yes, if by reducing prices our penetration of the market increases, we will definitely do it.

Reducing prices because our competition has pared prices gives us no added benefit; it means nothing.

Is Shaw Wallace going to be split into three companies which would handle beer, liquor and other businesses independently?

These will be divisions just to have a very focused approach on marketing. That is the strategy. There is no other plan behind it.

The basic idea is to ensure that one set of people promotes liquor. If we have to go global then this strategy has to be adopted. Also, we have to concentrate on beer where the consumers have been significant.

The multinationals are coming, but they do not yet know what the situation is in India. We could also take up distribution, or import and distribute their products. This is a common practice around the world. These separate divisions are to provide greater efficiency.

Why is it said that you cannot hold on to professional managers. Some of them leave you to join your rivals and at times, it is even worse - there is bad blood and ugly exchanges. Do you think you go wrong somewhere?

You see Shaw Wallace is like an institution that produces executives and gives them experience. Look at the liquor industry - all the competition has been developed on Shaw Wallace's philosophy. And they feel that if they take Shaw Wallace's executives, they will be successful.

Competition feels that bringing in our executives will give them relief and take them on a greater path. It is a compliment to us if they are taking away our people. And in certain cases, we are happy, at least I don't have to pay money to remove people. M D Shukla left, but came back to Dunlop. He was not forced to join back.

Now he has quit Dunlop again and you have a new MD?

Shukla, who was the president of the company, was brought in to open the factory and run it. He has written a letter expressing his health failure. He has become a cardiac patient. He wanted to be relieved from his responsibility. He had neither resigned nor has he left us high and dry. We have brought in a younger person, T C Goel, who looks after Falcon.

But with Ravi Jain, who left Shaw Wallace for UB, there is litigation?

The company has to make some recoveries from Ravi Jain. Thus, the litigation.

Those who know you, say good things and some not-so-good things. Let's take the good things first. They say you are brilliant and dynamic. What do you feel?

People who are in touch with me will appreciate that our approach to business is very simple and clean. We are associated with 27 leading brands of the world. We have 60 per cent of the world's top brands in consumer electronics with us.

Take Sony, IBM, Compaq, Acer, Silicon Graphics, Palm, Nokia, Ericsson, Siemens. Some of these brands have been with us for over 26 years. So they are witnesses and testimonies to our relationship.

Once we establish relationships we don't give up, it is like a marriage. And these relationships are highly sacred to us. But if some people, who do not understand business, want only compromises, life becomes difficult. I can assure you that 99 per cent of my critics have not even met me.

Now the same people who find you brilliant and dynamic say you break commitments easily. How would you react to this?

I don't think that is a correct perception. There is no question of making commitments and not honouring them. Then what good is business? Business without commitment, business without honour - if that commitment wasn't there I would not have paid 17,000 fixed deposit holders. We would not have paid 106 creditors Rs 1.45 billion. This is not correct.

Fifty per cent of your empire is in India, how is your group doing worldwide?

Fantastic, except for Dunlop. If Dunlop starts producing as per our projections, it will be a great company.

Twenty-seven years ago when you came to Dubai from Bombay I believe you traveled in an Air-India jumbo jet and you were so impressed with the size that you decided to call your company Jumbo.

Yes, that is true.

What prompted you to come to Dubai?

(Laughs) What prompted me? In Dubai, even now imports are free. There are no hassles or restrictions. The environment and the business suited my temperament.

So when I came to Dubai, I realised that this is a place where business has no restrictions, there are no taboos and it is a free society, a free economy and I would do well. That gut feeling made me migrate.

What were you doing in Bombay?

I was in the family business, selling radio parts. That was from 1964 to 1973.

Do you at any point regret your investments in India? Do you ever feel you should have focussed your attention elsewhere?

In certain companies, maybe, yes. For example, the Indian rupee's deterioration hurt me. I invested US dollars when the rupee was 12 to a dollar. Today, it is Rs 47 to a dollar. So, though the companies were making profits I incurred exchange losses.

If the same money had been invested overseas, I would not have seen these hassles. I would not have got involved with litigation and I would have been a happier man.

But Shaw Wallace is a company which, I think, can make my dream of going global come true. Thus, I don't regret my Shaw Wallace investment.

When do we see you in India?

Very soon.

This year?

Yes, yes, definitely. Without fail. I am looking for an occasion to visit. There must be some reason for me to visit. Once I find a good cause, I will come.

And what kind of occasion are you waiting for?

Any good occasion, some nice ceremony…

Any new takeover?

Could be. (Laughs) You never know.

Is anything on the cards?

No. Under McKinsey's scheme we are upgrading all our facilities, so our energies are concentrated upon upgradation of our breweries, our distilleries and all our plants.

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