GHCL: The new Indian multinational

If you drive almost anywhere in Danville, Va. around Christmastime, you can see the 28-foot-high metal bust of the Virgin Mary and the baby Jesus atop the sprawling redbrick Dan River mill. It costs $10,000 just to mount the 1,200-pound bust each year.

This holiday season it will grace the faded city's skyline for the last time. The mill, which made textiles for a century, has closed, and the bricks will come down. Madonna and child will be donated to a charity.

From thousands of miles away, globalization has hammered Dan River for years. Now it has moved right into Danville and taken over. In January GHCL of New Delhi bought the company--founded in 1882, when the South was stealing textile jobs away from New England--for $54 million.

At the time the $250 million-a-year company had three plants and 3,000 workers in this city of 46,000 on the North Carolina border. Now it has no plants. But at least it will live on, as a hollowed-out virtual corporation.

Globalization is a two-way street. Not long ago few countries were more paranoid about foreign investment, free trade and multinationals than India.

And Indian businesses were tied down by so many rules and so much red tape that they struggled to do business at home, much less abroad. But the far-reaching economic reforms of the past decade have changed that. Now a raft of Indian companies, such as GHCL, formerly Gujarat Heavy Chemicals Ltd., are suddenly free to seek opportunities overseas.

Dan River went bankrupt in 2004, its sheets and towels unable to compete with cheap imports from China. What GHCL wanted was not the factories but the brands, the designers, the distribution network--and the customers. Under GHCL, Dan River has won back customers, such as retailers Bed Bath & Beyond, Linens 'n Things and Target.com, and it expects a positive cash flow by the end of the year. In January it signed Disney teenage star Hilary Duff to put her name on a new bedroom collection.

This is all part of a grand multinational strategy conceived by GHCL chairman Sanjay Dalmia. In July he paid $50 million for Rosebys, a U.K. retailer of linens, bedspreads and other home textiles that tallied $200 million in sales last year. He says he's in talks with chains in Italy and France and is on the watch for U.S. retailers that come on the market.

The production side of this strategy is already in place. Dan River's design department in New York conceives a product, GHCL's mill in Gujarat produces and weaves the yarn, a plant in Pakistan dyes it, factories in Pakistan, Mexico and elsewhere supply the packaging.

Then the towels, sheets and the rest are shipped to Danville, where they're sorted and sent to stores. "From concept to consumer, it's all in one chain now," says Dalmia.

That this vertically integrated textile company is being assembled from a base in commodity chemicals is not so strange, given its country of origin. It is not uncommon in the insular capitalism of India to see one conglomerate with an empire that stretches from tea

to cars to consulting. GHCL started out in the business of making soda ash from salt and limestone. Soda ash (a.k.a. sodium carbonate) is an ingredient of detergents, glass and myriad industrial chemicals.

That core business accounted for most of GHCL's $161 million in revenue and $22 million in profit for the year ended Mar. 31. Dalmia continues to expand that operation with the partly completed purchase in the past year of two Romanian soda-ash companies. That still leaves GHCL a midsize player in the global soda-ash business led by Solvay in Belgium and FMC in the U.S. No matter.

A smaller operator can make money in soda ash--or steel or glass--if it buys assets cheaply enough.

You get assets on the cheap by buying moneylosers. In 2003 Dalmia started experimenting with his new license to go global by purchasing a small moneylosing call center in Albany, N.Y. called Colwell & Salmon. He installed Sanjay Purohit, an Indian who was working in the U.S., as the chief executive.

Last year it contributed $2 million to GHCL's pretax profit on revenue of $24 million. Now Dalmia has Purohit running Dan River. Purohit, 41, jets between Danville, his family in Texas and business meetings around the country, all the while keeping two secretaries working separate shifts, one in Danville and one in New Delhi.

GHCL financed its recent purchases with $80 million of convertible bonds paying 1%. To continue the textile expansion, it plans to spin off textiles into a separate company and use its stock in acquisitions.

For that matter, the parent's stock would be a pretty good currency these days, having roared ahead on the Bombay Stock Exchange from 80 cents at the beginning of last year to $3.86 today. At that price the shares are going for 26 times expected earnings.

At 62 Dalmia is undertaking something of a second career. He started the family company in 1983. For years growth came in fits and starts. Frustrated by the vagaries of the Indian bureaucracy, the barriers to seizing opportunities and often a lack of funds, he was resigned to running a provincial outfit that just puttered along. Now he finds himself hurrying to make up for lost time and thinking big as he taps investment banking, legal and accounting expertise worldwide.

Dalmia certainly doesn't fit the profile of an international corporate chieftain. For one thing, he leans toward socialism. In 1996 he served a one-year term in the upper house of Parliament as a member of a socialist party.

"I wanted to see if I could do any good [for people] if I was in the government but realized that because of the bureaucracy, I could do a much better job as a businessman." He's a vegetarian, an ex-smoker and a health fanatic, lecturing anyone he meets for transgressions as slight as drinking a diet soda. "I do yoga every day, and that has given me a lot of inspiration and ideas," he says.

Married with no children, he does philanthropy as a leisure activity. He runs outdoor camps for asthmatics and a rainwater conservation project in the state of Rajasthan along the western border. He also operates two schools for mentally retarded children from poor families.

Globalism is not a popular theme in Danville. Ubiquitous sights around town are "Closed" or "For Sale" signs on buildings, one a recreation center for mill employees. The Dan View Restaurant, a popular diner, has lost 5% of its business, and the customers who are left are plenty upset about what's happened.

"Our local economy was centered on tobacco and textiles," says Mayor Wayne Williams. "First we saw the tobacco industry erode, but we never imagined that the textile industry would die, that our key employer would declare bankruptcy." Now the town will take whatever it can get. With the remaking of Dan River nearly complete, 210 of its jobs will remain in Danville.

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