Abstract
It is often argued that a business just does not have to grow internally by increasing profits; some experts demur. Evidence suggests that a firm can also grow externally by joining forces with other businesses. Experts tend to argue that external growth of a firm can take place in two ways: one, with a merger when two companies agree to join each other as a team and two, a takeover, when one company buys a majority share in another company on the stock market to have complete power over the new, merged entity. Theoretically, a takeover may take place in two alternate ways. Amicable or friendly takeover is supported by the managers of the company being bought. In contrast, a hostile takeover is opposed by managers, who can try to persuade shareholders not to sell up.
Peter Drucker describes the hostile takeover as ‘the final failure of corporate capitalism’. He noted that such steps may lead to a threat to a good society. His American experience of hostile takeovers might have supported his view. In fact, Drucker was moved to say that ‘although I believe in the free market, I have serious reservations about creating wealth in such a way’.
Late Rama Prasad Goenka aka Ramababu was heavily influenced by Peter Drucker. So, ‘grow externally’ was the mantra of Ramababu. Known as the takeover king, Ramababu religiously followed Drucker’s style. Perhaps Indian culture has something to do with this.
What are the conditions of corporate sustainability? To Ramababu, it means managing business responsibly and sensitively. After all, long-term business successes are determined purely by social, economic and environmental factors.
It all started in the year 1979. After the death of Keshav Prasad Goenka, the businesses were divided among the three brothers. Ramababu was the eldest of the three sons of Keshav Prasad Goenka. He founded the RPG Enterprise in 1979 with largely inherited companies, such as, Phillips Carbon Black, Asian Cables, Agarpara Jute Mill and Murphy India.
In the case of internal expansion, a firm grows gradually over time in the normal course of business. But Ramababu thought otherwise. Quite unusually, he decided to grow externally but followed a risky route to fulfil his goal. Many people felt that he had a knack for predicting the future.
What about his business acumen? It requires an overall ‘helicopter’ picture to understand a business. This possesses many insights, such as, critical interdependence across functions and divisions, and also grasping the short- and long-term trade-offs of business decisions. Evidently, Ramababu had this picture in all his actions.
A true Druckerian, he believed in eight practices in order to qualify as a successful executive, which are: ‘what needs to be done’; ‘what is right for the enterprise’, ‘develop action plans’; ‘take responsibility for decisions’; ‘take responsibility for communication’; ‘focus on opportunities rather than problems’; ‘run productive meetings’; ‘think and say “we” rather than “I”’.
Ramababu’s most powerful inventions are amicable acquisitions (mostly once British-owned companies) that got him the aforementioned epithet ‘takeover tycoon’. He first picked up Ceat Tyres of India in 1981, followed by KEC in 1982, Searle India (now RPG Life Sciences) in 1983, Dunlop in 1984 and Gramophone Company of India Ltd (now Saregama India) in 1986. In 1989, Goenka took control of four more—CESC, Harrisons Malayalam, Spencer & Co and ICIM. Unfortunately, these are hardly studied in Indian business schools, although Asian Business Practices have now strong global prominence in many business schools in developed economies.
Take the example of Batiwala of Kolkata, the Calcutta Electric Supply Corporation (CESC). Set up on 7 January 1897 Kilburn & Company secured the Calcutta electric lighting licence as agents of The Indian Electric Company Limited. The company changed its name to the Calcutta Electric Supply Corporation Limited sometime later. Ramababu took over the company in 1989 and the name was changed from The Calcutta Electric Corporation (India) Limited to CESC Limited. Imagine Kolkata during the period 1977 through 1980. Load-shedding, Mahamichill, poor condition of the roads, people’s unhappiness and poverty were increasing year by year. Even Rajiv Gandhi was not hesitant to call Kolkata a dead city. Many business pundits were surprised by his decision to take over CESC. Many people feared serious labour union problems, strikes in Kolkata, because of takeover by Ramababu. He proved everybody wrong. However, the people of Kolkata believed in him. To quote his Druckerian mantra, ‘focus on opportunities rather than problems’.
In the context of Indian business, he is actually an icon. The path he followed in creating wealth led to employment generation and subsequently India’s development. His role will be remembered for generations to come as a great nation builder and academic thought leader.