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The rise and fall of BPL

The rise and fall of BPL
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First Published: Tue, Mar 15 2011. 10 42 PM IST

Analysing the slide: BPL chairman and managing director Ajit G. Nambiar says wrong priorities let the consumer electronics and durables company down. India Today Images
Analysing the slide: BPL chairman and managing director Ajit G. Nambiar says wrong priorities let the consumer electronics and durables company down. India Today Images
Updated: Tue, Mar 15 2011. 10 42 PM IST
Bangalore: In 1995, BPL paid Amitabh Bachchan Rs 8 crore to front a new campaign called Believe in the Best. While celebrity endorsements are routine these days, 16 years ago, the deal was significant for two things.
Bachchan signalled that his career as one of India’s biggest stars wasn’t quite over and would, in fact, revive in subsequent years, besides paving the way for celebrities endorsing everything from shaving foam to cooking oil.
Analysing the slide: BPL chairman and managing director Ajit G. Nambiar says wrong priorities let the consumer electronics and durables company down. India Today Images
For BPL (the acronym comes from its original name, British Physical Laboratories), the endorsement marked its emergence as one of India’s most high-profile companies. That year, the Bangalore-headquartered consumer electronics and durables company had made a group profit of around Rs 120 crore.
Dynamic House, on Church street in Bangalore’s central business district, was the group’s headquarters and the nerve centre from which BPL plotted its spectacular rise. Starting from its core of medical electronics, it expanded into consumer electronics, telecommunications, soft energy and electronic components, with peak group revenue of Rs 4,300 crore in the late 1990s. During its prime, BPL would regularly feature among the top 10 brands in the country.
A combination of circumstances brought this once mighty group to its knees, with the current entity a pale shadow of its former self. The reason for the decline—simultaneous expansion into several unrelated areas of business, lack of financial discipline, the entry of the South Korean companies LG and Samsung and dissension in the family.
This was definitely not the script which T.P. Gopalan Nambiar, now 82 and the well-respected patriarch of the group, had in mind when he set out to manufacture panel meters for the defence forces in 1963. Initially operating from Palakkad in the decidedly industry-unfriendly environment prevalent in Kerala at the time, by dint of sheer hard work and quality products, TPG as he’s widely known, slowly expanded his range to include electrocardiographs and patient-monitoring systems. The 1982 Asian Games, which introduced colour television broadcasts in India, convinced Nambiar to enter consumer electronics.
Nambiar had a preference for collaborations with Japanese companies for technology. Thus, at various points of time, BPL had collaborations with the likes of Fukuda Electric Co. for electrocardiographs, Nihon Kohden Kogyo Co. Ltd for patient-monitoring systems and Gestetner of the UK for manufacturing paper copiers. However, it was the collaboration and eventual joint venture with Sanyo of Japan that stood the test of time.
“Japan dominated the global consumer electronics market at the time, so we were naturally particular about finding a Japanese partner,” recalls son and heir to what is left of the BPL empire, Ajit G. Nambiar. “Sadly, at that time, most Japanese companies were sceptical about even supplying products to India, leave alone coming to India for any kind of technology collaboration.”
Sanyo was surprised BPL was not seeking the kits like every other company, but was asking for transfer of technology to fully manufacture TVs in India, Nambiar said in an email to Mint.
That was a tall task considering India had practically no local vendors to supply most of the components needed to make colour TVs, which was something BPL set out to do. But the entry of LG and Samsung meant serious competition.
“The Koreans, with their relentless focus on customizing products for the local market, cost-cutting and global volumes had a huge edge,” said a former BPL group senior executive who did not want to be identified. “Why, the Koreans have even dethroned the Japanese globally. Today, Samsung which initially copied from Sony, is larger than that firm.”
BPL should have focused on scale by either going global or sold when it could get a good price, this executive said.
But just as competition intensified in the late 1990s, TPG stepped down, handing the reins to his son.
K.S. Jayanth Kumar, who worked with the BPL Group for three decades, including a stint as CEO from 2001 to 2004, disagrees with this assessment.
“Technology was a commodity and we could have sourced it. Where BPL failed was the lack in control on finances,” he said. “There was one milch cow for the group, which was throwing up all the cash, which was being diverted to manufacturing facilities and several new ventures in unrelated areas which, while fundamentally sound, had long gestation periods. The group took its eye off the threat posed by deep-pocketed Koreans.”
Ajit Nambiar said it was the focus on wrong priorities which let BPL down.
“To a great extent, our thinking was ‘inside-out’—products, technology and manufacturing were our priorities. With economic liberalization in the early 1990s, very large global brands like Samsung and LG joined the fray,” he said. “With very large volume global manufacturing bases, these brands were able to put pressure on Indian brands like BPL. Further, rapid technology change cycles created immense market volatility.”
By early 2000s, the market dynamics had dramatically changed across the world. China established itself as the “factory of the world” and this changed business economics globally. In electronics, value creation is to be found increasingly at the two ends of the value chain, Nambiar junior said. At one end is value created by proprietary technology; this requires large and continuous investment in R&D (research and development). Brands such as Intel and Philips extract value through technological breakthroughs. At the other end, value is created through a strong brand that connects with customers.
“For instance, Apple, one of my favourite brands, does extremely well in applying technology to make a difference in the lives of their customers,” he said. “In the middle sits China, masters at manufacturing and assembling electronic products at unbeatable prices but with no brand differentiation; China is the brand.”
Kavil Ramachandran, professor of family business and wealth management at Hyderabad-based Indian School of Business, said BPL didn’t have a clear strategy for growth in consumer durables. Videocon and Onida were faced with the same competition, but were able to come back with a more focused strategy, he adds.
Meanwhile, son-in-law Rajeev Chandrasekhar carved out his own empire using the telecom business of the group, which he had built up. TPG unsuccessfully went to court against his son-in-law to assert ownership over the BPL telecom business. All this meant BPL couldn’t focus on external threats, said the former senior executive cited above who did not want to be identified.
“In business, it is not necessarily nice guys who finish first. A degree of ruthlessnes and ability to take hard decisions is required to win. Manufacturing was run by TPG’s brother-in-law. Rajeev, the son-in-law, ran a different part of the empire,” he said. “The group was seen as nepotistic with Malayalees being favoured. So, when the family fortunes frayed, the family was not united.”
Jayanth, an Indian Institute of Management-Calcutta alumnus, who closely worked with TPG for three decades, refutes this.
“Whenever an entrepreneur starts off, it is usually family and friends who are the first who join. BPL was run professionally and attracted topnotch professionals,” he said. “A combination of certain factors led to the group’s decline and it would be incorrect to attribute it to a single person or a single reason.”
Asked about the split between the Nambiars and son-in-law Chandrasekhar, who now runs his own Jupiter Group and is a Rajya Sabha member, Jayanth who continues to be a board member of BPL Techno Vision said: “Obviously, TPG feels sad about what has happened. Who will not if they were in his shoes? The empire which he built through so much hard work has diminished. Whenever I meet him, we don’t discuss family issues. But my own understanding is that they have reconciled, if not exactly resolved their differences.”
Prof. Ramachandran of ISB says in BPL’s case it didn’t have a good family governance mechanism. In the case of companies such as Godrej and Dabur, even if they didn’t have clearly articulated or written constitutions, they still did practise some form of family governance.
A family-run business works when its members act in concert, but in BPL’s case, Chandrasekhar and Nambiar were on different paths. The impact then becomes far more severe when there is external competitive pressure on the business, Ramachandran said.
Chandrasekhar declined to comment on BPL, preferring to keep his comments general.
“As a general issue, family-run companies have a challenge of responding to changes to them in fast-changing product groups like IT, consumer electronics,” he said by the telephone.“Family-run businesses do find it difficult because of the way they are structured.”
BPL’s partner Sanyo itself underwent several challenges and was eventually bought out by Panasonic. Meanwhile, Ajit Nambiar, who has moved his base to Bannerghata Road on the outskirts of Bangalore, is trying to make a comeback.
Having restructured its business, BPL now intends to focus on core growth sectors: energy, including renewable energy; healthcare, with frontline medical equipment for primary care; home care and lifestyle, with consumer electronics appliances and smart home and security systems. From Believe in the Best it has refashioned its brand promise to Happier Living Everyday. But with a revenue of Rs 119.3 crore and a loss of Rs 2.1 crore in 2010, it’s going to be an uphill journey for the group.
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First Published: Tue, Mar 15 2011. 10 42 PM IST
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