Kolkata: For the past three years, RPG group companies have maintained an arm’s length relationship and worked with each other “pretty much on commercial terms only,” according to vice-chairman Sanjiv Goenka.
Speaking for the first time since he and his brother Harsh Goenka split business interests between themselves, Sanjiv Goenka said RPG group companies from across the ownership divide would continue to work with each other but only on commercial terms.
For instance, KEC International Ltd—a power transmission and cable company controlled by Harsh Goenka—could continue to support Sanjiv Goenka-run power utility CESC Ltd, but it has to bid the lowest to secure contracts. “There are so many other transmission companies that we could work with,” Sanjiv Goenka said, while admitting that KEC was, till now, CESC’s sole partner for laying transmission cables.
Sanjiv Goenka is the vice-chairman of CESC, which generates and distributes electricity in Kolkata and its suburbs. It has plans to expand generation capacity by 7,000MW over the next few years across states such as Uttar Pradesh, Orissa and Maharashtra.
It’s been almost a year since the brothers reached an agreement to split their business interests, but Sanjiv Goenka continues to maintain silence on it, saying his brother was the sole spokesperson on this matter. Instead, as he turns 50, he reflects on the RPG group’s checkered past and says it spent “a lot of time and energy” pursuing growth “recklessly and indiscriminately”. Edited excerpts:
Do you agree with the view that the RPG group has slowed in terms of business expansion?
No. In a developing economy, there are so many growth opportunities that one could pursue. We chased so many businesses, grew recklessly and indiscriminately, but eventually realized that one has to pick the right opportunities. We lost Rs600-700 crore on Ceat Financial alone, and eventually had to sell assets to repay depositors.
In the process, we missed out on a lot of opportunities. For instance, we should have bid for coal blocks more aggressively at a time when there wasn’t so much competition. Some of these were most expensive misses.
For us, the meaning of growth has changed. Growth now means more efficiency. CESC is a case in point. When we bought the company it was in difficulty. But it has improved on all key parameters: plant load factor, transmission and distribution loss, power outage and so on, and is now setting standards for peers.
Your first major assignment was at Dunlop India Ltd, which your father famously said he had bought as a birthday gift for you. Do you think, in hindsight, that Dunlop was one of those ventures that the RPG group should have avoided?
Actually, I think it was one of the better experiences in life. It gave me the first experience of dealing with people who were more capable than me, and more importantly, outside of a typical Marwari set up. It spurred me to work a lot harder. Dunlop was a great learning experience, and in the end I derived a lot of confidence when 43 of the 46 top executives—general manager and above—left with me.
But partnerships haven’t quite worked for your group…
No, not really. At Dunlop, there was a mismatch of culture, which forced us to end the partnership (with M.R. Chhabria, Jumbo group chairman).
How closely is your father, Rama Prasad Goenka, involved with the operations of the group?
We live in the same house (at Goenka Niwas in Kolkata’s Alipore area). So as you can imagine, he hears about everything that’s happening. He continues to guide me on a lot of important things, especially those that I cannot decide on my own.
How often do you have a situation like that?
We had one very recently.
All key companies under your leadership—CESC, Phillips Carbon Black Ltd—are on a comfortable growth path. Only Spencer’s Retail Ltd continues to make losses. What are your plans for it?
It will continue to make losses for at least another year-and-a-half. But that’s alright—things are improving. Sales per sq. ft has gone up from Rs650 to Rs970. Some private equity funds are interested in buying stake in it, but we don’t need a lot of money immediately. Yet, we are considering their proposals. But one thing is clear we won’t yield control of Spencer’s.
So what’s going to be the guiding philosophy for your group?
Think big but with feet on the ground.