Chennai: Chennai’s business landscape is dotted with blue-blooded business houses, some of which can trace back their history at least a hundred years, but even among them, the TVS Group stands apart.
The group came into being in 1911, when the then 32-year-old T.V. Sundram Iyengar gave up his timber business and started running a bus service in Madurai, Tamil Nadu. Legend has it that commuters would set their watches by the arrival of the buses.
There are other legends associated with the group as well: about the sheer quality of the auto components many of the groups companies would make (many went on to win awards, including the prized Deming medal for quality, manufacturing’s Oscar); about the prudence of its financial services firms; and about the conservatism of the managers.
The last is a generic quality associated with many south Indian business groups of TVS’s vintage, and it is telling that even a young member of the current generation of the family (the fourth) subscribes to this theory.
“I believe that the third generation of TVS were excellent managers, but they lost that entrepreneurial, risk-taking spark that characterized the earlier generations,” says Krishna Mahesh, 38, chief operating officer of Sundaram Brake Linings Ltd, established in 1976 by his father, Mahesh Krishna.
Photo: Hemant Mishra/Mint
Indeed, under the third generation, TVS was an early entrant in several businesses, including organized, or modern, retail (supermarkets branded Stop & Shop, if you must know), consumer durables (washing machines in partnership with Whirlpool), software (Sundaram Information Services) and hardware. Among these, the businesses that have survived haven’t exactly set the market on fire.
“I feel it is incumbent on the fourth generation to revitalize that flame and take TVS to new heights,” says Mahesh.
Suresh Krishna, chairman of Sundram Fasteners Ltd; Venu Srinivasan, chairman of Sundaram Clayton Ltd; and Gopal Srinivasan, chairman of TVS Electronics Ltd and TVS Capital Funds Ltd—all third-generation members of the TVS family—didn’t want to participate in this story.
Until 1991, the government regulated everything, and “the TVS Group and other companies from the south always played by the rule book and never tried to grow aggressively like their north Indian peers”, says Abdul Majeed, leader of the automotive practice at audit and consulting firm PricewaterhouseCoopers (PwC) India. And when the markets opened up, TVS, partly because of its risk-averse nature and partly because the group wished to steer clear of businesses that require political leverage, didn’t enter areas such as telecom, he adds.
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That’s a theme that recurs while discussing TVS or other hoary Chennai-based conglomerates such as the Murugappa Group or the Amalgamations Group (Mallika Srinivasan, widely seen as the heir of this group, is married to TVS’s Venu Srinivasan).
“In TVS, making money alone was not the prime factor, and growth was pursued in a manner that would protect the interest of all stakeholders—employees as well as shareholders,” says R. Dinesh, another member of the fourth generation of the TVS family, and the managing director of TVS Logistics Services Ltd.
Yet, grow the group has, and in what is perhaps some affirmation of Mahesh’s statement, the last five years have seen it double revenue from around $3 billion to $6 billion. It has also started 23 new companies in this period, taking the total number of group firms to about 56.
In some ways, the TVS Group is not so much a group of companies as it is a group of groups run by brothers and cousins.
For instance, Venu Srinivasan runs Sundaram Clayton, which is the holding firm for TVS Motor Co. Ltd, which, in turn, is the parent of a clutch of subsidiaries.
And Suresh Krishna runs Sundram Fasteners, which also has a bunch of subsidiaries.
Yet, even a casual perusal of the large companies will indicate the extent of cross-holdings with TV Sundram Iyengar and Sons Ltd (the holding company of the group), Sundaram Industries Ltd and Southern Roadways Ltd being large shareholders in most. Despite this, the members of the family have managed to carve out their own domains and if there is any discord, they have managed to keep it private.
Together, the brothers and cousins run a group that makes two-wheelers, nuts, bolts, brakes, fasteners and tyres; distributes trucks and cars; and which has also diversified into logistics and financial services. Of these, auto components alone contributes around half the group’s revenue.
And it is a business that has become increasingly complex and global, according to Srivats Ram, managing director of Wheels India Ltd, the maker of wheels for trucks and cars. Ram, 42, started off in the company nearly two decades ago, assisting his father Ram Santhanam.
The challenges are stiffer, too. Volatility in currencies, sharper commodity cycles that affect raw material prices and competition from Chinese low-cost manufacturers are some of these, says Shobhana Ramachandran, managing director of TVS Srichakra Ltd, which manufactures automotive tyres. Ramachandran is the first woman in the TVS family to head a company. Also involved in the business are other women from the fourth generation of a family in which they have traditionally steered clear of business.
Arathi Krishna heads Sundram Fasteners and is the second daughter of Suresh Krishna, who founded the company in 1966. Lakshmi Venu, daughter of Venu Srinivasan, heads the US operations of Sundaram Clayton. Krishna declined to comment. Venu didn’t wish to participate in this story, although she did speak to Mint.
If dealing with this complexity and uncertainty requires more aggression than the group has displayed in the past, then the current generation has it, according to Bala Balachandran, director of Kellogg School of Management, Northwestern University, who also runs the Great Lakes Institute of Management in Chennai. The fourth generation of the TVS family is a different breed and not averse to taking risks because of the expertise it has gained from the previous generation and overseas education, he adds.
Some have even worked elsewhere.
Krishna Mahesh of Sundaram Brake Linings and Harsha Viji, 36, who recently took over as managing director of Sundaram Mutual Fund, worked at consulting firm McKinsey and Co. in the US.
Much like auto parts, the mutual fund business, too, is in the midst of a crisis. Globally, investors are less interested in risk and equity as an asset class, says Viji.
Still, the group is ready for the challenges, says Ram. “Risk-mitigating strategies have been in place for the last two years so as to improve our ability to better manage downturns in the economy,” he adds.
“We need to go further in translating consumer needs into engineering specification so granularly and in such detail that we can guide the vehicle manufacturer to help them set the right specifications for drum, calliper and friction (the three interacting components in a brake system),” adds Mahesh.
Meanwhile, the fourth generation is always looking for new opportunities.
Indeed, the difference (between this generation and the last) could be the desire to grow faster because there are more opportunities available now, says Dinesh, who trained as a chartered accountant. And interestingly, the company he heads, TVS Logistics, is the first in the group to tap private equity (in 2008, Goldman Sachs invested Rs.100 crore in it).
In April, US buyout firm KKR and Co. LP invested Rs.242.2 crore in Dinesh’s logistics business as the company seeks to expand in India and abroad, including through acquisitions.
Yet, Dinesh reiterates the group’s enduring philosophy when he says there is a difference between taking risks and being imprudent. “Don’t bite (off) more than you can chew,” he says.
That’s an approach investors prefer, says K. Ramakrishnan, executive director and head of Spark Capital, a Chennai-based investment bank. “Between aggressive growth and creating sustainable value creation, investors choose the latter,” he adds.
Still, the group has to cope with the dynamics of doing business at a time when talent matters more than ever before.
Talent management has become critical for TVS especially because, as Dinesh puts it, “most of TVS Group companies are not present in glamorous sectors”.
Scale matters, too, and “large investments in innovations and cost synergy cannot be established if you don’t have scale of operations”, says PwC India’s Majeed.
While private equity could be one source of capital, public equity could be another, say analysts. An analyst who holds Sundaram Finance Ltd as a long-term stock says that while TVS executives usually don’t talk much to investors, they have displayed a focus on growth and profitability. Sundaram Finance hasn’t got as many bad loans as other finance companies, adds this person, who did not want to be identified. Still, he says, the company could have grown faster had it diluted equity like some of its peers did.
While several TVS Group companies— Sundram Fasteners, Sundaram Brake Linings, Wheels India, Brakes India Ltd, Axle India Ltd, TVS Srichakra, Sundaram Finance—are listed, the public float of these companies is small, an indication that the family is not comfortable with a large public shareholding (and the threat of a possible loss of control).
Umesh Karne, an auto analyst with Brics Securities Ltd, says many of these companies have managed to create shareholder value while they haven’t displayed any aggression in the market. Still, their appeal among investors has dimmed, with exports of auto parts slowing due to a weak global economy.
“Being conservative or aggressive does not really matter if you deliver value to shareholders,” says Viji of Sundaram Mutual Fund. “I believe the TVS Group overall has delivered such value and will strive todo so.”