Mukund Choudhary’s bid to become a global voice in his industry almost didn’t take off.
It was August 2004. The 36-year-old managing director of New Delhi-based Spentex Industries was in Uzbekistan to meet Ruzilov Rahamatullah Ruzikovich, the country’s textile minister. The meeting was to be a prelude to Spentex’s bid to acquire Uzbekistan’s largest spinning mill, Tashkent Toytepa Tekstil. The two men met, and Choudhary realized he had lost his voice; he had forgotten to take an interpreter along and Ruzikulovich spoke no English. The meeting had to be cancelled.
Choudhary stayed on in Tashkent, the country’s capital for two more days and eventually managed another meeting with the minister. This time, he took an interpreter along.
“The first thing I did after acquiring the company was to hire 10 interpreters to help co-ordinate our Uzbek operations,” Choudhary says.
An Indian company making an overseas acquisition (it cost Spentex $81 million, or Rs364 crore) is no longer big news. According to consultancy firm Grant Thornton, in 2006, 152 Indian firms acquired 190 overseas ones at a total cost of $9.9 billion, or Rs44,550 crore. What makes Spentex, and Choudhary, special is that no one expects the Indian textile industry to be competitive at the global level.
Once one of the main drivers of Indian industry, yarn and textile manufacturers have over the past five-six years fallen upon hard times because of low productivity, heavy debt burdens, low availability of capital and a restrictive quota regime that regulated how much they could export.
“The Indian textile sector has witnessed very little productivity increase even though expansion has taken place,” says Prof. K. Rangarajan of the Indian Institute of Foreign Trade. Choudhary thinks otherwise. A textile trader—his family-run firm CLC was in this businesss—he acquired Spentex from the RPG Group in 2003 when the company was posting losses. He has since made seven acquisitions, all of them loss-making textile firms.
“I would like to be known as the person who proved that the textile business could be conducted profitably in India,” Choudhary says. With a total capacity of 57 million spindles, Spentex is already the largest yarn maker in India.
Choudhary’s turnaround-recipe: empower local managers and ensure that they have the resources they need to run the plant. He lays particular emphasis on cost-cutting and aggressive quality and productivity benchmarks. In some ways, that’s not very different from the approach L.N. Mittal used to build a global steel business, and the similarity hasn’t gone unnoticed.
“He (Choudhary) is set to become the (L.N.) Mittal of the Indian textile industry,” says S.P. Oswal, chairman of Vardhman Spinners, a company that competes with Spentex. “He has injected a sense of positivism into the textile community.”
Such praise isn’t too bad for a man who dropped out of college to start at the bottom, as an office boy, in the family firm CLC Enterprises founded by his grandfather Chiranji Lal Choudhary in the 1950s.
That was in 1993, and Choudhary took a shine to textile trading, which was the company’s business. By 2003, CLC was a Rs20 crore entity and Choudhary, who had by then become its managing director, was restless. “I felt we had reached a ceiling in our trading business,” he says.
The same year, a senior executive at Spentex, from whom CLC bought yarn, approached Choudhary with a plea for help. Initially, the assistance was in the form of an advance against future orders but eventually, CLC acquired Spentex for a paisa a share. Spentex was a listed company, then trading at Rs5 per share, and CLC was merged into it. Today, Spentex shares trade at Rs70. “Mukund has an ability to spot growth areas and set systems in place,” says ICICI Securities vice-president Rohit Gulati, who advised Spentex on two of its acquisitions. “His biggest strength is his ability to disregard conventional wisdom.”
That would explain the focus on textiles, loss-making units and overseas acquisitions. Spentex ended 2005-06 with Rs350 crore in revenue and Rs10 crore in net profit. Choudhary estimates that it will end 2006-07 with Rs1,100 crore in revenue and Rs35 crore in profit.
Acquisitions, Choudhary’s preferred route to growth, do not come cheap. Spentex has Rs450 crore of debt on its books, but has been able to keep the number lower than it could have been by selling a 39% stake to Citigroup Venture Capital and other investors for Rs127 crore in 2006.
And Choudhary doesn’t exactly believe in burning money. He drives a Hyundai Sonata, and shares an office in his company’s headquarters in Delhi’s Okhla borough with an executive director.
His managers are already looking for the next target in eastern Europe. “They are working on identifying suitable targets,” says Choudhary. “The cost of production in Uzbekistan is 25% lower and there are no business risks.”
Sixty in Sixty is a special series that we plan to run through 2007, the 60th anniversary of India’s independence. We will introduce you to sixty Indians—both here and abroad—who are not rich or famous. These are people who are making quiet, but important, contributions without seeking headlines, to help make India and, in some cases, the world a better place. We also welcome your suggestions on people whom you think should be profiled in this series. Please send your suggestions by e-mail to email@example.com