It is a challenge in the chemical industry to expand: Vijay Sankar of Chemplast Sanmar
New Delhi: Chennai-based Chemplast Sanmar Group has never chased meteoric growth even though it had opportunities to build businesses in areas such as IT and telecom. One of the reasons for that was strict adherence to its ethics. “If we had bent some corners somewhere, we probably would have been much, much bigger,” said N. Sankar, the 71-year old chairman of the group.
“But, whether we would have been happy, we don’t know,” he said. But, the group has to grow at a faster pace and the responsibility of running the business is now with his son Vijay Sankar, deputy chairman. In an interview, the father and son speak on a range of issues such as their businesses, promoter and management relations, cricket, etc. Edited excerpts:
A lot of people speak about the ethics that your company has followed over the years. In that context, when you look back at your journey over the last 50 years, how would you rate it?
N. Sankar:The group, Sanmar Group, starts from 1972, which is when I struck on my own and acquired Chemplast. So, from 1972, having started off in a small way, we were able to bring in whatever style of management I wanted—conservative accounting, honesty in accounting, way of doing business and ethics being a part of that. As the group grew gradually, we were able to bring that style to the rest of the businesses. Those companies had existing cultures. We took some time to change. The other question is whether strict applicability of our ethical guidelines have helped us... Yes and no! Yes, I mean... if we had bent some corners somewhere, we probably would have been much, much bigger. But, whether we would have been happy, we don’t know. Overall, I am content. As far as the future is concerned, we have to grow much faster.
After liberalization when Indian businesses actually opened, when you look back, what are the things you could have done differently?
N. Sankar: I could have made a big hit in software. I could have started a tyre plant. What are the other things that make money now? You know it is difficult. For example, my brother Kumar was way ahead of the market when it comes to software. He started software much before the boom and he got out, saying it was very slow. We acquired the licence for mobile telephony in Karnataka, Andhra Pradesh and Punjab. Sunil Mittal acquired that and that is his biggest base now. We invested Rs10 crore and now it must be in thousands of crore. But we concentrated on the businesses that we wanted to be involved in. There are so many things that I wish I had done. But, looking back, and saying I wish could have done does not make any... (sense).
In your PVC business, there seems to be a lot of concern around import duty, which is around 7.5%.
Vijay Sankar: Obviously, we would like it to be higher as a domestic manufacturer. There are other negatives that the industry faces. We don’t have a pipeline network that gives us feedstock. We don’t have the advantage of low-cost feedstock like the US or Saudi Arabia. We don’t have the transport infrastructure of China. It is a challenge in the chemical industry to expand.
We would like a level playing field. Since the government is not going to be able to invest in a pipeline network from Mumbai to Gujarat or to South, we think duty is a means to allow us to (reach) a global scale. We want foreigners to come in and manufacture in India. We are just saying that don’t allow them to set up plants in Saudi Arabia, Thailand or Malaysia and bring products here.
N. Sankar: There is another key to it, which Trump has raised, which is national security linked to imports. He says, you can’t depend on Japanese and Korean steel to make American arms. That’s true in Indian sense also. As Vijay mentioned, India consumes 3 million tonnes of PVC consumption, of those 80% goes to the water programme. For some reason, if imports are cut off, where would your water programme be? So, you need to build up domestic capacity of some basic commodities to a sufficient order. We need time-based incentive to manufacture. I have seen the industry going up from 300,000 tonnes a year to 3 million tonnes a year and the last one and a half million tonnes have all been imported. Prior to that, it was all domestic.
Locally, do you have enough demand coming in?
Vijay Sankar: We are 50% import-dependent. We (industry) need a new plant every year of minimum 300,000 tonnes. To give an example, Thailand, which is our neighbour, per capita consumption of PVC is somewhere around 8 kilos per person. Our per capita consumption is 2 kilos per capita. Even if we get to Thailand’s level, we are talking of taking our PVC level to 2.5-3 million to 12 million. Globally itself, we don’t have that capacity to satisfy that, forget domestic. For a developing country, it is a basic product. The per capita (consumption) has to go up. If the country needs to develop, the per capita necessarily has to grow. We are looking at this as a home market. We have done well in the automobile sector, we have been given protection right from the beginning.
Ours is an even more capital-intensive business, we will necessarily create jobs in construction and downstream applications.
Prem Watsa has invested in your business. Will you seek further investments?
Vijay Sankar: We will certainly talk to him as he is positive about the country. He is a supporter of investing and growing.
Is it difficult for founders to let go off things?
N. Sankar: Yes and No. In our case, we still overlap...which is coming down slowly. It is a gradual process. It is difficult to let go. But, you also recognize that if you want the company to grow, you have to let go. We operate like board of directors. We don’t get into the management of the business.
How do you give space to Vijay?
N. Sankar: It is a daily thing. Issues that come up are largely policy-level issues. So, it is up to us to clear it. We talk to each other, but primarily, he is the one driving it.
You have been associated with cricket for so long, but you’ve never been involved in the game commercially.
N. Sankar: Which is why I think we have maintained 50 years of interest. There is no other commercial body, private sector company that has maintained more than 50 years of continued interest in cricket. We have converted our IIT ground to a centre of excellence. This is purely in love for the game. There is no reason for us to advertise. In corporate advertising, there is a limit to what you can do. This gives us a lot of recognition and recall. It helps. Commercial doesn’t attract us.