The move marks a second coming for Patel, the feisty founder of the company which in the mid-1980s prised open the stranglehold Hindustan Unilever Ltd (HUL) had on the detergents market with his launch of detergent powder priced at an astonishing ₹ 3 per kg, when the cheapest brand available in the market cost ₹ 13 per kg.
As a no-frills, low-cost alternative, albeit one with a catchy jingle, the eponymous detergent hit multinational heavyweight HUL (then called Hindustan Lever Ltd), the maker of dominant detergent powder Surf, hard. Patel’s own humble background and the rags-to-riches nature of his success made him an icon.
It wasn’t until the late 1980s that HUL would get its own back, with the launch of inexpensive detergent Wheel.
Today, Nirma continues to be among the top 15 brands in India in terms of penetration and reach. According to the 2016 edition of Brand Footprint, the IMRB Kantar Worldpanel’s annual ranking of the most chosen consumer brands in India, Nirma ranked 14.
Nirma’s successes peaked in 2004 when its detergent capacity touched 800,000 tonnes, one of the largest volumes sold in the world under a single brand. The company stepped into the toilet soaps market relatively late, in 1990, and but this did not deter it from achieving volumes of 100,000 tonnes per annum.
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Almost as mysteriously as he had appeared, Patel then went off the radar after 2004, a disappearing act that culminated with the delisting of the company in 2010 with the promoters acquiring 36.3 million equity shares of the company.
“As a person, Karasanbhai is very humble and quiet. He has been maintaining an extremely low profile, avoiding any publicity or public interaction. This is especially after a tragedy where members of his family got killed in a car accident. For a long time he held that God had punished him," said Dwijendra Tripathi, a business historian and author of The Oxford History of Indian Business.
Even then, the company was keen on diversification.
In 2002, Nirma was a frontrunner for Indian Petrochemicals Corporation Ltd, a petrochemicals company that was put on the block as part of the government’s divestment plan. The company was eventually acquired by Reliance Industries Ltd, which emerged as the highest bidder.
In 2003, Nirma announced its plans for a cement venture. The same year, Patel also set up a university that is today among the top private universities in the country and offers programmes in engineering, pharmacy, law, and architecture. And in 2004, the Nirma group expanded into pharmaceuticals by acquiring an IV fluid factory in Ahmedabad. It also acquired US-based Searles Valley Minerals to become one of the top producers of soda ash in the world.
The 2010 share buyback seemed to have been driven by the promoters’ belief “that it is this changing nature of the business of the company that has led to market valuations of the company to be valued as diversified conglomerate, rather than as a consumer products company or at a valuation that reflects the sum of its parts. The acquirers believe that given the low trading liquidity in the stock, the delisting offer should provide investors with an opportunity to get an exit at a fair value, while according the company the flexibility to carry on its operations", according to a statement released by Nirma at the time.
Over much of the past decade, though, Nirma and Patel have both been out of the news, except for occasional headlines about the delisting and the travails of the company’s proposed cement plant in Gujarat. In this time, the company’s fortunes in the detergents business have waned.
Two industry experts whom Mint spoke to are of the view that its market share went down to 12% in the detergent segment in 2015 while HUL was the leader with close to 35% market share.
In a 29 June report, credit rating agency Crisil Ltd said Nirma had lost market share in the past few years because of intense competition in the detergent business.
“Decline in market share, combined with lack of segmental diversity, exposes Nirma to risk of further reduction in market share as consumers further move up the value chain to premium categories. Declining market share in detergents segment reduces cash flow stability and, consequently, ability to withstand volatility inherent in the chemicals segment. Given strong competition, Nirma will continue to face pressure in its soap and detergent business over the medium term," the credit rater added in the report.
In addition, Ghari, by Kanpur-based Rohit Surfactants Pvt. Ltd, followed Nirma’s footsteps and beat it at its own game, capturing almost a fourth of the detergent market over the last decade, said one of the two industry experts quoted above.
After its plans for the cement factory in Gujarat were scotched by issues related to environmental approvals, Nirma moved its attention to Rajasthan and in November 2014, commissioned its first cement plant.
Now comes the news of the LafargeHolcim deal.
“The acquisition of cement assets marks the comeback of Karsanbhai in the cement sector. He is a man with drive. Very simple, very focused. Like the Sarabhais who set up institutes like IIM-A (Indian Institute of Management, Ahmedabad), Karsanbhai has maintained a tradition of businessmen setting up high-quality educational and research institutes and running it professionally without interfering," said Y.K. Alagh, economist and former chairman of Institute of Rural Management Anand.