Little remains of Premchand Roychand.
That is if you were to go out looking for him. In the real world.
In Mumbai, as the city is now known, there’s a gallery named after him (funded by the Roychand family) at the Chhatrapati Shivaji Maharaj Vastu Sangrahalaya, formerly known as the Prince of Wales Museum. Then there’s an award. The Premchand Roychand Award, given out by the University of Calcutta every year to an outstanding student, who clears the Master of Arts degree with flying colours. And then, there’s the Venetian gothic Rajabai clock tower (named after Premchand’s mother when he donated Rs2 lakh for its construction in 1869) in Fort, Mumbai, which till about a month back was lying defunct. It is now up and ticking.
In business, Premchand Roychand and Sons (PRS) is but a tiny enterprise; its only significant undertaking is the manufacturing of insulation products for automotive and industrial applications. According to documents filed with the Registrar of Companies, the company, PRS-Permacel Pvt. Ltd recorded a turnover of Rs82.3 crore on 31 March 2014, with a meagre profit of Rs15.3 lakh. The group’s other business is D-M-E Co. India Pvt. Ltd, a joint venture between Milacron Corp. of Cincinnati, US, and the PRS Group; D-M-E manufactures standard components (mould bases, ejector pins, etc.) for the plastics moulding industry.
All of this stands in stark contrast to what was once a prosperous family name, a name which was taken in the same breath as three other men—Jamsetjee Jejeebhoy, David Sassoon and Jamsetji Tata—the four merchant princes of Bombay.
Premchand Roychand was one of the most influential businessmen in 19th-century Bombay. A man who made a fortune in the stockbroking business and came to be known as the Cotton King, the Bullion King or just the Big Bull. He was also the founder of the Native Share and Stock Brokers Association, an institution that is now known as the BSE.
It’s been a while for that story. More than 150 years.
Sushil K. Premchand, 70, head of the PRS Group, of the fourth generation of the family, is aware of his great-grandfather’s legacy. Or what remains of it. It doesn’t seem to bother him much. Mostly based in Zurich, Switzerland, he also spends some time in Mumbai. Premchand says that the group’s business interests are more out of choice than lack of ambition.
“Every generation is different,” he says. “It is a question of what you are comfortable doing and how well you do it. As long as you do what you are able to do well, as well as you can do it, what else can anybody expect?” And then he adds a little more: “Some of these buildings and objects are not in themselves important. But to me, they are important because (of) what they reflect, which is the concept of returning to society because you have benefited from society.”
That Premchand Roychand was a generous philanthropist is true. We will get to that. Because this piece is a look back at his life. A life that over the years has been documented in two narratives. One, the story of how he amassed a massive fortune, squandered it all, regained a bit of it and then contributed generously to philanthropy, where he was an extraordinary man who sought neither fame nor riches. And then two, where he was a scam artist and led to the collapse of the Bank of Bombay and the Asiatic Institution in 1865 and then later in life redeemed himself in philanthropy.
Let’s start at the very beginning.
Premchand Roychand was born in March 1831 in Surat. He was the son of Rajabai and Roychand Dipchand, a dealer in timber, who eventually moved to Bombay in search of better opportunities. Little is known of Premchand’s early days except that his father wanted his son to have a good education. So he enrolled him at the Elphinstone Institution, now known as the Elphinstone College.
After his education, in 1849, at the age of 18, Premchand entered the stockbroking business. Historian Sharada Dwivedi, in her book Premchand Roychand: His Life and Times, writes: “He is believed to be the first Indian broker who was fluent in speaking, reading and writing the English language. Success in his profession came quickly to young Premchand when he began to work as an assistant with Ratanchand Lala, a wealthy and successful broker, in 1852.”
In his 1913 book, Premchund Roychund: His Early Life and Career (one of the oldest biographies of the man), historian Sir Dinsha Eduljee Wacha says, “He (Lala) had shrewdly gauged how far valuable the young fellow would prove as an assistant, especially when the going the round of his growing business as a broker among Europeans, both merchants and bank managers.”
Over the years, several legends have been passed down. Of how Premchand had a fabulous memory, in the sense that he never recorded his trades with pen and paper; he would just make a mental note of it and remember them to the T. But perhaps the most well-known legend is the one about how he went about his business. Under a tree.
In her book, Dwivedi writes that Premchand began his “successful career as a broker under the shade of a stately, spreading banyan tree at the western end of the beautiful Horniman Circle garden in South Bombay where wayfarers, cotton and opium brokers, clerks and strangers came to quench their thirst”. Around 22 such brokers began trading under the banyan tree and formed the Native Share and Stock Brokers Association, each contributing Re1.
Anyhow, dabbling in cotton and opium trading (legal back then), both of which were in demand in China, Premchand did well. As Wacha writes, by 1858, Roychand and his son “were reputed to have amassed a modest fortune of a lakh of rupees or thereabouts”. But it was only a few years later that Premchand really made it big with the outbreak of the American Civil War in mid-April 1861.
Boom and bust
Plantations in the US were the major source of cotton for the Lancashire Mills in Britain. The war brought an abrupt end to it. So, Britain turned to India. Naresh Fernandes, in his book City Adrift, writes: “India stepped into the breach, shipping much of its crop through Bombay port. Over the next five years, the value of Indian cotton exports to the UK jumped from Rs16 crore to Rs40 crore, as the price of Indian cotton rose from around four pence a pound in the Liverpool market to between twenty pence and twenty-four pence.”
It was an absolute frenzy. Or in the words of Wacha, “King Cotton was the great deity at whose shrine… the merchant and the trader, the rich and the poor, high and low, master and servant, all paid pooja… even old mattresses were put into requisition to get the cotton, new beds being made of coir fibre.”
It was a period of prosperity and as people flocked to the city to make a quick buck, the need was felt to reclaim land from the sea. Several reclamation companies and financial institutions sprang up. The Bombay Gazetteer records that in December 1864, there were 31 banks, 16 financial associations, eight land companies, 16 press companies, 10 shipping companies, 20 insurance companies (as against 10 in 1855) and 62 joint stock companies where none had existed in 1855.
Needless to say, Premchand was in the thick of this boom. He founded Back Bay Reclamation Co. And then struck gold in the cotton crisis. In the words of Fernandes, “Of all the ‘Share Kings’, the most fabled figure was Premchand… whose exploits would help create another stereotype: he would be the first of many famous Bombayites who believed that profit held primacy over principle. The ingenious merchant was a promoter and shareholder in the Commercial Bank and Mercantile Bank, and associated with about seventy mushroom companies. He also took control of the Bank of Bombay. He had a sharp eye for the loophole and regulatory grey area.”
There’s a popular legend about how Premchand tipped others in the cotton business by sending boats to the sea to secure information on the condition of the Liverpool cotton market much before anyone else. According to Wacha, “there being no telegraphic services between England and India, it became a vital matter to be able to obtain the earliest news possible… fast sailing boats… were kept in readiness to board the steamer at what was known as the outer lighthouse”.
At the height of the boom, the Bank of Bombay increased its capital in 1863 from Rs52 lakh to Rs104 lakh. It also allowed advances on personal security, which was prohibited earlier. As Wacha writes, “Colossal speculative business was daily transacted, involving crores of rupees—mostly at a fictitious price.”
There was absolute frenzy for the shares of Back Bay, where the price for its future delivery went up to almost Rs50,000. As Wacha says, “This, in brief, was the wild speculation of which the master pyrotechnist was Mr Premchand Roychand. There was hardly a company in which his assistance to bull its securities in the market was not invoked by promoters.”
The modus operandi was simple. A bank would help float a financial company by advancing against its shares; the promoters of the financial company would launch a reclamation company, against the shares of which both the bank and the financial company would advance funds. And then the shares would change hands at ridiculously high premiums.
The end of the American Civil War changed all this. On 1 May 1865, Britain would again source its cotton from the US. The India story was over. On the Liverpool market, the price of cotton fell from 20 pence to 10 pence.
In Bombay, there was panic and pandemonium. Everyone tried to sell their shares in the bubble companies. But there were no buyers. As Dwivedi notes in her book, “By the middle of May, one by one, the city’s wealthy businessmen went bankrupt, led by Behramji Hormusji Cama, Kharshedji Furdunji Parekh, K.J. Readymoney, Rustomji Jamsetji Jejeebhoy, K.N. Cama and, of course, Premchand Roychand.”
Needless to say, Bank of Bombay collapsed. So did the Asiatic Institution.
In 1868, the government of India set up a commission to inquire into and report on the causes and circumstances of its failure. Sir Charles Jackson, a judge of the supreme court of judicature in Bombay, was appointed president of the commission. A total of 96 witnesses were examined, 74 of them in Bombay.
As Wacha notes in his book, A Financial Chapter in the History of Bombay City, “The root of the mischief was the Act X of 1863 which led to the lending by the Bank officials right and left of the shareholders’ and depositors’ monies by lakhs to all and sundry, to men of straw, to men of moderate means, and to men of reputed wealth, but out of all proportion to their respective financial positions, their committals elsewhere, without circumspection and without any reasonable limitation. Lakhs were given away on personal security which had not even the merit of guarantee of another independent name as is customary where cash credits are allowed. These again were permitted to be renewed to an indefinite extent at any rate till the mischief was done irretrievably. Accounts to the extent of lakhs were allowed to be overdrawn.”
Through his web of companies and interests in financial institutions, Premchand was at the centre of this mischief. As Wacha notes, “The other shareholders and directors allowed him to withdraw vast amounts of money from the Bank to finance his multitudinous schemes—directly and indirectly Rs1.38 crores… a colossal and unheard of advance.” That amount was about half of Bank of Bombay’s total capital.
It is another matter altogether that in the years that followed the 1865 bust, Premchand spent a lot of his time and money on philanthropy. His largest endowment was made to the University of Bombay, for a library and a clock tower. It is but another legend that Premchand wanted the clock tower to be named after his mother Rajabai.
As Dwivedi notes in her book, “Rajabai’s eyesight was fading and she was unable to read the time. However, as a devout Jain, she liked to dine before sunset and therefore to make her aware of the hour, her devoted son contributed the clock… which in those days could be heard many miles away.”
Premchand also contributed generously towards education. For instance, he gave five shares of Mazgaon Reclamation Co. to the Cathedral School for girls. To the Alexandra Girls School, he donated Rs50,000 for setting up a boarding and lodging house. A large sum for those days, Rs3 lakh was donated to the University of Calcutta for the Premchand Roychand Award.
In Surat, he established a girls’ school called the Roychand Dipchand Girls School, named after his father. Dwivedi notes in her book, “It is difficult to exactly calculate the extent of his gifts to education, particularly to the education of the girl child, but the Premchand family has ceased being surprised, as time goes by, by new discoveries of his magnificence.”
It is a question that must be asked. How much of this was an image-building exercise? There are no clear answers, but a little scepticism would be useful.
“I have always found him to be a fascinating man,” says City Adrift author Fernandes. “But you should look at his history carefully. Think about it, his first biography was commissioned by the family almost 100 years ago, and over the years, the family has carefully maintained a certain narrative about him.”
Sushil K. Premchand, though, believes it is a myopic view of his great-grandfather, who should be best remembered for giving back to society. “That is his biggest legacy,” he says. “I know that some people call him the Harshad Mehta of that time. They say what is the difference? There is. He returned every penny.”
1. Dinsha E. Wacha, Premchund Roychund: His Early Life and Career
2. Sharada Dwivedi, Premchand Roychand: His Life and Times
3. Naresh Fernandes, City Adrift: A Short Biography of Bombay
4. Dinsha E. Wacha, A Financial Chapter in the History of Bombay City
5. Dwijendra Tripathi, The Oxford History of Indian Business
6. Dwijendra Tripathi, Premchand Roychand, The Career of a Speculator, IIM Case Study, 1971