RPG Group in for a do-over as a scion takes charge

He has built himself a reputation as more of a consolidator for the RPG Group, a conglomerate that had grown through aggressive acquisitions. But the third-generation scion, after about a decade-and-half at the group, may finally be ready to change stripes. 

The RPG Group—which Rama Prasad Goenka founded in 1979—was often critiqued in the eighties and nineties for its highly diversified businesses that it had accumulated through aggressive acquisitions and debt.

His grandson Anant Goenka, 40 years old, was elevated in October as vice-chairman of the conglomerate spanning tyres, chemicals and software, and engineering, procurement and construction businesses.

Anant Goenka likes to keep a low profile, reflective of his conservative approach to business. He has been focused on improving the group's financials even as he steadily expanded its businesses into adjacencies.

But his strategy of taking fewer risks appears to be changing. “Certainly, going forward, we hope to be a little bit more acquisitive than we have in the past," Anant Goenka said in an interview with the Mint.

Four megatrends

“I think of capital allocation as 70-20-10, where 70% of the capital is used to grow your core businesses, 20% into adjacent businesses, and 10% of capital into high-risk, high-return segments," said Goenka.

Over the last 6-8 months the group has made a few nimble moves, seeding two ventures in the e-commerce (Tyres and More) and telematics spaces (Taabi). The conglomerate has also made fresh inroads in the climate sector.

“If you were to look at what the future big trends for India are, I would say India's consumption story is looking very strong... Manufacturing looks very strong. Digital and AI look very strong, where we are in the tech space. And maybe climate," Goenka said. 

“These are those four big megatrends that are currently in the world, and we are fairly well-positioned in maybe at least three of the four themes."

RPG is riding the consumer trend through its tyres business, Ceat Ltd, and the manufacturing theme through KEC International, which operates in the engineering, procurement and construction space. 

Anant Goenka’s rise within the RPG ecosystem and how that reflects some of his future moves is explained by his friend, Bhavish Aggarwal, founder of Ola Cabs and Ola Electric, who describes Goenka as a "thoughtful and empathetic leader."

"I've seen him consolidate his business in the last few years, and he has been thoughtful and thorough with whatever business decisions he has made," Aggarwal said.

Early path to succession

RPG Group has been more organised in paving an early path for the younger generation of its promoter family than many other business houses. 

The late R.P. Goenka had the foresight to divide the group assets between his sons Harsh and Sanjiv Goenka. Anant is Harsh Goenka’s son and the heir apparent to inherit the mantle of the RPG group. Sanjiv Goenka got the energy flagship, CESC Ltd, the music business Saregama, the chemical specialities company PCB, and business process management firm FirstSource, among other businesses.

Anant’s elevation within the Harsh Goenka-led RPG Group flows from this path set by his grandfather. The younger Goenka also has the benefit of working across various group companies, including at Ceat and KEC International Ltd, over the past decade or so, giving him significant operational expertise.

At Ceat, Goenka, who began his career at consumer goods giant Hindustan Unilever Ltd, was deputy managing director for 18 months before he took charge as MD in 2012, eventually leading the business for over 10 years.

In October, when he was promoted as vice-chairman of RPG Group, he ceded his position as MD of Ceat to a professional, Arnab Banerjee, who was earlier chief operating officer at the tyre company.

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Anant found that working across the group in various cross-functions allowed him to grow stronger within the system.

“I think that helped me get credibility amongst my peers. Had I jumped into a leadership role (directly), I feel not only would I have less credibility, but my own confidence possibly would have been somewhat less," Goenka said.

The markets have noted the change at RPG, with Ceat’s market capitalisation soaring to ₹10,000 crore, or $1.2 billion, from $50 -60 million in 2011-2012, when Anant Goenka had taken charge as MD. 

Other group companies have kept pace with the tyre-maker in recording growth in revenues, profits and market capitalisation.

A decade at Ceat

Anant Goenka helped Ceat grow its market share in two-wheeler tyres from 10-11% to nearly 30% now. The company then began to increase its focus on the sports and utility vehicle segment and its current focus now is on off-highway tyres. 

Ceat is now looking at capitalising on exports, seeking to tap opportunities in international markets as global companies diversify their supply chain systems outside of China.

"Europe and the US are two very important geographies where we want to substantially look at growth," Goenka said, adding that Ceat would consider acquisitions as a way to grow in these geographies.

Yet, Ceat has a long way to go before it can bridge the gap with competitors Balkrishna Industries Ltd, Apollo Tyres Ltd, and MRF Ltd. 

Balkrishna Industries, predominantly in the off-highway tyres space, has a market cap of over ₹45,800 crore, or about $5.5 billion. MRF has a market cap of nearly ₹55,000 crore, or $6.5 billion, and Apollo Tyres about ₹30,000 crore, or $3.6 billion. 

Apollo Tyres has made significant headway into the European market through some acquisitions, including of Netherlands-based tyre-maker Vredestein in 2009 and Reifencom GmbH in November 2015.

“We have to grow faster," Goenka said of Ceat.

One of the ways that Ceat can gain speed includes growth in off-highway tyres and increasing market share in the passenger segment, including by selling more premium products.

“If you look at the US market, maybe 50-60% of the market is in passenger cars because their GDP levels are higher. India is moving towards higher GDP growth, which means the passenger segment will outpace commercial vehicles, and over time, we will reach a similar mix as our GDP grows," Goenka said. “We feel we are playing in a space that is going to grow faster over time."

Ceat is also looking to grow in the personal electric vehicle segment.

“Ceat indicated that it expects to increase its export revenue mix to ~25% from the current ~19%, led by foraying into new markets, customised product offerings, ramping up capacities and winning orders from legacy OEMs," brokerage Yes Securities Ltd said in a research report dated 4 March.

“The company highlighted that it has a low presence in the replacement TBR (truck and bus radial) market, which the company will be capitalising on in the coming years to drive growth. New products in TBR and PCR (passenger car radial) will be launched in the US ahead," it added.

Building war chests

Much like Ceat, Zensar Technologies Ltd, the RPG Group’s software services company, operates in a sector with much larger players. So far, Zensar has largely been concentrated on the banking, financial services, and insurance, or BFSI, segment, but is now looking at other business opportunities as well. 

“We have a clear strategy to grow in healthcare and lifesciences as a new vertical," Anant Goenka said about Zensar, which has a ready war chest for potential acquisitions. “Our balance sheets are in a very comfortable position at this point, where we are sitting on around $250 million of cash in Zensar."

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Similarly, KEC International, the RPG Group’s EPC business, has seen its revenue mix change.

At one point, KEC earned 70-80% of its revenue from the power transmission business. This has now dropped to less than 50% because of KEC’s growth in areas such as oil and gas and infrastructure. It also expects a boost in its cable business as the sector makes way for branded businesses and opens up for international play.

“KEC will continue to grow in newer areas—green hydrogen could be a huge opportunity," said Anant Goenka. "In transmission and distribution, with renewable energy becoming bigger, people are reconstituting their lines worldwide. The entire TMD business becomes very important."

KEC has been making bolt-on acquisitions over time. In 2021, it acquired EPC company Spur Infrastructure, which was engaged in setting up cross-country oil and gas pipelines as well as city gas distribution networks.

"We will continue to look if some capability acquisitions are there," Goenka said.

The lure of new ventures

For all these expansions, RPG Group’s future may lie in newer ventures. 

Over the past year, Goenka has been instrumental in seeding new venture firms within the group to solve specific pain points. Although his experience in running a startup or a technology or pharmaceutical company is unproven, Ola’s Aggarwal argues that Anant Goenka has the essential attributes of an entrepreneur.

"He has all of them: focus on the future, decision-making, understanding the customer well, walking the shop floor, and focusing on excellence," Aggarwal said.

RPG Group in August last year acquired a small tyre startup called Tyres and More, which provides doorstep change of tyres to customers through a website and an app. Currently, the company provides this service across three cities but plans to expand.

In September, RPG Group launched its telematics-focussed venture Taabi Mobility, a software-as-a-services platform that offers ways to analyse vehicle data to manage fuel inefficiencies and vehicle uptime.

Recently, the group also launched a new venture for climate change.

“Climate change is a big problem and presents itself as a big opportunity. We are exploring a carbon offset business," Goenka said. “The current carbon credits business has a reliability issue. What we want to do is take genuine, high-quality businesses that are not only offsetting carbon but also helping local communities."

Still in its early stages, the RPG Group’s climate venture is taking a multi-prong approach–consulting and advising other businesses, financing projects, and trading carbon credits. “It is still in an exploratory stage," Geonka said.