An entrepreneur’s instinct

By Ajay Piramal

Piramal Enterprises started off on a road that was bumpy, to say the least.

There is no romantic story behind how I built this business we have now. I did not have the luxury of being eased into the business like so many of my peers. It was after all unfortunately fate which brought me to lead it in the first place. My father passed away when I was 24. My brother passed away five years later. That is how I came to take the reins of the family business, which was led by our textiles arm [Morajee Textiles]. Though it was a long-running family business, when I stepped in, it had run into many almost immovable challenges.

In 1982, a crippling worker’s strike had taken place in the textile mills under the leadership of Datta Samant. Aggravating our problems was the fact that we had, as a family, invested more into the business not even a year before that. It was a double blow for us. It was in 1983 that my brother’s illness unraveled.

The strike, meanwhile, continued unabated. As I understand, it was the longest strike in any industrial nation as it ran for a period of 18 months and involved no less than 2.5 lakh people all over what was then called Bombay. Also, if you look at the history of the organized textile industry, which was comprised of large companies with a number of mills, you would notice that by 1982, it was already in decline. This was because of government policies at that time, which clearly encouraged the smaller textile makers i.e. the power looms.

Needless to say, it was the worst possible time for our industry and the business as well. From being a well-run family business, we were now stretched for funds and short on talent at the top at a time where external pressures were threatening to be fatal for the company.

Looking for a direction of sorts at that time, I came across a pharmaceutical firm called Nicholas Laboratories. This was an Australian multinational firm, which wanted to exit out of India. We saw this as an opportunity to diversify and lower the risk for the business as a whole. And we took it over in 1988.

When people ask me if there was any hesitation from our end in heading into a completely new business line of sorts, I just have a one-word answer: no. My theory is that if you apply your mind too much or solicit advice for the task at hand, you will invariably muddle things up.

There is no doubt that if we were to hire a consultant at that time to advise us, the answer would invariably have been in the negative. For one, the two industries are as different as chalk and cheese. The textile business is a commodity business whereas the pharma business is a brand business.
The textile industry’s core lies in manufacturing whereas marketing is the core of the pharma business in India. While in the pharma business you need hundreds of feet on street, the textile business needs only a few hands talking to a few clients. In operations and management both, the businesses were a sea apart.

When we took over Nicholas, though, it was not like we had bought a winning thoroughbred from the start. It was a business that was ranked number 48 in the Indian pharma sector. To top it off, there was an unexpected resistance from inside the unit we were acquiring.

As the acquisition unraveled, we realized that there were people within the management team who were actively working together to make a bid for the company themselves. They were talking to some financiers who were backing them as well.
Needless to say, our first few months in control were not pretty. This management group went ahead and complained in the Parliament too, saying that we are up to something fishy and unethical, and had paid the British company in an illegal manner.

They carried out their agenda via the media and held a press conference too to back their claims. Things came to a head when a starred question was asked in regards to the takeover in the Parliament [where an oral answer is expected from the minister in charge].

That is when I decided to take a step that I am sure would have been considered a mistake by many consultants at that time. One morning, I sacked the entire top management team. While I understood the gap it would have created at the top, I also had to assert myself.

Here was a person who did not understand the industry, now walking into a board meeting to sack the entire lot. I remember vividly that I entered the meeting with one of my youngest employees at that time. I remember the acrimony and the shouts of locus standii. It was all very swift and decisive.

As it stood then, the core group that was working against me was made up of the top four of the management. Within a day of them being sacked, two of them came back to me and said they wanted to come back. One did not come back to us while another was retiring, so this was convenient of sorts for him.

The ones who came back had realized that not only they had made a mistake but also that conducting an acquisition was not their cup of tea. Going from a professional to being a business owner via a takeover is not an easy play.
Not many on the outside comprehended what I had done. But as the business owner and head of the company, it was important that I retained control.

Nicholas, as you probably know, was turned around to a leadership position in the pharma sector. Since then, there have been many more acquisitions that Piramal Enterprises has done. I can proudly say that we have a 95 percent success rate in these acquisitions with none of the same management issues.

A lot of what I have achieved can be traced back to what I learned back then. When you are faced with adversity, it’s your instincts that you should always count on. At such times, many people turn advisors and theorists, but it is ultimately you who have to live by the decision. Step back, analyze, and then trust your instincts to do what is best for the business.

Ajay Piramal is Chairman, Piramal Enterprises

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Ajay Piramal, industry, Nicholas, Piramal, textile