Harsh Goenka, the 57-year-old chairman of the $3-billion RPG Group, is on a mission to transform the diversified group’s image. The goal: to ensure a makeover which helps establish the 36-year-old conglomerate as a niche, brand- and consumer-driven enterprise that attracts youth, from having been seen traditionally as a commodity-led business.
Mr. Goenka, a passionate art collector who has overseen a fivefold surge in the group’s market value to Rs.14,000 crore over the last three years, says the best is yet to come. Here are the edited excerpts from an interview Mr. Goenka gave The Hindu at the group’s uniquely designed RPG House headquarters in Worli.
How is the group opening up to new economy businesses like startups, e-commerce?
In the world of startups, a lot of employment is taking place. What the government can do is to make this thrive. Out of 100, 40 will close, so we need easy exits and labour policy reforms. We have seen what happened at TinyOwl. I was just studying the whole ecosystem to understand the startup game. This is one of the things that we as a group are actively looking at.
We just released a new vision statement for the group: unleash talent, touch lives, outperform and the smile emoji. For the first time, an emoji has been used in a vision statement, considered to be a very serious intent statement. What we will do is promote startups and entrepreneurship.
People within the group can become founders and entrepreneurs with no limitations of corporate-like timings or what they wear. They will have separate salary structures. It’s an interesting way to change the group dynamics and we have allocated Rs. 100 crore as seed capital for this new venture.
How are your existing businesses doing?
Our group’s market cap has increased fivefold in the last couple of years. In the first six months, our top line grew just by 4 per cent; that reflects that demand is not growing much but our bottom line has grown 30-35 per cent, which not many companies have, as we had tightened working capital and improved operational efficiencies. We got in McKinsey and BCG and they have helped us to squeeze profits out of various businesses. KEC is now the largest transmission company in the world with an order book of Rs.10,000 crore and its market cap has gone up 80 per cent or so. In Ceat, we are making investments to double the capacity of our Baroda plant.
We have a new plant coming up in Ambernath for the global markets with investments of Rs. 600 crore and a two-wheeler tyre unit at Nagpur. We are also setting up a plant in Bangladesh and have a venture in Sri Lanka as well.
We are moving away from commodity-led businesses to consumer- and brand-led businesses. In Zensar, we are excited about our new equity partner Apax. Together, we can create some music and see ourselves in the top-10 in the near future. Zensar’s stock price has doubled in the last six months and is doing reasonably well compared to the peers. Raychem RPG is the most profitable company within the group, but it’s not quoted so not much is known about it.
We also have a smallish life-sciences business, but now we are growing the business to concentrate on the Indian formulations markets.
Is RPG also looking at defence as an opportunity like other business groups?
We don’t want to get into areas which are connected with the government. Our integrity is very important for us. We don’t have the expertise nor do we want to have the expertise to manage governments.
How are things on the ground?
Consumption has not increased and it’s a vicious cycle. First, the investment cycle has to improve. Private sector had made lots of investments in infrastructure and has no more money to invest. After having been beaten blue, bankers are not willing to lend to infrastructure. The first round of investments has to come from the public sector. The Finance Minister is pushing the public sector to invest more. Rural demand has all of a sudden disappeared, largely due to the poor monsoons. Fertiliser and tractor demand have fallen substantially. It’s extremely important to put money in the hands of consumers.
Another half per cent interest rate cut in the next six months will help. Then, there is the demand issue. Businesses are running at 70 per cent capacity. In 10 out of the 12 important sectors, capacity utilisation is lower than in the last five years.
How do you see the Indian economy faring now?
The global situation is fairly grim. The biggest change is that while it was once thought that the BRICS economies will take the world economy up, Brazil is down, Russia is struggling, South Africa is not going anywhere and as for China we all know what is happening. India stands out among the BRICS. We have operations in Brazil, where the economy survives on tariff and non-tariff barriers, if they open up, the economy will collapse. Europe is in terrible shape with no signs of revival.
The hedge funds are only talking about two markets, U.S. and India. So, by default, we are looking very good. They see 5.5 per cent growth and saw ‘wow’. There are two moods. In India, the mood is very different. We are cynical. There is a dichotomy in what Indians thinks about themselves and what the world thinks about us. What the Prime Minister has done is in terms of image building. No doubt, there is recognition of potential but it’s the economy and money that talks. I feel it’s good times ahead for India.
