How Gen 5 is reimagining the 117-year-old Murugappa Group
The Murugappa Group headquarters in Chennai - Dare House - is located in Parry's Corner, a landmark in the port city.
- May 27, 2017,
- Updated May 31, 2017 11:09 AM IST
The Murugappa Group headquarters in Chennai - Dare House - is located in Parry's Corner, a landmark in the port city. It's named after a Welsh merchant Thomas Parry, who set up EID Parry in 1787, a company the Murugappas acquired in 1981 from a clutch of institutional investors and successfully turned around. Today, EID Parry is a major national player in sugar, bio-pesticides and nutraceuticals.
The extended Murugappa clan works out from a maze of interconnected but thoroughly modern offices in Dare House. In spite of its headquarters' name, the 117-year-old Murugappa Group is known for its caution, collective decision-making and conservativeness. Sometime last year, however, celebrations broke out at Dare House. For the first time, group company Cholamandalam Investment and Finance Company (CIFC), a non-banking financial company (NBFC) into vehicle and home equity financing, had overtaken cross-town rival Sundaram Finance in market capitalisation on the bourses. There was a history to why this achievement was being celebrated. When Arunachalam Vellayan, current Executive Chairman of Murugappa Group, took over in 2009 from his uncle M. A. Alagappan, CIFC was just in the process of ending a disastrous joint venture (JV) with DBS of Singapore. The JV had made ill-advised moves in consumer and personal finance. Uncharacteristically, it had imprudently advanced consumer and personal finance loans in the go-go years between 2005 and 2009, which had turned bad; the losses threatened to bring down the group's reputation, if not the group itself.
CIFC had to fire 200 employees, write off several hundred crores in bad loans and exit its JV with DBS, with the Murugappas buying out the partner. For the family-run group, which still treats its 32,000 employees as a part of the extended family, the layoffs made the optics look worse. Shares of CIFC nosedived and were trading at Rs24 on the bourses. However, those who had the foresight to pick up its stock then would have seen their investment grow at a CAGR of 60 per cent-plus over the past eight years. CIFC shares today trade at over Rs1,000 levels. CIFC now has more than 700 branches across the country, and last year generated more than Rs1,000 crore in profit before tax with an asset book of Rs30,000 crore-plus. "In NBFC and insurance (financial services) we have been growing at a CAGR of 30 per cent. In insurance, we have a good partner in Mitsui-Sumitomo,'' says Vellayan. While CIFC was only one of the group's 28 divisions and among the 11 listed companies of the group, the successful turnaround showed that the Murugappas had not lost the touch of going against the odds and winning. In the eight years under the chairmanship of Vellayan, Murugappa Group's revenue has increased by more than 250 per cent; in 2016/17, it recorded a turnover of Rs30,023 crore. The group has big ambitions of growing its revenue to Rs50,000 crore by 2020.
The Murugappa Group headquarters in Chennai - Dare House - is located in Parry's Corner, a landmark in the port city. It's named after a Welsh merchant Thomas Parry, who set up EID Parry in 1787, a company the Murugappas acquired in 1981 from a clutch of institutional investors and successfully turned around. Today, EID Parry is a major national player in sugar, bio-pesticides and nutraceuticals.
The extended Murugappa clan works out from a maze of interconnected but thoroughly modern offices in Dare House. In spite of its headquarters' name, the 117-year-old Murugappa Group is known for its caution, collective decision-making and conservativeness. Sometime last year, however, celebrations broke out at Dare House. For the first time, group company Cholamandalam Investment and Finance Company (CIFC), a non-banking financial company (NBFC) into vehicle and home equity financing, had overtaken cross-town rival Sundaram Finance in market capitalisation on the bourses. There was a history to why this achievement was being celebrated. When Arunachalam Vellayan, current Executive Chairman of Murugappa Group, took over in 2009 from his uncle M. A. Alagappan, CIFC was just in the process of ending a disastrous joint venture (JV) with DBS of Singapore. The JV had made ill-advised moves in consumer and personal finance. Uncharacteristically, it had imprudently advanced consumer and personal finance loans in the go-go years between 2005 and 2009, which had turned bad; the losses threatened to bring down the group's reputation, if not the group itself.
CIFC had to fire 200 employees, write off several hundred crores in bad loans and exit its JV with DBS, with the Murugappas buying out the partner. For the family-run group, which still treats its 32,000 employees as a part of the extended family, the layoffs made the optics look worse. Shares of CIFC nosedived and were trading at Rs24 on the bourses. However, those who had the foresight to pick up its stock then would have seen their investment grow at a CAGR of 60 per cent-plus over the past eight years. CIFC shares today trade at over Rs1,000 levels. CIFC now has more than 700 branches across the country, and last year generated more than Rs1,000 crore in profit before tax with an asset book of Rs30,000 crore-plus. "In NBFC and insurance (financial services) we have been growing at a CAGR of 30 per cent. In insurance, we have a good partner in Mitsui-Sumitomo,'' says Vellayan. While CIFC was only one of the group's 28 divisions and among the 11 listed companies of the group, the successful turnaround showed that the Murugappas had not lost the touch of going against the odds and winning. In the eight years under the chairmanship of Vellayan, Murugappa Group's revenue has increased by more than 250 per cent; in 2016/17, it recorded a turnover of Rs30,023 crore. The group has big ambitions of growing its revenue to Rs50,000 crore by 2020.