The apology, a half-page advertisement by Jain Irrigation Systems in The Economic Times, on November 26, 1997, began thus: "I'm sad that for the first time since our inception, we've fared badly. We ventured into 'unknown' areas like finance, IT and granite at the cost of our core business… We have lost money but more importantly, we've lost some of our reputation. I feel it's my duty to account for, to own up, to admit my misjudgements, to apologise.'' Not many in the management team agreed with my decision to apologise but nevertheless I went ahead to cleanse my conscience.

The 1990s offered new-found opportunities, and being a dream merchant, I could not resist the temptation of taking advantage of them to become a large conglomerate. Between 1992 and 1994 we acquired an IT company, took a granite quarry on lease, ventured into merchant banking and even bought an advertising agency. These diversifications happened along with forward/backward integration projects for our existing operations. By March 1997, we were trying to manage 11 different projects involving an investment of Rs 400 crore - almost equal to the company's size then. About Rs 250 crore was raised by way of debt.

All the diversifications were conceived on instinct and in the euphoria that surrounded the economy then. But the organisation lacked management bandwidth. The investments turned bad, leading to diversion of working capital, which hurt our core businesses. We posted losses. The share prices, which had touched Rs 365 (on a face value of Rs 10) in February 1994, crashed to a low Rs 8 in October 2000. Lenders hauled us to court and a few even sought our liquidation. We were struggling to breathe.

In early 2001, Aqua International Partners, a water-specific boutique fund, offered to invest in the company. There was a catch: we had to give the fund a controlling stake. We grappled with the unenviable question: who should survive, the promoter or the company? We decided to cede control, and in August 2002, the fund invested Rs 183 crore and took a 49.4 per cent stake in the company. The promoters' stake dropped from 73 per cent to less than 37 per cent and two family members had to vacate the Board.

We used the money to retire debt and bolster our working capital needs. We exited non-core businesses. By 2005, the company had revived and its share price was at Rs 160. The fund chose to exit. Today we are a Rs 3,800 crore company, the largest globally in mango processing and tissue culture, and second largest in drip irrigation. The share price is hovering around Rs 80 (on a face value of Rs 2 per share). Diversifying into unknown areas without required management bandwidth and eyeing disproportionate growth using debt is not sustainable. That was the lesson of a lifetime for me.

As told to N. Madhavan

Bhavarlal H. Jain is Founder, Jain Irrigation Systems

Stories of other companies that faced tough times and emerged stronger, told by the people who were in the thick of things.
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Mahendra Mohan Gupta on Jagran Prakashan	Rakesh Jain and Sushil Agarwal on Aditya Birla Nuvo
Sanjay Lalbhai on Arvind Mills	Peter Mukerjea on Star India
Sanjiv Goenka on CESC	Bhavarlal H. Jain on Jain Irrigation Systems
Govind Shrikhande on Shoppers Stop	Sunil Pahilajani on Greaves Cotton
Anu Aga on Thermax	Sunil Duggal on Dabur India
N. Srinivasan on India Cements	Arvind Uppal on Whirlpool