Who is Keki Gharda, and why is he being wooed?

Keki Gharda with his wife

This is the unfinished story of Keki Hormusji Gharda. At the age of 80, this maverick chemical-scientist and entrepreneur is preparing to sell his assets and leave his wealth with a foundation. The Abaan and Keki Gharda Memorial Trust, named after his wife (she is 77) and him has been formed. However, there still is this little matter of selling the company—or 60 per cent of it—and taking care of the legal wrangles with family and business rivals.

Schoolgirl blue—the reddish blue used for school uniforms—was an import from Germany till the late sixties when Keki Gharda looked at the dye that Bayer sold in India. It was a dye no one else had managed to produce or copy. Gharda figured out that the product was actually a mixture—of the dye and a chelating agent that helps the colour stick to the fabric—and not a compound.

In the late sixties when Gharda Chemicals made the dye in India, ‘Gharda Blue’ became a hit as it was better and stronger than the original. “Since I offered the chelating agent separately, the dye’s colouring ability per kilogram became stronger than the original mixture,” Gharda recollects with an impish smile that betrays intense pleasure at having called the bluff of a multinational corporation.

Gharda’s life story is one of such innovations that allowed him to make blockbuster chemicals in India, once they went off-patent. And he made them so cheap that often the original manufacturer was eventually forced to buy from Gharda Chemicals and supply to the world. Today, he supplies Chlorpyrifos, an insecticide, to the Dow Chemical Company, and makes a purer product than Dow ever made—even though Dow scientists had invented it. “Instead of the high-temperature chlorination of pyridine, we use a low temperature process and a pyridine derivative,” Gharda explains.

Gharda is still the Chief Scientist at his company with a 200-strong research team with 15 doctorate degree holders. The company is still working on new products and technologies. Just one such technology in the works has the potential to replace huge blast furnaces in iron and steel-making by burning the lower grade Indian coals in a reactor, and thereby replacing high grade coal imports.

But Gharda realises that, at 80, the greater part of his journey is done. With no children to bequeath his wealth to, Gharda now wants to give up his company to the right suitor and use the money in a foundation that will fund research, hospitals and education. And some big guns are in the race, right from Tata company Rallis, Godrej Industries, and United Phosphorus (its biggest competitor), to an Israeli firm that buys 40 per cent of Gharda’s production and private equity giant Blackstone Advisors.

Before he became an entrepreneur— Gharda had wanted to be a professor—he has a doctorate in Chemistry from the University of Oklahama. Today, he has set up a school and an engineering college near his factory in Lote, in Ratnagiri district of Maharashtra. But before he can go into full time philanthropy— and retire from life as an active entrepreneur, there is a lot to be sorted out.

Key to the end lies in the beginning
When Gharda started his business he was fresh from his PhD in Oklahama University, hoping to land up a professor’s job in India. It never happened and his mother Ratanbai Gharda, sister and brother-in-law Jer and Rutton Kavasmaneck, and another sister Coomi Warden, pooled in cash to help him start the company.

A partnership firm was formed and converted into a private limited company in 1967. Today, Gharda owns around 60 per cent of the company. He has bought out Coomi Warden, but the remaining stake is with his nephews, the sons of Jer and Rutton Kavasmaneck, friends—the Rebello family, the Patel family— and some employees. And there is the involvement of Godrej Industries, and its Chairman Adi Godrej, who lent some money to the minority shareholders in return for a pledge on 6-7 per cent of the shares. Godrej Industries refused to participate in this story as it is fighting two cases against Gharda Chemicals as well as one against the minority shareholders in the Bombay High Court.

Rutton Kavasmaneck was the chairman of Gharda Chemicals till 1977 when he died and even in his lifetime there were disputes between Gharda and Kavasmaneck on how to share the spoils of this highly successful business. The Kavasmanecks have fought Gharda in the courts for 19 years (1990-2008), alleging oppression of the minority shareholders, but Gharda has weathered that battle to emerge the winner. Now Rutton’s younger son Darius Kavasmaneck, is in no mood to allow Gharda to have his way and sell the company—not at his terms.

“We have decided to wait it out for now. According to Article 57 of the articles of association of the company, no shareholder can sell the company’s shares to an outsider without offering it to the existing members. If he does that (offers it to us), we will buy the shares; if he doesn’t, we will move court before he can sell to someone else,” he says. Darius points out that, at 56, age is on his side. He adds that unlike a negotiated sale, under Article 57 the price, too, will be determined under a pre-set formula and will be lower than market price. “Anyone wanting to buy this company will have to talk to us,” he concludes.

Darius, who owns and manages his own chemical company, explains that in the past the main grouse of the minority shareholders has been the measly dividend of 2 per cent paid by Gharda Chemicals, which was often less than the wealth tax they had to pay as shareholders of a private limited company up to 1992. “To hold our shares we had to pay out of our pocket,” Darius says with a smile that shows pains taken in the past.

How exactly did Godrej come into the picture? In the nineties, some shares were offered by Keki Gharda to other shareholders. The minority group borrowed Rs 11 crore from Godrej Industries to buy these shares in 1992. They planned to sell back to Gharda a year later when the price went up and at the time Gharda refused to buy. So the group offered these shares to Godrej who bought them out, although Gharda Chemicals refused to register Godrej Industries as the shareholder. Godrej is still trying to get a legal remedy to this issue and has even offered to buy out Gharda. Sources indicate that Adi Godrej met Keki Gharda a couple of months back, but a solution eluded them. But can’t Gharda buy out his nephews? “I will need money to do that,” Gharda says.

Even as they fight, the relatives maintain cordial relations. “Even today morning I spoke to Dr Gharda; we speak a few times every week. We visit each other for dinners and for family functions. We are not aggressive. But when it comes to business, we have a fight on,” says Darius Kavasmaneck. “I am open for any solution. Take the company public, or a buyout but any solution must involve us and Godrej. He cannot bypass us.” He is prepared to run the company if he gets total control of it. Keki Gharda, for his part, says his sense of humour and ability to laugh at anything is his secret to his long life—but can he laugh his way out of this tangle and sell his stake to the highest bidder? The story hasn’t ended, not yet.