The empire crawls back

Avisit to the office of the 150-year-old Khatau Fabrics Group in the Laxmi Building compound of Ballard Estate, Mumbai's erstwhile commercial hub, can be an unnerving experience. Guests are ushered into what was once the office of the late Sunit Khatau, the former Chairman of the textiles, cement and shipping group, who was shot dead in May, 1994. A large framed photograph of Khatau is placed on what was once his chair and other photographs of him hang on the walls of the large room. Nothing else seems to have changed—the furniture and even the items on the table remain as they were. A magnifying glass, and a miniature vintage car are among those items. Time has stood still inside the room—almost like a wish, a desire to go back to the past days of glory.

For the NextGen in the Khatau family, however, the past is not the way to the future. Whilst one faction of the family, headed by Dilip D. Khatau, has inherited group company Varun Shipping, Sunit Khatau's three daughters, Reena, Neesha and Aparna, are trying to revive the group —which at its peak in the '80s boasted revenues of Rs 2,000 crore—by picking up contemporary trends in textiles and retail. The Khatau story is one that finds echoes in some of the oldest business houses of India—establishments that were once among the country's topmost.

Reena Khatau Family: Khatau Group patriarch: Seth Khatau Makanji (1874) Woman in picture: Reena Khatau, Executive Director, Khatau Fabrics Group's glory days: Founded ACC Ltd, co-founded Hindustan Aircraft with the Walchands. Introduced marble chiffon to India What set them back: Legal problems with workers in their mills, assassination of Sunit Khatau in 1994 NextGen in business: Neesha, Aparna and Reena Khatau (daughters of Sunit Khatau) New Opportunities: After a decade of dormancy, some activity has begun. Earlier known for sarees, dhotis and fabrics, has now launched bed linen, home furnishings and dress material collections. Plans to restart three mills in and around Mumbai within the next year or two.

Right from the Mafatlals to the Kilachands to the Walchand Hirachand Group in the West, the Shrirams and the Modis in the North, the Bangurs in the East and the BPL group in the South, India's corporate landscape is littered with family businesses whose best days may be behind them. Some were broken by the violent trade unionism and gang wars of Mumbai in the '80s and others by family splits and competition from global enterprises. Some made merry in the Licence Permit Raj and then found the going tough when India opened up its economy to foreign competition; others found themselves squeezed by the regulation and red tape of the Licence Raj itself, what with licences doled out only to a select few (in the quest for a ‘planned' economy post-Independence). These are stories of some of India's top business families that had been there, done that—and then lost the plot or missed a trick. These are also stories of how the next generation of these families are trying to regain some of the lost glory, albeit in most cases with scaled-down ambitions.

How the Damage Was Done
Consider the Walchand Hirachand group. Founded in 1920, it was once among the top three business groups in India—often counted after the Tatas and the Birlas even in college text books of modern India in the '80s. The group splintered into four parts in the mid-'90s. A third- generation scion of this group, Pallavi Jha (45), is today the Chairperson and Managing Director of Walchand PeopleFirst, which was formerly Walchand Capital. In fact, Walchand Capital was the flagship of the group at some point in history.

Jha still operates out of their legendary office building Construction House in Ballard Estate—where a road is also named after Walchand Hirachand. Pallavi's uncle Ajit Gulabchand today heads the much more successful Hindustan Construction Company (HCC). Pallavi's father, Bahubali Gulabchand, was the last Chairman of a unified Walchand Group. After his death in 1990, the tremors of a rift were felt across the group and four years later the first split took place. "There was bitter fighting and the family broke," recalls Jha. In the first phase when the Doshis and the Gulabchands slugged it out—Jha points out—it took close to four years for a settlement.

Pallavi Jha Family:Walchand Group patriarch: Walchand Hirachand (1920) Woman in picture: Pallavi Jha, Chairperson, Walchand PeopleFirst Group's glory days: Founded Premier Auto, HCC, Ravalgaon Sugar, Indian Hume Pipe, co-founded Hindustan Aircraft with the Khataus What set them back: Family split in 1992 and inability to manage the Licence Raj NextGen in business: Pallavi Jha, daughter of Bahubali Gulabchand, the late elder brother of Ajit Gulabchand, who runs HCC

After much haggling, a Rs 50-crore figure was arrived at as compensation from the Doshis to the Gulabchands. Ajit Gulabchand, who was the largest shareholder among the Gulabchands, inherited HCC. The construction firm today is a flourishing business, growing at a robust 18.5 per cent annually in a fast-track sector, and ironically Jha, whose operations are not comparable in terms of size and scale, makes the point that: "If splits are not quickly reached, they can breed stagnation." For the Khataus, a split in the mid-'80s only compounded their woes.

Says Reena Khatau (34), Executive Director, Khatau Fabrics: "Unlike other members of the textile fraternity who were crippled by the Datta Samantled strikes, the Khataus were largely unaffected. Sadly, it was around this time in the mid-'80s that the family split." The company her father got, Khatau Makanji Spinning and Weaving Company, had set up a new mill that was set to come on stream. It was the first mill to make marble chiffon, an avant-garde fabric then, in India. But the inability to get loans in time and cost escalations made the mill—which had invested heavily in importing machinery from Japan—unviable.

Sunit Khatau's death in 1994 crippled the group, and three years later Khatau Makanji Spinning and Weaving Company was closed down (the group has three mills, just one is semifunctional today); the workers went to court seeking salaries. The Khataus were down (but are not yet out, as we will discover later in the story). Cut to north India where, in the 1960s and 1970s, the Shriram family was considered one of the region's most influential business houses with a significant presence in textiles, chemicals, sugar, automobiles, and edible oils.

Anjani Kasliwal Family: Kasliwal Group patriarch: Brothers Abhaykumar Kasliwal & Shambhukumar Kasliwal (1948) Woman in picture: Anjani Kasliwal, Vice President, Luxury, Brandhouse Retail Group's glory days: Were among the top three textile manufacturers of the country till the '80s What made them change: Realisation that preferences were changing rapidly to readyto-wear. Also, the businesses formally split in 2008 NextGen in business: Anjani Kasliwal, Kartikeya Kasliwal, Anirudh Kasliwal New Opportunities: Looking at acquisitions, acquired brands in the US, UK, Italy, and Asia-Pac; focus on retail, especially luxury ready-to-wear

A group once known for its household brands such as Rath Vanaspati, Usha fans and DCM textiles withered away once the second generation (Murli Dhar, Bharat Ram and Charat Ram—sons of the founder Shri Ram) picked up the reins. By the '80s, a large number of the family's businesses ran into losses. In 1990, conflicting aspirations between brothers took their toll on the group, which inevitably split into four different entities: DCM led by Vinay Bharat Ram, DCM Shriram Industries led by Bansi Dhar, DCM Shriram Consolidated led by Ajay Shriram and Shriram Industrial Enterprises Ltd. under Siddharth Shriram.

The Modi Group, too, went down the same road. Founded by Gujarmal Modi and his brother Kedar Nath Modi in 1933, it was one of the rapidly growing groups with interests spanning from sugar to sponge iron to chemicals. However, the inability of the brothers to work together saw the business breaking into two pieces in 1989, with Gujarmal's five sons handling one part and Kedar Nath's three sons handling the other. After the split, the decline of the erstwhile-successful Modi Group was quite apparent. B.K. Modi, son of Gujarmal Modi, went his own way and started the Spice Group, which has had limited success in telecom (where he sold the wireless telephony operation for a cool Rs 2,720 crore). His son Dilip has taken charge of group company Spice Mobiles and daughter Divya is being groomed in financial services.

The Comeback Bid
The good news for many of these families is that a fast-growing economy is throwing up huge opportunities for growth for the NextGen, most of whom aren't constrained by capital. Consider the Kasliwal family, which runs the 62-year-old S. Kumars group. It hit a rocky patch around the same time that Abhaykumar Kasliwal—the older of the founding brothers—passed away in April 2003. When the younger Shambhukumar (the group bears his name, S. Kumar) took over as Chairman, the group slipped into a financial crunch. Debt of Rs 700 crore taken at a very high interest of 18 per cent needed urgent refinancing. Some of the company's ambitious projects had also fallen flat. The Maheshwar power project launched in 1990 hadn't taken off and in apparel retail new brands such as Tamarind did not click.

The brothers—Mukul, Warij (both sons of Abhay) and Nitin, Vikas and Ambuj— formalised a split in 2007-2008. While Warij and Mukul were given the school uniforms division and the power division and floated a new company M.W. Corp, Shambukumar's sons too split the remaining empire in three. While Ambuj got Shree Ram Textiles, Vikas got Shree Ram Urban Infrastructure Company. Nitin Kasliwal ended up with the largest share of the pie—the main SKNL (S. Kumars Nationwide Ltd) group which had over the years slowly refocussed its key area from uniforms to ready to wear garments across all segments.

Dilip Modi Family: Modis Group patriarch: Gujarmal Modi (1933) Man in picture: Dilip Modi, Chairman, Spice Mobiles Group's glory days: Founded companies Modi Rubber, Modi Xerox, ModiLuft, Godfrey Phillips India What brought upon the decline: Group split, foreign collaborations opted out, and economy opened up. NextGen in business: Dilip Modi; Samir Modi, MD, Modi Enterprises; Divya Modi, Executive Director, Spice Finance New Opportunities: Mobile handsets, mobile retailing, infotainment, finance and pharma

Since then, SKNL has seen a sharp rise in its fortunes with net profit growing every quarter. Says Anjani Kasliwal (23), daughter of Nitin, who is now Vice President of one of the family businesses, Brandhouse Retail: "We diversified from just being a manufacturer of textile and uniforms, to being perhaps the only Indian textile giant to have a presence in all forms of fabric." However, the biggest casualty is the one-time monster brand S. Kumars, which is now reduced to being primarily a manufacturer of fabrics for school uniforms.

Yet, the Kasliwals are still relatively better off. The Khataus had problems that threatened to finish the family off. Panna Khatau, the wife of Sunit Khatau, was handed down a suspended jail sentence in August 1997 for failing to pay salaries to workers of Khatau Makanji even after the court ordered it. It was only in 2007 that things finally started turning around. Reena, the youngest among the three sisters (all EDs), says: "We have three large mills in Byculla, Borivali and Mahad (in the Konkan in Maharashtra) and in the next few years we hope they will be buzzing with activity again." Elsewhere, Jha at Walchand has changed course totally. She has moved from financial services to human resource development and training.

Jha prefers to see Walchand PeopleFirst as a 90-year-old start-up because it is a new avatar of a very old company. "If anyone wants to do a case study on transformational leadership, Walchand Capital (now Walchand PeopleFirst) is the company to look at." Jha has steered the company into consultancy services for performance enhancement and business skills development in partnership with the marquee Dale Carnegie and Associates.

The task for the NextGen at these businesses is clear-cut. As Reena Khatau, with a large photograph of her father in the backdrop, says: "Let's get the business back on its feet first." However, doing that involves not so much as revisiting the glory days of the past but seizing the opportunities today presents.

Why Businesses Decline

• They are unable to cope in the new liberalised regime, and in a competitive marketplace.
• Family splits queer the pitch for some members who were left with bits and pieces or low-growth businesses.
• Resistance to change and reluctant to share control with professionals.
• Diversify into unrelated areas; show lack of strategic vision.
• NextGen lacks fire in the belly of the founders.