As an investment banker, Ashish Guha was known for his promptness in closing deals. The most famous of these was a 12-day affair in 2001, when he advised Sunil Bharti Mittal to acquire Spice Cell, owned by fellow billionaire BK Modi. Apart from the pace, it was the finish that gave him a high. As Guha says, “The sweetest part is closing a deal, especially when the conversion rate in investment banking is two out of 10!” Guha was scoring high on that parameter when a dramatic shift took place in his career in 2006.
It all started after he had closed yet another deal. This time around, Guha was advising German cement behemoth HeidelbergCement AG in its acquisition of the SK Birla-owned Mysore Cement. While congratulating Guha on a deal well struck, Daniel Fritz, who headed the multinational’s Asia Pacific market, added an offer: He asked Guha if he would be willing to take up the position of CEO and managing director of HeidelbergCement India (HIL). Apart from Mysore Cement, the new entity would include Indorama Cement, which the German company had bought earlier.
Challenge Accepted
This was a tough ask for Guha. Mysore Cement, now HIL, had been profitable only once in 15 years. Though the deal was designed such that the company would come out of the clutches of the Board for Industrial and Financial Reconstruction, it would still take a mountain of effort to turn it around.
Its brand Diamond was languishing at the bottom of the market and was known as ‘contractor’s cement’ because of its low price and poor quality. There was hardly any synergy between the units that functioned as separate companies; the morale of the workforce was uninspiring. Despite these hurdles, Guha, who had spent over two decades in investment banking, said yes. His family and friends were taken aback–even shocked. “I agreed because I liked the challenge. I also had the comfort of knowing I could go back to investment banking if it didn’t turn out well,” says Guha.
In reality though, going back was not an option. The 56-year-old had staked his reputation on this job. As Guha himself points out, while closing a deal is sweet, what makes it sweeter is if it turns out to be a win-win for both the seller and the buyer. Mysore Cement had been relatively cheaper at a valuation of $80 per tonne as against $180 per tonne that Heidelberg was willing to pay for another local cement maker. Guha had to make sure the acquisition also paid dividends in the long run. The newly-appointed CEO and MD had two things going for him. One, there was some low-hanging fruit that could immediately benefit the loss-making cement maker. Second, he had a clean book to start with as the new company was not carrying the burden of legacy, or debt, from its past owners.
Today, seven years later, Guha has still not felt the need to go back to investment banking. HIL turned operationally profitable within a year of his stewardship. In the following year, it reported net profits for the first time since 1996.
The financial performance has been impressive. From a top line of Rs 517 crore and a loss of Rs 90 crore in 2006, the company touched revenues of Rs 1,114 crore and net profits of Rs 30 crore in 2012. Its capacity has increased from around 3 million tonnes to 6 million tonnes per annum, thanks to expansion efforts. This change has reflected in its reputation too. Its new brand Mycem, which replaced Diamond, now sells in the upper B segment (cement brands sell in A, B and C category) and is close to matching the pricing power of heavyweights like ACC and UltraTech Cement.
(This story appears in the 04 October, 2013 issue of Forbes India. To visit our Archives, click here.)
With financial acumen, perseverance and knowledge on the market, the London School Of Economic person has shown the way of taking challenges in Not-So-Known areas. Brave, Mr. Guha, We like such person in the industry
on Jan 18, 2014