Arun Nanda Looking back on your time at Mahindra & Mahindra, what stands out?
Title: Stepped down as excecutive director on the board of Mahindra & Mahindra
Career: He joined M&M in 1973, when he was 23 years of age, in the accounts department as a management trainee. Was promoted to the board in 1992 at the age of 40. In 1994 was put in charge of the services sector.
Education: Chartered accountant
Hobbies: Classical singing, playing golf and playing the tabla
You people only look at my successes, I’ve had failures also. But to the credit of Mr. Mahindra he told me something which was very interesting. He said Arun, if you did not take risk, I’d be worried. The actual credit for finding an entrepreneur in me — that transformation from an accountant to this — goes to Anand. He was the one who actually saw the entrepreneur in me, before I knew I was an entrepreneur.
You have worked here for over 30 years…
I have worked here so long — for 36 years — and never, ever have I appeared for an interview elsewhere. There are two reasons. Firstly, we were never treated as employees. Even today, Anand or Mr. Keshub Mahindra — if they introduce me they will never say, Arun works for us; which most people would say. They always say meet my colleague on the board. The value of a human being was one. And second is the ethics – not one day did I go to bed with my conscience telling me I did something which was not right. Why drop it all now? You’ve just launched one of the most successful IPOs in 2009 and you’ve been awarded the highest civilian honour by France, you’re at the height of your career some would say.
This [M&M] has been home. I joined the company in 1973 as a 23-year-old. Twenty-three to sixty is a long time. It’s a very important decision — at the peak of your career, to give up money and power is not a very easy decision to take. I started thinking of it honestly, two years ago. Because if I want to do something and I want to grow it — I must start at a time when I still have the energy to do it. There’s no point doing it post retirement. Why social entrepreneurship?
What I have observed is people are living longer and the joint family system has virtually disappeared. And even your own children whether they go abroad or within the country they are more mobile in their work. So senior citizens are very lonely. So I’m going to build up community centres where every afternoon people can go and meet like-minded people. And I will have social workers who will organise activities there. And the second thing I’m going to start is a helpline. You’ll be surprised. You read in the newspaper about child abuse, there’s lots of adult abuse in this country. So the helpline is where we can provide all sorts of facilities. We will tie up the backend with providers. For the present I am going to create an NGO — a trust which I will fund personally to start with. I’m also going to build an NPO. I’m looking for people to join me — people who’ve worked in industry and are now thinking like me. I will use my vision but I will get people to translate that vision, like I have done at Mahindras. What is the role you will retain at M&M and within the group companies?
I talked to Anand [Mahindra] about my plans and he was very generous. He said since what you are going to do is not conflicting with M&M why don’t we find a way that you can be involved here as well as follow your passion. So I will give up my executive position and continue in a non-executive role. But my role is actually going to be fairly significant. I’ll continue to be the chairman of Mahindra Holidays which I started. I was the vice-chairman of Mahindra Lifespaces, the real estate company, and now Anand is proposing to elevate me as chairman of that company. Plus I will continue to look after the infrastructure interests of the Group like Mahindra Water — the Tirupur Water Project and also Mahindra Consulting Engineers. Speaking of the IPO, what made you take the plunge with an IPO when everyone else was taking the private equity route? Your IPO was seen by analysts as a test of whether or not the market had the appetite for investments in IPOs.
Everybody thought I was mad! This is not the first time Mahindras did it. Even Tech Mahindra, when it came, it was after a lull. I am a trained accountant. The mind is not only conservative but also you think rationally. But I also think somewhere I have got this gift to think through the stomach. And sometimes you have to listen to your gut. The story was very good, because the company was growing at 73 percent CAGR. We could see that the market needed some and as a responsible company we thought that we have to lead the way. I don’t think I took a risk. I was confident that it is a good issue. Because the track record was good. Tech Mahindra had done well. And look at the stock — the issue at 300 rupees was quoting at 465 in less than six months time. WSJ has quoted that this was one of the best Indian IPOs in 2009. After us there was a spate. But in a war, it’s the first guy who goes who is the most vulnerable.
It took us a little effort to explain to people the story because it was a different story — it’s neither a hotel industry nor a real estate industry. It’s a very unique position where you have a growth story and an annuity. The company is growing and since your membership is for 25 years, the member gives you money every year for 25 years. And I think the challenge before us was how do you educate the investor about this. You can’t do this issue by saying it’s a multiple offer thing. We had to actually go out and explain to people how this company will work. In the end, the issue was 10 times over subscribed.
How did Mahindra Holidays all start?
What was the turning point for Mahindra Holidays? When did it become a good story?
I think when people started using the product, the team has put in a lot of effort tin Mahindra Holidays – our product is different. It’s a very composite business model, very different business model, very well thought through and I think – consistent delivery of service to the customer. That is something we have mastered. But the first 5 years Club Mahindra made losses. It tolk us a lot fo effort to build this institution. But look at it today, its rocking. We are already the third most valuable hospitality company, Taj, Oberoi and us, and we’re a close second to Oberoi. And I started this company with 18 crores of rupees. That’s what we put in to this company. When we did the pre IPO values last year we got a billion dollar valuation. Today its about 4300 crores in 12 years. And first 5 years we made losses. Most people didn’t know Mahindra Holidays would do this well. Its 4300 market cap, 27 resorts, 110,000 members. Its growing steadily.
You know how I started Mahindra Holidays? We used to run Guestline Hotels and at some stage we realized that one of the Mahindra philosophies is that we should be leaders in the business we are in and we realized that given the headstart the big boys have we wont be able to be number one in the hospitality because it requires huge capital. Around that time I used to read newspaper articles "Times Share or Times Scare – fun filled holidays or hassles"- becase most timeshare operators had taken people for a ride. One day I went to the Chairman and Anand and I said you know I've been reading these articles none of these articles criticize the product. They criticize people behind the product. And our strength is our reputation. Because it’s a promise to deliver. Most of your businesses, whether Timeshare or Mahindra World City or Mahindra Life Space which is a developer, all need land. Several infrastructure projects have been held up because of land problems like in Nandigram, Maharashtra and Orissa. What has been your experience?
I built that 3000 acres of land for Mahindra World City in Rajasthan by not greasing any palm. But you have to build a reputation that you don’t give handouts. I say that my files get cleared faster because if Mr X pays money then the officer also sits on the file saying I'll wait for the money and sit on the file and only clear it after it arrives. If they say Mahindras don’t pay – he has no incentive to sit on the file. But why did Jaipur happen? Jaipur happened because the then CM – wanted to bring IT into the city and she had seen what we had done in Chennai and was told by Infosys – get Mahindras in to build Mahindra world city. And I delivered to her. In 14 months time we had Infosys and Deustche bank operating out of that project. Credibility also you must have. How difficult was it getting the first Mahindra World City to take off in Chennai?
I've had some very difficult times – when I got into this Mahindra World City in Chennai it took me 5 years to accumulate land. Because that land was private acquisition. And after I built it, for the first 2 years I had no customer. In fact, people used to come and tell that these projects will not work. Both Anand and the Chairman believed in my conviction. If they had not supported me that project would not have taken off. We used to get some small customer here and there but I had told my colleagues look if youre building a project of that type the anchor customer has to be a blue chip. I would get phone calls that some hosiery unit wants land, some Korean company wants to buy land to build handtools, and I would – it was very difficult when your budget says plan so much and the actual is nil – to turn away a customer at that time, is very diffcult. But somehow good sense prevailed Mr. Narayan Murthy was the person who believed in my dream and supported me by being the first customer. How did Mr. Murthy become involved?
We were talking to Infosys but there was resistance we knew they were looking for space, but there was resistance. Then I went to Mr Murthy and Mr Mohandas Pai and I said to them look you're a visionary – whether you take the land or not, but this is my dream. Why don’t you please have a look at it? And you'll be surprised that Mr. Murthy went there at 6 am in the morning to see that land. And rest is history. Because he told his people this is the future. And I want to be part of the future. And that’s what turned it all around.
(This story appears in the 05 February, 2010 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)