Entrepreneurs create wealth, for themselves and for those who invest money or sweat in their labours. The man who has been held up as icon for wealth creation in liberalised India is Sunil Mittal: Bharti became a world-class organisation in just about 15 years, and the firm that invested in it, Warburg Pincus, made close to six times the invested amount and a profit of almost $1 billion.
Though no other company has delivered such a large amount of profits, there are at least five other companies that have delivered huge returns for investors (see graphic). However, there is one firm that is special even within this small club: Shriram Transport Finance has delivered large returns for not one but multiple investors; ChrysCapital made 10 times its investment a few years ago, and TPG made seven times its investment a few weeks ago when it sold its stake in the company.
Consider this: Over the past decade, Shriram Transport’s share price has gone up a mind-boggling 70 times, while Bharti Airtel’s has gone up about 25 times. Sure, the two businesses are very different. But if Bharti’s is tricky with regulatory risks, Shriram’s—which started off with financing the small truck owner—is no less treacherous.
Ashish Dhawan, earlier with ChrysCapital and now with Central Square Foundation, believes the secret behind Shriram’s success is the formidable R Thyagarajan. He built the company through internal accruals and debt over 20 years before accepting any private equity. By then, his processes were rock-solid.
Dhawan points to two key things Thyagarajan did to make this risky business work: “Shriram’s field officers know their customers and their needs really well. Thyagarajan also put in a system where the person who acquired a customer was the one who also collected the money from him.”
These are important things, but even more crucial is Thyagarajan’s approach to business itself, which is a mix of the earth and the pragmatic. This is what the 70-year-old had to say about his approach. Not having a cellphone is a beginning.
A doctor needs a cellphone because his patients may need urgent attention. There are professions in which a customer benefits if he can reach you urgently. I am not in that sort of a business. I am of no use to anyone in an emergency. I also don’t like to carry anything too heavy on me. Before I get down to work, I take off my watch. I don’t carry a purse, just some 10-rupee notes or 50-rupee notes.
I cannot distrust people. I don’t start with suspicions. This goes for private equity investors or partners. In 1990, when Ashok Leyland and Tata Motors took 15 percent stakes in the company some people said, “Oh, they are big players and they will swallow us.” I did not think so. When we made people branch managers, we gave them total freedom to decide on the quantum of money to lend and the risk mitigation steps. I shared my opinion on what I thought, but the decision was theirs. We have 700 to 800 branch managers, and only one or two didn’t work out. Most people are quite sensible. Till date, my trust has never been betrayed.