Industry doesn’t need sops; it needs clarity in procedures
M Murugappan, the executive chairman of the Chennai-based Murugappa Group—one of the largest family-run conglomerates in the country—is a fourth-generation member of the family. He took over from A Vellayan, who stepped down last year from that post when he had turned 65. It is mandatory for the chairman to retire at that age, and the Murugappa family strictly abides by the rules and values that have been passed down generations.
Since 2009, Murugappan was the group’s vice-chairman, spearheading technology, innovation, environment, health and safety initiatives across the group. I am meeting him for lunch at the dining room at the top floor of the group’s headquarters at the Dare House building in Chennai. One of the landmark buildings of Chennai, Dare House was inherited by the Murugappa Group when it took over EID Parry, an old, fading British company.
It is a few days after the presentation of the Union Budget. I am keen to know his views and how the group has been dealing with difficult times—its focus areas are agribusiness, such as sugar and fertiliser, and financial services, which are not easy businesses to run.
My dietary preferences have already been noted and we are served a delicious vegetarian lunch. We start with a light tomato soup. I ask Murugappan how did he react to Nirmala Sitharaman’s Budget. “I always think of the Budget as a document that sets directions. The government tells us what it wants to do, and I am sure a lot of it will be done in due course of time. The industry needs no sops to make in India. What it requires is more clarity in procedures. Then there will be more enthusiasm, which will have a cascading effect on job creation, skill development and better quality of education. It is very important that the national policy percolates down to states, and we keep the dialogue going,” he replies.
EID Parry, the company that the group took over in 1981, is the largest sugar manufacturer in south India. But sugar, one of the group’s major businesses, has been shaky in the last few years. There has been oversupply and low prices. In fact, the company has had to shut down manufacturing at its Puducherry plant and also at two of its Tamil Nadu units.
Over some sprouts and grilled vegetable salad, Murugappan explains how the group is dealing with the situation. “We have nine sugar mills—five in Tamil Nadu and Puducherry, three Karnataka, and one in Andhra Pradesh. Wherever there is water, farmers are able to plant sugar cane. Nellikuppam in Tamil Nadu is suffering from drought-like conditions and the availability of sugar cane is very low. Even in Karnataka there is shortage of rain. The three major oil marketing companies have released tenders for supply of 329 crore litres of ethanol. We have permission from the Tamil Nadu government to convert impure spirit to ethanol at Nellikuppam and Sivaganga plants in the state. We are doing it in select areas where molasses is available.”
All the sugar manufactured by the group is supplied to institutions with particular needs, helping make more downstream products. “We look at ourselves as a food manufacturing company. Selling sugar directly to the end-customer is a tough task,” he says.
Our main course consists of mixed rice, rotis and vegetables, along with crisp vadais. I want to understand whether the group will hold on to sugar business or not? After all, it has shed some unprofitable businesses earlier. “As long as we have a viable strategy to take forward, we will continue to be in the sugar industry. Our current strategies are good for the long term. We have a large stakeholder community, the farmers, and we can’t let them down.”
The Murugappa Group has 800-plus retail outlets to sell fertilisers and agriproducts largely in Andhra Pradesh, Karnataka, Telangana and parts of Maharashtra. “In the last few years, we have hired a large number of agronomists working with farmers to improve customer needs. On the manufacturing side, we constantly improve the quality of inputs,” he says.
He adds that there are concerns because of the monsoons. “We will do our best working closely with the farming community. We have to constantly follow the developments in agriculture in the country. There has been no growth in arable lands, but farm productivity has increased. There has been significant improvement in horticulture, fruit and vegetables. However, water is going to be a major challenge. We have to learn to conserve and preserve water.”
He says the country has to think through all this. “There are changes taking place, but not fast enough. If more corporate farming happens in certain areas, it will help. There are many issues like storage to be dealt with. I am hoping changes will happen without being pushed to the wall.”
As we are about to finish the main course, I ask him how Cholamandalam Finance, the group’s financial services company, has not only survived the crisis the NBFCs have faced, but has also done well. “I would say it is due to discipline, prudence and conservatism. We stick to what we do best. Asset liability remains matched. We have a good equation with banks. It is the fastest growing part of the Murugappa Group.”
I am given a choice of three desserts—fruits, ice cream and ras malai. Having had a healthy lunch so far, I opt for ice cream and Murugappan orders fruits. We talk about the group’s other businesses, most of which are steady performers. Companies on the engineering side such Tube Investments and Carborundum Universal (CUMI) will be transforming themselves to make products for emerging areas such as electric vehicles. “Last year, CUMI applied for 47 patents. We are moving towards providing comprehensive solutions to customers,” he says.
The Murugappa Group’s turnover was `36,093 crore for the year ending 2018-19. It has 28 businesses, including nine listed companies traded at both the NSE and BSE.
Lastly, how does it feel running a legacy company that was founded as long ago as in 1900? “I feel a great sense of gratitude for being given this opportunity. All my predecessors have played very important roles in taking the group forward. We all subscribe to a common set of values. The fifth generation is always welcome to work for the group. If they want to do something else, we will not discourage them,” he replies.
As we walk towards the lift, Murugappan tells me that he believes in four simple themes in running a business, which are: Is my order load increasing? Is the quality of my customer engagement improving? How do I increase the quantum of profit and cash flow? Am I providing a safe working environment with happy and satisfied employees?
“I believe in keeping things as simple as possible,” he says.