HAKSAR’S LAST HURRAH
[India Today]
Published date: 15th Sep 1982
Sentimentality rarely intrudes in to shareholders’ meetings, but this one was different. Over 3,000 had gathered in the incongruous setting of a Calcutta cathedral compound for ITC Ltd’s 71st annual general meeting, on August 26. And dominating the stage, flanked by the other directors, out-going Chairman Ajit Narain Haksar was making a public spectacle of himself.
Beginning his last address to the shareholders with composure, his resonant baritone filling the vast panda, Haksar summed up 14 years of path breaking corporate steward ship. But before long, the sentimentality of the parting consumed a man otherwise as tough as nails. Breaking down repeatedly, often unable to continue, Haksar barely managed to get through his half-hour address before collapsing into his chair, turning away from the hushed crold to bury his face in a handkerchief
Honorary Post: The assembled gathering was no less moved. Shareholder after shareholder ran to the nearest microphone to demand that Haksar should not leave. And by the end of the day, they had had their way: a resolution was passed unanimously to appoint Haksar chairman emeritus.
Haksar insisted he looked forward to retiring next January, when he turns 58, but finally consented to accepting the honorary post.
The handsome honour, without precedent in any professionally-run Indian company, only underscored the measure of Haksar’s achievements since becoming chairman in 1968 of the then lmperial Tobacco Company. Taking charge of a flabby, inbred, foreign-owned organisation struggling to hold on to its market share in a non-priority industry, Haksar has charted a course that is already corporate legend.
Imperial Tobacco became Indian Tobacco, the change in name following from Haksar’s fierce nationalism and his cajoling the company’s foreign principals into Indianising shareholding. “I told them my country came before my company,” says Haksar, recalling a memorable meeting with the directors of Btitish American Tobacco Company soon after he became chairman. “And that control of the company’s operations would have to be in India.”
There soon followed another change of name, to ITC, signifying this time the ambitious and far-sighted diversification from a semi-stagnant, highly-taxed tobacco industry to hotels, fisheries, exports, paper boards and much else. In the process, the company has held on to its leadership in tobacco; its rapidly growing hotels division has quickly outstripped much older rival chains; its printing and packaging division has become the largest converter in the printing industry; and Bhadrachalam Paperboards Ltd, which ITC promoted, has the highest efficiency rating in the paper boards industry, with a capacity utilisation of 11S per cent. There is probably no other professional chairman of a company who has made the same kind of fundamental contribution to his company.
Says K.N. Randheria who was a senior ITC official till 1979: “For an organisation which for over 50 years had been a single product single-business company, diversification on such a radical scale called for skills and abilities of an exceptional level.” Adds S.B. Aibara, till recently vice-chairman of ITC., and now corporate affairs counsellor: “Under Haksar, a stagnant company suddenly sprang to life, and became vibrant and dynamic. The change achieved in 14 years is incredible. In 1968, no one would have thought this was possible.”
Managerial Revolution: But Haksar’s contribution to ITC has been more than the sum total of the individual changes he pu shed through. Armed with an MBA from the Harvard Business School, and a faith in management science and market research that only caused problems in a conservative company, Haksar nevertheless took over as the company’s first Indian chairman and proceeded to stamp his personality on one of the country’s largest companies. He gave what was a “very pucca” company the philosophy of meshing its own growth with national needs, and then proceeded to bring about a minor managerial revolution, transforming hide-bound executives concerned with their specialist tasks into managers who thought as businessmen. Says Randheria: “I have not seen any other company in which professionals have been made into entrepreneurs in the way Haksar has what he calls the proneurial style.”
While setting the new direction, dictating the pace and dominating the company’s thought processes and actions, Haksar has nevertheless built a management team with strength all the way down. Says Santanu Ray, who was vice-chairman of ITC till he left in 1977: “The structure that has been built in ITC is very very strong, and professionalism is of a very high order.” The result is a company which, as Haksar says, was once “sufficient unto itself, alienated from the environment,” but is now aggressively outward-looking, quick to spot opportunities and home in on them, and ready to build on the base he has created.
In his first address to shareholders in 1969, Haksar asked them to “prepare for the challenge of the future …(for the company) to play its part in the economic development of the country.” Looking back on the strategy he adopted, Haksar says: “We identified the country’s needs as generating employment, earning foreign exchange, developing core sector industry, and using natural resources in a proper manner. Then we assessed our own strengths and weaknesses, and harmonised the country’s needs with our abilities.”
The Move into hotels came because the company had a vast store of marketing expertise and consumer servicing skills; and the hotels earned foreign exchange while being employment-intensive. The move into paper boards broke new ground in a field where no one had cared to invest for over a decade, while helping to use natural wood resources and easing a shortage. Exports became a major priority in the drive to earn foreign exchange, and forays were made into garment exports, fisheries for foreign markets, and exports of a number of other items; foreign exchange earnings have risen from Rs 25 lakh to around Rs 60 crore. “There were many moments of anxiety,” recalls Jagdish Narain Sapru, the chairman-designate who will succeed Haksar next January as chairman. “We were undertaking the diversification when the cigarette operation was under great pressure because of steadily increasing taxes. Margins were getting squeezed, and the new projects had their gestation periods. But cigarettes successfully carried the weight of the diversification. It was not an easy task, but we have pulled through.”
Surviving the transition was a challenge that brought out the best in Haksar. Though cigarette margins getting narrowed, he launched a major productivity drive, worked with the unions to achieve unstinted cooperation for modernization, the installing of computers, and for unprecedented levels of productivity-in return for handsome pay packets.
Combining corporate objectives with social responsibility, ITC also moved into carpet exports in an effort to boost the income of weavers in Uttar Pradesh’s Shahjahanpur. Says Haksar: “A whole family used to work on a loom and make about Rs 200 a month. We moved in, gave them training, improved the quality of the pro duct, provided the weavers with wool, and sold the carpets abroad. The weavers’ income rose dramatically, to between Rs 1,800 and Rs 2,000 per month for a family.”
Failures: Nevertheless, there were the failures as well: marine fishing, for one. Started boldly in yet another bid to earn foreign exchange through shrimp exports, ITC soon ran into government restrictions, a falling market, and what Haksar admits were management failures. Eventually, the company had to pull out of the line altogether, and is now in the process of selling off its trawlers. Yet other ventures, such as garment exports, have simply not taken off.
In a number of the ventures, profits are still small. Bhadrachalam Paperboards is still to declare a dividend, severely restricted in its financial performance by being excluded from an excise concession scheme, and by the Andhra Pradesh Government’s inability to cough up the promised sales tax loans. The leaf tobacco export operations are equally under pressure, and Haksar says the company has to virtually subsidise exports. Carpet exports have slowed down because the German mark is depressed. Cigarettes themselves remain barely profitable, and the company has been forced to take massive deposits from cigarette dealers in order to shore up its position : income from investment of these deposits accounted for half the pre-tax profit of Rs 16.9 crore by the Rs 589 crore company.
The financial performance, even in Haksar’s farewell year, would have looked pretty grim without such buttressing of profitability. Another drawback is that Haksar’s growth strategy has not permitted ITC to take advantage of officially permitted tax write-offs. So, unlike other growing companies, a hefty chunk of lTC profits goes straight to the-Government as tax. To top it all, some major industrial houses-Modis, Goenkas and Dalmias-have acquired the other large cigarette companies, and have given a new edge to the competition for the smoker’s preference.
Take-off: For all these continuing uncertainties, Haksar sees the company at a take-off stage. “You must see today’s position in relation to that in 1968, when the company had its back to the wall,” he says. “Today, most of the diversification projects have matured, and the company is in a position to take on major capital investments, to mobilise the required resources and move into an era of rapid growth.”
One major venture round the comer is aimed at giving Brooke Bond a run for its money. In collaboration with the Lon<ton based Jokai group, which owns tea estates in Assam, ITC plans a major entry into the packaged tea market. Other projects on the drawing-boards include cement, micro computers, data processing, developing alternative energy sources, and the export of management services. “We expect to invest around Rs 300 crore in the next IO years,” says Jagdish Sapru.
Nevertheless, with Haksar bowing out, the company is certainly at the crossroads again. For 14 years, he has shaped its vision, moulded it as an extension of his own personality, using a managerial style that he frankly admits is authoritarian. To an extraordinary degree, the ITC today is what Haksar has made it. How then will the company fare without Haksar?
