Gautam Thapar’s life so far can be divided into three distinct phases. The first was when he was “an outsider looking in” on the wealthy Thapar family, owners of one of the biggest industrial houses in India. His father had opted out of the business, and young Gautam was regarded as a barnacle living off the largesse of the hardworking members of the clan. “I had heard talk that the family tree was big enough to support some dead branches,” he once told a reporter. “I thought I’d stay on in the U.S. and find my own destiny rather than be another dead branch.”
Thapar was studying chemical engineering at Pratt University in New York in the early 1980s when his uncle and group chairman L.M. Thapar, who had been grooming his eldest nephew Vikram Thapar as his successor, sent for him. Gautam returned to India, albeit reluctantly, to plunge into the family businesses. Like Ratan Tata, who in his initial days was given the toughest nuts to crack, Gautam was asked to rescue sick companies like pulp manufacturer AP Rayons. He did so with great success.
This was the second phase: salvaging the empire’s bleeding outposts, reinvigorating the group’s ailing flagship — paper manufacturer Ballarpur Industries Ltd. (BILT) — and participating in the split of the group into four separate entities in 1998. In 1995, L.M. Thapar kept his promise to begin handing over the reins of the business to Gautam’s cousin, Vikram, by appointing Vikram managing director of BILT. But the next three years were disastrous for the company, and in 1998, Gautam took over as managing director. He has been successfully running the show since. When L.M. Thapar died in 2007, he left his share of the Thapar Group to Gautam.
Now in the third phase of his career — as the undisputed head of the family business — Gautam has renamed the US$3 billion group Avantha. Its two major companies are the $1.7 billion power transmission and distribution equipment manufacturer Crompton Greaves and the $600 million BILT. It has a number of smaller outfits such as BILT Tree Tech (forestry), Global Green Company (India’s largest exporter of gherkins, pickles and the like), Solaris Chemtech (a manufacturer of caustic soda and allied chemicals), Avantha Power & Infrastructure (coal-fired power) and Avantha Technologies (technology outsourcing services).
Avantha now has globalization on the agenda. Its overseas acquisitions began in 2005 with Crompton Greaves taking over Belgium-based power transformer maker Pauwels. In September 2008, Global Green acquired Hungarian foods company Puszta Konzerv. The group is targeting revenues of US$10 billion and a market capitalization of US$25 billion by 2013.
In an interview with India Knowledge at Wharton, Thapar, now 48, spoke about leading a family business in the Indian context, the Thapar succession saga and the plans and prospects of the Avantha Group.
India Knowledge at Wharton: In the West, ownership in family businesses is normally divorced from management by the third or fourth generation. It doesn’t seem to happen that way in India. Why?
Gautam Thapar: I think we need to make a distinction between public ownership in a family business through a stock market listing, and family ownership of business in general. In the first case, a large part of the reason this divorce doesn’t happen in India is the nature of our capital markets, the size of the economy and the nature of the institutional investors in our markets. Despite our vibrant equity markets, we have no debt capital markets to speak of. The size of individual market sectors in the Indian economy is small, and it is only now beginning to get to a scale and size that makes large investments possible. For years, the only institutional investor was the government of India. Given a choice 35 to 40 years ago, many family-owned businesses would not have opted for raising equity in capital markets, but were forced to do so due to tax and non-availability of capital.
In the second case, over time a system for sharing decision making on a day-to-day basis does evolve between owners and their key employees that allows family businesses to continue to be family-owned and managed in the third, fourth or fifth generation. Since there is no outside investor, there is no problem with such a structure.
India Knowledge at Wharton: How would you describe your early life, as part of the powerful Thapar Group, yet not part of it?
Thapar: Largely a case of an outsider looking in. It had advantages and disadvantages. In my case, I felt I had nothing to lose in challenging the status quo. At best, I would bring about much needed change and carve out a role for myself. Worst, I would be completely ignored or sacked.
India Knowledge at Wharton: You were never in the running for succession to the Thapar throne. You did not receive any particular grooming. What qualities did you bring to the table when you started working for the group?
Thapar: I brought to the table a willingness to challenge the conventional wisdom and the decision-making process. Although I was not in any succession plan, I still had the family’s last name and people were uncertain where I fit in the general scheme of things. I counted on the fact that they might not like my very pointed observations and challenges and would be forced to respond and defend themselves or their proposals. I used the uncertainty principle to my advantage.
India Knowledge at Wharton: I believe you were very reluctant to come back to India after studying engineering in the U.S., and you were not on talking terms with your uncle L.M. Thapar for some time. What motivated your return?
Thapar: My motivation was simple. My visa expired and I was unable to stay on. I also ran out of money. I did not come back to work in the family business, but rather to mark time and do something useful before returning to the U.S.
India Knowledge at Wharton: Who mentored you in the group, and what were your initial days like?
Thapar: I was mentored by a vice president by the name of Brij Mohan Bakshi. He asked me to come into his office every morning and sit there throughout the day, ask any questions and participate in any meeting. He looked after our diversification into synthetics with Dupont. It was an amazing insight into so many aspects, both tactical and strategic, that go into the decision process in an organization.
India Knowledge at Wharton: The Thapar Group has existed since 1919. Why did you feel the need to change the name to Avantha?
Thapar: The Thapar Group decided to split in 1998. There were now four Thapar Groups. Additionally, I bought out my brother’s holding in Crompton Greaves in 2005-06 and was also managing my uncle L.M. Thapar’s business. Upon my uncle’s death in 2007, I was in the position of running the largest and most successful parts of the business. I felt it was time we moved away from the baggage of the past and charted out a new identity for ourselves, essentially consolidating my ownership and inheritance under one name.
India Knowledge at Wharton: What does ‘Avantha’ mean?
Thapar: ‘Avan’ comes from the French ‘avant,’ meaning forward, vanguard, advancing; and the Sanskrit ‘stha’ stands for stability. Also, the last three letters ‘Tha’ are short for Thapar.
India Knowledge at Wharton: How hands-on are you? There is a perception that the Mumbai-based Crompton Greaves is professionally managed and has been doing exceedingly well (though it has had losses in the past), while the Delhi-based BILT has been run by the family and has put in a patchy performance. How true is this?
Thapar: Once again, perception and reality differ. Both companies went through major financial problems between 1995 and 2001, which forced us to take drastic action. To say one had a patchy performance vis-à-vis another is to miss the point. Professionalism in and of itself does not guarantee any success. Ultimately, it is the quality of leadership and decision making that matters. The history of companies and managements is littered with CEOs who started believing their own PR and omnipotence — a sure-fire recipe for trouble.
India Knowledge at Wharton: Your two flagships today are Crompton Greaves and BILT; they account for nearly 80% of your revenues. But they are totally unrelated businesses. Are there any synergies there? Can the same management style be used successfully at both?
Thapar: The only synergy that exists is me. Ultimately, these are companies with old cultures. Neither is going to change into looking like the other. What I do is to try and bridge the learning for both the companies, while providing a stable ownership structure.
India Knowledge at Wharton: What is the rationale for going into areas like foods and outsourcing? Are you merely chasing the flavor of the month?
Thapar: If we chased flavors, I should be doing real estate. I like businesses that are different and a little ahead of their time in the market.
India Knowledge at Wharton: What is your vision for the group?
Thapar: I see myself as an entrepreneur. I believe I have the vision to spot opportunities to create value and wealth, the risk-taking ability to commit to the opportunity, and the ability to put together a management team to execute. We are financially innovative, yet conservative and low key. In essence, I function as an allocater of capital and other resources within the framework I’ve described. That is the framework we use to develop our people. We will continue to diversify as the opportunity presents itself. That’s the entrepreneurial part.
India Knowledge at Wharton: What are your plans in insurance and power? What other areas are you looking at diversifying into?
Thapar: Insurance is on the back burner; power is very much in the cards, both generation and distribution. Initially, it is captive [coal]; later, it will be non-conventional energy like wind and solar. None of these diversifications are through any of the existing companies.
India Knowledge at Wharton: You have started on a series of international takeovers. What is next on the agenda? How do you see yourself on the global stage?
Thapar: Our acquisitions have been specific and served specific purposes. These have been met. Our next phase will look at technology and service opportunities in the same verticals.
India Knowledge at Wharton: How do you see India’s role in the future of global business?
Thapar: Despite all the excitement in India, we’re still barely 2% to 3% of world trade. Additionally, we are a low-cost and low-price economy. Companies with goods, products and services that are geared towards delivering that value proposition in any segment of the economy will always be the strongest as they cater to the largest consuming base in the economy. One example is telecom. A willingness to adapt your business model to suit the economy is a necessity for success. India’s role will continue to expand on the world stage as she becomes a larger part of the global economy.
India Knowledge at Wharton: What is your view on succession in the Avantha group? Will your daughters take over from you?
Thapar: My children will have to learn how to manage their wealth. I am already setting up a structure that will allow them to exercise that right without interfering with the day-to-day running of the company. The best that I can do for them is to leave them with a structure and people that allow them to do that. If they’re interested in running a business day-to-day, then they will have to go through the grind.
India Knowledge at Wharton: Thank you very much.