Recently market regulator Sebi charged A.Vellayan, chairman of the Rs 269 billion Murugappa Group, with insider trading, following which he exited the chairmanship. The company, though, says his exit reflects the high standards of corporate and family values that the group practices. In an interview to K.T.P. Radhika, Mr M.M. Murugappan, vice chairman of the Murugappa Corporate Board, talks about the group’s ethics, existing business environment and his expectation from GIM.
Q) The group targeted to grow three times the GDP, but reported only an 11 per cent growth in 2014-15 in overall revenues. What went wrong?
2014-15 was a difficult year. We grew much lower than our aspirations. The environment was not hugely conducive. In the difficult environment, we focused on operations, cash flow and consolidation of business and ensured our capacities were utilised better; the company is fit for next generation growth. We used this time to improve our internal efficiencies and productivity and we worked on developing capabilities.Despite these circumstances, the group recorded a turnover of '26,926 crore. All our companies have done decently well. The debt level has been low. We have capacities to use for the next level of growth and we are well positioned.
Q) We have seen a lot of splits and feuds in family businesses recently, even in Tamil Nadu. How is the 115- year-old Murugappa Group holding itself together?
We like transparency in business and are very proud about our people. We communicate regularly within the group. The whole group has strong work ethics and a very good value system that cut across from the leadership downwards. We are entirely professional and at the same time our employees enjoy freedom in their work. While we are very focused on service with our customers, we like to balance the interests of our stakeholders. For us, all stakeholders are equal — whether it is suppliers, customers, government or societies and, of course, the shareholders. If our smaller shareholders are happy, we are happy.
Q) Sugar industry in India is going through an unprecedented crisis as sugarcane prices mount year on year. How is it affecting the group’s sugar business?
Sugar business continues to face the challenges and we cannot wish the challenges away. Our sugar units are spread across Karnataka, Tamil Nadu and Andhra Pradesh. Sugar business is in a situation where there is a world surplus in sugar and naturally an Indian surplus on sugar.
It depends lots on policy, pragmatism at the Centre and in State level. For example, a week ago, the Centre announced Rs 6,000 crore interest-free loan to sugar mills to enable them to clear cane arrears payable to farmers. If they announce it for the people who procure sugar, it must be much better. Sugar business has to be profitable to pay back the loan. The Centre has put across fair remunerative price and all States should subscribe to it.
Q) Recently TI cycles has opened up a Cycling Cafe in Chennai. And you have a new plant as well..
Our Rs 95-crore bicycle plant in Punjab will go on steam by early next year. In the first phase, the plant will have a capacity of about 1.5 million units a year. The facility will cater to the domestic market. Currently, the company has three plants in Chennai, Nashik and Noida with 1.5 million units capacity each. Yes, cycling is evolving as a lifestyle and is moving more on the performance side. We are still making bicycles, which are called simple roaster bicycles for local transportation. In developed countries, bicycles are seen as modern transport. With India getting more and more urbanised, there will be more cycle for fitness.
What we are trying to do is to build communities. We want to encourage communities like cycling groups. Last year, we opened India’s first ‘Cycling Cafe’ in Chennai called Ciclo Café at Kotturpuram, aiming to bring people closer to cycling. It is our endeavour to bring bicycles and its lifestyle to one place under one roof. And we are also straggling various segments right from toddlers and kids to performance bikes to adults.
We like to straggle the entire range and that is our aspiration as our bicycle business is concerned. In order to give a good retail experience TI has opened about 658 retail stores in different formats in metros, small towns, tier 2 and tier 3 cities across the country. 10 per cent of our bicycle business comes from TI’s retail showrooms.
Q) What is your expectation from Global Investors Meet being organised by the TN government?
Murugappa is a pan-Indian company headquartered in Chennai. We believe Tamil Nadu has tremendous opportunity. We have a good cost line and talented people. We need to have good vision, pragmatism and
consistent policies.
