 "MAM Ramaswamy")
The last week of August was filled with drama for the Chennai-headquartered Chettinad group, a conglomerate with interests in cement, engineering, logistics, minerals, education, healthcare and plantations. On August 26, the first act of this drama took place in Chennai with the Central Bureau of Investigation, or CBI, arresting M Manuneethi Cholan, the registrar of companies in Chennai, for allegedly accepting a bribe of Rs 10 lakh. The following day, at the annual general meeting of Chettinad Cement, the flagship of the Chettinad group, the shareholders voted against the reappointment of the octogenarian chairman, MAM Ramaswamy, as a director in the company.
With these events, the family turmoil within the oldest and perhaps the most famous family-run business of Tamil Nadu came out in the open. According to CBI, Ramaswamy, 84, apprehended his removal and the takeover of the company management by a faction within the company, and offered Cholan Rs 10 lakh to declare any decision taken at the annual general meeting as "null and void".
Ramaswamy's fears became more pronounced when a key resolution to be passed at the annual general meeting was amended to say that he would not be reappointed as a director. In fact, the local media reported that Ramaswamy had said his life was in danger and filed a police complaint against a "family member". He withdrew the complaint on August 27, it was reported.
It wasn't surprising that these developments triggered a spate of rumours about a boardroom coup by Singapore-based M A M R Muthiah, the 43-year-old adopted son of Ramaswamy and the incumbent managing director. While Ramaswamy was not available for a comment for this report, being hospitalised at the time, Muthiah denies such insinuations. "When I am the only son, how will the question of a succession war arise?" says he. "As far as a power struggle is concerned, I have been running the company for the past 15-16 years and taking all the decisions."
Muthiah, his wife, Geetha Muthiah, and companies founded by him together control about 74 per cent of the group, while 24 per cent of the equity is held by Ramaswamy, who has now been named chairman emeritus of Chettinad Cement.
| I am not against my father. He has done so much for me: M A M R Muthiah |
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In his first interview since the controversy in Chettinad group broke out, MAMR Muthiah, 43, the managing director of the group, a resident of Singapore, explains to T E Narasimhan why he needed to take some tough decisions on his father's role in the company.
How do you react to reports that say you are trying to wrest control of the group?
These are baseless. There is no succession war or power struggle. I haven't become the chairman of the company. When I am the only son, how will the question of a succession war arise? As far as a power struggle is concerned, I have been running the company for the past 15-16 years and taking all the decisions, even though my father is the chairman.
Why was your father then not reappointed as chairman?
Personally, I am not against my father. He has done so much for me. But to save the business and in the interest of employees, shareholders and other stakeholders, sometimes you have to take tough calls.
But the allegation is that you have forcibly taken over the company from him.
That is not true. For the last 15 years, his interest has been in other things. When I became the managing director in 1999, the capacity of Chettinad Cement was about 1 million tonne per annum. Today it is 13.5 million. Similarly, the group was into stevedoring, but I converted it into a logistics company, with business worth Rs 1,000 crore today. Other businesses, again mostly started by me, are small. Education is not a business, we run it for charity.
Have these allegations impacted the business or you personally?
Business has not been affected. We have a very clear road map for the next three years, including our investment plans, which will involve over Rs 4,000 crore in cement and logistics.
Has the board elected a new chairman?
L Muthukrishnan has been appointed as the chairman of the board.
The redoubtable Ramaswamy still has his admirers, but many feel it is time for a clear succession plan. "Ramaswamy should accept the reality that he no longer controls the business," says an industry veteran. "He should let the next generation run the show now." He adds that big business families like Murugappa have come up with clear succession plans, as has A C Muthiah of Southern Petrochemicals Industries Corporation who has handed over the baton to his son, Ashwin C Muthiah.
The internal wrangling at the Chettinad group had been going on for some time now, and people close to the family say that senior members from the Chettiar community had tried to mediate between the father and son and an agreement of sorts had been finalised. However, things rapidly took an "ugly turn" in the weeks running up to the shareholders meeting on August 27.
In 2012, Forbes had listed Ramaswamy as the 88th richest person in India, with a net worth of $650 million. His palatial house in Chennai is estimated to be worth Rs 1,700-2,000 crore. An avid horse racer, he has been featured in the Guinness Book of World Records for winning over 500 classic races. He still owns around 1,000 horses, according to reports.
Insiders in the group and other sources confirm that it is indeed Muthiah who has been steering the ship for over a decade now. Muthiah also says, "For the past 15-16 years, though my father was chairman, I was running the business because he had other interests. I have increased the cement business from Rs 600 crore in 1999 to Rs 4,000 crore at present."
The past and the future
It was Ramaswamy's grandfather, Raja Annamali Chettiar, who founded the House of Chettinad in 1912 with the vision of improving "the society economically by providing industrial and business development". His son, Raja Sir Muthiah Chettiar, and grandson later took up the mantle of leading the business house. It started as a commodity trader and subsequently ventured into financing. Chettinad Cement came into being in 1962, which was followed by forays into logistics and other businesses. Today, the Chettinad group has over 15 companies.
Ramaswamy's interests also lay in sports and in the Annamalai University that had been founded by his grandfather. There, he introduced new courses such as bio-informatics and biotechnology, and promoted sports. However, the Tamil Nadu government decided last year to take over the university for "alleged" mismanagement, though Ramaswamy himself has claimed it was a reaction to his approaching the government for pending grants of Rs 276 crore.
After losing the university, insiders say that Ramaswamy refocused attention on Chettinad Cement. Those in the know say that before Muthiah took the reins in 1999, the company was looked after for 38 years by a non-family member, Sabaratnam. They admit that Muthiah, who was adopted in 1995 by Ramaswamy and his wife, Sigapi Achi, as they didn't have any biological children, is a canny industrialist. "He gives money and freedom, but if you don't produce results, he will not allow you to even get close to him," say people who are acquainted with his way of working.
Under Muthiah, the group increased the capacity of the existing cement plant in Puliyur at Karur and commissioned two greenfield cement plants in Ariyalur and Karikali, apart from a new cement plant at Kallur in Karnataka. From about 1 million tonne in 1999, the capacity has risen to 13.5 million, including 1 million tonne of Anjani Cement, a subsidiary company.
Muthiah also expanded the logistics business, taking it from being a stevedoring company to running a coal terminal and operating 500 trucks. There are plans to expand by setting up new ports for coal and bulk cargoes on the west coast. The group also has an eye on the power sector and has plans for a 1,320 Mw power plant in the state, but despite having received all approvals, the state government hasn't yet signed a power purchase agreement with the group.
The group has lined up investments of over Rs 4,000 crore in cement as well as logistics to support future growth. Last week, the board approved a 3.5 million tonnes per annum cement manufacturing unit at Guntur in Andhra Pradesh, at an investment of Rs 1,100 crore. The group is also looking at a cement facility in Kadapa. The board also approved a unit at Solapur in Maharashtra at an investment of Rs 660 crore. The third proposal is for a 5.75-million-tonnes-per-annum plant at Kallur at an investment of Rs 2,010 crore. Besides, the group is also looking for opportunities in Gujarat, Rajasthan and Madhya Pradesh.
Muthiah says the group's plans will not face financial hurdles. "We will fund it through internal accruals and debt," he says. "The company's debt level is around Rs 600 crore, so we have enough room to borrow."
Clearly, despite the hiccups within the family, Muthiah is gung-ho about the prospects of the Chettinad group. He talks of new investment plans as being "aggressively driven" and points out that, given that India's infrastructure is expected to be in the fast mode under the new government, "every bit of our expansion will align to the country's long-term plan in a strategic manner."
| THE SLOW DESCENT INTO CHAOS |
In 2014:
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