On a November evening in 2012, the Burmans, the promoters of Dabur group, were busy greeting their friends and well-wishers who had gathered at the terrace of an upscale hotel in Marine Drive, Mumbai. The party was thrown to celebrate the first anniversary of the family’s entry into investment banking and equity broking in partnership with Portugal’s Espirito.
Last week, there was reason for celebrations once again as the group announced its foray into another niche segment of finance, secured lending. It acquired a strategic stake in DMI Finance, a leading non-banking finance company specialising in senior-secured lending. Gaurav Burman will join the board of DMI.
With that, the Burmans have achieved the status of a full-fledged financial service player, with presence in investment banking, equity broking, research and insurance. The Burmans hold 25 per cent stake in Espírito Santo Securities, the joint venture with Espírito Santo Investment Bank, which focuses on equity research, brokerage and investment. The other companies where they hold a stake are Aviva Life Insurance (74 per cent) and Universal Sompo General Insurance Company (10 per cent). They had also invested in the erstwhile Lord Krishna Bank; it later merged with Centurion Bank of Punjab which was eventually acquired by HDFC Bank. The Burmans had also bought a 25 per cent stake in Fidelity Fund Management — India asset management company of Fidelity group in 2004, which they sold back in 2007.
| WHO IS LOOKING AFTER WHAT |
|
Their life insurance business Aviva was started in 2002 and turned a profit for the first time in 2011. The Burmans are on the lookout for a strategic partner for their insurance business. Mohit Burman, the son of former Dabur India Chairman VC Burman, had recently said he would consider selling a minority stake to any bank that “can add value and distribution to the partnership”.
One of the new areas where the Burmans wanted to try their luck was private equity. They had listed PE fund Elephant Capital plc, formerly Promethean India, on AIM (Alternative investment market, a sub-market of the London Stock Exchange ) in April 2007. Before that, the business was a part of Promethean Investments, a UK-based private equity fund that was co-founded by Gaurav Burman. In August 2008, the Indian business was separated from the wider group to pursue an independent strategy, and Promethean India was re-branded as Elephant Capital, led by Gaurav Burman. The fund had raised £57.5m (Rs 500 crore, this included £7.5 million from the Burman family) for private equity investments in India and India-related businesses. A few years later, it also launched a fund focused on the healthcare space. The Asian Healthcare Fund, which was launched by Anand Burman with former Dabur Pharma CEO Ajay Kumar Vij, recently raised Rs 180 crore. It made its first deal by investing $20 million in Diwan Chand Medical Services, which operates the Diwan Chand Satyapal Aggarwal Imaging Research Centre, a radiology centre, in 2010.
Changing strategy
The Burmans started out in business in 1884 as an Ayurveda company. Over the years, Dabur expanded its product profile to fast-moving consumer goods. The company had also diversified into allopathic medicine and oncology products. But, in 2008, the oncology business was sold to Fresenius Kabi of Europe for Rs 872 crore; and in 2007, the other pharmaceutical business to Alembic for Rs 167 crore. At the same time, the Burmans had gradually started to pull out of the day-to-day affairs of Dabur, leaving it to a team of professionals to run the company. However, they continue to serve on the board of directors. There is a family council of all Burmans which decides by consensus who joins the board. All Burmans are free to get into any business so long as it does not conflict with Dabur’s business, though they are free to compete with each other.
This is where finance comes in. Though the family has been present in the space for over a decade, mainly through joint ventures, it is only of late that it has been widening its focus to include new areas and function to strengthen its presence in the sector. “We believe that with consolidation in the financial services space, only strongly capitalized banks with global distribution will exist and that’s the reason for this deal,” Mohit Burman, who is a director on the Dabur board, had said after the announcement of the joint venture with Espirito. Kavil Ramachandran, Thomas Schmidheiny Chair Professor of Family Business and Wealth Management, Indian School of Business, says: “The younger generation is much more accustomed and excited about the new generation of industries which are currently in the rapid growth phase on the product life cycle. This means there is a good fit between the opportunities and the personal preferences of family members.”
Not all are convinced this is the right road to take for the Burmans. “The changing mindset of youngsters (deviating from core business) is negative and dangerous. They are looking for easy annual returns of 18-20 per cent from financial services areas and refusing to take up the cudgel in their family-run businesses”, says SP Tulsian, a leading market expert who tracks the Dabur group. Shareholders are also a worried lot as the promoters are not putting their money and heart into the core business, he adds. Refuting the allegations, Mohit Burman says: “Our initiatives have nothing to do with the Dabur business as we are investing our own money into the diversified businesses."
He says historically the family has been identifying and investing in new sectors ranging from financial services to F&B, retail, healthcare, automotive and sports. “It just happened that financial services emerged as our largest investments, but that does not mean we are moving away from the FMCG business. The idea is to set up independent business ventures outside Dabur that one day will be bigger than Dabur,” says Burman. Sharing a similar view, Indian School of Business’s Ramachandran says: “I will not be surprised if in the next few decades the business families may exit their traditional family businesses and move onto new businesses.”