Wind of change blows through Victoria House

For Sanjiv Goenka, moving with the times was an important decision, but more tedious has been changing mindsets.

At 50, Rama Prasad Goenka’s younger scion, Sanjiv Goenka, is competing to succeed in a flat world. Victoria House, the imposing headquarters of CESC in Kolkata’s central junction, is buzzing with activity these days. “There are two private equity (PE) firms in this office right now,” says Goenka, making way for some obvious questions.

The stake dilution being discussed will be in Haldia Energy, a special purpose vehicle (SPV) for three power projects in West Bengal, Orissa and Maharashtra. Kotak and CLSA have been mandated to carry out due diligence. The deal is imminent, with talks having been initiated three months ago. “They are top quality firms,” is all that Goenka is willing to reveal at this time. That’s the micro.

The macro picture looks somewhat like this: 8,000 Mw in six years at a cost of Rs 35,000 crore. Goenka has the “simple” funding arithmetic in place. Equity will be Rs 8,750 crore and a dilution at the SPV will bring down the requirement to Rs 7,750 crore. Cumulative cash flows will be around Rs 6,500 crore and at some point there will be dilution at CESC as well.

But the power utility, which has been around for more than a 100 years, failed to secure a significant place in India’s booming power sector. At present, CESC has a capacity of 1,250 Mw. Miniscule, compared with the capacity that has been added in the past few years. “In the 10th Plan, 26,000 Mw was added. In the 11th Plan, so far, 23,000 Mw of capacity has been added,” points out an Angel Broking analyst.

Even Goenka’s close associates can’t contradict this. “He is sitting on a golden goose. He should have been more aggressive.” Not that Goenka is denying it.

So, is Sanjiv Goenka intrinsically conservative? At 28, he was the architect of the CESC acquisition. A lot of drama, burnt effigies and 24 years later, CESC has grown by less than four times. For Goenka, changing with the times was an important decision, but the more tedious task was to change the mindset of his team.

“I had to make them believe that the target is not ambitious. It’s a conservative estimate and it’s achievable. We have to be among the top five in power,” Goenka says. Currently, CESC figures in the bottom half of the list of top ten power players in India, while newer entrants surpassed it to top the charts.

There is some consensus, though, that CESC is at the threshold of a major change with major projects across West Bengal, Orissa, Maharashtra and Bihar. The acquisition of Dhariwal Infrastructure in 2009 was only the starting point.

Growth plans are being chalked out for other firms in the Goenka portfolio, now more clearly demarcated from elder brother Harsh’s group of firms following a family settlement.

Spencer’s Retail is likely to break even in the next 12-18 months and PE firms, it appears, are jostling for space at Victoria House. “Talks have been revived with PE firms for Spencer’s,” Goenka says, adding that it could be spun off once it breaks even. It is a subsidiary of CESC.

“We are now present in 62 cities and the next 25 per cent of space — all of which will be this year — will be added in these cities. Sixty per cent of the stores will be big format,” he adds.

The two major growth drivers in Sanjiv Goenka’s portfolio, with combined sales of around Rs 6,000 crore, will be power and carbon black. Phillips Carbon Black (PCBL) will invest Rs 1,250 crore in the next three years in India and Vietnam. “All clearances in Vietnam are now in place,” Goenka says.

But Goenka realises that size matters and the plans may get much bigger. PCBL is one of the shortlisted bidders for the carbon black unit of Evonik Industries, Germany’s largest specialty chemicals maker. The deal size is pegged at $1.2 billion.

The acquisition, if it materialises, will coincide with 50 years of PCBL. “It was a business started by my grandfather, who had a vision that it would achieve profits of Rs 250 crore in 50 years,” Goenka says. That dream is well on track.

For Saregama, where plans haven’t exactly panned out, Goenka has a surprise up his sleeve. “I am committed to Saregama. It’s an inheritance and I am not exiting,” he says. Formerly The Gramophone Company of India, Saregama has a repertoire across genres and languages, including the top recording artists of the past 100 years and some of the greatest names in music.

But it’s Goenka’s fledgling business, Open magazine, which has been making headlines lately. Open was one of the first publications to make public the Niira Radia tapes. Goenka doesn’t want to say much on the controversy. “We have spent more than we had envisaged, but in the last 18 months we have gone where we wanted to,” he says, adding quickly that it came from personal wealth. Open’s success could be impetus enough for Goenka to revive plans of a portfolio of magazines.

After all, he "openly" declares, it’s his latest passion. “I am enjoying this space.” The smile across his face is smug.