 "40 Years Ago... and now: Riding the services wave")
I joined the Mahindra Group in 1973. Over the last 41 years, I have observed that the strength of the Group has developed far beyond resilience and has emerged stronger from crisis. I think our strengths are best encapsulated in our core values, which are professionalism, good corporate citizenship, customer first, quality focus and dignity of the individual.
I would like to demonstrate this with a few anecdotes :
When I was promoted to the senior management, there was a meeting arranged with Keshub Mahindra, the then chairman of the Group, and I was expecting a big sermon. After talking to me, he just gave me one piece of advice, "Arun, be fair and perceive to be fair."
The following incidents gave me the courage to ride through the difficult periods in the new areas we ventured.
Among the various businesses that we started, was the hovercraft service on the western sea board. While we were promised, we did not get the landing rights in Nariman Point and it did not make sense to carry on the business. I had to give the bad news to Keshub Mahindra and contrary to my apprehension, he said, "I am glad to see that you are taking risks otherwise I would have been concerned. As long as you take calculated and well-thought-out risks and succeed in majority of the businesses, don't worry."
Mahindra World City was probably the most difficult start-up in my career and the word around was, 'what does this accountant understand of real estate?' Many though this project would not succeed. Both Keshub Mahindra and Anand Mahindra asked me if I believed in this project. Once I said yes, they supported me against all odds. And today Mahindra World City is the dream of every state government.
In my initial years of becoming the chairman of a public listed company, we had excellent results in one year and I went to meet Anand Mahindra to seek his consent to declare a dividend higher than the conventional rate of distribution. He said, "Arun, it is for your board to decide."
In the 1970s, our decision to get into a business was based on two considerations: you had a licence or you had a collaboration. It was an opportunity-based decision. Besides auto and tractors, the Group had businesses as diverse as insulating varnishes to advertising, elevators to diesel engines, oil drilling to auto components, environmental engineering to steel trading, metallurgy to M-Seal, etc. And these emerged either out of collaboration or licenses.
In the 1990s, we decided to use four tests to determine, which businesses we will retain or divest: 1) We were leaders or near leaders in the business; 2) innovation is the key element of the business; 3) we must make reasonable return on capital, and 4) globalisation should be an integral part of the business. Eventually, we exited those businesses which did not meet these tests.
When the economy started opening up, people were most worried about the auto industry because it was primarily a supply driven market. We realised that the customer is going to be the king and what really helped us was our customer centric approach coupled with investment in technology and ability to come out with new products. Example of customer centricity included dealer management and relationship, and incorporation of Mahindra Finance to meet the needs of our rural customers. You can see the results. After so many years of liberalisation we still control nearly half the utilility vehicles market whereas all the MNCs and domestic players put together share the rest.
In 1992, Anand Mahindra wanted the Group to have a significant presence in the services sector because he saw, before others, that this sector will dominate GDP growth. At that time, less than three per cent of our turnover came from the sector and today nearly 50 per cent of our business comes from services business. This diversification was a well-thought-out strategy based on synergies that we could draw from the Group.
More importantly all these businesses were based on what the new India would need. Besides our technical and commercial expertise, we leveraged on the most important strength of the company - its value system and businesses like Mahindra finance, real estate, hospitality were built around the concept of 'trust'. Take the example of Mahindra Holidays. Time-share was a bad word in the mid-90s and what the customer was really looking for was trust and we built Asia's largest and now soon to be the world's No. three vacation ownership company.
Speaking of trust, post detection of fraud, Satyam lost most of its major customers and when Mahindras took over, besides the effort of the Tech Mahindra team, the support of the senior management of M&M to assure the customers that Mahindra Group values will be imbibed by Satyam, brought that company back to its strength.
We believe that values have to be a part of the DNA of the organisation and cannot be imbibed just by rule books. In addition, it has to be demonstrated by both the promoters and the top management. Major credit for this goes to Keshub Mahindra and Anand Mahindra, because they have conducted themselves as per highest governance standards.
To sum up, I would like to say that the history of Mahindra is linked to the history of India. We started with bringing off road vehicles in the country when Pandit Nehru was trying to build India and there were no roads. We started manufacturing tractors to partner the green revolution and now we are moving into sustainable and inclusive development and alternate energy.
I would like to demonstrate this with a few anecdotes :
When I was promoted to the senior management, there was a meeting arranged with Keshub Mahindra, the then chairman of the Group, and I was expecting a big sermon. After talking to me, he just gave me one piece of advice, "Arun, be fair and perceive to be fair."
The following incidents gave me the courage to ride through the difficult periods in the new areas we ventured.
Among the various businesses that we started, was the hovercraft service on the western sea board. While we were promised, we did not get the landing rights in Nariman Point and it did not make sense to carry on the business. I had to give the bad news to Keshub Mahindra and contrary to my apprehension, he said, "I am glad to see that you are taking risks otherwise I would have been concerned. As long as you take calculated and well-thought-out risks and succeed in majority of the businesses, don't worry."
Mahindra World City was probably the most difficult start-up in my career and the word around was, 'what does this accountant understand of real estate?' Many though this project would not succeed. Both Keshub Mahindra and Anand Mahindra asked me if I believed in this project. Once I said yes, they supported me against all odds. And today Mahindra World City is the dream of every state government.
In my initial years of becoming the chairman of a public listed company, we had excellent results in one year and I went to meet Anand Mahindra to seek his consent to declare a dividend higher than the conventional rate of distribution. He said, "Arun, it is for your board to decide."
In the 1970s, our decision to get into a business was based on two considerations: you had a licence or you had a collaboration. It was an opportunity-based decision. Besides auto and tractors, the Group had businesses as diverse as insulating varnishes to advertising, elevators to diesel engines, oil drilling to auto components, environmental engineering to steel trading, metallurgy to M-Seal, etc. And these emerged either out of collaboration or licenses.
In the 1990s, we decided to use four tests to determine, which businesses we will retain or divest: 1) We were leaders or near leaders in the business; 2) innovation is the key element of the business; 3) we must make reasonable return on capital, and 4) globalisation should be an integral part of the business. Eventually, we exited those businesses which did not meet these tests.
When the economy started opening up, people were most worried about the auto industry because it was primarily a supply driven market. We realised that the customer is going to be the king and what really helped us was our customer centric approach coupled with investment in technology and ability to come out with new products. Example of customer centricity included dealer management and relationship, and incorporation of Mahindra Finance to meet the needs of our rural customers. You can see the results. After so many years of liberalisation we still control nearly half the utilility vehicles market whereas all the MNCs and domestic players put together share the rest.
In 1992, Anand Mahindra wanted the Group to have a significant presence in the services sector because he saw, before others, that this sector will dominate GDP growth. At that time, less than three per cent of our turnover came from the sector and today nearly 50 per cent of our business comes from services business. This diversification was a well-thought-out strategy based on synergies that we could draw from the Group.
More importantly all these businesses were based on what the new India would need. Besides our technical and commercial expertise, we leveraged on the most important strength of the company - its value system and businesses like Mahindra finance, real estate, hospitality were built around the concept of 'trust'. Take the example of Mahindra Holidays. Time-share was a bad word in the mid-90s and what the customer was really looking for was trust and we built Asia's largest and now soon to be the world's No. three vacation ownership company.
Speaking of trust, post detection of fraud, Satyam lost most of its major customers and when Mahindras took over, besides the effort of the Tech Mahindra team, the support of the senior management of M&M to assure the customers that Mahindra Group values will be imbibed by Satyam, brought that company back to its strength.
We believe that values have to be a part of the DNA of the organisation and cannot be imbibed just by rule books. In addition, it has to be demonstrated by both the promoters and the top management. Major credit for this goes to Keshub Mahindra and Anand Mahindra, because they have conducted themselves as per highest governance standards.
To sum up, I would like to say that the history of Mahindra is linked to the history of India. We started with bringing off road vehicles in the country when Pandit Nehru was trying to build India and there were no roads. We started manufacturing tractors to partner the green revolution and now we are moving into sustainable and inclusive development and alternate energy.