Market mind: An eye popping tale

How an ex-DM and ex-CEO of a forgings company gets a shot at ownership of a suddenly-valuable Caterpillar franchise

This is my most romantic story in decades.

Chartered Accountant Sunil Chaturvedi was District Magistrate (DM) in Howrah as recently as 2009. One day he circulates his CV through head-hunters who get him posting as CEO at Bharat Forge. A few years later, he gets a Boston Consulting Group call asking if he would be interested in buying out Caterpillar’s franchise across eastern and northern India (after a four-year probation). He says, “Achcha mazaak hai (a good joke)”. The caller persists: “This is serious.”

This is how the story threads out: the listed Tractors India Limited (TIL) is passing through cash trough, needs to exit its 70-year Caterpillar franchise and is seeking an individual (don’t ask me why when this could so easily have been an industrial conglomerate) to pull the company out. Of all the slick people in the country, Caterpillar narrows down on an ex-bureaucrat working with a forgings company… I mean how confused can you get?

Our man assumes charge as managing director in January 2014, inherits an outfit bleeding, demoralised and command-driven, tells me that by personal estimate his outfit (Tractors India Private Limited) reported a loss of around Rs 40 million in 2013-14 and the first thing he does is embark on a roadshow to meet customers who give him so much gaali  (abuses) that he doesn’t know where to hide.

So he doesn’t hide. Instead, he makes one change: when executives call to ask what they should do when faced with a contract or challenging market reality, he tells them, “You know what to do, just trust your judgement.” Managers find this odd; this fellow is the man who is expected to know everything and he is telling them to do what they think is right.

But strange things happen. The company lands an unprecedented underground mining contract with Coal India in 2014. Employees suggest cost cuts. Service technicians suggest responses to customer pain. And suddenly, a miracle: this TIL subsidiary reports a profit of Rs 540 million in 2014-15. Caterpillar rubs the sleep off its eyelids, says what the hell and indicates that if this is going to be our man’s batting average then it better abbreviate his probation.

This is how an ex-DM and ex-CEO of a forgings company gets a shot at the ownership of a suddenly-valuable Caterpillar franchise. A man with savings of a low seven-digit number needs to raise Rs 4 billion to buy the company out. People laugh, he will die of a heart attack they say. He raises this from an NBFC, sustains the turnaround, sells 40 per cent for Rs 3.5 billion, repays Rs 6 billion of working capital to the erstwhile listed owner and gets a Rs 6 billion bank transfusion in 30 minutes.

The future: moderate CAT (Caterpillar) revenues to 50 per cent of turnover and build a $1 billion revenue company by 2022.

If this happens, then given a global CAT family valuation of one dollar for every dollar in revenue, Sunil Chaturvedi’s shareholding could be worth Rs 40 billion – a straight 4,000 per cent appreciation in seven years.

A kind of story that would make Mani Rathnam (the man who made Guru) sit up and say “Ahaaa!” 

The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed