Suveen K Sinha: FMCG's David

BACKSTAGE

At first, it appears to be a screen name, one adopted by the person hoping it would help his screen persona click with the masses.

It isn't. Nevertheless, Kumar has been quietly doing things that would surpass many a screen protagonist in sheer bravado.

The man, as a young entrepreneur in the 1980s, foresaw the opportunity in home appliances, a small segment then, but one destined to grow with the evolution of nuclear families which had less time than the previous generations for time-consuming household chores.

To cash in on the opportunity, Kumar promoted Maharaja International (remember the Maharaja Whiteline appliances?) with the intent of providing good quality appliances to Indian consumers at affordable rates.

He couldn't go on for too long. Up against the might of multinationals that came with the liberalisation, Maharaja International became a 51 per cent subsidiary of Swedish consumer durables giant A B Electrolux.

Indian corporate history has its fair share of entrepreneurs who, after bowing to multinational might, settled down to reaping shareholder benefits and maybe doing something of their own in a much smaller way.

Kumar chose neither. For years, he has been waging a bruising legal battle against Electrolux, under Section 392 of the Companies Act, over what he perceives as an erosion of shareholder value after the merger of Electrolux India, Electrolux Kelvinator and Intron Ltd in 2001. He has also challenged the delisting of the company.

In fact, in 2002, at the first annual general meeting of the company after the merger, Kumar had raised a voice of protest, questioning how the company, which was making profits at the time of the merger, had plunged into losses. (The company showed a net loss of Rs 144 crore for the year ended December 31, 2001.) This in spite of having established brands in its fold, such as, Allwyn, Kelvinator and Electrolux.

He is particularly peeved at the closure of the some of the plants owned by the merged entity, such as those at Sanathnagar, Warora (near Nagpur) and Nandlur (Andhra Pradesh).

He wonders how the closures could have enhanced shareholder value and points out that they in fact put a lot of burden "" such as the outgo on account of voluntary retirement schemes, the dead stock and so on "" on the company. Instead, he would have liked an increase of production at the plants.

Sources close to Kumar say the cases will total about a dozen. And the number keeps growing. Last month, Kumar, who was thought of as one of the contenders to acquire the beleaguered Electrolux Kelvinator, filed a case in the Delhi High Court challenging the changes in the legal structure of Electrolux India. In another petition filed in May 2003, he had alleged misrepresentation to the shareholders at the time of the merger.

Now, this legal battle is threatening to derail the big-bang announcement of last week, Videocon Industries' proposed acquisition of AB Electrolux's entire 91.25 per cent stake in its Indian subsidiary, Electrolux Kelvinator Ltd.

Those close to Kumar contend that the announced merger is doomed from the start. "An announcement is just an intention. It takes a long time to complete a merger. It is not very difficult to see the fate of this deal. There are cases pending against an earlier merger. How could they be overlooked?" they ask.

The Videocon brass though appears unruffled. They are now looking around for a suitable person to fill the CEOs slot at Electrolux, a position that fell vacant with Rajeev Karwal's recent announcement that he was quitting.

Kumar, at the time of writing this article, was in Stockholm, apparently negotiating with the Electrolux management. He could be offered payment for his equity stake of a little over 5 per cent in the merged entity.

As things stand, Kumar's equity holding has already dwindled drastically from about 14 per cent at the time of the 2001 merger, mainly through rights issues. It will get diluted further if the Videocon's acquisition sails through.

Or, Kumar could come back to renew his battle in court.

The picture would be getting clearer even as you read this. The case comes up for hearing in the Delhi High Court today.