Lunch with BS - Bal Krishan Goenka

A Welspun venture

How the Hissar businessman became the world's fifth largest terry towel maker.

Hissar is a sleepy town in Haryana with no claim to fame. Except it has produced a crop of pugnacious businessmen: steel magnate Om Prakash Jindal who died in a helicopter crash some months ago, media and entertainment baron Subhash Chandra and now Bal Krishan Goenka of Welspun, writes Business Standard.

You could fault me for putting the 38-year-old vice-chairman and managing director of Welspun in the same bracket as Jindal and Chandra "" with a turnover of Rs 2,000 crore split more or less equally between his textiles and steel pipes businesses, he is way too small.

But his ambitions are no less lofty than the other two earthy men of Hissar. Goenka is the world's fifth largest maker of terry towels and plans to leapfrog to the third spot in three years flat.

And he is focused on bed linen and terry towels: "We only want to be in the bedroom and the bathroom." The reason is simple: unlike garments, terry towels were never reserved for the small-scale sector, allowing entrepreneurs like Goenka to put up large capacities; and China, India's arch rival, had a small terry towels quota in the Multi-fibre Agreement (MFA) regime, which discouraged the country from investing in this line of business.

For the record, Goenka is distantly related to the Jindals (he even studied in a Jindal school in Delhi) and grew up in the same neighbourhood as Chandra in Hissar. His father also ran an export business along with Chandra in the pre-Zee Telefilms days.

We are at The Dhaba, a restaurant specialising in "fine highway dining". Light comes from petromax lamps hanging from the roof made of bamboo reeds. The seats of the chairs are made of jute lining, the crockery is copper and the music system is playing peppy numbers from old Bollywood flicks. The setting is perfect for a leisurely lunch "" long and sinfully heavy.

"Vegetarian thali," he tells the waiter after scanning through the menu for less than half a minute, while I settle for a non-vegetarian ensemble. Clealry, Goenka is hardly interested in food. A look at his past will tell you why. At 16, he joined his father's dal mill. After that, he shifted base to London to try his hand at brass exports. But it didn't work out. Then, in 1985, he set up Welspun when he was all of 18.

"You miss out on a lot of things when you have to join the family business at an early age," Goenka gets philosophical as he sips lassi. "But you start making money early," I counter. "Yes," Goenka says after thinking about it for a while: "It is a passion."

Not for nothing, a merchant banker had once told me that Goenka's biggest strength is his sharp "Marwari budhhi" (Marwari intelligence). "He has got every kind of funding in his business ranging from IPO to private equity [Temasek and ICICI Ventures have invested in Welspun] and overseas borrowing," his words were still ringing in my ears.

"But all the investors have made money," Goenka goes on the defensive: "ICICI Ventures bought our shares at Rs 65; the price is now Rs 130." What about Temasek? "It invested at Rs 130. But this is the Singapore government's [Temasek is its investment arm] first investment in the Indian textile sector. This is a vote of confidence in our favour," Goenka replies, adding: "Our valuation is low. The group's market capitalisation is Rs 2,000 crore, whereas our assets are worth Rs 2,000 crore."

Our thalis have arrived. Goenka wants the rice on his platter to be removed. The waiter suggests he should find his way round the mound at the centre. Goenka doesn't mind and starts breaking rotis. But his mind is on the new facility Welspun is putting up at Gujarat at a cost of Rs 600 crore. The state has given him 5,000 acres of land for growing cotton.

This will make Goenka a fully integrated player in the business. "Narendra Modi asked me to focus on four Fs: farmer, factory, fashion and foreign," he says. "But do you have orders in hand," I ask. "All our production is booked till December 2007," he replies.

I am eager to know how life has changed for Goenka after the MFA phaseout. While some exporters complain that there is an unprecedented squeeze on prices, others say business is booming like never before.

"For the first few years, I never even got to see our ultimate buyer as there were several agents and distributors between us. Things are different now. We now supply directly to all the big chains like Wal-Mart and JC Penney. We also sell to Nautica and Tommy Hilfiger."

Goenka says that there are big opportunities in the towel business in India also. He is setting up a chain of 22 retail stores under the brand Spaces to sell towels along with bed linen. "I will sell world quality towels for as little as Rs 80," he says.

Goenka claims to have done extensive research on towels in India: it is used till it becomes a swop, a towel is washed only twice a month, most people buy it by weight, it is not a fashion statement and so on. The retail foray, Goenka informs me, is being spearheaded by his wife.

We are now on coffee. The restaurant, which was empty at the beginning, has started filling. Goenka now shifts to another family business: the ultra-expensive GD Goenka schools. (The new school at Gurgaon has a fees of Rs 14,00,000 for boarders. People can even pay in dollars.) "It's an interesting business," he says. "What's the ROCE," I am eager to know. "I don't know. But once your brand is established, you just sit back and enjoy. You don't have to do anything," he replies.

Surely, the good life. But both of us have a long day ahead of us. We call it a day and go our separate ways.