'We don't need joint ventures anymore'

Q&A/ Bhupendra Kumar Modi

During the 1980s and early-1990s, Bhupendra Kumar Modi had emerged as India's top joint venture specialist, having brought names like Xerox, GBC, Olivetti, International Paper, Alcatel and Telstra to the country.

Twelve years after the P V Narasimha Rao government brought down the licence-permit-quota raj, Modi is a changed man. He does not believe in joint ventures and feels India is no place for manufacturing. But one thing remains unchanged "" controversies have an uncanny knack of following him wherever he goes.

Modi now operates out of New York, where his holding company MCorpglobal is headquartered. During a recent visit to India, he fielded questions from Business Standard.
Excerpts:

Both Xerox Corporation as well as you want to buy each other out of Xerox Modicorp. What went wrong?
I built Xerox in India. I left it in 1994 since we were getting into telecom. As I didn't have a son or a brother helping me in business at that time, we put a managing director from Xerox to run the company.

Now, Xerox went through a bad time. But it managed to save itself as Fuji bought its business in the Far East. In India too, it is looking for arbitrage. But to sell, it needs to raise its stake to 100 per cent.

They are trying to run the company from the US. But it is a services company that has to be a low-cost operation. We are competing with HP and can't be in the market with huge overheads. It should sell products of all companies "" whatever the customer wants.

Worldwide, Xerox's marketshare has fallen to below 6 per cent. High-cost manufacturing out of the US and Europe can no longer be competitive. There was an agreement in 1995 that all products would be sourced from China. But that company is no longer with Xerox. It is still trying to survive on old products.

Xerox Modicorp is a fine institution with fine people. If we get control of the company, we will get the whole range of products from Fuji and China. The introduction time will be low and so will be the costs. I have more value in mind for the company than them.

What about the disclosure by Xerox to the Securities & Exchange Commission that money was paid by Xerox Modicorp to secure orders from the government?
The disclosure was done to drive down the value of the company. Fortunately, I had left the company in 1995. I didn't even know what was happening.

Has it affected your views on joint ventures with multinational corporations?
We don't need joint ventures anymore. Multinationals suffer from a disadvantage. They have standardised everything. But people are looking for not only standardisation but also for specialised products and services. The best hotels at several places have been put up without any tie-up with a hotel chain.

If I go to a multinational corporation, I will end up doing what it is doing, which is not the best. There is more technology now with people than with corporations. Big companies are too slow in decision-making.

But earlier you had done a string of joint ventures.
Such joint ventures were the need of the hour at that time. Foreign companies could not come to the country on their own as there was a ceiling of 40 per cent on foreign investment. But it is not the case now.

Besides, technology is more versatile and readily available now. Instead of large corporations, I am looking at dealing with leading people. I have over 200 people advising me on my various businesses.

What are your new businesses?
Whatever I built was always three to four years before others did. We are now getting into industries 10 years ahead of their time. For instance, the mall we are building in Noida at a cost of over Rs 300 crore is futuristic. It will be of a global standard. We have acquired 2,00,000 square feet area in new Bombay for a similar mall and are trying to buy an existing mall in Singapore.

We are setting up a day care centre in Delhi. We feel that 99 per cent of physical problems can be cured in a day and do not require the patient to get admitted to the hospital.

Earlier, insurance companies would not pay unless the patient got admitted. The new global trend is that insurance companies pay even if the patient is not admitted. I had gone to Atlanta and came across a hospital with no beds. In India, we are still stuck with the mindset of 100- or 200-bed hospitals.

As a result, the capital investment in our hospital will be low. Our promise to the patient is that he will not have to wait for more than two minutes to see a doctor. We are planning to do a similar project in New Jersey and in West Asia. Even in the past, I have never done old things. Whatever I do is global.

We are also putting up a holistic centre called "The Global Village" in Delhi. It will provide total rejuvenation "" physical, mental as well as spiritual. It will be a centre for leaders, not followers. It is a place where you have to think in a clear-headed way. We are looking at another such centre in Singapore. We have drawn elements from the US, China and Europe.

We see India as a knowledge society. The world is moving towards a knowledge society. People with knowledge are being recognised and rewarded. I have had enough successes in life. I want to leave an imprint as a man who made money with values. The next generation is losing these values. People are leaving the country thinking money cannot be made ethically here. We are saying it's not true.

These are all services. Does it mean you are no longer interested in manufacturing?
We are getting out of manufacturing and will be totally into services. I have fired 35,000 people and I am glad about it. But I will create another 100,000 jobs. Many of these will be in call centres. And we are going to places where nobody goes. Companies from the US are coming here because the costs are low. Similarly, we will go to smaller cities. In this age, it makes no difference if you are operating from Delhi or a small village in Himachal Pradesh. You are dealing through space where distance has no meaning.

The way we see it, China will emerge as the hub of manufacturing, India as the hub for software development, and the US for consumption. In China, we will invest like portfolio managers. We are trying to buy two or three factories in China. The sectors we are looking at include steel, tyres, textiles and so on "" industries we have an experience of running in India.

But you are still left with Modi Rubber in India. Associated with that is the problem of cross-holdings in other Modi companies.
There has been a family agreement to disentangle the cross-holdings. It has already been done in two companies, Modi Spinning and Modi Rubber. Those who held shares in these companies have been paid. The other two companies, Modi Industries and Modipon, will be done later this month. We have informed the government that we can resolve our own issues. The government has asked us to disentangle the cross-holdings in all four companies and then get back to it.

This history has to end, a new era has to begin. By the end of this month, all the issues will be resolved. We will start 2004 with a new slate. We have not got a single penny from Indian banks for our telecom business.

You had announced that you would no longer hold an executive position in your operating companies. How have you structured MCorpglobal?
We have a family board which looks after the family wealth, remuneration of the senior management and so on. Then there is a management board that looks after the business. Each business has an advisory board made up of people from all over the world. All family members working in group companies report to the management board. CEOs can be pinched, not management board members.

I am out of all operating companies, working like a shareholder and a motivator. Bill Gates is doing the same. People look at him for guidance. I cannot say, "I don't know." I cannot duck questions.

What made you relocate to New York?
It is the financial capital of the world. We need to think global and act local. For this, it is essential to know what is global. Thus, I travel 250 days in a year. I am never in a place for more than two days.

You are also the president of VHP Overseas. Does all the travel leave you with any time for it?
There is no country in the world that has no Hindus. In fact, I have stopped eating out when I travel abroad. People call me to their homes for meals. The hotel bills have also been cut. I am treated like a family elder. I have a private plane in New York. I get on to it and land it nearest to wherever the Indian community lives.