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When R Thyagarajan, 77, started a chit fund business three decades ago with two friends in Chennai, he did not expect the Shriram group would one day manage Rs 78,000 crore of investors' money and have financial powerhouses queuing up for partnership.
Thyagarajan's success is based on frugal management, The Shriram group does not pay its employees fat salaries but gives them freedom at work and posts them in their hometowns to build a community around their companies. The group does not spend much to dress up its offices and the staff are taught to keep tabs on costs.
"The only time Thyagarajan spent money on himself was when he bought a Wagon R after using his Maruti 800 for 20 years," said a source working within the group.
"Even now, he travels economy class and encourages others to do likewise," the source, who did not wish to be named, added. Thyagarajan has turned in his stake to an employee trust and his two sons working in group companies have been asked to rise through the ranks. The group's attrition is below 10 per cent against the average 15-16 per cent in India.
A Padma Bhushan awardee with a masters degree in mathematics, Thyagarajan says he believes in investing in simplicity, detachment and integrity, which ultimately lead to building great institutions. When asked why he sold a 20 per cent stake to an outsider, Thyagarajan said investments by outsiders were an opportunity to grow and that is why he accepted Ajay Piramal's offer. Thyagarajan said Piramal's entrepreneurial skills would help guide the extremely conservative group in future.
"We at Shriram are hesitant to invest abroad… the advice of Piramal will come in handy," he added. This trait puts Shriram's investors at ease. South African financial powerhouse Sanlam has invested not only in its life and general insurance businesses but also in the group's holding company. Sanlam's insurance ventures with Shriram started making money in the first year itself. Apart from Sanlam, 20 private equity companies have invested in various Shriram group companies. On Thursday, Piramal Enterprises bought a 20 per cent stake in Shriram Capital for Rs 2,014 crore, valuing the holding company at Rs 10,000 crore. After this deal, the employee trust will own a 47 per cent stake. Piramal said even after investing Rs 1,636 crore last year in Shriram Transport Finance, he had not nominated a director on its board.
"Thygarajan is our representative," he added, although Thyagarajan himself is not on the board of any Shriram company. "We are happy with his conservative management style," said Piramal. "That is the need of the hour."
