‘Sekhsaria wanted to become the Lakshmi Mittal of cement’

It’s the day after the Reserve Bank gave its approval to the Axis Bank-Enam deal. Anil Singhvi has a glint in his eyes and appears very cheerful. Why not? A mega deal he helped broker is reaching fruition. Singhvi, clad in blue jeans and a striped t-shirt, is in a sporting mood, agreeing to talk a bit about the deals he has facilitated. In an interview with DNA, he speaks about the Axis-Enam, Camlin and a slew of deals he knit for Gujarat Ambuja (now Ambuja Cements). Excerpts:

You were always sure the Axis-Enam deal would fruition…
I know. At least, we who were involved were confident. The central bank had certain observations which we had to factor in the deal. I am glad, but I don’t want to talk much about it.

But there would have been anxious moments…
In the situation that we are in now in India, there is practically no decision making at any level. But I am a great admirer of the way the Reserve Bank functions. They have done an excellent job. I am happy that we went through all that churning and now we are at the last leg of court approval which is normally a process. It has to go through the process but it will not suffer on account of any approval. The process will try to assess if there are any objections from the shareholders. Since the government is the largest shareholder, I don’t think it will be an issue.

You have been a deal maker, whether it was growing Gujarat Ambuja Cements through acquisitions or the Axis-Enam deal…
I won’t talk on deal specifics. But if you look at Indian business environment, promoters don’t see consolidation as a way of life. Many promoters are averse to trading the business off, even if it was not making money or was not run properly. To say that I’ve sold some business is a sign of humiliation for them.

They are wary of how society and their friends will view it. It is difficult to take them out of the shackles of the business, even if it’s in the larger interest of the business. Will the business shrink after the demerger or merger? No. The business will expand and grow much more than they could have grown on their interest. In the larger interest of all stakeholders it should get into a new house and new hands. In that process, it is very important to win the confidence of the promoters.

Who brought the deal to the table?
I know the Enam founders very well. I used to talk to them for a while on the way forward in business. They had grown the business for 27 years; the natural corollary was to keep growing. But my own view was that standalone businesses, especially investment banks without the balance sheet backing them up over a period of time, will have a disadvantage over those investment banks which have balance sheet strength. International commitment was not sufficient enough to do transactions.

Why Axis Bank?
Enam is culturally a very different investment bank. The promoters of Enam are very cohesive and family-oriented. If they wanted to get into a relationship with a bank, it had to be a similar culture, because it’s a people’s business. I knew Shikha (Sharma) for a while.

But Nemish Shah is said to be a recluse. To convince him must have taken a lot of effort…
Yes. It took a while. I know both (Nemish and Vallabh Bhansali) for a long while. I know Nemish for about 25 years. I think we respect each other, for what we have done in our lives. He respects me for what I have done at Ambuja and I respect him for a lot of things he has done in life. There is a certain amount of chemistry. It wasn’t that difficult.

Should investment banking be separate?
I look at it differently. Whether it is a commercial bank or an investment bank, ultimately you are addressing the needs of the customer. Customer needs would be the need for working capital, project funding. What is a business? An idea. When you have an idea, which is your intellectual capital, can a bank back it up with capital? I am not an investment banker at all. When I did those transactions in Ambuja, whenever I bought any cement company, what was I looking for? No investment banker has run even a paan shop, I am sorry to say this. They give gyaan. They can speak extremely well. Most clients get carried away. I have never used any investment banker. What is it that I really needed? I needed a good idea. I needed somebody to back that idea with capital. Rest all was done by me. So other customers also would be looking at it the same way.

If you compare the ACC deal that you did in Ambuja Cements and the Enam deal, which is more satisfying for you?
I think both were very satisfying. In ACC, I was involved both ways — in buying ACC and later selling ACC. When I was involved in buying ACC in 1999, I was much younger than I am today. It was very exciting. But when the Holcim transaction happened, it was a two-phase transaction: the selling of ACC and then the selling of Ambuja Cements. I think it became a defining moment for the cement industry in India. The re-rating of the cement industry came post the Holcim-Ambuja deal. If you look at that perspective, the cement industry was a large industry, about 300 million tonne. If you look at $130 a tonne, it was a huge transaction. It was a turning point for the cement industry’s fortunes. ACC Ambuja was a defining period.

Was L&T’s move to sell its cement business to Grasim also a defining moment?
We did ACC in 1999. We were also offered L&T’s cement business. Since we had just done ACC, Ambuja’s balance sheet was not large enough for us to buy one more. When we declined, they approached Grasim. Even after these two transactions — Ambuja buying ACC and Grasim buying L&T’s cement business — it was not a defining period. The needle did not move on profitability of cement companies from 2001 to 2005. In fact, the industry suffered. It is not necessary that every transaction become a defining moment for the industry; it may be defining moment for the company. But the Ambuja-ACC transaction was a defining moment for the industry, because of the value of the transaction — $100-120 a tonne transaction would have been a normal transaction, but $200 a tonne was out of whack. It was a benchmark deal.

Was the deal to sell to Holcim a result of the slew of deals that Ambuja Cements struck including the acquisition of ACC, which stretched your balance sheet?
Of course not, we could have sold ACC and got a lot of money and we could have held on to Ambuja. Our debt came because of ACC, and if we had sold ACC we could have got rid of that debt. But that wasn’t the reason. Narottam Sekhsaria’s health was an important reason. Succession was also an important aspect. These two things weighed in favour of selling entirely to Holcim.

By succession issues do you mean the two families —  the Sekhsarias and the Neotias — had some issues?
No. Sekhsaria’s son and Neotia’s son Harsh did not want to run cement. Harsh wanted to do real estate. It needed big investments, too.

We spoke about Nemish Shah being a recluse, but Sekhsaria is also a recluse. It’s hard to imagine that he could with single-minded purpose build such a huge enterprise in the nineties...
Very few people I have come across in my life, and I’ll put both of them in one slot — Nemish and Sekhsaria — they were extremely passionate about whatever they’ve done. Sekhsaria was very passionate about cement, no doubt about it. He had a tremendous yearning and passion to become a global player, be the Lakhsmi Mittal of cement globally. Tragically, his illness in 1995 was a setback for us. Otherwise, I am sure, the prices we saw in 2008-09 in the global cement industry, we could have gone ahead and acquired cement assets globally. We could have bought Heidelberg for a song. We could have cobbled up enough private equity. When we grew, the availability of funding was limited. The access to capital and the emergence of private equity are five- or six-year-old phenomena in India.

That was a tragedy for the Indian cement industry…
There are very personal issues, too. For instance, Parvinder Singh of Ranbaxy had so much passion to build Ranbaxy into a global pharma player. He had the vision and he did everything. I draw a parallel (with Sekhsaria) — both were iconic figures. Who could have ever imagined during Parvinder’s time that Ranbaxy could be sold? They were so passionate. Indian industry had very competent people who could take their companies and the local industry to the next level.

Who all do you think have that iconic aura to straddle the global stage with their businesses?
I would reckon Sunil Mittal, who is again very passionate about telecom. I don’t know why Mukeshbhai (Ambani) is not showing the same hunger for growth as he used to show some five years ago. The cash flow is good. He could have definitely looked globally for oil and gas assets. I also don’t know why Kumar (Mangalam Birla), who is young, is not eyeing global assets to expand. But Anil Agarwal is showing a lot of gumption in acquiring assets.

Anil Agarwal seems to be bogged down by the Cairn deal…
I think it got into a lot of political muddle. It is unfortunate, because it is an Indian asset owned by a foreigner and an Indian business is willing to acquire it staking $8-9 billion. What’s wrong with it? Government must be more supportive especially because oil is a critical strategic asset. Other assets can be owned by anyone. But oil is a national security asset. It is going to an Indian, so why should there be a hurdle?

You have started an advisory services firm for institutional investors. How did you decide to venture into this area?
What people like me bring to the table is experience on both fronts — having run a business and looking at it, how one can add value. I am not a typical investment banker. In India, very few would chuck their jobs at the age of 50 as I did. At 50, one is at the prime of one’s career. It is important to quit when you are at the top. Over a period of time, a lot of people will look at such options. But I am speaking for myself and I am thoroughly enjoying myself.

Independent directors still don’t have a voice…
Look at Dr JJ Irani. He decided to quit as the chairman of Everonn. First of all, he chose to become the chairman of the company and not an independent director. He should have done enough due diligence. When the managing director of Everonn was arrested for bribing an income tax official and he is in jail, Dr Irani decides to leave the company. Now, many shareholders would have bought the shares of Everonn thinking that Dr Irani is on the board. He is a luminary and was the chairperson of the corporate governance committee of CII, and investors would have rightly believed that everything was alright with the company as the chairman was a towering personality. Next thing I read in the morning papers is that the managing director is in the jail and Dr Irani has quit the board. What am I supposed to do? Sell the shares.

Our advisory firm will advise mutual fund managers and insurance fund managers, FIIs and domestic institutions who’ll be subscribers to our reports. We will generate reports of 200 companies to begin with of all the corporate activities. It will not be restricted to the AGMs or postal ballots. We will go through the information available in the corporate domain and will advise them to vote in favour or against resolutions. Should these fund managers want us to vote for them, we will do that. Our primary function would be to come up with the reports. Today’s world, the fund managers get a report with a buy, sell or hold recommendation. The fund managers forget to take a look at the qualitative aspect. They never raise a question because they think the access to the management will be difficult. We will raise those uncomfortable questions. The fund manager will not have a problem of meeting the managements as we will be the ones asking all the uncomfortable questions on their behalf and not them. If there are six fund managers owning 5% in a company then they can defeat a resolution if it is against their interests. I will be just writing a report and if they see merit in my reasoning then the fund managers will come together.

Will you also be buying shares of all the 200 companies so that you can ask uncomfortable questions at shareholder meetings?
Eventually we will. Then we will be aligned with the interests of the fund managers we represent.

Do you see Indian businesses doing more deals in the coming days?
Per se, Indian businesses are very fragmented. But they are competitive. Look at telecom, the tariffs are very competitive, except power where tariffs are prohibitively high because new capacities are just coming up. Consolidation may happen because of the fragmented nature but Indians don’t like to sell their businesses. It will happen because the younger generation does not suffer the stigma of selling businesses that their seniors felt.

The Dandekar family of Camlin used many innovative methods to perpetuate ownership, taking turns to manage the company, but still decided to sell. Was it because of the foreign competition entering the Indian writing instruments segment in droves?
I think the families grew larger than the business. There wasn’t sufficient place for everyone. There were those who wanted to vacate the business and those who wanted to stay with the business. For those who wanted to leave the business, their attempt should be frustrated by those who wanted to stay in the business, and that’s where I played a role. I am very happy that they took a business-like decision. I met each one of younger scions of the family and checked their aspirations in life. And they wanted a life beyond Camlin. I hope many business families emulate what Camlin did.

Are you still fond of playing the tabla?
I always loved music, but never thought I could play any of the musical instruments. At the age of 42, somebody said tabla was the most difficult instrument to learn. I was mesmerised by Zakir Hussain. It remained in the back of my mind. That explains the glint in my eye. It gives me my own space. Tabla communicates. There is a huge channel of communication between you and the tabla. That gives you the peace of mind. It helps you reach a different level which is not experienced by taking a vacation or river rafting. I have an NGO. Eight centres with 800 children. It is a large orphanage. It takes a lot of time in sustaining and improving it. I enjoy doing it. Then I spend some time at Flame, an educational institute in Pune located on 60 acres of pristine greenery funded completely by Nemish Shah of Enam. This is what gives me the kick.