Sitting ducks

Swraj Paul’s significance in India’s corporate history cannot be overstated. Before him, businessmen were comfortable with low stakes in their companies. In a crisis, the government-owned banks and financial institutions, which held large stakes in their companies, could be persuaded to take their side, given the considerable influence they wielded in the corridors of power. Those were the days of unbridled crony capitalism. When Paul mounted a takeover bid for Escorts and DCM in the mid-1980s it was perhaps the first time that businessmen realised how vulnerable they were to predators.

Eventually, the raid came to naught. Unfortunately, there exists no authentic account of that corporate battle. So, when Vinay Bharat-Ram recently came out with his book, From the Brink of Bankruptcy: The DCM Story (Penguin, 2011), it was expected that he might give out the full story, blow by blow. Sadly, he has given just over four pages to the episode, of the 200 or so pages he has written. His father, Bharat Ram, too glossed over the matter in his autobiography, Reminiscences and Reflections (Vikas, 1990). Paul got no space in the biography of Bharat Ram’s younger brother, Charat Ram (Points and Lines by K V Kamath, UBSPD, 1994). Only Har Prasad Nanda of Escorts wrote extensively on the subject in his book, The Days of My Years (Penguin, 1992).

Nanda ran Escorts with just a 15 per cent stake, while the Shriram family owned 16 per cent of DCM. The Escorts and DCM shares had been rising sharply for a while, but nobody had a clue who was buying. The needle of suspicion first pointed towards Ram Prasad Goenka, the original takeover tycoon. It was only later that they came to know that Paul, along with his stockbroker Harish Bhasin, had been buying the shares. There was also a buzz that Mahindra & Mahindra and some Tata companies were next on Paul’s radar screen because of the low promoter stake. There was a time, after all, when Tata Sons held a smaller stake than the Birla family in Tata Steel!

There has long been speculation that Paul backtracked from the takeover after the Shriram family lobbied the highest political authorities of the time. To his credit, Vinay Bharat-Ram acknowledges that his youngest brother, Vivek, sought the help of Rajiv Gandhi who had then become the prime minister. “Rajiv called Paul and asked him to settle the matter out of court. Thus were both DCM and Escorts saved,” he writes. Vivek and Gandhi had studied together in Doon School. Vinay Bharat-Ram also discloses that an offer was made that Paul would settle the dispute with DCM and continue to chase Escorts. But Bharat Ram said that Paul would have to settle with both or none.

The unanswered question till date is, why did Paul target DCM and Escorts? There were rumours that somebody from one of these families had rubbed a political bigwig the wrong way, and this paved the way for the takeover bid. There was also talk that the large tracts of real estate owned by the two companies had aroused Paul’s interest. Vinay Bharat-Ram says that what could have encouraged Paul, apart from other things, was DCM’s stake in truck-maker DCM Toyota and the nylon tire cord plant (SRF) near Chennai.

DCM and Escorts were sitting ducks. “It is amazing,” he writes, “that DCM’s management, like most others, had blind faith in the government’s reluctance to destabilize the management of family-run companies.”

(bhupesh.bhandari@bsmail.in)