A tough competitor for multinationals: Chandubhai Virani

Starting with a capital of Rs 20,000 in 1982, the Virani brothers have built a Rs 1,200-crore wafers-and-snacks empire

What was founded with a capital of Rs 20,000 in 1982 by two brothers who came to Rajkot from a remote village in Jamnagar district has grown into an empire with revenues of Rs 1,200 crore. Multinationals like Pepsico and Kellogg India are reported to have shown interest in picking up a stake in the Rajkot-based wafers and 'namkeen' (salted snacks) giant.

Says Chandubhai Virani, "We never started the business with the aim of making money. We wanted to do something good and meaningful. Today, when we pass on our venture to the next generation, we would like them to continue the business with the same discipline."

In 1974, three sons of a farmer in Dhundoraji migrated to the nearest urban centre, Rajkot. Armed with no more than a primary education and Rs 20,000 as initial capital from their father, the Virani brothers - Bhikhubhai, Chandubhai and Kanubhai - came to Rajkot in search of work. They had not much money, no references, and no prior experience of working in manufacturing industry.

Bhikhubhai and Chandubhai began selling refreshments in Rajkot's Astron Cinema, and in 1976, the cinema owner Govindbhai handed over the canteen to them on a contract basis. Six years later, in 1982, the brothers decided to turn this into their core business and invested around Rs 20,000 in it.

They began sourcing wafers from the only supplier in Rajkot, and also started selling toasted sandwiches made at home by their wives. Potato wafers, they noticed, constituted around 80 per cent of the refreshment sales, but the supplier was unable to meet the demand. This got them thinking of ways to develop their business by inducting new technology.

In 1989 the company set up a plant in Aji, Gujarat Industrial Development Corporation's industrial estate in Rajkot, investing Rs 5 lakh. Since then the company has invested around Rs 500 crore in operations. The first year's revenue was around Rs 2.4 lakh.

Chandubhai and his brothers were quick to realise the importance of technology in scaling up. In 1995-96 the company installed its first semi-automatic plant with a capacity of 250 kg of potato chips per hour. By 1998-99 it was working at almost full capacity.

Demand still exceeded what they could produce, and in 1999 Balaji Wafers installed Gujarat's first fully automated potato chips plant, following it up with another in 2003-04 in Vajdi district with a capacity of 1,200 kg per hour. Sales continued to grow and, between 2000 and 2006, Balaji captured a 90 per cent share of the potato chips market in Gujarat, and a 70 per cent share of the namkeen category. Besides, its markets in Maharashtra and Rajasthan were also growing.

Thus encouraged, they set up yet another plant in Valsad in 2008 with a processing capacity of 8,000 kg of potatoes per hour, producing 2,000 kg of potato chips per hour. The company now has a capacity to process around 450,000 kg of potatoes per day and 400,000 kg of namkeen per day. It generates direct and indirect employment for 250,000 people.

Recently, there have been reports of Balaji Wafers' promoters looking to dilute their stake, and multinationals like Pepsico and Kellogg have shown interest. Pepsico is believed to have exited the race because Balaji was not open to selling more than 15-20 per cent of its holding. However, Kellogg is learnt to have started discussions with Balaji to pick up a 10-15 per cent stake. Balaji is now considering entering the northern and southern Indian markets, and plans to set up manufacturing plants over the next two to three years with an investment of around Rs 200 crore. The stake sale is likely to help fund the expansion plans.

Chandubhai declined to discuss the stake sale issue, saying, "All decisions will be taken by the next generation. Whichever way they want to run this company, I am with them."

Chandubhai Virani, Founder & Managing Director, Balaji Wafers