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Sanjay Dalmia's third innings: Textile retailing

Suvi Dogra  |  New Delhi 

Till the mid-1990s, Sanjay Dalmia's flagship company was GTC Industries, the tobacco company. So much so, that Rothmans wanted to acquire a stake in it. But Dalmia did not want to give up control and the talks fell through. Soon thereafter, Rothmans was acquired by BAT and GTC went sick, landing up on the operating table of the Board of Industrial and Financial Reconstruction (BIFR).
Soda ash then emerged as Dalmia's claim to fame and riches. In fact, some years ago, Nirma had launched a takeover bid for his soda ash firm, Gujarat Heavy Chemicals. But, Dalmia survived the attack.
Now, Dalmia is putting his money in textiles, which at around $600 million has emerged as his biggest business "" soda ash at $200 million is the third in size.
At an age when you would expect him to hang up his boots, Dalmia is drawing up multi-billion-dollar plans for his textile business.
"Nothing can stop me," he says, sitting in his house in Lutyens' Delhi. A Mercedes stretch limousine is parked on the driveway. A massive Hussain adorns a whole wall of the room we sit in.
A new model
Textile producers, to be sure, are a worried lot these days. Cheaper rivals from China and Bangladesh have given them a run for their money in global markets. The appreciation of the rupee vis-à-vis the dollar has only made it worse.
The future of textiles, Dalmia says, is not in production, but in retail. With this view, Dalmia plans to set up shop all over the world. He has already spent around $100 million to acquire a retail chain in the United Kingdom (Rosebys) and three firms in the United States that specialise in institutional sales (hospitals, hotels and retailers). Together, these sell home furnishings worth $600 million.
Dalmia now wants to have retail stores in all major markets, including India, using the franchise route. The brands stocked will be Dan River, one of the three he has picked up in the US. On the institutional side, Dalmia says he is close to striking a deal with a global hospitality major to supply furnishings as well as uniforms.
He plans to feed these channels by sourcing from the cheapest producers in the world. The US factories that came with the acquisitions have been shut, though he has kept one each in Mexico and Cambodia alive. His own factory, Shree Meenakshi Mills in Tamil Nadu, has become just one of his sources for furnishings.
"We are buying from China, India as well as Pakistan," says Dalmia. The Dalmias owned two cement firms in Pakistan till 1962, when the impossibility of repatriating the profits made them sell those assets.
Fortifying business
Dalmia is following a somewhat similar plan for his soda ash business. He has already acquired Bega Upsom, a leading soda ash producer in Romania, for $20 million. Dalmia says he came close to sewing up together an acquisition each in the US and China, but the deals fell through at the last moment over valuation. However, he is still looking for soda ash producers in these two countries.
Dalmia obviously feels he has a winning strategy up his sleeve. To begin with, he has consolidated his hold over Gujarat Heavy Chemicals by acquiring the Gujarat government's 26 per cent stake. This has taken his shareholding to over 51 per cent. He is also studying the option of demerging the company into two, giving the investors the option to invest in either soda ash or in textiles.
Sceptics say Dalmia lacks the management bandwidth to give effect to these plans. Only too aware of it, Dalmia says he is getting people from the US and Europe, where there is some redundancy.
Other business
Things are also looking up for his tobacco business. GTC Industries, Dalmia says, is no longer sick and is out of the BIFR's clutches. The company owns real estate worth Rs 2,000 crore in Mumbai and Hyderabad, which Dalmia wants to develop.
Aware of the restrictions under which the tobacco industry functions, Dalmia says his company has developed a new technology, which cuts toxicity in cigarettes by nearly 50 per cent. Dalmia hopes to achieve volumes through this technology and the brand (Lo Tobac). It is worth noting that Dalmia has tried his hand at nutritional products in the past, but with limited success.That still leaves out Bharat Explosives, another firm in Dalmia's portfolio. This, clearly, is out of favour. "This is not going to be a growth area," he says.

First Published: Tue, October 09 2007. 00:00 IST