In the early 1990s, the darling at Lyons Range, where the Calcutta Stock Exchange was located, was Hindustan Motors, or just Motor as the brokers called it. In the bourse where 3,400 companies were listed, Motor traded at around Rs 150. Old timers at the exchange recall the buzz surrounding the stock. Today, just a decade and a half since, the stories of both the stock exchange and Hindustan Motors are headed for an ignominious end.
The regional stock exchange, which once logged a turnover of Rs 2,40,000 crore, hasn't been trading on its own platform for a year now. After the Securities and Exchange Board of India set down strict stipulations in 2012 on financial obligations for regional bourses to continue operating and gave them two years to meet the norms, the men at Lyons Range had to admit failure. With the deadline passing on May 30, the only hope for the stock exchange lies in its appeal to Sebi for some more time to meet the new criteria.
Glorious past, troubled present
The bourse's favourite scrip too has had a parallel tale. On May 23, Hindustan Motors, maker of the Ambassador car, citing worsening conditions, suspended all work at the manufacturing site of the iconic passenger vehicle in Uttarpara in the Hooghly district of West Bengal. For those who were hoping things would work out, the indication of the company's dire position came last weekend, when over 80 per cent of the managerial staff was handed out pink slips. The company is also looking to divest its stake in the Chennai plant which it had transferred to its subsidiary, Hindustan Motor Finance Corporation. The unit produces various cars in collaboration with Mitsubishi Motors of Japan.
Critics blame Hindustan Motors' former chairman, Chandra Kant Birla, for the crisis facing the company. Birla had officially dissociated himself from the management of the company last year to pave way for strategic investors. Birla family insiders, however, defend the 58-year-old CK, as he is known. "Hindustan Motors was already a sinking ship," a family member says.
The primary allegation against Birla is that he failed to innovate and allowed the Ambassador to remain trapped in time.
"Given the outdated plant and machinery at Uttarpara, the fate of Hindustan Motors was inevitable. If you ask me, the promoters lacked vision and intent," says a former company executive.
Birla last visited Uttarpara in 2011 - this was seven years after his earlier tour there.
It wasn't as if Birla did not want to make it big. His collaboration with foreign companies started early in the day. In 1994, Hindustan Motors entered into a joint venture with General Motors of the US, giving birth to General Motors India. In 1999, however, the Indian partner had to retreat due to its inability to expand equity.
In fact, as the former executive points out, Birla even sold his stake in Pilani Investment and Industries, the company through which the Birlas held critical stakes in their numerous group ventures. In 2005, the father-son duo of Ganga Prasad Birla and CK Birla sold its 20 per cent stake in Pilani to Basant Kumar Birla and his grandson, Kumar Mangalam Birla. Family insiders say Birla may have made Rs 300 crore from the deal. How were these funds deployed? A Hindustan Motors official says they were meant to be ploughed into the car company. A questionnaire sent to the Hindustan Motors chairman did not elicit a response.
Scrambling for resources
Officials privy to the deal say that Birla had always wanted to pull out of Pilani for the sake of Hindustan Motors. But the sale was precipitated by the alleged will of Priyamvada Birla, the widow of MP Birla, that bequeathed the family estate to an outsider, Rajendra Singh Lodha. With the MP Birla group holding a 25 per cent stake in Pilani, it became imperative for the Birla family to consolidate its holding in the investment company.
The divestment in Pilani was not the only exit engineered by Birla. Birla Technical Services, which used to be one of the frontline project engineering companies of its time, was downsized significantly. The company had handled the modernisation of Durgapur Steel Plant in 1989 with Hindustan Steel Construction, Demag of Germany and Russia's Tyazpromexport. The company was also involved, as part of a consortium, in the modernisation of Rourkela Steel Plant in 1993. "The turnaround time in project engineering is high. For Birla, it was too high," explains a former official of Birla Technical Services.
In 2001, the earth moving division of Hindustan Motors was sold to Caterpillar, a US company. In 2005, the heavy engineering division of Hyderabad Industries, which manufactured wagons, was bought by the J P Chowdhury-controlled Titagarh Wagons. In 2007, 314 acres at the Uttarpara plant were sold to Bangalore-based Shriram Properties for developing an information-technology township in a deal that is still under a cloud.
Not everything failed. There have been positive developments around Birlasoft, an IT services company, and Orient Cement, both created by Birla. Recently, investor and trader Rakesh Jhunjhunwala picked up 1.7 million shares of Orient Cement for Rs 9 crore through an open market transaction. The move, say industry watchers, displays investor confidence in the company. Orient Cement has a capacity of five million tonnes and is a relatively small player in the sector. The group is also stepping up its plans for the electrical business. Recently, it rebranded the operations of Orient Electricals after nearly 60 years.
What's next on Birla's agenda? What will be the main revenue drivers for his group? Birla is not disclosing. As of now, what's making headlines is the dying Uttarpara plant. Is that the reason why Hindustan Motors doesn't feature on the website of the $1.6 billion group? Family members say, "We loved the car company." And then add almost in whispers, "But in a family, no one ever comes out even."
1942 Hindustan Motors is incorporated at Port Okha in Gujarat as a small assembly plant for passenger cars
1948 Uttarpara plant - the birthplace of the Ambassador- is set up in Hooghly in West Bengal. Initially it is an assembly plant for Hindustan Landmaster that is based on Britain's Morris Oxford Series II
1957 Ambassador, the face of India's automobile industry, is born at Hindustan Motor's Uttarpara plant. It owes its current look and styling, which has hardly changed since its inception, to Britain's Morris Oxford III
1967 The company enters into a partnership with America's General Motors to manufacture earthmoving equipment at Trivellore in Tamil Nadu
1971 Hindustan Motors sets up a plant at Tiruvallur, near Chennai, to manufacture earthmoving equipment such as dumpers, front-end loaders, crawler tractors, in order to diversify its product line
1994 A new joint venture with General Motors, General Motors India, is set up to produce and sell Opel vehicles
1995 Hindustan Motors enters into a technical collaboration with Mitsubishi Motors of Japan to assit in the production of Mitsubishi-Lancer cars
1999 GM buys out Hindustan Motors
2006 Hindustan Motors gets approval from the West Bengal Government to sell excess land at Uttarpara
2007 Hindustan Motors inks a pact with Shriram Properties of Bangalore for the development of an integrated IT township and an auto park spread over 314 acres at Uttarpara . The project is languishing because of dispute with the state government over land
2013 Hindustan Motors decides to hive off the profitable Chennai car plant into a separate entity but the effort hits legal hurdles as state and Shriram Properties oppose the demerger citing land sale issue
Dec 2013 CK Birla resigns from the company board and chairmanship
Mar 2014 Dropping demerger plan, Hindustan Motors transfers the Chennai plant to its wholly-owned subsidiary, Hindustan Motor Financial Corporation (HMFCL). Company Managing Director Uttam Bose too resigns, takes charge of this company
May 2014 Work stops at Uttarpara plant; production of the Ambassador stalls
June 2014 250 managerial staff at Uttarpara get pink slips