Splitsville in India Inc

Differences over culture, management and focus is making even many supposedly "happy" partnerships come unstuck

Years ago, a fairy large business owner told me in the course of an interview that the biggest learning for her from a failed joint-venture in a related business was never to get into bed in business with anyone, because sooner or later the partners always pull in different directions. The excuse could be differing views on strategy, finances, control, culture or even something like personal chemistry. 

Scanning the headlines in the last fortnight or so brought her prescient words back to me. Splitsville seems to be playing all over again in India Inc., albeit at different stages and often in stealth. After staying put for six years and investing Rs 4,500 crore, and taking executive charge of the financial conglomerate Shriram Group, Ajay Piramal is looking to exit the group lock, stock and barrel. Serial entrepreneur and investor V G Siddhartha exited his investment in mid-tier IT firm Mindtree triggering off a takeover battle with Larsen & Toubro. IndiGo promoters’ fight over who gets to control board and management appointments is all out in the open. And for all the other problems around a failed business model, what also added to Jet Airways’ closure was the sheer distrust between promoter Naresh Goyal and his foreign partner, the Abu Dhabi-based Etihad.  

It is not that India Inc is stranger to divorces. Far from it. In fact, the path from the 90s is littered with splits across sectors — from Godrej-Procter & Gamble, Britannia-Danone, Birla-AT&T-Tata, Hero-Honda and many such. What marked these earlier partnerships was the need for the foreign partner for someone to help navigate the bureaucratic and political labyrinth in India. Once these controls were relaxed and made simpler by the government, there was no reason to carry on with the Indian partner. And often it was the foreigner who pressed for the separation and picked a big separation bill. 

In that sense, the current spate of divorces or near-divorces is different. They involve partners with supposedly complementary skills, and not necessarily driven by regulatory need to have a partner, barring Etihad which can't invest more than 49 per cent in an Indian airline and perforce has to have an Indian as the majority partner.

Piramal was supposed to bring in the moolah and the management smarts to steer a traditional group with no clear succession plan to bigger things, so much so that the founder even willingly gave up the executive head’s position. Apparently, it was the culture issue, where Piramal was seen as an outsider, with an aggressive business approach that did not sit well with the conservative south India-based group. Now the separation, according to founder R Thyagarajan, is made out to be a purely financial move to exit with a good return! A new partner hunt is on at Shriram, with marquee private equity and business group names being thrown around.  

Again, the partners at IndiGo — Rahul Bhatia and Rakesh Gangwal — complemented each other, one with money and deep knowledge of the Indian business ecosystem and the other with decades of global airline experience right at the top of the food chain. They even split the shareholding almost equally, but sewed up an apparently one-sided contract which has become the bone of contention between the two at the country's biggest and by far the most successful airline.   

The two partners at Mindtree — V G Siddhartha and the management team led by Subroto Bagchi — essentially differed on how they viewed the firm’s future. Siddhartha saw better value for his investments by subsuming Mindtree in the bigger L&T fold, whereas Bagchi and team made it a culture issue for staying independent. And even though it was the firm's largest shareholder, Siddhartha, who invited L&T to come and pick up his stake in L&T, the ensuing fight was billed wrongly as a hostile takeover.  

At Jet, the foreign partner made Goyal's complete exit a pre-condition to even think of rescuing the financially troubled airline. Little wonder it is now reportedly in talks with the Hinduja Group to restart the airline.