The unravelling of a Rs 1,000-crore empire, through the eyes of its chairman, operations chief and a salesman
As you walk up to the first floor office of Dadan Bhai, you notice an air of emptiness in the grey, unobtrusive PCL building in Okhla. Its evening, but that doesnt fully explain the silence and the empty chairs on the groundfloor, where the sales guys normally work. This is the headquarters of the group that has seen its business shrink from Rs 1,000 crore to just a couple of hundred crores in one year, and profits of Rs 18 crore in 1996 turn into such heavy losses that the reception area was flooded with aggressive, noisy creditors.
In his spartan office, Dadan Bhai, 49-year-old chairman and supremo of PCL Ltd, is tired, but tries not to show it. This is the first time since his group went into a tailspin last year that he is meeting someone from the media for an extended session. As he settles down to tell the story of the rise and fall of his Rs 1,000-crore empire, he promises: We will come back with a vengeance. In two months. On his table, facing him, is a small statue of a jaguar poised for the kill.
But the story of the come-back will have to wait for another day. Right now, its a grim tale of ambition, opportunity, heady victories and crushing defeats. Heady victories that made PCL the largest computer company in the country and crushing defeats that has made it unable to pay salaries to its employees. Perhaps the story should begin at the beginning.
It was in 1983 that three HCL engineers, Dadan Bhai, A B Chopra and Bikram Dasgupta, along with a few other friends, came together to form PCL. They started off by selling video games and then electronic typewriters. It took them four years to start selling what they really wanted to sell: PCs.
To fight adversaries like HCL and Wipro in the computer market, we needed lots of aggression, says Dadan Bhai. And aggression they had. The new-kids on the block used every trick in the book to outsmart their rivals, especially in institutional sales. In another five years, PCL and its manufacturing arm, Altos, had joined the Rs 100 crore-plus league. Altos went public in 1983, and PCL in 1994. And at that stage, goes the story, A B Chopra sold out his share-holding because he wanted to play golf for the rest of his life.
Meanwhile, Bikram Dasgupta and Dadan Bhai, a combination of flamboyance and financial wizardry, were on to bigger games. In late 1993, Dasgupta returned from the US with a contract to manufacture motherboards for Dell. It was a $100 million order. By 1994, PCL had become the third largest computer company in the country. But the period also saw the two promoters falling out, and Bikram Dasgupta exited from PCL.
If I look back, 1995 was the best period for us. In Altos we were putting up additional assembly lines. We were also planning a major backward integration project in Calcutta. And Mindware, our software business, was just getting off the ground, reminisces Dadan Bhai. There were even plans to go global. By February 1996, a complete docket to invest in two motherboard assembly lines in Malaysia had been prepared. Altos was even toying with the idea of a prototyping plant in San Jose, California. A Seagate order worth $8 million to make controller cards was bagged in end-1995. Also, Altos started trial runs for a 5-step vendor approval process with HP, another contract which could have meant business of $40 million every year.
During those heady days, did Dadan Bhai see any signs of the impending disaster?
It was completely unanticipated. In just three months, April to June, our entire export business collapsed. Dell, Seagate and Hewlett Packard cancelled their contracts. Each one for a different reason, but coming closely one after another, it knocked us out completely, admits Dadan Bhai. What was lost was not just business, but also credibility. In an already depressed market, Altos stock-price fell to a new low of Rs 32 in July 96.
The bankers behaved as they always do: ask for the umbrella back just when it starts raining. They froze the working capital for Altos. This happened during the credit squeeze phase in the economy. And FIs were still to release capital for our Mindware and Altos expansion programmes, which had already taken place, explains Dadan Bhai. We were in a serious cash jam. But I was hoping that things would be sorted out soon, and we just had to keep going, he says. So in September 1996, PCL unleashed a stunning marketing campaign, which on hindsight, appears to have worsened the financial plight of the group.
Events moved very quickly thereafter and nearly destroyed the IT empire that Dadan Bhai had painstakingly built over a period of 15 years. That was a crisis grave enough for him to seek help from the ex-marketing chief of PCLs arch rival, HCL Sumit Bhattacharya.
Sumit Bhattacharya could well personify the PCL of the future. Aggressive and confident, but with his feet firmly on the ground. That is assuming, of course, that the 40-something, bearded marketer proves to be a skillful troubleshooter as well.
PCL is a very aggressive company but did not have resilience, he remarks gravely when we meet in a pub on a Sunday afternoon. He adds, Dadan Bhai is a very emotional and sentimental man. His competitors have been more successful because they were very clinical in their approach, taking decisions with only one thing in mind: profits.
What is the mandate Dadan Bhai has given him? When I came in October 1996, I had to put Mindware in order first. The business had already soaked in a lot of capital, and it had to start delivering now. Now, I have come to PCL and am holding the reins of the company while Dadan Bhai finds a way out of this enormous financial mess, he says.
The mess began in September last year when PCL cut the prices of its PCs by nearly 50 per cent and launched a marketing scheme: customers who wanted the cut-price machines were to pay in advance and then collect their computers six to eight weeks later. Twenty thousand orders were booked in just the first month of the scheme with nearly Rs 30 crore collected in advance. But PCL got to see very little of that money: a large part of this money was used to regularise some of Altos bank accounts. The bankers were agitated that Altos funds had been used to fund PCLs software business. Even then, we were reasonably certain that additional funds would be released to us definitely by early November, says Bhattacharya.
Wait for some time, said the banks. So PCL ran another scheme in November to raise money and buy components for the orders booked in September. But the customers were now getting impatient. December came and there was still no sign of the money, so yet another scheme was launched. It is very easy to sit in judgement now, and say how things should have been done differently. But we desperately needed about Rs 30 crore to get operational again, he explains.
By the beginning of 1997, the management finally started looking at alternative options. In February, they decided to radically restructure the organisation. The aim: to spin off Altos export unit and Mindware into separate companies, and offer equity to outsiders. We have got Altos Global valuated by Arthur Andersen and are now talking to the second largest contract manufacturer to take a stake in the company. The Mindware valuation is still on, explains Bhattacharya.
Bhattacharya is confident that PCL will bounce back as soon as the money starts coming in. But now he sounds as if he is making a presentation to his financiers. With a 20 per cent market share last year, the largest installed base in the country, employees and dealers remaining loyal to the company during this crisis, we have some big strengths...
Bhattacharya says PCL should be 50 per cent operational by November, if things go as planned. But right now, he reveals, he has to take his wife out for a dinner to a sales trainees house. The trainee had said that it would assure his father about the sons future. There are a lot of people worried about their future in PCL like Ravi Kumar.
Ravi Kumar (not his real name) was extremely reluctant to talk about his company, PCL. Later, he explained his initial hesitancy. He thought that it was his boss on the phone checking on his teams intentions.
A bitter Kumar lashes out: I have given the best eight years of my life to this company. Today, after this fiasco, we are untouchables. I have applied for many jobs, but they dont even bother to call me for an interview. The 30-something marketer is seen as a person past his prime who is also over-paid.
And almost immediately, he is unsure about his feelings. PCL is the best place to work. The entire industry used to be in awe of us, almost fear our aggressive selling style. The organisation was one big family. If only I got my salary...
You begin to realise the awful import of Dadan Bhais statement. It is a shame that we have not been able to pay salaries to our employees, he had said.
It was only around February this year that we began to realise the enormity of the crisis, says Ravi Kumar. At the New Years bash, going by the enthusiasm of the top management, everything seemed just fine. And why not? With our marketing coup last year, we had got a huge chunk of the first-time user PC market. During that September scheme, customers were booking orders on the phone. I would get at least four-five calls every day from people pleading, cajoling that they wanted to become dealers for PCL. The phones would never stop ringing.
And then everything changed. In February, my salary cheque bounced. And there were angry customers to deal with. At the head-office, in regional offices, and dealer outlets, customers were shouting and ranting at us, Give me my machine or my money back. Now. We were told to keep asking for more time.
By May, production and marketing had ceased completely in Altos and PCL. The salesforce was told to focus on collections. Only the service division was somehow kept functional. And of course, Mindware. I have a friend who is a software programmer in Mindware, Delhi. Their salaries were coming entirely through the collections. So deadlines had to be met.
Mindware had to keep going because it was executing a $5.5 million NEC project which is coming up for renewal this month. Nobody was taking chances. The Mindware chief in Bangalore was shifted to Delhi temporarily to ensure that the project was completed on time.
But in the rest of the group, there is little work to be done. And with salaries unpaid for the last 3-4 months, many have started looking for jobs. The first bout of resignations took place in June. Then I would think that they were deserting the company, says Kumar. But it is September now, and there is no assurance from the management when and how things will change.
At the moment, Dadan Bhai is waiting patiently in his cabin, waiting for that elusive piece of good news. Bhattacharya is jet-setting across the globe seeking partners who are willing to invest in what was one of the most enterprising computer companies in India. Kumar does not know what he should do: ditch his beloved company, or stick to it.
