The Indian Maharaja

But then he grew ambitious. As one observer puts it, "Once you have a balance sheet with which you can raise some money from financial institutions, you immediately go for it." Thats what Harish Kumar did.

He put forward two projects, one for dishwashers and the other for making refrigerators.

The dishwasher project was very close to his heart. In fact, he designed the dishwasher. Akin to his other ventures, the idea was to outsource everything. The critical element the thermostat was imported as it could not be made in India. However, the demand estimation was done at gut-feel rather than any scientific research.

 

Kumar decided to use the door-to-door direct marketing model as it was a product that required demonstration.The product bombed badly. At Rs 20,000, the product was expensive and was at best semi-automatic.Thus, the product bombed badly. The situation was compounded by the fact that Kumar had the large sales force typical of direct selling networks. Consequently, he ran up huge losses.

Market sources say in order to cover those losses Kumar diverted money that he had raised for the refrigerator project. Thus, he ran short of money for that. Even so, he bought a site and tried setting up the plant. All he could actually set up was a paint shop and a press shop.

Once again, outsourcing was the buzzword. But it all went wrong. The vendors - whatever Maharaja could tap were erratic in both supplies and pricing. Things reached a point where despite buyback agreement with OE marketers like Godrej, it failed to sell its refrigerators as they found the quality unacceptable.

Losses mounted. With financial insitutions chasing Kumar he was desperate for someone to bail him out. Thats where Electrolux came in. After losing the Kelvinator bid, Harish Kumar was sounded by the Swedes towards the end of 1992. By June 1993, they had struck a deal. Electrolux was to buy a 51 per cent stake in the Maharaja International at Rs 21.5 per share aggregating to Rs 40 crore.

After that Electrolux had to pump in Rs 75 crore to get the factory going and putting other things in place. Even that has not been enough. Another Rs 34 crore are in pipeline to add capacity.

Harish Kumar, meanwhile, is busy lining up other joint ventures. One with Solac, the Spanish white goods maker, to make food processors and other home appliances. He has also entered a marketing tie-up with Zass, a German home appliance marketer.

What about MIL? By selling it for Rs 40 crore he has already received more than he invested. And he still owns over 25 per cent of the company. Should MIL do well, Kumar will again reap windfall gains, be it dividends or capital gains.