Big changes had been underway in the Indian cement industry since price controls were fully lifted in 1989. The abolition of licensing and the dilution of the MRTP (Monopolistic and Restrictive Trade Practices) Act in the early 1990s accelerated this process. The process picked up pace towards the second half of the 1990s, as a wave of consolidation swept across the industry. Weaker players in the historically fragmented industry were shutting down plants or were being taken over by more efficient companies.
Our Modi Cement takeover was among the many similar deals that happened as part of this process. Others included Visaka Cements which was bought by India Cements; Narmada Cement bought by L&T; the cement division of Tata Steel bought by Lafarge; and Lafarge’s buying of the cement division of Raymond Limited. However, nothing in Indian corporate history generated as much controversy, publicity, petty jealousy and heartburn as when we bought the Tata group’s 14 per cent stake in ACC in early 2000.
My tryst with the Tatas started when Tata Steel wanted to sell me its cement plants roughly around the time that we were working on the Modi Cement takeover, which concluded in December 1997. Located in Jojobera outside Jamshedpur, the two grinding plants had a combined capacity of 1.7 million tonnes and manufactured hydraulic cement from slag—a by-product of their steel blast furnace located nearby. It is a type of cement that sets and hardens once mixed with water. The company’s clinker unit was situated at Sonadih in Raipur district.
Dr Jamshed Irani, Tata Steel’s MD, called me saying that they wanted to sell us the plants. It was a far cry from the time I had tried to meet Dr Irani when we were setting up Gujarat Ambuja. Since we were then in the market for a large amount of steel for our civil work, I had thought it a good idea to meet him in person before placing the order. He had given me a two-minute audience at Bombay House before fobbing me off on a deputy. I felt slighted and gave the order to Steel Authority of India Limited (SAIL). Later, as Gujarat Ambuja became a name to reckon with in corporate circles, I was told by industry insiders that Mr Ratan Tata admired what Ambuja had done. So did many others at Bombay House. ‘Yeh Marwari hai, ethical hai, efficient hai. This man has done a fabulous job, created a fabulous brand out of nothing,’ was one conversation that was quoted to me.
Dr Irani said he wanted to meet me without any intermediaries. He was friendly and warm. He told me that Tata Steel had decided to get out of cement and wanted to sell its plants. Mr Ratan Tata was keen that Ambuja buy the plants. Besides everything else, they were impressed by our record on pollution control. Their significant concerns were pollution and dust. I was surprised that they asked me instead of ACC, a company in which the Tatas had a stake. It became clear later that this was an indicator of the troubled relationship between ACC and the Tatas.
Jamshedpur in those days was still part of Bihar (Chhattisgarh being formed in November 2000) and my concern was about our ability to handle the local unions, politicians and the government itself. Outside of the Tatas who founded Jamshedpur, no other industrial group had too many good things to say about investing in the state. I was very wary. A few days later, I went back to Dr Irani and told him, ‘I am honoured that you and Ratan have decided to invite us to buy these plants and we would like to buy them. But I have heard stories about the problems non-Tata companies have had in Bihar. We will buy them on the condition that the Tatas will continue to be a shareholder in the company. Whether it is 10 per cent or 50 per cent holding, you can decide. But I want the Tatas to be our partner. It will reduce the chances of people creating a nuisance for us.’
My thinking was that since Tata Chemicals had a partnership with Excel Industries in Gujarat, there was no reason they could not partner with Gujarat Ambuja in Jamshedpur. They were strangely reluctant. ‘Ratan and I have decided to get out of cement entirely,’ Dr Irani told me. I was disappointed at giving up the opportunity, but I felt it was too much of a risk to go in alone. The Tatas eventually sold the division to Lafarge for `500 crore, signalling the French giant’s arrival in India.
This history with the Tatas was at the back of my mind when Nimesh Kampani of JM Financial, my friend and fellow board member, met me in early 1999. Nimesh was close to the Tata bosses, having been their investment banker for a long time. He told me that the Tatas were looking to sell their 14 per cent stake in ACC and were wondering if I would be interested. To me, the offer represented much more than just an opportunity to buy a stake in India’s largest cement company.
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