As chairman of one of India’s oldest conglomerates, the Murugappa group, A. Vellayan’s foremost challenge will be to accelerate expansion without diluting the group’s traditional philosophy and values
A. Vellayan (Murugappa group)
Age: 58
Profile: Chairman of Chennai-based Murugappa Group
India Rich List Rank: 55
Family wealth: $1.02 billion
Insights:
• Wants to stick to values such as integrity and trust
• But says decision making will have to be faster
Sometime in 1945, A.M.M. Vellayan, the second son of A.M. Murugappa Chettiar, went back to Burma to take stock of the wealth his family and his community left behind during the Japanese occupation. One evening, after a meeting, Vellayan walked back to his house. It was dark, there was no power. As he reached the door, a young man, who was waiting for him, pulled out a gun, shot him and sped away. Vellayan died immediately. He was 40.
Back in India, Murugappa Chettiar’s world crashed. He would spend the rest of his life in his family house at Pallathur, a village in southern Tamil Nadu, but not before taking two far-reaching decisions. First, he decided to pull out of all overseas investments — the family had holdings in Malaysia, Sri Lanka and Burma — and focus only on India. Second, he insisted that his eldest son, who had only daughters, adopt the second son of Vellayan. It was a wise decision, the youngest son A.M.M. Arunachalam told his biographer many years later: “It helped the family stay together.”
A. Vellayan, the grandson of the adventurous young man who lost his life in Burma, and the chairman of 110-year-old, $3.8-billion Murugappa Group since October 2009, knows that years down the line his own contribution will be judged by a similar metric — whether he managed to grow the business while keeping the family united.
The Goal
Vellayan, however, will get little encouragement from history.Across the world, the probability of a split in a family business rises with every passing generation. In India, Reliance split in the second generation and Bajaj in the third. Vellayan himself belongs to the fourth generation — one of the seven from that generation — and is overseeing the fifth coming on board.
What’s amazing about Murugappa is the way it built the business over many years, across generations, even while maintaining an united front, says K. Ramakrishnan, head of investment banking at Spark Capital, who has worked with the group for over 15 years. The group’s interests today span several sectors from abrasives and bicycles to fertilisers and financial services — across 29 companies employing over 32,000 people.
When Vellayan succeeded his uncle as chairman, it represented a significant change. For one, the mantle moved from the third to the fourth generation. More importantly, Vellayan is regarded as being more aggressive than the others. In 2003, he led one of biggest acquisitions of the group, when Coromandel Fertilisers, Murugappa’s flagship company, took over Godavari Fertilisers. It was hostile and Coromandel paid over 50 times the market price for each Godavari share. He also led the group’s entry into Russia and South Africa.
There are no overt signs of the leadership change at the group headquarters at Dare House, a British-built, 1930s building at Parry’s Corner near Chennai harbour. The photographs at the foyer are mostly of different CEOs with their teams, while those in the conference room are dominated by family elders.
But insiders talk of subtle changes. People are asked to think big and take risks. Access to the chairman has never been easier. “Earlier, the focus was on control. Now it’s about finding opportunities,” says V. Ravichandran, a director at Murugappa Corporate Board.
Vellayan, who went to the Warwick Business School for his masters and spent his entire career at Murugappa, says he will stick to values such as integrity and trust. “What will change is that decision making will have to be faster. We have to take some calculated risks even if we have only 75-80 percent data. We might miss an opportunity if we don’t move. Second, we have to look outside the country’s boundaries for opportunities if we want to grow fast. Third, there will be inorganic growth. We have people who are looking for deal flows rather than wait for them to come.”
Vellayan wants Murugappa’s growth to be three times faster than that of India’s GDP (gross domestic product). It’s not going to be easy. Part of the challenge lies in its portfolio. More than half its revenues come from agri-based businesses, a sector that grows slower than the GDP. And he has to achieve this while operating within the constraints of the group’s tradition of preferring profitability to revenue growth and of staying within its circle of competence.
The Boundaries
(This story appears in the 18 November, 2011 issue of Forbes India. To visit our Archives, click here.)