Meet the man behind a Rs 4,500-crore empire

Focus and gusto is what describes this 65-year old chairman of The Sanmar Group.

He is N Sankar, the recent recipient of the Lifetime Achievement award at the TiE Chennai Entrepreneur Awards 2010.

Adding to his list of credits is the fact that Sankar leads the group that has manufacturing entities in Germany, USA, Mexico and Egypt operates in the areas of chemicals, engineering, metals and shipping.

Today, the turnover of the group is estimated to be around Rs 4,500 crore (Rs 45 billion), and all this because Sankar believed in his dream.

In this exclusive interview with rediff.com, Sankar talks about what it means to choose a profession that’s not so romantic and the highs and lows of being an entrepreneur.

 

 

Growing up in an entrepreneurial family

I was born in an entrepreneurial family of 3-4 generations, so automatically I also became an entrepreneur.

My grandfather, S N N Sankaralinga Iyer, was the first industrialist in the family. He started the Indo-Commercial Bank and also India Cements Ltd which made the largest public issue in 1949.

He was a visionary who did many things like corporate farming, chemicals, shipping, rubber products, etc.

He, along with my father started the first cement plant in Tirunelveli, Tamil Nadu.

Growing up in such an atmosphere, it was taken for granted that I also became an entrepreneur one day.

I had decided even when I was in school that I would become a Chemical Engineer though it was not a romantic profession.

It is true that I never used my engineering in business but it taught me logical analysis and financial techniques.

Like Jack Welsh said, Chemical Engineering taught me the tools to run a business.

After my engineering here in Chennai, I went to the US to do my Masters in Chemical Engineering. In hindsight, it would have been better if I had done an MBA.

After I came back, I got admission at IIM-Ahmedabad but I didn’t take it up. I think it was the second or the third batch.

Joining the family business

When my father’s partner passed away, my father needed my assistance. So, I joined Chemplast in 1967.

I had no funds of my own to start an enterprise at that time. From 1967 to 1972, I worked with Chemplast.

I worked under S Ramaswamy, the chief executive of the company.

I learnt a lot from him in those five years. He was the only boss I ever had in my life.

He taught me simple things from how to draft a letter to how to manage people.

Those were the most difficult times for Chemplast. But I learnt to cope with it.

Starting the entrepreneurial career

As I didn’t want to work for anyone for long, in 1972, I left Chemplast to start my entrepreneurial career.

I borrowed Rs 16-20 lakh (Rs 1.6-2 million) from friends and investors and bought the majority ownership in a company that made industrial chemicals. From then on, I have never worked for anybody else.

I also wanted to build it as a company, that is, a technology based company, with foreign collaborators.

It was very difficult to go for collaborators in those days.

I will give you an example. Even the seal which was used in pumps to block leaks, had to be imported at that time.

The seal was only worth Rs 3,000-4,000 but if it was not there, sometimes, we had to close the plant down. So, we decided to make it in India and tried various collaborators.

I, a 26 year old, was writing letters to foreign companies that I wanted to collaborate with them.

Finally, we chose a company from Michigan, USA and it required a lot of approvals at that time to have collaboration with foreign companies.

 

The goodwill that my father had built over the years helped me in good stead in getting approvals. I started it (Durametallic India Ltd ) in 1976 and it has been 34 years.

It has been profitable right from the first year. In the first year, the turnover must have been around Rs 100,000 to 200,000.

It felt good when the business you started makes profits in the first year itself. I have not looked back since then.

Today, Sanmar Engineering Corporation has 5-6 joint ventures. It was a unique model I started at that time.

You no longer need such joint ventures today. When they are part of the management, they keep giving you technology. Thus, they will have the confidence in you.

Sanmar Engineering, the first business that I started, is still growing with a turnover of Rs 700 crore (Rs 7 billion) and we are continuing to add new products.

We are market leaders in many products. It gives you a lot of satisfaction to see your first company grow like this.

Buying new companies

In 1997, I bought Chemplast and took over the management. From then on, I am running Chemplast and we have expanded it tremendously.

In the late 80s, I acquired Mettur chemicals. In 2001-02, I acquired the caustic soda plant of Kothari sugars and Chemicals at Karaikal, Puducherry.

Last year, we expanded in a huge way by starting a PVC (Polyvinyl chloride) plant in Cuddalore, Tamil Nadu. Chemplast alone is a Rs 2,000 crore (Rs 20 billion) company this year.

Sanmar group started in 1991

Before liberalisation, we could not have any group. After liberalisation, we decided to have a group, and we had many fancy names first but finally we joined my name with my brother’s (N Kumar) name and called the entire group Sanmar group.

The Sanmar Group includes 15 major companies — Chemplast Sanmar Ltd, TCI Sanmar, Sanmar Speciality Chemicals LLC (Egypt), Cabot Sanmar Ltd, Flowserve Sanmar Ltd, BS&B Safety Systems (India) Ltd, Sanmar Engineering Services, Fisher Sanmar Ltd, Xomox Sanmar Ltd, Tyco Sanmar Ltd, Sanmar Foundries Limited, Matrix Metals LLC, Sanmar Ferrotech Ltd, Eisenwerk Erla, Sanmar Shipping Ltd.

We are into chemicals, engineering, shipping and metals. We have six ships operating internationally and have done pretty well in the shipping business.

 

Pre-liberalisation and post-liberalisation

I started my own business in 1972, so had the opportunity to know the pre liberalised and post liberalised India.

In 1991-92, I was the president of Associated Chambers of Commerce and Industry of India (Assocham) and it was an amazing period for everyone.

I had the opportunity to discuss with the then finance minister Manmohan Singh on what we should do and what we should not.

Like Monopolies and Restrictive Trade Practices (MRTP) the limit was Rs 100 crore (Rs 1 billion) at that time and P R Kumaramangalam was the Minister of State for Company Law at that time and he asked me, “Sankar, should we make it Rs 200 crore (Rs 2 billion) or Rs 500 crore (Rs 5 billion)?” I said, there shouldn’t be any limit.

He asked why? I said, see, you are fighting against producing more which is actually better for the country. Now MRTP has no limits in terms of assets.

P V Narasimha Rao, the then prime minister, was very open to all ideas and we could discuss things frankly with him.

Now, I will tell you an interesting incident about the pre-liberalised economy.  It was 1967, and I had just joined Chemplast.

Our American collaborator was visiting the plant but a particular machinery was shut down because of the non-availability of a small steel blade for the cutter.

He was shocked and asked, how can you shut down a plant for such a small thing? We said, we don’t have the import license.

The minimum amount needed to get the import license was $5,500 and this blade cost only $5.

He was so taken aback that the moment he reached the US, he asked his secretary to send the blade to us.

You know what happened? I was raided by the customs! They said, you have no license to import this item. I said, I didn’t import, somebody sent it to me. That was the situation before liberalisation.

Those days, duties on chemicals were 200-400 per cent, but today it is 5-10 per cent.

Liberalisation created its own challenges too, like competition. There is no tomorrow to solve problems now; you have to address everything today.

Rise of entrepreneurship

India is a paradise for entrepreneurs. Today, it is not tough to start a company. Before liberalisation, you needed so many approvals. Similarly, there are so many fields that are there unlike in the past.

There are two types of entrepreneurs; one comes up with ideas that are new and never heard of before. That is very unusual and maybe one in a million only succeed.

The second type of entrepreneurs are those who work on existing ideas but with dedication and hard work, and succeed in a big way.

You take the case of Dhirubhai Ambani. There is nothing new in what he did but he bought a new angle to the business. Similarly, Wipro too.

 

India as a market

Today, India, China and Africa are the biggest markets. Africa is going to be the next big thing.

India is said to be the largest producers of sugar but our per capita consumption is less.

So, everybody wants to come to this market. I feel we should take advantage of our market first. Our per capita consumption of any product or service is very small.

Take our product PVC, our average annual consumption 1.6 kilos per capita while the world average is 16-17 and the West’s average is 20-30 kilos.

Forget that, Thailand and Malaysia are 6 kilos per capita. So, if we look at these two countries itself, there may be 4-5 million tonnes more of PVC per annum and nowhere in the world is such a demand possible.

Though we are exporting wherever possible, our primary market is India.

Ups and downs in business

We don’t plan annually; we have quarterly planning and we plan for the bottom of the cycle. It doesn’t always succeed but we plan that way.

An entrepreneur has to learn that he will have to lose sleep over issues. Entrepreneurship is not a 9 to 5 job; it’s a 24- hour job. To the question, how do I come out of the difficult situations, there is only one way to face the problem, and that is by solving it.

It is a huge responsibility to be on the chair where the buck stops. It is not only money that you are responsible for but people too.

We have about 10,000 people working for us and you are responsible for them, you have to take care of them. I am lucky to have very senior professionals working for us, who have been with us for 30 to 40 years.

Except for my son who will take over from me, no family member works for us; we have only professionals working here. Whenever there is a problem, I discuss it with them.

For the environment

We are ahead of others in environment protection. Our Mettur plant has not discharged a single drop of treated effluent since September 2009 while in Cuddalore and Karaikkal there has been no discharge since inception.

At the 7th National Award for Excellence in Water Management organised by the Confederation on Indian Industry in Hyderabad recently, Chemplast Sanmar Limited, the flagship company of The Sanmar Group won the “Innovative Case Study” and “Excellent Water Efficient Unit” awards for the successful case study of zero liquid discharge at Mettur.

Cricket, an integral part of Sanmar group

I used to play tennis and it was total relaxation for me. But for the last 5-6 years, I was forced to stop playing because of a knee problem.

Cricket is a passion for me. For the last 45 years, we have been managing a cricket team and I am sure very few can say that they own one such team.

Top national level cricketers like Balaji, Badrinath, Murali Vijay, Ashwin, are products of our team.

We have been lucky to have the former wicket keeper Bharat Reddy as the person in charge of our team for the last 35 years and he spots talent. I feel happy that we have spotted so much good talent.

 

Satisfying moments in the 38 years of journey

There are many satisfying moments in the long journey that I undertook.

The most satisfying is that the company I started in 1972 is still with us and it is doing and growing so well.

Our group’s motto combines integrity with excellence. We run the companies excellently and we have also been able to inculcate integrity and ethics in our people.