When looks deceive

FOR THE CHENNAI CHAIRPERSON of a billion-dollar company, Mallika Srinivasan’s office on the second floor at 35, Nungambakkam High Road, Chennai, is surprisingly simple.

White linoleum tiles, a few plants laid out Zen-style in one corner, and two or three pieces of Oriental artwork on the walls. No curtains, leather accessories, or flat-panel TV to be seen anywhere. Her desk is the focal point—because it’s far smaller than what you’d find in most executive offices. The four-foot wood flat-top groans beneath five stacks of files. There’s barely space for a pen-holder, let alone a desktop.

Till a few months before his death in January this year, her father, A. Sivasailam, worked out of the same building, his office just a few steps away from Srinivasan’s. That office looks like the headquarters of a Rs 9,822 crore empire that is the Amalgamations Group. A large chairman’s desk, nearly thrice the size of Srinivasan's, stretches halfway across the room, surrounded by dark, imposing furniture.

“I like the glass walls and open structure of my office,” says Srinivasan, offering an insight into why her office is the way it is. “It makes me more accessible and sends out an open-door message.”

That’s integral to her low-key management style. She’s so devoid of flash that it’s difficult to think of her as an industrialist’s daughter or wife. She is both—and more. Daughter of a legend, she is married to Venu Srinivasan of the T.V.S. Iyengar business family. And in keeping with tradition, Srinivasan’s daughter Lakshmi married Rohan Murty, son of Infosys founder N.R. Narayana Murthy, earlier this year.

“I’ve had a ringside view of her as a businessperson, and she’s very traditional and attends all the family functions. You really can’t find a more typical Madrasi housewife,” says R. Seshasayee, executive vice chairman of Ashok Leyland. Typical Madrasi housewives are supposed to be mild, with strong family values and steeped in tradition. “But she can be almost audacious and very progressive when it comes to making business moves,” adds Seshasayee.

SRINIVASAN'S FAMILY, with members from three different business backgrounds, keeps her energised. “There are many refreshing views being brought to the table; so much know-how and so much cross-learning,” says Srinivasan. Reacting to her daughter’s marriage, she adds, “Just the other day, Rohan said I should get an iPad, so I could see my daughter in Boston every day. Then Venu said ‘that’s a great idea’ and he got me one!”

Srinivasan heads TAFE (Tractors and Farm Equipment), the second-largest tractor manufacturer in India, third largest in the world by volume, and the flagship of the Amalgamations Group, founded by her grandfather Sivasailam Anantharamakrishnan. The tractor business gets the most attention, but she also runs Southern Tree Farms tea plantations; distributes Tata Motors and Skoda vehicles in South India under TAFE Access and TAFE Reach, respectively; makes batteries for cars, bikes, and tractors, engineering plastics for health care, auto, and IT; and diesel engines for industrial usage under TAFE Power Source division, TAFE Engineering Plastics division, and TAFE Engines division, respectively.

She’s got aggressive plans to expand TAFE, and is unfazed by market leader Mahindra & Mahindra (M&M), which plans to expand in South India, traditionally TAFE’s stronghold. M&M is building a tractor plant in Andhra Pradesh on its captive land at Zaheerabad to feed the south. According to its president of automotive and farm equipment sector Pawan Goenka, the plant, with an installed capacity of 100,000 tractors, will start production next year.

Srinivasan says, “We’re working our plants to full capacity and are bursting at the seams; the total tractor output is 150,000 this year, averaging 15,000 per month.” TAFE plans to increase production to between 180,000 and 200,000 tractors by the end of next year, and has begun working on another plant with 50,000 units capacity.

Srinivasan won’t say where the plant is going to be; just that it will have separate production lines for two tractor brands—Eicher and Massey Ferguson. TAFE has four domestic production centres: Chennai, Madurai, Bengaluru, and Bhopal; and one new plant in Turkey, opened in 2010. According to a KPMG report, the market for tractors is $4.8 billion (Rs 23,332.8 crore)
in India.

Srinivasan learnt the ropes from her father, who was all about managing a combination of business situations and communicating with people from all walks of life.

“He’d say: I need to get out of this [tight] situation, Mallika. Pick up the phone and make the call for me,” recalls Srinivasan, the elder of two sisters. “And when you got through that, then he’d throw you another challenge and another.”

Growing up in a business family meant that often vacations were cut short by news of labour problems. “That was something we just had to accept.”

But she was clear that business was something she wanted to excel at. The decision to get a business degree from Wharton in Philadelphia came after her marriage in 1982 to Venu Srinivasan, chairman and managing director of TVS Motors. She’d already had a child when she went there; that was in 1984, and she was the only Indian woman in her class. “It’s a hard act to repeat;
the baby’s crying and you are trying to study,” she says. That balancing act is something she’s carried forward till today.

The business community is used to her now but earlier officials couldn’t believe she was in charge, when she would visit government offices. “Bureaucrats were always surprised to see this young woman—they’d look at me and say, ‘Oh, really?’” (The only other female executive heading a tractor company is Cathrina Claas-Mühlhäuser, the new president of the supervisory board for the German CLAAS Group, a leading agriculture engineering outfit.)

But behind Srinivasan’s soft demeanour lies boldness and steely grit. In 2005, when competition was knocking at the door, she made a smart move to narrow the gap. She acquired the tractor, engine, and gear division of Eicher Motors for Rs 310 crore, which catapulted TAFE to second position with a combined market share of 22%, putting her within striking distance of M&M.

“We felt she was best positioned culturally, among anyone in the industry to take it over,” says Siddhartha Lal, managing director, Eicher Motors. “Our stakes in the business are zero, except the brand-sharing in the same name, but she’s retained the same values that we had and even enhanced it from a business perspective. It’s gone up a couple of notches—no question about it.”

The move was sweetly timed. Srinivasan bought the tractor company coming off the back of a downturn, displaying her deep understanding of the market. “Almost overnight, our share increased by about 8%,” she says.

Srinivasan has kept Eicher alive as a separate subsidiary and brand. “We didn’t choose to merge and that was unconventional. We didn’t sack people.” TAFE has also kept the sales and distribution teams totally independent. This also gives an insight into her tactical business skills. Strong in the south, TAFE has been able to strategically take on M&M in the north and west with the Eicher brand, thus getting a pan-India footprint.

Rohtash Mal, president of the Tractor Manufacturers’ Association, says Srinivasan’s model is a good one given the changing landscape. “She’s going to face intense competition from M&M and Escorts,” he adds, pointing out that in the tractor industry, if one looks back a decade, not much has changed. “That’s because it’s a very regional business with a lot of players holding strong in their own turf.” In states such as Rajasthan and Haryana, TAFE dominates, while in Maharashtra it’s M&M. According to research agencies CARE and CMIE, the mid-size tractor market (31 hp to 45 hp) dominates the industry, accounting for half of its sales. It’s also where the gap is the narrowest, with M&M leading TAFE by 13% in market share.

TAFE doesn’t stop investing when the chips are down. When the market for tractors slumped between 2001 and 2004, TAFE stuck to schedule and kept launching new products, such as the Samrat tractor. “It was the first tractor we designed completely in-house and the deadline for the launch was set in stone,” says T.R. Kesavan, TAFE’s senior vice president of marketing and product strategy. He knew the markets weren’t receptive, but says, Srinivasan stuck to her guns on the launch date. “We ended up having stand-up meetings so that we wouldn’t waste time getting too comfortable,” he says. “You can have sit-down meetings for eight hours at a stretch but when you’re standing, the decisions and agreements happen much faster.”

But for all her aggression, Srinivasan is conservative when it comes to finance and being successful. “As of now, we are at zero debt, have strong cash reserves, and have fairly ambitious targets,” she says, adding that TAFE is on track to increase revenue from Rs 5,819 crore (2010-11) to Rs 7,855 crore for the current year. If the company can sustain that sort of growth with internal funds, then Srinivasan doesn’t see the value in going public. TAFE is privately held and she intends to keep it that way. “I think equity is the most expensive form of financing. So when I have the debt-raising ability and the cash, I don’t need to raise money to service that equity.”

It’s not just the strong reserves that give TAFE its inherently strong fundamentals, but also its extensive realty holdings. R. Ramakrishnan, director of TVS Motors and former sheriff of Chennai, talks of how each of the group’s companies are sitting on cash banks and land banks. “The J farm where her (Srinivasan’s) daughter got married is on some 300 acres of prime
real estate.”

Srinivasan being born into a very family-oriented traditional business has also had its effect on how she steers the ship. In Chennai, legend has it that the Central Bank of India lent to the Amalgamations Group when other banks refused, which is why the bank works out of a building owned by the group on Mount Road in the heart of Chennai’s business district. Srinivasan dispels those stories claiming that they have more to do with how the group views relationships.

“We take the long view when it comes to business practices and relationships,” she says. “Central Bank has been our lead banker for more than 50 years—since my grandfather was in business—and it was towards nurturing long-term partnerships that he offered the building to it.”

It’s the same with her business partners, dealers, and component suppliers, some of whom are now in their third generation. Adi Godrej, chairman of the Godrej Group, says he has done “a few joint ventures with the Amalgamations Group, through Godrej Properties” and now interacts with Srinivasan through Hyderabad-based Indian School of Business, where he’s chairman and she’s a board member. “The deals I did with the group were mutually beneficial. In all my interactions with the group, the impression I got was that it was closely held and was being led by a woman with astute business sense.”

But the key relationship that stands out in her industry is the 50-year alliance between TAFE and agricultural equipment maker Agco of the U.S., through which vehicles are marketed and distributed abroad. Agco owns 24% of TAFE while Srinivasan’s family owns 76%.

Managing such alliances is no mean feat, points out Seshasayee. Indeed, in recent times, joint ventures between Indian players and foreign |partners haven’t lasted. Examples are M&M and Ford, and M&M and Renault.

Srinivasan is passionate about what she does. And when asked why she is in a clearly unglamorous business devoid of women, she’s quick to answer, “That it’s profitable is great but the end product is something that you can see, feel, and touch. For any farmer a tractor is his biggest investment. It’s a status symbol, it’s a tool of production, and it’s his livelihood. You can’t ignore that.”