King of Cawnpore: Business Today, 13 Jan 2018

Source: As featured in Business Today, Jan 13, 2018

As a member of one of India's oldest and most prosperous business families - the JK Group, 64-year-old Yadupati Singhania is averse to any ostentatious show of wealth. Still operating out of the 90-year-old Kamla Towers in Kanpurs busy Jareeb Chowki area, Singhania disregards the luxury of a big German sedan and opts for a modest Maruti Ciaz for the half-hour drive to office from his ancestral home, Ganga Kutir. Even the smaller and less stately Mercedes B Class that was bought for him a couple of years ago has been discarded. "Look at the congestion and narrow roads here. A Maruti is best for Kanpur," he says.
Dressed casually in a woolen pullover, seated atop an antique 80-year-old family chair, Singhania looks frail for his age the day we meet him on a particularly foggy December morning. It is a picture of a contented man who has seen much in life. Singhania feigns a mock surprise when told he has been adjudicated as the best CEO for the cement industry and is at a loss to explain what makes him special.
"The vision is to grow just like any other company aspires to. I don't think we have done anything different. We are doing what we have been doing all the time. It just happens that we are performing better," he says. "Compared to others, you would have a better idea as an observer (outsider) to gauge what we are doing differently. Because internally, I do not see anything different."
Cement is a rather peculiar industry in India. For all its importance in nation building - construction of houses, bridges, roads and ports, it is taxed heavily. There is also a perception that the industry is opaque; charges of cartelisation often surface, and it is continually under the radar of the Competition Commission of India.
Despite these challenges, JK Cement has been an out-performer. Its revenues, `3,848.6 crore between October 2016 and September 2017, have grown by an average of 10.6 per cent in the last three years. In the same period, profit after tax has grown by 42.2 per cent. The growth has been recognized by investors. Its average market capitalisation in the last one year has gone up by 42 per cent.
Till a few years ago, the company was dragged by its factories which, like the head office, were antique. Unlike a heritage building, though, factories do not get any brownie points for being old and need to be continually upgraded. That is what the company did. "There has been a general slowdown in the industry that is affecting everybody. From our own end, we have added new capacities, as old factories have a tendency to be inefficient. The realization that we needed to upgrade our capacities was there all the time. It was just that we were not able to do things because of certain constraints," he says.
"Once we were able to do it, we did it. We have to be modern and plants have to be efficient. Energy is a big cost factor as new plants consume much less energy. So, one has to be competitive and keep investing in modernization. When you are financially strong, you can do it. So, 70 per cent of our capacity today is new." Another major contributor has been the early mover advantage in white cement and wall putty. White cement is a niche design-oriented commodity where margins are more than five times that of grey cement. The IIT-Kanpur alumnus foresaw the opportunity way back in 1984 when J.K. Cement set up country's first dry process white cement factory. Today, white cement accounts for 37 per cent revenues, among the highest in the industry. J.K. Cement is the second-largest player in this segment with nearly 40 per cent market share. "You can say we sowed the seeds three decades ago and the result has been more visible in the last four-five years," he says.
"Our white cement business, especially the wall putty, is growing at a 14-15 per cent rate year on year," says Chief Financial Officer A.K. Saraogi. "It took time as it was a new product. When Ultra Tech came up with its own white cement plant in 1987/88, it simply followed what we had done. We have established ourselves very well in this segment and our market share is growing in both these categories."
The company is expanding even in grey cement. It plans to add up to eight million tonnes per annum capacity in the next five years, which will take its overall capacity to 18 million tonnes. Capacity expansion in cement is a tricky issue as predicting demand is nearly impossible. "We may project demand and ramp up capacity but the demand may not happen. That has been the case in the last five-six years," says Singhania. "There is lot of talk on infrastructure but there is not so much (work) on the ground. There is surplus in housing in big cities. That segment is gone right now. I do not see a sudden change or uptick in demand."
The negative image of the industry also acts in the way of the government acting in its favor. Cement is one of the most taxed at 28 per cent under the new GST regime. In contrast, steel, which has much the same use, is taxed at a much lower rate. "The industry has definitely a negative image. Taxes were always high."
Personally, he is more disappointed with the situation of his city. Once the industrial hub of north India, Kanpur was often referred to as the Manchester of the East in the per-independence era. JK Group's genesis in the city before part of the family branched out to Kolkata, Mumbai and Delhi, had a big impact on the city. Even though all of JK Cement's factories are in Rajasthan and Karnataka, Singhania remains rooted to the city of his birth.
"Some parts of the company and some other industries have moved out. But I have been born and brought up in this city so you can say it is inertia," he reminisces. "If you ask a third person, he will say Kanpur is a horrible place. Nobody has a good opinion about this city. There is disappointment with what the city has become. Other small places which did not exist earlier have moved ahead. Noida for example. In UP, for the last 20-25 years, no industry has come up. This city has been neglected."
His preference for Kanpur over all the other fancy cities he can settle in-his wife is from Chennai -- is very much in consonance with Singhania's personality. Just like he opts for a Maruti over a Mercedes. His favourite however, remains parked inside his garage in Ganga Kutir. It is a 100-year-old Rolls Royce Silver Ghost.

@sumantbanerji

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