Book Excerpt: How Kuldip Singh Bought Berger From Mallya When Paints Industry Was StrugglingBloombergQuintOpinion
“Gurbachan and I went to meet Vijay Mallya at his Sardar Patel Marg home,” remembered Kuldip. Surinder was also present at the meeting. “We reached his house and Vijay was sitting in his large room having beer,” remembered Gurbachan. “Come on, guys, have a cold one,” offered Vijay to his guests. “But we had gone for work, how could we have beer?” asked Gurbachan as he related the story. The beer offer notwithstanding, the conversation got going from the start.
Vijay Mallya knew Surinder was a common factor. Kuldip found Vijay Mallya to be a very smart businessman, a far cry from the flamboyant and larger-than-life image that was later to become the trademark of the liquor baron.
“We talked about the paints business and then talked about many other things,” said Kuldip.
Surinder added, “We completely sidestepped the fact that we were there to negotiate a buy-out. Vijay Mallya kept asking us about our Golf Links days and then our college days. We talked of many things, laughing and chatting. I think of the total time we spent, only 5 percent went in talking about Berger Paints.”
Vijay Mallya understood, astutely, that the Dhingras were very keen to acquire Berger Paints. He upped his asking price. The figure Vijay asked for was found to be much more than what Kuldip and Gurbachan had anticipated. However, both parties were unwilling to put an end to the negotiations. Finally, the deal was agreed in principle but subject to conditions laid down by both sides. It was agreed that Surinder would take the necessary steps to take this further.
It was February 1990, and Kuldip was neck-deep in his exports business. He had to leave for Moscow the night after his meeting with Vijay Mallya. Before leaving, Kuldip and Meeta went to meet Surinder at his farmhouse to discuss strategies and numbers. “I tell you I was so impressed with Meeta! She was so supportive and she kept asking such intelligent questions about the deal. I was surprised,” Surinder continued.
Meeta, Kuldip and Surinder discussed various aspects of the business deal. “I remember telling him that it was a mistake to let Vijay Mallya know how much Kuldip wanted to buy the company. The numbers had to go up obviously,” said Surinder. However, Kuldip had made up his mind to join the big boys of the paints industry. Kuldip asserted that while he was an emotional man he took business decisions non-emotionally and said that the decision to buy Berger was an unemotional, cold business decision.
While many people intuitively understood Kuldip’s desire to be part of the corporate world, they found his keenness to buy Berger perplexing. The Indian paints industry had not been in the best health since 1988. The paints industry was in a crisis because excise duty had been increased from 20 percent to 45 percent. To add to its woes, the VP Singh government had increased the import duty to 110 percent. Manmohan Singh and his liberalization-driven budget was nowhere on the scene.
Kuldip certainly did not have any foreknowledge of excise and import duties falling after the mid-1990s. These were the years when the business was actually de-growing and the problem was compounded by Berger being a Vijay Mallya company. While Vijay Mallya may be known for a great many things, running a tight company and adhering to corporate governance rules was not among them. But Kuldip did not care about any of this. He simply wanted to work on a larger canvas.
Kuldip had no doubt in his mind that Rajdoot would eventually get in the list of top five paint companies in India. However, he knew that it would require time and money. Kuldip had the money and was a man in a hurry! With his export profits, Kuldip wanted to shorten the time to get to the top five. Buying Berger, with its ready-made business and management team, would enable him to do just that. When he considered the net present value of the money it would take Rajdoot to get to the top five, the deal with Vijay seemed in the range, though the numbers were just about pushing the boundaries.
He shared his thoughts with Gurbachan before leaving for Moscow and told him to continue the discussion for further action with Surinder and their lawyer—Rajive Sawhney. “In less than forty-eight hours we had the broad details of the deal that would be workable with numbers in line with our respective mandates,” said Surinder.
“I called up Kuldip very excitedly to give him the news that the deal was through,” said Surinder. He was surprised by the reaction from Moscow.
“What? The deal is finalized? Have you confirmed with Vijay Mallya? How can companies be bought and sold like this? At least take the details to Vijay and let him go through it. The owner should agree and only then can the deal go through,” Kuldip told Surinder. The shopkeeper-turned-exporter was quite at a loss to understand the workings of multinationals where the entire company could be sold off without the owners even meeting to shake hands!
It was decided that Gurbachan would meet Vijay Mallya at his Safdarjung Office in the evening.
Rajive and Surinder had a sheet of paper with the details. Vijay looked at the sheet and said, “Hmmmm . . . looks OK. Wait, what? My CEO will go along with the company? And what’s this, I am to remain the chairman for the next six months?”
Surinder and Rajive advised Vijay that it would be better for continuity for the current chairman and the current CEO to stay on in their respective positions for at least half a year.
“OK then, let’s shake hands and finalize the deal,” boomed Vijay delightedly. He needed funds for his other businesses and this deal would help with that.
Gurbachan was delighted as also was Kuldip. They were going to be the owners of a multinational company!
Did Kuldip imagine, as he sat in his shop in Amritsar selling British Paints, that one day he would be the owner of the company that owned British Paints? “What a stupid question! Of course not,” snapped Kuldip but with a broad smile!
Excerpted from Unstoppable: Kuldip Singh Dhingra And The Rise Of Berger Paints, with permission from Penguin Random House India
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