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Though it was a Thursday, very few had actually ventured out. Many private buses were off the roads, parked at various places. So were the yellow taxis. Even Uber and Ola drivers were reluctant to hit the roads. Then it started pouring. By the time the first showers cleared out, it was evident that Didi was winning a landslide. The celebrations by Trinamool supporters started mid-afternoon.
In the heart of Kolkata, in front of CESC House, the headquarters of the Rs 17,000 crore RP-Sanjiv Goenka Group, a truck carrying a dozen men with Trinamool Congress festoons, flags, drums, cymbals and tubas played tunes from old Bo l lywood songs.
For these men from the Trinamool backed trade union of CESC Ltd, the victory of Didi against a CPIM-Congress combine was a good reason to celebrate. They have a running feud with the rival CITU-backed trade union of CESC. In 2012, an altercation had led to fisticuffs between the two unions inside the headquarters, putting power distribution in Kolkata in jeopardy as the control room was also in the building.
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On the fifth floor, in offices decorated with expensive paintings, sits CESC and RP-SG Group chairman Sanjiv Goenka, perceived by many as the businessman closest to Mamata Banerjee. He agrees with the people celebrating downstairs and feels Mamata is good for West Bengal. With a twinkle in his eyes he adds: “Wait for a big announcement from CESC in power soon.”
Goenka’s CESC Ltd has the licence for distribution of power in Kolkata city, and a humongous luxury mall called Quest in Kolkata, apart from other business interests in the state like organised retail, quick service restaurants, and power generation plants. Goenka also has a carbon black operation and a music business under Saregama Ltd. In the last few years, Goenka has nimblefootedly managed his relationships with politicians. From being known as someone close to erstwhile Left Front chief minister of the state Buddhadeb Bhattacharjee, today Goenka has emerged as a key ally of the Mamata-led government that came to power in 2011. He co-chairs a key committee set up by the government to attract investments to the state.
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On the business front too Goenka had to handle a transition. In 2010, the old RPG Group was split between Sanjiv Goenka and his elder brother Harsh. Then in 2013 Rama Prasad Goenka the group founder passed away. RP-SG Group revenues have more than trebled to Rs 17,000 crore from Rs 5,000 crore in 2010. Group profits have climbed five-fold to 1,000 crore and assets have gone up to Rs 32,000 crore from Rs 7,200 crore. The RP-SG Group also acquired BPO firm Firstsource in 2012, apart from venturing into a soccer team (Atletico de Kolkata) and now an IPL team (Pune).
Back in 2001-02, Goenka had been the youngest president of the industry-lobbying forum Confederation of Indian Industry (CII). The NDA of Atal Bihari Vajpayee was in the saddle at the time and it would have been natural for a CII president to have built close ties with ministers of that government, many of whom are in the NDA government under Narendra Modi too.
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Harsh Neotia, Goenka’s childhood friend and chairman of Ambuja Neotia Group (also the current Ficci chief ), says: “Being one of the largest investors in the state, Sanjiv has a stature that commands a lot of attention from Indian and international investors. He has been able to use this to help promote West Bengal.” There are no points for guessing that help was needed. Mamata came to power the first time in 2011 on the back of agitations like those at Singur against the proposed Tata Nano factory, or at Nandigram against a proposed chemical hub. To erase the anti-industry image, it was important for Mamata to have a guardian angel among businessmen; Goenka has played that role rather well.
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Although Goenka stresses that he would work with whoever is the chief minister of the day, he admits that the state has a problem. “West Bengal has suffered from a perception problem, not just now but for decades. The CM and the finance minister have tried hard to get rid of this image.” He feels the return of Mamata is a “very positive outcome” and he is confident about West Bengal’s future under Didi.
Reinvent for Growth
On May 19, Mamata’s victory seemed to have spurred Goenka on to talk about growth and expansion. On the same day, a CESC board meeting also approved the results of the company for 2015-16 — a profit of Rs 670 crore as a standalone company with net sales of Rs 6,434 crore. As a consolidated company that is a parent for both the BPO (Firstsource) and the retail businesses (Spencer’s and Quest), CESC has net sales of Rs 11,899 crore and net profit of Rs 366 crore. Two other companies Phillips Carbon Black and Saregama are not subsidiaries of CESC and contribute to add up to the net group turnover of Rs 17,000 crore.
They way RP-SG has grown has, however, not pleased analysts, who hate investments outside core businesses. On April 28, Edelweiss analysts Manish Saxena and Santosh Hiredesai wrote in a report: “The company in the past has made investments into unrelated businesses (outside of core business of power generation transmission distribution) with no synergetic benefits which might dilute management bandwidth and hence poses a key risk.” And back in February 2016, Nomura analyst Anirudh Gangahar wrote:
“CESC’s promoter has ventured into unrelated business verticals using the cash flows and/or balance sheet of the company — organised retail in 2008, BPO/BPM in 2012 and recently (Dec-2015), acquiring a cricket franchise in the Indian Premier League (IPL)…While the investment and cash burn in relation to the cricket franchisee are unlikely to be significant in terms of the consolidated financials, the action of the promoter group to once again utilise CESC’s cash flows to fund its foray in new businesses suggests that unrelated diversification is clearly not a dormant risk.”
Goenka says he prefers to focus on running his business instead of worrying too much about analysts. He points out that criticism is not new for him and in the past he has been slammed for not betting on the ultra-mega power projects or even keeping power generation, transmission and distribution under the same umbrella of CESC. “I cannot be in the business of pleasing everybody. Investors invest for returns and they will keep investing as long as we are able to give returns.”
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While Goenka is sitting pretty as Mamata gears up for her second term as chief minister, it would be a totally different ballgame if she is serious about ‘Mission Delhi 2019’ — as she indicated several times during campaigning for the recently-concluded election. If — and that’s a big if three years before the next Lok Sabha election — Mamta does manoeuvre herself into a vantage position in national politics, Bengal’s industrialists would be in clover. Goenka says: “Banerjee is very decisive, takes time-bound decisions and usually has a very clear vision.”
Kolkata based industrialist Sanjay Budhia, who also heads the CII national committee on exports, has travelled with Banerjee for West Bengal road shows to Singapore and London. He feels Mamata’s support to the GST bill at her victory presser on May 19 is a signal of her commitment to a broader agenda of development. Budhia, who heads the Patton Group of companies, says: “We have seen her commitment to business. We all felt energised. It doesn’t matter whether she is in West Bengal or Centre, the state is now on a fast track.”
Adds Sunil Kanoria, president of industry lobby Assocham: “Mamata’s priority has always been the development of West Bengal, and that was demonstrated during her stint as the Union Rail Minister during NDA-I. Thus, if she gets another opportunity to play a national role, I have no doubt that will be good for Bengal. Having said that, I do not see any reason why she would relinquish her post of CM to settle for a Union Minister post.”
Meanwhile, Goenka has a few big bets that must come off in the next few years. He has to firm up fuel and power purchase deals for his power plants in Haldia in West Bengal and in Chandrapur in Maharashtra. He has a major plan to step on the accelerator of a small realty business he has. Sources also say that he owns prime realty in Kolkata and may want to convert some of them to retail. For now Goenka holds all the aces — along with the queen of hearts. There may be no better time to raise the stakes.
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