Visions of Greatness - Avantha Group

Visions of Greatness
The rise of Avantha Group as one of the fastest growing business groups in the country belies
its legacy. Though the conglomerate was formally launched just a year ago, its foundations
were laid at the turn of the millennium. The Thapar Group, which was one of the biggest
business houses at the time of independence, slipped away from public eye in the 1990s. But
things changed dramatically after Gautam Thapar, the grandson of group founder Karam Chand
Thapar, inherited a major share of the family empire from his uncle Lalit Thapar.
Three years ago, the group launched its go-global drive by acquiring companies across sectors
and continents. This is one of the main reasons behind the group’s success. Its global foray is
ironical as the group patriarch, LM Thapar, vociferously opposed the liberalisation of the
economy. After turning around Ballarpur Inds (Bilt) — India’s biggest paper manufacturer — and
Crompton Greaves, Gautam Thapar slowly built up scale in all the businesses, which now
straddle across pulp and paper, farm forestry, engineering, IT-ITeS, food processing, chemicals
and power.
The biggest change took place in 2005, when Crompton Greaves — which was a debt-laden
loss-making company only a few years ago — made its first overseas acquisition. The e32-
million (Rs 180-crore) buyout of Belgian firm Pauwels opened up the way for future acquisitions
in the engineering space, and made Crompton Greaves the group’s flagship company,
overtaking Bilt. It also catapulted Crompton Greaves among the top 10 global power transformer
majors and set the base for it to become the first group company to enter the billion-dollar
revenue club.
The following year, the group went on a global acquisition drive. While Crompton Greaves
struck its second deal by acquiring Hungarian power equipment maker Ganz, the Bangalorebased
pickle making arm Global Green bought Belgian food processing firm Intergarden.
Avantha also signed the biggest overseas acquisition deal in the paper space, when Bilt took
over Malaysian pulp and paper major Sabah Forest for $261 million. This was followed by
Crompton Greaves’ acquisition of Ireland-based Microsol in 2007 and that of French firm
Sonomatra in June 2008. Global Green is close to finalising its second deal by acquiring a
Hungarian firm, which will strengthen its position as one of the top pickle makers globally.
The underlying theme of these acquisitions was to lap up underperforming or loss-making
assets, which can add to the group’s global expansion strategy. This strategy has not only
added revenues, but also enhanced the group’s global presence across markets, especially in
Europe and South-East Asia. Now the group has a presence across 10 countries. The revenue
of Avantha Group companies has grown from $1 billion five years ago to $3 billion today.
Though only a few of the group companies are listed, together they are generating a net profit of
around $200 million, against $40 million in FY03.
Now, with multiple M&A deals under different group firms, most of these companies are MNCs
in their own right. However, multiple deals across geographies have their own complexities. As

Avantha Group Chairman Gautam Thapar says, “Acquisitions are sexy to talk about, difficult to
see through and even more challenging to implement and integrate.” He adds that besides
striking deals, he has also opted to walk out from some deals where valuations didn’t match up
to the value of assets. The chairman has been ably assisted by the top management of his
flagship group companies. He heads a four-member group management board, which includes
the CEOs of Crompton Greaves and Bilt, SM Trehan and RR Vederah, respectively, besides the
group CFO B Hariharan. This board also doubles up as an in-house M&A group, though in
future, a focused team may be set up to advise on all deals for the group firms. A beginning has
already been made with the group hiring Ash Gupta, former head of Honeywell India, as
President, Group Strategy and Business Planning, who will hand-hold some of the smaller
group companies.
The group is now looking at scaling up businesses. These include negotiations for partnering a
foreign insurance firm in India; extending the chemicals business to an ingredient supplier for
pharma companies; besides venturing into capital-intensive power. However, the group has to
tread cautiously after an indiscriminate diversification drive in the 1990s almost killed the Thapar
flagship Bilt. Says Mr Thapar, “Things have changed. We were not very clear of what we
wanted to achieve through some of the diversifications back then. Besides, there were
differences in opinion within the management. Now there is a clear management vision.”
But the target of reaching a group turnover of $10 billion and an m-cap of $25 billion by 2013 is
a tough one. Mr Thapar agrees: “Different group firms have their own challenges. For Crompton
Greaves, it is ‘what next’ It can look to acquire very big engineering firms, but they are not up
for sale or will be very pricey. So, it may continue to acquire small and mid-sized firms, which
will bring in new technologies for the company. However, in case of Bilt, the next step has to be
big.”
But Avantha may still need a new pillar, which can become a big revenue generator. If the
group’s initiatives in the power sector take shape as planned, it can fill that gap. Though it will
essentially be a domestic business, Avantha will look at acquiring coal mines in future.
The journey won’t be easy as risks increase. However, if some of its group businesses match
up to the efforts of other units, Avantha can replicate its revenue growth over the past five years
to once again treble its size by 2013.