The Story behind DLF - Delhi Land and Finance

Destiny often unfolds itself when you least expect it to do so. For DLF chairman Kushal Pal Singh, it was under a fierce sun on May 12, 1981, in the wilderness beyond Delhi called Gurgaon, with just two keekar trees for shade and a deep well to quench his thirst.

Singh had been sitting all by himself on a cot next to the well when a Jeep stopped as its engine had got overheated and the driver was looking for some water to cool it. In the Jeep was Rajiv Gandhi, who had just entered politics and had big dreams to fast-track India to the 21st century.

Delhi Land & Finance, or DLF, a company set up by Singh's father-in-law, Chaudhary Raghvendra Singh, had developed no fewer than 21 colonies in Delhi between 1947 and 1961, when all development in the capital city was taken over by the Delhi Development Authority. That had forced DLF to diversify into batteries, cables and so on. Twenty years later, on this blistering summer afternoon, Singh still nurtured hopes of getting back into township development.

The two men got chatting under the trees and a couple of hours later, Gandhi was convinced that the laws constraining the sector needed to be liberalised. "It was a turning point for not just DLF but also for urban development in the country," Singh remembers 25 years later at The Chambers, the exclusive club at the Taj Man Singh hotel.

DLF has definitely come a long way since then - from townships, shopping malls and commercial space to hotels, special economic zones and infrastructure projects. At the moment, DLF has invested close to Rs 80,000 crore (Rs 800 billion) in projects running into 100 million square feet. "We are not aware of any developer in the world who has undertaken work of this magnitude," says Singh, sipping nimbu pani from a tall glass.

Singh hasn't done too badly either. His flagship, DLF Universal, is all set to offload 10 per cent in its IPO for Rs 10,000 crore (Rs 100 billion). As Singh personally owns the rest of the stock, his fortune is worth $20 billion - below L N Mittal's $23.5 billion, but the same as Prince Alwaleed Bin Talal Alsaud of Saudi Arabia and higher than Li ka-shing's $18.8 billion and Michael Dell's $17.1 billion. Watch out for the next Forbes' list of billionaires - Singh is sure to leapfrog amongst the top dozen or so from number 114 this year. Not for nothing, Singh's father-in-law would often expand DLF to Damn Lucky Fellow!

Singh is 74 but his tall frame is ramrod straight. Dressed in a deep blue blazer and a red tie, there is something military about his bearing. Singh tells a long story when I ask him about his days of wearing olive green. While studying for aeronautical engineering in England, Singh's fondness for polo led him to the Indian Military Academy. But the tough regimen of the academy did not agree with him and he was all set to run away.

"I can help you run away but can do nothing when you will be called a bhagora (deserter) for the rest of your life," the commandant told the young cadet when he came to know about his designs. Singh got the message. He passed out with the sword of honour and served nine years with the Deccan Horse.

From tanks to houses. "How did you discover Gurgaon?" I want to know. "Right from the Mughal times, Delhi has expanded towards the south: From Chandni Chowk to Daryaganj, Connaught Place, Lutyen's Delhi, Greater Kailash and so on. So, we thought Gurgaon was the next logical extension," Singh answers as we move on to the dining table for sumptuous Indian fare.

However, so as to make people feel it was not a distant suburb of the city, DLF cleverly called its first project Qutab Enclave after the historical monument in south Delhi. Still, there were few takers for Gurgaon in the 1980s. Then destiny gave another helping hand to Singh. Enter Jack Welch.

Rajiv Gandhi had invited the charismatic CEO of GE to India. But Welch was reluctant. "I had known him for a while. So, I spoke to him and he agreed to come," says Singh, as we are served delicious carrot soup. While in India, Welch was struck by the country's trained manpower and started thinking in terms of outsourcing back office work to India.

From DLF's point of view, the visit was no less important. Welch decided to set up GE's first office at Gurgaon. Others were quick to follow. Almost overnight, Gurgaon had turned from a sleepy village to a throbbing hub of commercial activity. Singh, who had put his money on Gurgaon, was soon riding the gravy train.

And now, he plans to unlock the value by going public. "Why aren't you going for private equity or a strategic partner?" I am curious, as we are served dal, rice, cauliflower and raita. (This being the age of bird flu, both of us say no to chicken curry.)

Singh's answer is cocky, yet practical: "We still have several offers. But what expertise do foreign players bring to the table? Doing business in India requires a special expertise, which nobody has better than us. They will only ride on our brand. A strategic partner will bind us to one set of architects and planners. At the moment, we are hiring the best people in the world."

LN Mittal - The king of steel

The story of how Mittal rose from relative obscurity to become a modern day Andrew Carnegie is relatively well known.

He was born in Sadulpur, Rajasthan. His father's business Ispat India has weathered many storms in the last decade.

At the tender age of 26 Lakshmi Mittal was despatched to Indonesia to oversee the family's mill now called Ispat Indo. Lakshmi Mittal parted ways with his father's in 1995.

In the late '80s, Mittal moved into acquisition mode and bought mills in places like Trinidad and followed that up in Canada.

The greatest coup was when he snapped up the loss-making Sibalsa Mill in Mexico for $220 million in 1992. The 20-year-old facility was originally built by the Mexican Government for around $2 billion.

Most steel industry analysts say the deal was extremely favourable and till recently the plant was the mainstay of the LNM empire.

His mills in Trinidad and Canada and Ispat Mexicana gave him a strong base in North America. In 1998 he consolidated his position in the continent by buying Inland Steel.

In the mid-'90s Mittal decided that he needed a more central base for his rapidly growing empire and shifted to London. There he set the tone that other Indian industrialists have watched enviously -- and some have tried to emulate. His neighbours in Bishop's Avenue, Hampstead include the Sultan of Brunei and King Fahd of Saudi Arabia.

And other Indian businessmen -- perhaps hoping that the Mittal effect would rub off on them -- have also taken up premises near the LNM office in Berkeley Square House, Mayfair.

Mittal has always insisted that he is on the lookout for buys anywhere in the world. But he seems to have followed a clear pattern.

In the early '90s he focused mainly on North America then he shifted focus to Western Europe and bought plants in Ireland, France and Germany.

These moves gave him a strong hold in the western European market for what are called long products.

His moves in eastern Europe could also pay off in a big way. By 2005 the Czech Republic and Poland will be part of the enlarged EU and by 2007 Romania will also join the fold.

That means the LNM Group will probably be producing around 15 million tonnes in the EU.

Says Mittal: "The major companies in eastern Europe are now privatised. The opportunities now lie in the enlargement of the EU into central and eastern Europe."

As it set out on the acquisition trail, the LNM Group hasn't been afraid to leverage itself.

At Ispat Karmet, for example, it took a $450 million package put together by the European Bank for Reconstruction and Development (EBRD) and the IFC. Similarly, at Sidex it has taken a $100 million EBRD loan.

What next? Mittal once said that a modern steel company would be right-sized at around 20mt. He has now upped that to around 40mt and admits that he might double that once again.

But as the industry consolidates it looks certain that Lakshmi Mittal will be out there in front stoking up blast furnaces around the world.

Big Daddy Reliance - The Ambani magic

For almost two decades, Indian Petrochemicals Corporation Ltd dominated the Indian petrochemicals industry. Its three plants fed half the country's demand from the plastics and textile industries. The remaining 50 per cent was met through imports.

In a supply-driven market, managers in its downtown Mumbai marketing office were constantly besieged by hundreds of small plastic processors hungry for raw materials for their factories. For years, IPCL was one of the most successful public sector companies in the country, turning in sturdy profits.

All this changed in the mid 1980s. The Indian petrochemicals industry continued to be supply driven but two factors reversed IPCL's fortunes.

The first attack on the government-run monopoly's bottom line was a steady softening in the international prices of petrochemicals.

The second was the commissioning of the Reliance Industries' cracker at Hazira. IPCL now had local competition. That it came from the private sector made competition all the more interesting.

Reliance is undoubtedly one of India's most interesting companies and its founder, Dhirubhai Ambani, the stuff legends are made of. What is worth noting is that at the time Reliance's Hazira plant went on stream, internationally prices of its products had started falling, and locally it had to compete with IPCL's largely depreciated mother plant at Vadodara.

Internally, the Hazira plant had overshot its budgeted cost more than twice over - partly because the Ambanis wanted a world-scale and world-class plant, a gold-plated Rolls Royce, as a business journalist once described it - and partly because of some unforeseen extras such as a jetty and pipelines which earlier the state government had promised to provide but for which eventually Reliance had to pay.

Despite the rocky start, within five years, Reliance overtook IPCL as India's number one petrochemicals company. Today, it is snapping at the heels of Indian Oil Corporation.

What did Reliance do right? Its many critics argue that Reliance's phenomenal success, particularly in the 1970s and 1980s, was substantially due to some government rules and regulations which seemed to have been designed by Reliance for Reliance.

But there is an old adage that you can take a horse to the water, but you can't make him drink. Reliance wins in the market place every time because customers like to buy its ever-expanding range of products in ever-increasing volumes.

In the textile business, for example, the company won the battle for markets primarily on the strength of a differentiation strategy.

Reliance is India's single largest producer of textiles, but its Naroda complex started modestly in 1966 with just four imported knitting machines. At the time, its entire production was exported. In the early 1970s, the burgeoning demand for polyester fabrics in India caused Reliance to shift its attention to the domestic market.

The Vimal brand quickly attained leadership status - customers liked the quality, the designs and the prices of its range of sarees, suitings, shirtings and dress materials.

Unlike other textile mills, Reliance invested heavily in state-of-the-art technology. In 1975, a technical team from the World Bank inspected a number of Indian mills and its report concluded that only Reliance's mill 'could be described as excellent by developed country standards.' In 1977, a Japan Textile News reporter was sufficiently taken aback by the design studio facilities to report that 'such a scene is hardly seen even in the highly advanced textile producing countries like Japan.'

If Reliance used the differentiation route to win the textile market, it won the battle for the petrochemicals market through an aggressive cost leadership strategy, based largely on scale and pre-emption.

By continuously investing in capacity, often ahead of manifest demand, Reliance not only expanded its market share but also wrested all investment initiatives away from its competitors.

The net result is that Reliance has come to command between 33 per cent and 80 per cent market share in India for all its key petrochemicals products.

Coupled with an insistence on always procuring the latest technology, these large capacities and market shares have translated into unbeatable cost advantages that not only make Reliance the most profitable company in its industry during an upswing, but also the most robust in a downswing.

Why was Reliance successful in developing and implementing its strategy? Many other companies, including the public sector giants, also tried to achieve low costs by putting up high-scale plants. Why did they not succeed like Reliance?

Reliance's strategy worked because it was anchored in a set of outstanding competencies. Its project management skills are unsurpassed in India, and among the best anywhere in the world. It pioneered competencies in mobilizing large amounts of low-cost finance. It could manage the regulatory environment, partly through an extensive system for gathering and interpreting information - a key and often overlooked component. And it can move fast.

These core competencies allow Reliance to set up world-scale plants at the lowest capital costs of any company in India.

Clearly, Reliance's growth spiral is built on an iterative process. Its competencies in project management, the mobilisation of finance and the influencing of the regulatory environment, support its high-volume, low-cost strategy of putting up ever-larger plants. Each large-scale project, in turn, allows it to invest more in - and deepen - those competencies, thus preparing the company for even larger projects and bigger leaps.

But this explanation, too, begs a question: what is the engine driving Reliance's evolution? Where does the energy come from?

That question leads to the third stage of competition: the competition for dreams. This is where the power of corporate ambition and human will combine with a vision of future markets to create the exciting sense of purpose that energizes the whole strategic process.

The spiralling dynamics of continuously engaging in bigger projects and using the experience from those projects to deepen its competencies have been powered in Reliance by Dhirubhai's dreams and, later, by the growing ambition of his two sons.

Making of naukari.com

Luck. It's a thought that keeps coming back while hearing the story of how Sanjeev Bikhchandani built Naukri.com into the country's largest web-based employment site, ahead of even Monster.com's India offering which got stronger when it took over JobsAhead.com or print-giant Times of India's employment site. Or is it that entrepreneurs like Bikhchandani recognise opportunity while the rest of think it's just happenstance.
We're at the recently-opened Piccadelhi in Connaught Place's Plaza cinema complex, styled to resemble the London locale right down to the park-style benches and bus in the middle of the restaurant and doormen with the red coats and bearskin hats made famous by the Buckingham Palace guards, but it's too noisy to hear a long story which Bikhchandani is primed to tell.

So we walk down to DV8, which is what that the 1970s hangout disco, the Cellar (which later became El Arab) has now morphed into. Lunch is quickly ordered. No booze since neither of us can down two in the afternoon without feeling groggy; it's a very hot chicken goulash soup with some crispy veggies for starters and grilled fish for both of us.

Bikhchandani's story, or the salient parts of it, are, of course, pretty well-known by now since parts have appeared in various newspapers including this one as well as in a case study prepared by a professor at the IIM Ahmedabad. For the record, Bikhchandani quit a lucrative management job at Glaxo Smithkline (where he earned "Rs 8,000 a month with prospects") to start off his own jobs venture since he saw colleagues queuing up all the time to look at the appointments section of Business India magazine - "you're always looking at a job, even when you're not looking for one".

He started off his company doing the odd market surveys and feasibility report, but the company was too broke to pay him, so the house was looked after by his wife who worked with Nestle. He taught management over weekends at various places like the Times School of Marketing, management school IMT and at the IMS coaching classes - to earn around Rs 2,000 a month, "enough for booze and cigarettes since I didn't want to be a fully-kept man", he says with the practiced air of a well-told story.

In between, for four years, he got a job as a consulting editor of The Pioneer and ran their careers supplements, something made possible through chance meetings with the editor Chandan Mitra - later, as Chandan bought the paper, Bikhchandani helped him restructure operations to cut costs.

In 1990, or thereabouts, the department of telecom came out with ads launching a video text service and wanted content providers. Bikhchandani got staffers to reword job ads from various newspapers to create a jobs database - a lawyer told him there were no IPR issues as long as the words were different! - and had a readymade database.

However, the DoT project never took off. In 1996, at a visit to IT Asia at Pragati Maidan, Bikhchandani saw a stall with a "www" sign and got his first exposure to the net and what it could do. The forgotten database suddenly looked useful, so staffers began combing 29 newspapers to build it up - the recession of the mid-1990s, in any case, resulted in staffers having nothing to do. His brother was given a 5 per cent stake in Naukri for offering to pay $25 a month to a web-hosting firm, the "best programmer in the world".

Anil Lall was given 8-9 per cent for learning net-programming and doing it, and another friend V N Saroja was given 9 per cent for running the company. 'By now I'd given away around a fourth of the company, but a fourth of zero is still zero!'

The model worked, and while VCs began calling, Bikhchandani turned them down, till in 2000, JobsAhead launched and advertised in the Sharjah cricket tournament with an ad budget greater than Naukri's turnover. Naukri gave ICICI Ventures 15 per cent for Rs 7.3 crore (rs 73 million), just before the dotcom bust. Last year's turnover at Naukri, all from fresh ads (not from rewording of print ads!), was Rs 45 crore (Rs 450 million) with a profit of Rs 8.4 crore (Rs 84 million).

What's the way forward? Sure, running a company of 775 people across 30 offices is a nightmare, but how is Google's Googlebase or Yahoo! Hotjobs affecting Naukri?

Bikhchandani's now thinking smart, and you realise his success has a lot less to do with luck. He will, he says, put out all his 80,000 job ads on aggregators such as Google and Yahoo! (this will give his clients a larger response level). Isn't Naukri dead then? Not really, he argues, since his search algorithm will be a lot more robust than the "single box searches of the US".

Once you aggregate various databases, like Google will do, you can't do searches with very detailed criterion - like a job in Delhi in a FMCG firm as a general manager for someone with over nine years of experience, for instance. In the last year itself, Naukri's changed its search algorithm 20 times to take into account changing needs of the client base.

Bikhchandani's on a roll now, with strategic advice coming forth faster than I can handle. Business Standard, he says, should have a separate desk for its web edition, reword the news got from various agencies like PTI and Reuters (basically, once you put out 50-100 stories an hour, you get huge traffic) and run Google ads along the side to get revenue.

He says the media war in Mumbai needs to be re-targetted and newcomers like Hindustan Times and DNA (along with others like Mid-Day and The Indian Express) need to offer combined ads to clients since this will equal the Times of India's reach (his Lintas days recall that clients pay for reach first, and worry about costs later) and will force the Times to lower ad tariffs and so hit its ability to take on the market so aggressively - better to target the Times' market he says than to compete for just the non-Times segment!