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[Music]
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uh Mr kushu Khan thank you so much for
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joining us today thank you thanks nice
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nice to be here well to begin with uh I
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know that in 2009 February 2009 9 you
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were appointed a special advisor to the
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board of satam soon after a major
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Scandal uh broke over there uh I'm sure
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that our audience all over the world
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will be very curious about your
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impressions on what really went wrong
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and uh what you in your role were able
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to understand about how India can avoid
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such situations again well um when I
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took the assignment everyone said I must
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be crazy to to take on something like
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like that but um I found um within a few
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days that it was a very fine company and
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um it was just the actions of the
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promoters which which brought it to its
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sorry state but there were 40,000 people
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who worked very sincerely for this
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company did a phenomenal amount of good
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and um I really felt I I I was glad a
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few days later when I took the
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assignment because I found you know
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there's so much you could do in a
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positive way for Revival of this company
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it was a great company it's just very
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unfortunate that a promoter could do
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something like what the Raju
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did um how do you prevent such things in
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future very difficult I think um you can
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always legislate you can always sort of
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try and put tighter rules into the
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system but eventually it comes down to
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basically the the philosophy of the
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promoter and this was a blatant fraud
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and it was clear that you know there was
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an intent to deceive and it was done
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over eight years very systematically
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very
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methodically so I I don't think there
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can be ultimate safeguards against this
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sort of thing ever happening again but I
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suppose there will be tighter
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regulations in future and certainly
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people will have to be a lot more
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Vigilant about these sort of things
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happening right now uh considering the
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fact that you have seen governance in in
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a lot of different uh companies uh were
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you surprised that the fraud went
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undetected for so long and and uh could
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there have been any red flags that
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people could have paid attention to to
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bring this to light sooner see in
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retrospect it's always very easy to say
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look surely somebody should have noticed
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this but it was a very very well thought
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out meticulously planned fraud uh the
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documents were forgeries most of the
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documents put before Auditors were
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forgeries uh one could say that look the
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Auditors are responsible for really
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checking on things and therefore the the
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one of the key um areas of blame lies
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there but then again you don't know
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exactly how how they were sort of lured
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into this feeling that everything was Hy
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Dori um it was a very difficult
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situation right the Indian government
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and and and the people on the board have
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received tremendous compliments for the
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way in which the whole Saum situation
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was handled uh and the way in which uh
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jobs were not lost uh clients were not
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driven away uh and and a new buyer was
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found uh what sort of lessons do you
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think can be learned from that in whole
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experience we sort of we we sort of
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structured our entire exercise into
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three buckets one was uh the customer
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which is very important because we had
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to make sure customers didn't walk away
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we had to look at the people because a
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lot of people were very anxious very
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uncertain about their Futures and of
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course the cash it was a very very IL
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liquid company in a pretty dire
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situation in terms of liquidity I think
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when we went in I wouldn't be surprised
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if they had just about 2 weeks weeks of
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cash left in the organization so getting
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some cash inflows into the company
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Emergency Loans was extremely
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important um I think one of the things
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which um we realized uh fairly early on
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was that we needed to work very fast
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because if this thing was allowed to
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fester and drag on for a longer period
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of time uh it could have been disastrous
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so it was a tough choice it was a choice
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which I mean some people said look are
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you guys going to to a fire sale we said
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no we're still going to make sure we get
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the best price for this this company but
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we had to move very very rapidly I'm
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sure there must have been a fair amount
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of
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demoralization uh among employees as
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well as a high degree of skepticism
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among customers how how did you address
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those issues well the people felt very
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let down a lot of them were completely
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sh shocked they didn't know how this
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sort of thing could have happened I mean
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people who are not anywhere near the top
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of the organization were completely sort
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of dismayed uh
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demoralized um they thought they' built
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a great company and they suddenly found
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everything Vanishing in front of their
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eyes um as far as customers were
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concerned we had two types of customers
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the guys who said look we will not deal
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with a a company which is indulged in
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something like this and they walked away
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within the first week and was a
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knee-jerk reaction we just couldn't do
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anything about those but those who
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hesitated a little those are the guys we
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started working on and saying look this
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is not all bad it's a great company
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they've done a phenomenal amount of work
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good work in uh on the software side and
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you know if you stick with them just
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just weather this little period and
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everything will be good again and uh a
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lot of them fortunately stayed back
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great well let's take a step backwards
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in your career uh uh when you you you
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were you know the at the head of two of
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the major companies in the Tata group uh
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uh in two the year 2000 uh you you took
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over at tat t uh and and of course the
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tle acquisition is is very well known
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could you help us understand a little
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bit of the Strategic thinking that went
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into your growth plans for the te T Tata
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te and how you went about uh planning
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that growth actually the the acquisition
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decision been made before I join t i was
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sort of my one of my first tasks when I
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went in was to try to integrate the two
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companies but the thinking was very
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clear and uh very sound
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uh tarti Was An Old World Plantation
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company uh of course it had powerful
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brands in the Indian Indian Indian
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environment but it was not known outside
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of the shores of India and the only way
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to really grow the business
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geographically across the world was to
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acquire a major te Tea Company and a
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major tea brand and uh that direction
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was a very clear Direction taken by my
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predecessors and I think it's a very
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good decision um it's really changed the
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the the the type of company T te was and
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um once we in what way because really at
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the end of the day uh tees can be
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sourced from wherever you want there's
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no sense Force feeding your own tees
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into
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Brands you want to really buy the best
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teas available at the best prices uh the
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Temptation is when you have your own
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production of tea you tend to use that
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in preference to the best te's available
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for the Blends you
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need um so one of the tasks I had to do
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was a difficult one really to sort of um
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get people to focus on the value of tees
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they were producing and not just the
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quantity and yields of tees the
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Temptation in a plantation is to say
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look I've produced X x% more than last
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year but if the quality isn't what they
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should have produced it's really
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worthless tea so I had to introduce a
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system of internal transfer pricing and
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every batch of tea produced was actually
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valued at the price it could get in an
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auction
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so so that's how we sort of changed the
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the value concept of plantations and
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then people began to realize that you
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know it wasn't just a question of the
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quantity produced but the quality
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produced so well you you very modestly
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said that uh that the decision of how
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the acquisition was made earlier and
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yours was the task of the integration
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very often that is the toughest part
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after an acquisition uh how how did you
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go about doing it and what were some of
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the lessons learned well i' had done
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about three or four before that so it's
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like this is this is probably my fourth
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one and I had to do two more I've done
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about six or seven now so um I sort of
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knew the the basic model but you know
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while there are certain commonalities in
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all Integrations there'll always be some
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new uh thoughts which which come out of
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an integration but could you is pretty
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well Tren right could you talk us
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through some of the basic models and
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what was unique in the T situation um
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well in in most integration models I
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think two or three things which I insist
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on is first of all what is your
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integration philosophy what do you want
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to go what are you going to do are you
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going to just put two companies together
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or you going to try and build a new
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company or you're going to try and
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choose the best of both when you make
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your choices between people and
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processes and systems um so we decided
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in this one and I'm comfortable with
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this philosophy I said we'll use best of
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both so irrespective
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of um who the people where they come
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from which company they come from where
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the processes are run best we said we'll
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choose the best of the lot and put
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together a new company and I think that
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worked very well um we also found really
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that um although people talk a lot about
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cultural problems uh it's not such a
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huge issue um I think the mistake people
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try to make is to change cultures you've
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got to understand cultures and respect
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them you don't necessarily have to
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change them as long as you understand
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how things are done in a particular
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culture and adjust your way to handling
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that cultural difference I think that's
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a far better approach than trying to say
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hey these guys are now we bought them
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they've got to do what we do there is a
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difference in culture and you've got to
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accept it so I think that's that's
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always another important learning I've
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had and at the end of the day I think um
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most Integrations fail because people
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don't manage the uncertainty which goes
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within integration uh you've got to
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really think about the people the
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uncertainty they're going through lay
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their fears uh if you put a little bit
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of caring and you know
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employee involvement into Integrations
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they work much better they just a couple
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of things it's very Sound Advice I would
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say U uh you went through as you said
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similar exercise with uh when you were
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at Tata chemicals the in the soda ash
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industry also uh Acquisitions there
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could you tell us about some of the
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unique challenges those posed for you
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well the first one was a British company
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brunon which was very similar to the tle
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culture so that really we could follow
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most of what was done in tley but we did
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it a lot faster we had a 100 day uh
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period for doing the the all the sort of
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all the what I would call the
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administrative stuff in Integrations was
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put out of the way in the first 100 days
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we also Drew up a new strategic plan for
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the group going forward and um this was
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a company which was owned earlier by
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private Equity so the moment they felt
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they were back in the fold of a chemical
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company they felt so much better you
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know chemical parent was what they were
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really looking out for and I think that
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we gave them that plus they found you
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know they'd been strapped for cash we
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had things like R&D we were doing work
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in Innovation new technologies
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nanochemistry you know the sort of stuff
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fascinated the people who who were
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working in bramon and they really sort
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of enjoyed coming into the fold of a
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large Chemical Company so that that in
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integration went really well and a few
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years later well 18 months later we
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bought General chemicals which a really
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big American company
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and um this again turned out to be a
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very simple integration because um I
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guess again cultural difference between
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the the British and the Americans when I
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said to them look we'll do a typical 100
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day 100 day process they said why 100
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days let's do it in 50 you know that
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sort of thing so you know all gangho and
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ready to go and much more sort of open
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to change than um the British culture
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was they expected jobs to be lost they
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expected people to be changed around the
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expected changes in hierarchies and
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responsibilities much more sort of ready
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to accept that so some valuable
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learnings in those two as well I mean
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one of the uh things that academic
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research shows is that a large number of
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mergers actually end up destroying
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shareholder value rather than building
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it uh what did you learn through your
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experience about how to prevent that
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happening I think you've got to really
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draw uh draw up an action plan for for
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how you're going to build value because
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at the end of the day that that's really
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the the meat of the matters in in the
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value you create out of integration
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unless you have a plan going forward
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what you're going to do and how you're
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going to build that value just doesn't
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make sense a lot of Integrations tend to
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focus their attention on cutting costs
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and thinking that you know just by
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synergizing and reducing numbers they
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can produce results but at the end of
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the day it's the revenue synergies and
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the the sort of expansions the growth
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the new product opportunities which come
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out of Integrations which are far more
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important so I I'd sort of focus on the
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value creation rather than just cutting
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cost right uh if if I could take you
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still one step f for uh further back in
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your career to the the almost three
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decades that you spent in the
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pharmaceutical uh business in India with
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Glo and Burrows welcome uh what were
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some of the challenges you faced uh as a
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multinational trying to operate in
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India's
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pharmaceutical uh industry especially at
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the time when regulation was pretty
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tough Glo was a very unique
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multinational and I used to always say
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when we were running that company that
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um it was a multinational with a brown
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face because uh we we really thought as
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Indians we were manned by Indians our MD
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was an Indian from uh I think um 1975 or
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76
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onwards um we didn't have an
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expert um CL had some very strong
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beliefs um and hats off to the chairman
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at the time so Paul jolomi who was a
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really sort of farsighted legendary
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strategist um so Paul said look for a
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country like India and he said this
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sometime in the ' 80s he says I don't
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expect a bottom line out of this country
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for the next 25 years and you won't find
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many chairman saying something like that
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but he said as long as you do well in
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your environment and you're respected
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company in the environment which you
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operate I'm I'm happy and that
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philosophy continued for many years
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thereafter um we did of course have a
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lot more profit pressure as as the years
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passed but you know that basic sort of
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approach that India is going to take
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time there's no great
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urgency uh Saul was Italian and he saw a
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lot of resemblance between Indians and
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Italians and whenever he came to India
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he loved India he used to munch chili
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Chile's where the dozens and uh he loved
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Indian food and he really sort of uh
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thought of us like you know almost the
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same way as he thought of Italian
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so it it gave him a different approach
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to India and different outlook for India
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but I think that that certainly changed
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the way the group treated India we sort
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of uh sold our medicines in India at
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astoundingly low prices completely
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different to other countries around the
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world and we had huge volumes um at at
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one stage we were producing something
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like 48% of the total units produced
00:16:05
within the group were sold in produced
00:16:07
and sold in India so it was that scale
00:16:09
of operation it was really big one of
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the biggest subsidiaries of the group
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and what's the situation today is it
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still uh the case that uh multinational
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pharmaceutical companies would expect
00:16:22
not to generate returns or are things
00:16:25
better now things have changed because
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of the patent laws once the new patent
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laws came in from 2000 onwards uh things
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have certainly changed the newer
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products are definitely sold at much
00:16:36
higher prices and things are changing on
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the profits front I think today Glo
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Smith Klein is far more profitable than
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Glo welcome was a few years ago where
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where would you say are the biggest
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opportunities for
00:16:48
international uh pharmaceutical
00:16:50
companies uh for example I've heard
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quite a bit about uh you know
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possibilities in the rural Market do you
00:16:57
see any prospects there or India will
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always be a very fast growing Market but
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uh relative to the Western world uh
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price levels will always be low so that
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this is something you'd have to accept
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even with a completely new molecule you
00:17:13
just cannot charge anywhere near what
00:17:14
you would charge in a in an overseas
00:17:17
market so pricing is always going to be
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a bit of a problem in India and there's
00:17:21
always Big Brother government sitting
00:17:22
over your head and watching and uh they
00:17:25
would intervene I think if if they found
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U you know the price are too high for
00:17:29
the Indian market or the Indian consumer
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uh they have retained sort of horrendous
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powers of compulsory Licensing in the
00:17:36
patent laws so you know they can invoke
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those Provisions if they have to and
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they do tend to encourage U you know um
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Indian manufacturers to come in whenever
00:17:46
they think that prices are too
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high now over the course of your career
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you've faced lots of different
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challenges uh which would you regard as
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your single greatest CH leadership ship
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Challenge and how did you overcome it
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and what did you learn from
00:18:03
it it's difficult to say which was the
00:18:05
greatest challenge but I think there was
00:18:07
a period of time when um I had to um
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learn to manage people when ex Services
00:18:16
I was a functional guy I was a finance
00:18:18
guy and I was suddenly put in charge of
00:18:19
marketing and had a team of 1400 reps to
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look after and these guys were getting
00:18:24
unionized and I think my biggest
00:18:26
challenge was to encourage them to move
00:18:28
move away from external unions and bring
00:18:30
them back into the internal fold and I
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still look on that as one of my greatest
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learning
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experiences how did you go about doing
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it I intuitively didn't sort of attack
00:18:39
the level of the rep I attacked the
00:18:41
level of the manager they reported to
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and I said if I change make changes
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there then I think I'll I'll succeed if
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I'd gone straight to the rep level i'
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have probably failed but I got a lot of
00:18:53
Champions on my side by going to the
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level of middle management convincing
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them that they had treat their reps
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differently and then worked on their
00:19:01
bosses to make sure they were treated
00:19:03
differently and then everything fell
00:19:04
into place but it took about 2 and a
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half years of hard
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work uh one final question one final
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question how do you define
00:19:14
success something that makes you
00:19:17
happy it's got to be something you feel
00:19:19
within you I don't think a pat on the
00:19:21
back of course helps but you know it's
00:19:23
got to be something you feel deep inside
00:19:25
that yes I have
00:19:26
succeeded okay excellent well thank you
00:19:29
very much for joining us today it's been
00:19:30
a pleasure chatting with you thanks
00:19:32
thank you very
00:19:46
much
