Restructure or Perish – Gautam Thapar

Turnaround strategies of companies require hard and ruthless decisions, particularly so in family owned companies, where consensus for restructuring is often difficult and time consuming, according to Mr. Gautam Thapar, Chirman & CEO, Thapar Group.

While addressing the members of PHD Chamber at the CEO Lecture Series yesterday in the evening in Delhi, Mr. Thapar narrated the difficult and harrowing experience of turning around Thapar Group of companies, which fell into a very bad patch of time and survival was extremely difficult. “Poor leadership, lack of focus and resistance to change, which are recipe for corporate disasters were convoluting even the flagship company of the Group-Ballarpur Industries. Management change was the only way to re-orienting the company and that had to be done without looking at the faces or responding to emotional chords,” he said.

Mr Thapar said that even while going through such difficult phase, the Group embarked on three management principles-transparency, openness and a determination that the Group companies should not default to the financial institutions. “Group had to shelve a few expansion plans, particularly one plan for Rs.500 crore for Ballarpur industries-since the operating side and profit margins were under strain. Such financial commitments would have created strains on the financial flow of the company and repayment,” he said, adding that such decisions were received with stiff resistance.

Underscoring the need for seeking the support of stakeholders in the restructuring process, Mr. Thapar said that he had several rounds of discussions with the banks and financial institutions to apprise them about the restructuring plans. Initial lukewarm approach to such proposals gave way to their tacit support and a healthy relationship. That had helped the Group to go for global acquisitions, including a leveraged buy-out way back in 1998. Acquisition of the paper company in Malaysia helped the paper division not only to enhance its consolidation process but also have access to over 300,000 hectares of forest land for its raw material sourcing.

Terming paper industry-product of its flagship company- as non-sexy and capital intensive industry, Mr. Thapar said that constant monitoring and management changes are required to stay ahead and compete. He expressed the confidence that the paper division would achieve one billion ton production by 2009, though it is targeted to achieve that mark by 2010. The other divisions, such as power, telecom etc have changed the management styles and are focusing on next generation technology, which would enhance their profitability and contribution to the Group turnover.

Mr. Thapar observed that a businessman should clearly define the relationship with business and should only think of what he can contribute to business and if he does business to support his extravagant life styles, sooner or later such ventures would collapse, whatever may be the strength of its foundation and market positioning. If anyone thinks on that line, it is better for him to sell the business and vacate the field since business is always dynamic.