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‘Catch’-ing the right solutions

The DS Group put its expansion plans on hold, but did not fire staff, as it clawed its way out of the downturn, reports Sidhartha Roy.

delhi Updated: Aug 30, 2009 22:22 IST
Sidhartha Roy

A sweet, rich aroma gently embraces you as you enter the headquarters of the Dharampal Satyapal Group at Noida’s Sector 2 — a setting apt, perhaps, for the Rs. 1,400-crore group that had its beginnings in a shop selling perfumes in Delhi’s Chandni Chowk in 1929.

Over the last eight decades, the group has diversified into tobacco, fast moving consumer goods (FMCG), packaging, infrastructure, hospitality, cement and rubber, “but it is our connection with our roots that has helped the group beat the downturn and remain profitable,” says 46-year-old managing director Rajiv Kumar.

“It is the difference between naya paisa (new money) and purana paisa (old money). We are not into quick money and have seen our businesses grow slowly,” Kumar says.

The group’s flagship products are tobacco based with popular brands like BABA and Tulsi. It also makes Rajnigandha — a non-tobacco paan masala and mouth fresheners Paas Paas and Meetha Mazaa. It sells table salt, beverages, spices and ready-to-
eat snacks under the brand Catch, a household name.

The downturn didn’t affect the FMCG industry as much as some other sectors, Kumar says. But there were problems.

“We produce premium products and didn’t see any slowdown in demand but there were other issues. There was a huge credit crunch in the market as everyone wanted to maintain liquidity,” he says. Stock holding with distributors went down as no one was willing to sit on stocks and preferred to have more cash in hand.

“Prices of raw materials shot up suddenly and because we always use high quality material,” he says.

The company felt the pinch of downturn in the first quarter of 2009 but as it is privately held, he declines to divulge any financial details.

To counter the effects of the downturn, the group decided to consolidate its core business of tobacco-related products, mouth fresheners and food and beverages. He put DS Group’s ambitious expansion plans in other sectors on hold, but Kumar says he will “soon make an announcement in this regard”.

The DS Group ventured into the hospitality sector by opening Hotel Manu Maharani in Nainital in 2000. It has acquired the Airport Hotel in Kolkata and has plans of launching its first five-star hotel in the Northeast, in Guwahati.

The group has already acquired land in many other parts of country and is planning to tie up with international hotel chains for this.

The projects are highly capital intensive and the breakeven will take some time but Kumar is hopeful of things improving “very soon”.

“We believe that by the time these hotels come up, things will be back to normal,” says Ritesh Kumar, 28, son of Rajiv’s elder brother Ravinder Kumar, the group chairman. Ritesh is looking after the group’s hospitality projects.

“I have seen other people announce 10 new projects in one breath and gain publicity. For us, the number of projects doesn’t
matter but their standards should be high,” Rajiv says.

To counter the effects of the downturn, the group had to review its expansion plans, Kumar says.

The group also consolidated its core businesses and ensured that it retains customer loyalty. “Our spices business took 10 years to break even but we always insisted on selling pure spice.”

Despite the pressures, the DS Group, while focusing on cutting costs, did not retrench any worker.

“I have been working for DS Group for 30 years and even after I retired in 2005, I was asked to continue,” says B.S. Negi (62), who works as a product head.

The group employs over 4,000 people, many of whom have grown with the company.

“When I joined in 1979, we were selling chewing tobacco worth Rs 1 crore; that figure was Rs 90 crore last year,” says Negi. “The company has a human touch and I have not felt any pinch due to the downturn.”

The company has also come a long way from the days when its founder Dharampal moved from Karnal in Haryana and set up a perfume shop in Delhi’s Chandni Chowk in 1929.

The shop dealt in ittars, for which he bought raw material from different parts of the country. He later started manufacturing more value added products like scented tobacco. That shop is still owned and run by the family.

There is also a story behind the group’s popular tobacco brand BABA, the first branded tobacco in the country, which was launched in 1964.

Dharampal’s son Satyapal was strolling down a street in Kolkata when he saw a statue of a laughing Buddha. He decided right there that the scented tobacco that they were manufacturing would be named Buddha.

Back in Delhi, he decided against his choice, keeping religious sentiments in mind. The image of a laughing Buddha was replaced by that of rotund babaji wearing a genial smile and a Kashmiri shawl with a tika adorning his forehead. The brand was named BABA.

It was Satyapal who expanded the business nationwide.

“He was very innovative and had a keen interest in designing and packaging. It was his idea to sell branded tobacco in metal boxes,” says Kumar about his father.

As the business expanded, the factories moved out of the congested walled city of Old Delhi to the Wazirpur industrial area in northwest Delhi. The family, too, moved out of its Ballimaran home to a new residence in Civil Lines.

In 1983, the DS Group launched the non-tobacco pan masala Rajnigandha, its flagship product. In 1987, it started selling Catch salt, the country’s first table salt dispenser. “Before Catch was launched, no one bought branded salt,” Kumar says.

“The West was going through the Great Depression when our first shop was set up in 1929. Now with, the world more connected. The downturn in the US has definitely impacted us,” he says. “But the worst is over."