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Rider of the storm

Ram fell back on his tried and tested survival strategy — born out of 40 years of business leadership — when the first waves of the recession, “a once-in-a-lifetime phenomenon”, according to him, hit India shores in early 2008, reports Sumant Banerji.

delhi Updated: Aug 24, 2009 22:43 IST
Sumant Banerji

Ram fell back on his tried and tested survival strategy — born out of 40 years of business leadership — when the first waves of the recession, “a once-in-a-lifetime phenomenon”, according to him, hit India shores in early 2008.

He kept his audience — his customers and employees — calm and his Rs 2,000-crore SRF Limited on an even keel. And the patriarch rode out the storm, with only a few scratches.


Recollecting the phenomenon, Bharat Ram, 68, says: “There were some early signs of an impending slowdown in the middle of last year but by November things had become really bad.”

The company has four broad vertical businesses — technical textiles (nylon tyre cord), engineering plastics, chemicals (refrigerants) and packaging films. And not all of them were overtly troubled by the recession.

But SRF’s nylon tyre-cord business, which accounts for around 60 per cent of its turnover, was badly hit, as the automobile sector was one of the first industries to be mauled.

Nylon tyre-cord is an essential raw material for automobile tyres, and SRF is a major supplier to tyre manufacturers like JK Tyres, MRF, Goodyear and CEAT.

He says: “It wasn’t that the production of our customers was down very much, but everybody was correcting inventories (slowing down production to avoid a pile-up of stocks).”

SRF, too, cut production. By November, it was operating only a fourth of its plants. But this did not hit the company’s financial performance. In fact, selling products already in its inventory enabled it to temper the impact of high raw material costs.

Net profits for the October-December 2008 quarter rose 9 per cent to Rs 38 crore from Rs 34 crore in the previous corresponding quarter. Sales, too, went up 1.7 per cent to Rs 419 crore.

But despite operating at only 25 per cent capacity, SRF and Bharat Ram did not retrench any workers. It also used the period to upgrade its equipment.

“We were confident very early on that the depression would only be a medium-term phenomenon. So, we were determined not to go in for any lay-offs. We kept our employees informed about the company’s position and ensured there was no panic,” Bharat Ram says.

SRF also re-aligned some of its businesses. For instance, it found that packaging films had greater demand inside the country than outside. So, it shifted focus to the domestic market, where there was still demand for its products.

“Nobody could have predicted the extent of the economic meltdown, so the strategy to be export-oriented was not incorrect,” he says. “However, there will continue to be opportunities in export and we should not move our thinking away from it.”

Says the head of a rival business group, who’s also a big admirer: “Bharat Ram has seen and been through four decades of corporate life. He can smell a storm when it brews.”

Bharat Ram himself is more modest. “A thorough training in Indian classical music (he is a disciple of Pandit Ravi Shankar) has taught me to think critically, dress with a simple elegance and act judiciously,” he says.

But SRF was probably better equipped than others to ride out the slowdown because of its multi-faceted operations. Its refrigerants, industrial plastics and packaging films divisions, which account for 40 per cent of its turnover, weren’t too badly hit.

And now that the economy is rebounding, it is already riding the incipient return to good times.

For the January-March 2009 quarter, it earned a profit of Rs 21 crore compared to a loss of Rs 1 crore in the previous corresponding quarter (this loss was on account of Rs 21 crore foreign exchange losses and were not related to the slowdown).

Says Bharat Ram: “From January onwards, we witnessed a slight

revival in demand. And by this financial year, we were back in a robust growth phase.”

And robust it is. Its net profit for the April-June, 2009 quarter jumped two-folds to Rs 93 crore compared to Rs 46 crore in the previous corresponding quarter, even as its revenues went up merely 5 per cent to Rs 498 crore.

This indicates a massive improvement in its operating margins.

As the saying goes, all’s well that ends well.