?We have a great appetite for acquisitions?
Vivek C. Burman has been chairman of homespun, homegrown FMCG major Dabur since 1998. Dabur follows a unique management model where the promoter-owners don't manage the business on a day-to-day business, letting professionals do the job.business Updated: Sep 21, 2005 15:07 IST
Vivek C. Burman has been chairman of homespun, homegrown FMCG major Dabur since 1998. Dabur follows a unique management model where the promoter-owners don't manage the business on a day-to-day business, letting professionals do the job. Yet they operate through a family council which takes all critical strategic decisions. Burman, who is extremely active socially, says this arrangement works like a charm and also keeps the peace in the family. In a rare conversation with Sandeep Bamzai, he provides insights into this management model and details how the family is now functioning as a venture capitalist. Excerpts:
Dabur has a unique model, how does it work in this competitive environment?
The model chosen is after learnings from the world over. Some years ago, we brought in Accenture and between us we came to this conclusion that this was the best way to operate. The family owns close to 80 per cent of Dabur and it continues to provide vision and line of sight for the company while the professionals look at the nitty-gritty. Our job is to evaluate the long term strategy and goals.
Is that all the 80% shareholding does?
Earlier we roped in McKinsey and their ideas were distilled by Accenture. Till then five or six family members were running the company actively; in fact, G.C. Burman would regularly visit the plants. Production, finance, sales and marketing were being managed by family members. We found that after three generations, conflicts and fissures emerge between family members, so the best thing was to professionalise the company.
This is when we formed the family council and other than adopting a more active social role, we decided the council would take a view on new related and unrelated ventures, discuss capital requirements, among other things. It has worked well both in terms of corporate governance standards and best practices.
Explain how the divorce from day-to-day management actually works and doesn't this upset the younger family members?
There are 10 directors on the board — four at all times should be Burmans, four independent and two executive directors who are the voice of the council in many ways. There has been no deviation from the principles laid down three years ago when the system was institutionalised. The younger family members have fertile minds. The give their inputs all the time, but these are strategic rather than operational. These inputs are entrepreneurial driven. Make no mistake, they communicate their viewpoint strongly and sometimes these are divergent. All of them are educated and as such they make valid suggestions. If, for instance, there is an acquisition target, then it is thoroughly and constructively discussed.
Which brings me to the successful acquisition of Balsara...
We had been eyeing Balsara for quite sometime. We would send them feelers through investment bankers. Ultimately my son Mohit knew an investment banker who triggered it. This is where the family's risk taking ability comes into play. It has added 20% to our topline.
How has the Balsara acquisition worked out?
We engaged Accenture again, formed a team to integrate various functions for greater synergies — sales, distribution and corporate —so that we can consolidate and cut costs. Now the process is complete. Balsara Hygiene, Balsara Home and Bestacosmetics will all come together. Legally we are trying to clean up everything — property issues, leasehold rights, etc, are to be merged, so that there is no objection in the HC.
Where does Dabur go from here?
We operate on a four-year long term business plan and this gets over in 2007 when we have targeted a turnover of Rs 2,000 crore. We have a great appetite for acquisitions because we generate a lot of cash, are virtually debt-free and have good ROCE ratios. The structure can absorb another Rs 2,000 crore turnover where we can spread our overheads on a larger business.
Another related acquisition could be on the cards, this could be regional with the potential of becoming national. The size has to be material enough and should give us a beachhead — herbal/natural in the FMCG space. On our wishlist there are lots of companies — Paras has been there for sometime and there are others. We are pursuing them and hope they will oblige us. We are also looking at haircare, skincare, medicated soaps and balms.
What does the family do with all the time at its disposal?
Since we are relatively free, we meet bankers, investment bankers, consultants and watch trends. Yesterday, Accenture came and we discussed some new ventures. This is how we set up Aviva. In many ways we have become passive financial investors in a host of verticals. For instance, we own 5% in ABN Amro Securities, 6% to 7% in Lord Krishna Bank and 25% in Fidelity AMC.