Our retail partner could be Tesco or Wal-Mart. We are building our own model in discussions with world majors

Updated: Oct 30 2006, 05:30am hrs
From telecom, then to farming and now retail, he remains an entrepreneur on the move, ever willing to take the risk in times of change. Sunil Bharti Mittal, founder, chairman and managing director of the Bharti Group, meets the Editor-in-Chief of The Indian Express, Shekhar Gupta, on NDTV 24x7s Walk the Talk programme in the precincts of Ludhianas Arya College, his alma mater. He speaks about reading the technology and policy shifts right in a fast-changing India, about the pains and pangs of being on the cutting edge of business, and about being a small town boy with large ambitions. Excerpts:

Hello and welcome to Walk The Talk. I am Shekhar Gupta and what am I doing in a college called Arya College, Ludhiana It is no IIT, IIM or St Stephens, Xaviers, Elphinstone or Loyola, but a small, modest college in smalltown Punjab in Ludhiana. And I am here because it is small institutions like these that are now powering middle India into whats becoming the toast of the world. And my guest today, perhaps the proudest alumnus of this institution, Sunil Bharti Mittal. Sunil, I bet when you walk around the social circuit in Delhi, snooty as it is, you have often been asked in which year did you pass out of St Stephens.

(Laughs) I do get asked which university or institute I passed out from in the US or UK and then I tell them about my college and about my small town which is producing, to my mind, equally good students and brains. Yes, and you are never defensive about that.

No.

Nor am I. I think its a badge of pride.

Indeed, I always say education is one of the many ways of acquiring knowledge. A very good standard and accepted one, but there are many other ways. I learnt most of my stuff on the street, but I have very fond memories of the time spent here in this college.

This is your faculty, the commerce faculty. This is where you attended classes, if you attended classes.

(Laughs) I was not a great student, Shekhar. For me the biggest time of difficulty was passing out of college. And the principal here was my fathers professor and he told him, send him to me and I will ensure that he is at least a graduate, which I did become in 1976.

I believe you wrote the best guess papers for exams.

There was one exam a year in those days and you had to get five questions right out of the 10 or 12 that were given, and my job for the whole tribe which would depend on me was to find those magical five questions. I never failed them. I always got three right. On most occasions there were four, and sometimes I hit the jackpot of five.

So you were as good at guessing questions in an exam as you were at guessing policy changes in telecom

(Laughs) No, I wont claim that I was always perfect, but I must say that technology shifts and policy shifts were seen by our company ahead of time. We could prepare ourselves.

You know the reason we have brought you here It has taken us a year and a half of planning for you to find time to come to Ludhiana, because it is out of the line of business, but it is because I have this view that India is being powered by people whom I describe as HMTs, people like us the Hindi medium types. And I thought that since everybody presumes that India is being driven ahead by IITs, IIMs, Indias elites, maybe it is time to challenge that notion a little bit and to show our audience some live examples of the opposite.

Absolutely. While I would say Indias temples of higher learning like the IITs, IIMs are crucial, they are catering to such a small, limited number of students and the rest of India really needs to get in the second, third tier colleges like this one. And I can tell you, these colleges are producing world-class citizens and world-class professors, doctors. Most of India is powered by these colleges.

Absolutely, and this reflects in most of Indias ruling elites now. Take us back to your time here. How did those times prepare you for what you faced subsequently in life

Well, I think they gave me resilience. Coming from a middle-class background in a very surcharged atmosphere Ludhiana is a city where almost everybody works for themselveswe were surrounded by businessmen, business families and they looked much bigger. Thats a very Punjabi thing but the inspiration was great. There were hosiery exports to the Soviet Union. Bicycle parts.. Hero Cycles, Avon Cycles were producing a lot of cycles. Sitting here in these rooms, one really wanted to do something exceptional.

You started out manufacturing bicycle parts

Yeah, in Ludhiana, you either made bicycles or bicycle parts. So, I chose the bicycles parts and I was supplying to Hero or Avon cycles. It was my first project out of college in 1976.

Which particular part were you manufacturing

Crankshaft.

And then on to importing gensets, tiny gensets.

I was very clear that this is not going to take me to a grand position, even at the state level, forget the national level. Something had to be done which was different. So I decided to look at new things in the business arena and I struck upon, by chance, a portable generator. That gave me my first seed capital, and my first taste of success at a very young age. You must remember, in 1979, I was all of 20-21 and I was getting into Hamamatsu, Suzuki factories. I became the largest importer of generators in the world for a period of time.

People who knew you in those days say that you were extremely audacious. You never bothered about the size of your company when you went out to make a deal. And people often got the impression that you were much bigger than you actually were.

I think that again is a Punjabi trait, that you could project your image or size to be bigger than what you actually were. If you recall, in 1992, when we bid for the mobile licenses, our company was Rs 25 crore in sales, not profit. It was really a tiny company. But the image of the company was more like a Rs 100 crore company. So, yes, we came in with strong conviction and that gave us the necessary credibility in the market.

You have any instances of how this worked this image of being much bigger than you were

I can give you one very good instance. In 1992, when I was bidding for the mobile licenses, we were Rs 25 crore in sales and people told us, this business is meant for big business houses with deep pockets. I was in France in discussion with a company which was the third or fourth largest. I could charm the vice-chairman of the group through a two-hour conversation, finishing with an MoU and then I came back home. Two days later, he realised the size when some other business house went there and he sent a team to check on us.

Was it a rival business house

It wasnt a rival, but it was a large business house.

And showed them pictures of the college you came from

(Laughs) Possibly. Of course, the company was shocked and regretted their decision but, thankfully, stayed on course. And that, I would say, changed the course of my life. We won the cellular licence and today I must say, Airtel must recognise this very important milestone of charming a person in those two hours.

But then, the big bad world of Delhi. You had a headstart of sorts because you had political weight behind you, at least in others perceptions, in the Congress days.

My father was a staunch Congressman. He was a student union leader in this college and started his life right here. But other than getting a ticket on Indian Airlines out of turn or getting a phone connection, which was a big deal in those days, we kept those things very separate.

Tell me a little bit about how you saw the government mindset change. Take me back to 1991.

Lets go slightly before that. If you go to Mrs Gandhis time, generally you were given licences with a cap on what you could do. I got my first licence for cordless phones, which said you can produce Rs 2 crore worth of cordless phones. Today it may sound bizarre. That mindset changed much later. I would say Rajiv Gandhi was the first person to fire the imagination of our younger lot of entrepreneurs. Thats the time push-button telephones in Siemens came and a lot of new technologies, IT, computers, came through. That was the first time that you reined in some of these socialist mindsets. Of course, then Narasimha Rao and Dr Manmohan Singh opened up in a dramatic manner.

And then you got into a little bit of trouble with Narasimha Raos politics, or with politics in Narasimha Raos days the whole Fairgrowth, suitcase phase.

Not really, I think that I was a sideshow, there were much bigger things cooking there. But eventually, as the whole process went through, our stock came down. It was a difficult nine or 10 months a time of great learning for me.

Did you know Harshad Mehta

Of course, I knew him.

What was he like

I think he had plans grander than reality. He was always wanting to do big things. He spoke of a modern India being built on the basis of new reforms. What he said came true 10 years later. But I think the routes that he used, and the shortcuts, led to his downfall.

Also, at that point, our capital markets were not so well-regulated.

True, there were so many people. Shares were in physical form, securities were in physical form, IT was not in full flare at that time and people manipulated the system.

Sunil, youve been in cutting edge industries which depended on government changing. You have taken a new risk now, agriculture. What takes you there Are you confident that policy change will follow sufficiently rapidly

For me, the vision has to start from a very grand scalable business. I could clearly see that telecom would scale up. I think agriculture can scale up. You could be very big worldwide, not only in India. Can you do it, thats the big question. There are big issues around growing. The process of growing the cold chain, the freight forwarding, the logistics to take it to Europe. Those things have to be tested.

But the initial experience has been tough

Very tough, tougher than what I thought. India doesnt know agriculture exports. We waste 27-30% of our produce. There are no chains which sell vegetables in an organised form on the retail side. But I love being a pioneer, Shekhar. For me, telecom has always been a journey, not a destination. I have enjoyed it. We have come to a point (where) telecom is going on autopilot. I need one big wave.

And thats farming

Thats farming.

Tell me about the tough discoveries you have made in the first year.

We chose Punjab because of its fertile land and hardworking labour. Farmers are very forward-looking, they are accepting new practices. But when you are preparing land for horticulture, you are doing alternate cropping. You are shifting the cropping pattern rice and paddyto vegetables. That transition is tough. The land is not fully prepared. You are into contract farming. So you cannot deploy capital-intensive infrastructure because if the lease finishes after two years, you have to move everything. Thats one part. The other is the weather. We did not realise that you have to move your crops round the year. And that forces you to change your crop every season. Third is that there are no good exit points out of Punjab.

I think the cold chain really doesnt work. How much of the produce did you lose last year because there was no adequate cold chain or storage

Almost all of it. It was fed into the domestic market, very little got exported.

How many tonnes of bhindi, okra, did you lose

We are talking tens of thousands. If you have bought cheaper bhindi last year, you can thank us.

Because you basically had to dump it in the market. How come you didnt anticipate that

This is hit and trial. We felt we could export it but when the first lots went out, the problem started. There was blackening on the edges of the okra. The problem in the export of vegetables is that you cannot afford to export freight and lose it. Out of every 1 of vegetables, nearly 90 pence is in freight and handling. So you would rather kill the vegetable here than lose another 90 pence. Once we realised this is not making sense on the other side in the UK and Europe, we started terminating it here itself.

But you are persisting with it You are not giving up

No, no, we are persisting. My belief is that we are the pioneers, so we have to suffer the pangs or pains of being the pioneer. We will get it right. I mean, we will have to give it another two years. We are tenacious. We are going to carry on with what we are doing. I believe that in a years time things will get better, because of two reasons. One, well get the chain right, or at least near- right. Second, domestic retail is going to get much better organised.

I believe you are looking for a partner. Who is it going to be, Tesco or Wal-Mart or...

It could well be Tesco or Wal-Mart. We have been building our own model in discussions with all the world majors.

But Sunil, is there a real story to it or is it herd mentality Every corporate is going into retailing.

Its gold rush at the moment. There is not a single business house, worth their salt or without their salt, that does not want to come into retail. Everyday, you hear a new announcement and I can predict, there will be explosions in the next 12-24 months. There will be some companies which will go belly-up. Thats why we are taking so much time to design the format right and have the right partner, because a lot of failures in retail are inevitable.

Everybody wants to build an SEZ, everybody wants to get into retailing, and all those who are left want to start an airline.

(Laughs) I think the airline story is getting over. There are many players in the airline industry, just like telecom has many players but retail, everybody is waking up and saying Oh, my God, if I dont do this, Ill miss this gold rush. I think there are going to be a lot of sad stories.

But you got the headstart on that

No, but I would say we will be one of the leading ones.

But today, you are on your own. Congress is back in power but times have changed. Politics can do only that much for you. Second, you are no longer seen as a Congressperson, In fact you are seen to be very close to the powers-that-be in the BJP. You have walked this tightrope very carefully.

I think we aligned with the governments policies. Sometimes, they dealt a poor hand to us. We played with that poor hand that was dealt to us. That my father was a very active Congressman is a fact of life. But for me, our growth during the five-year term of the BJP has been phenomenal. Atalji, Advaniji have personally liked the Bharti story, applauded our success.

And you have always had direct access to them

I have been very close. I have been fortunate.

So you have never found it held against you that you came from a Congress pedigree

I would say, never. I think we built a company which was very professional. Our company is not built on licence quota raj. We have never had any government largesse. In fact, most of the time I was suffering because of the onslaught of the other big boys. And therefore, we had the media support and the government support.

Other big boys Give me examples.

If you look at our telecom story, in the first flush when we came in, there were all the big power houses. Reliance was not there in the first round but there were the Tatas, the Birlas. Everybody was there in the first round. Here was a young company coming from nowhere, that won a licence after three years of struggling in Delhi. People said this is a deep pockets business. This company will go belly-up.

And the suitcase business came around that time.

That came before the licence was awarded but yes, that was the 1991-92 time. So, we had to work doubly hard to prove that ours is a very different company. My innate need to demonstrate that were different also stems from the fact that we came from a political family. No political family has ever produced a business house of this magnitude. My father used to say, Ill be really proud if you can be a corporation, if you can be a business house. That was the foundation. Thereafter, whether it was the Congress government, the BJP government or VP Singh or Chandra Shekhar, we were absolutely away from politics.

So you had to fight that upstart image

I would say, in all fairness, government has given us due credit where we deserved it. Look at the competition. When the telecom competition came through, more licences were granted. BSNL came with the first shock in October, when they said incoming calls are free, the Prime Minister inaugurated it. We pleaded that you cannot use the might of the state to kill us. They went ahead. Then came Reliance, the biggest of all the juggernauts which came in telecom. My share dropped from Rs 45 to Rs 20. The question was not if, it was when will we close now. I would say we are battle hardened.

But does it help that you came from a background like this small town, small college. You had to fight, struggle, innovate

I think its the mixture, Shekhar. I wont say the entire credit goes to us. But I picked up some early fine grains of this business. This business was not about powercapital power or political power. This business was about people and customers. And once we realised that, we said, doesnt matter, we will get it right.

You said you are the first political family to produce a successful businessman. The reverse is happening now, many successful businessmen are becoming politicians. How do you look at that phenomenon

Politics runs in my blood. I was born in a political family. I had been watching elections very closely. I still pick up business pages and political pages with equal interest. But will I cross the line and go into politics I think four-five years back, that was a feeling, an ambition, in my mind. It doesnt hold true now. I dont think I will cross that line.

Never

No, you can never say never. But it doesnt appear to be on the horizon, because I do not believe that I would be able to make a significant difference.

We have both kinds of examples. Some businessmen are enjoying being in politics. And some gave up, like Anil Ambani. He is very young and very energetic at an interesting point of time and has friends in politics. He came in and went back, a bit like his friend Amitabh Bachchan. So what do you learn from these experiences

My belief is that both of them never went into politics, they came into Parliament. Theres a difference between coming into Parliament and politics. And when we are talking about crossing the line, that is about politics. Then you are rolling up your sleeves and doing it as your fulltime pursuit. I think, coming from a business background, having built a corporation, I think its best to stay here, make a difference to horticulture, to transformational projects in the rural hinterland, do things that can still excite you. We will build a very good foundation which will give me the necessary canvas to do things beyond business.

And politics can at some point be a logical next step to that.

I would say, in my mind today, no. Well fall short of it. In that process, well be meeting with the elected representatives on villages issues, panchayat issues, but you dont necessarily need to go across the line.

Well exchange notes on that in five to 10 years from now. I think I have a better sense where you will end up. Just keep your head on your shoulders and your sleeves rolled up and youll keep on doing better and better.

Thank you, Shekhar, it was a pleasure.