We will enter the equity market in two years, says MD of CavinKare

By: | Published: August 22, 2018 2:28 AM

The founder, chairman & managing director of CavinKare shares with Sushila Ravindranath how the privately-held Chennai-based company is considering new growth options, including focusing on international business and going public.

CavinKare, industryportrait: shyam kumar prasad

Chennai-based CavinKare is one of those first-generation success stories. CK Ranganathan, the founder, started a small partnership firm called Chik India in 1983—with an investment of Rs 15,000—to sell shampoos in sachets. His partners were his mother and grandmother. He had a single product, Chik shampoo. Today, the company has a product portfolio spread across five categories—personal care, professional care, dairy, food and snacks, and beverages. Ranganathan has done this single-handedly—he has ploughed his profits back into his business, which is privately-held.

CavinKare shampoos and personal care products have created a niche for themselves in spite of competition coming from multinational companies. His turnover was around Rs 1,650 crore for the year ending March 2018. CavinKare brands are hugely popular in south India.

Ranganathan has always cherished a dream of building pan-India leadership and of going global. I have wanted to ask him what are his next moves? Does he have a succession plan in place? Will CavinKare remain a family business? After much discussion, we decide to have lunch at the Southern Spice restaurant in Taj Coromandel, Chennai. He does not want to experiment with the newer restaurants that have come up recently.

We ask for neer, a delicious spiced buttermilk from the south Indian cuisine, and a platter of the restaurant’s famous starters—tiny banana dosas, okra and cashew nut fry, and kuzhi paniyaram.

Ranganathan tells me what he has been doing to take CavinKare forward. “We have been on a hiring binge. We want everybody to think and act like an entrepreneur. When I started, I had to do everything myself, including delivering sachets to retailers on a bicycle. I grew step by step, and professionalising was one of the steps. Now I am stepping back, giving a lot of freedom to the business heads. I am trying to create leaders,” he says.

“Our monthly review meetings are different from those of many others. We have 40-50 people attending these meetings. I include managers from tier-2, 3 and 4 towns, as I want them to learn. I want to demystify hierarchy and want all managers to be able to talk to the Board. A lot of youngsters who left for various reasons have come back to us, because (at other places) they don’t get the freedom they get here.”

We are ready to order lunch. Ranganathan knows exactly what he wants—he asks for a light meal of fish and meat with sannas (rice cake) with kori gassi (Mangalorean fish/chicken curry with idlies), Alleppey fish curry, idiyappam rice and roties. I settle for bisi bele huli anna (hot lentil rice dish in tamarind flavour) and fried potato curry.

“I have always invested in research and development even when we were a far smaller company,” Ranganathan says. “I attribute our success to strong R&D and an innovation mindset. As much as 45% of our products in the personal care space are uncontested. Take the examples of Meera hair-wash powder, Meera shampoo or the hair colour that can be washed in 10 minutes, or the shampoo hair colour. This positioning has given the company a competitive edge and has enabled us to price the products profitably. We spend 2.5% of our revenue (Rs 32 crore) on R&D.”

The CavinKare Research Centre is recognised by the Department of Scientific and Industrial Research (DSIR), government of India. It caters to businesses of personal care as well as food, snacks, beverages and dairy segments. It is a standalone, state-of-the-art facility spread over 39,000 sq-ft in a spacious campus in Chennai.

CavinKare’s international business is another area Ranganathan wants to focus on. The company operates through its subsidiaries—CavinKare Bangladesh Pvt Ltd in Bangladesh, and CavinKare Lanka Pvt Ltd in Sri Lanka. “The products are customised exclusively for both the countries. I need to really drive my international business.”

To do that and improve the parts of his business such as food and snacks, which are not growing as fast as he wants to, he needs to infuse more capital. “In the past, we didn’t make sufficient investments in these areas.” In 2013, ChrysCapital put in Rs 250 crore in the company, and in 2017 CavinKare bought back its stake from them. “They more than doubled their investment when they exited. Our private equity investors did add value to the company, and their representatives remain on our Board.”

He adds, “We can’t stifle growth. I have always put my money back into my business, and have never taken anything out of it. It’s time to consider other options. Going public appears to be the long-term solution. I am seriously considering it. We will possibly enter the equity market two years down the line.”

Ranganathan knows what he wants. He likes the tender coconut payasam served by the Southern Spice, and that is what he orders. After dithering a bit, I decide to have Kumbakonam degree coffee ice cream, instead of hot coffee.

Although Ranganathan is nowhere near fading into the sunset, he has already started his succession planning. He has a son and two daughters. “I could have made them come here and work for me. But I felt they have to learn to run a business first. I made the offer that I will give them each Rs 10 lakh to start a small business. I will guide them, if they want me to. The one who does really well will be my successor.”

Talking about them, he says, “My eldest daughter started a play school, which did very well, and is running my schools in Cuddalore successfully. She is now setting up a kulfi venture and wants to build a chain. My son has started a bakery, took bank loans, and now has 50 outlets. He is dreaming big, working on expanding to 250 outlets. My youngest daughter has started a sweet shop, and her siblings are helping her. Food retail is a good place to learn from, and provides you great opportunities—you learn to aggregate, restart and consolidate.”

As we leave, he tells me that the country and the state are in a state of transition. “Contrary to popular perception, responsiveness is far higher in the state now. There is a lot more transparency at the Centre. Some things continue to remain opaque. I want the changes to continue and the government to become a role-model.”

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