The Wrapper Tycoon
At India Foils though, things were not going right. Debt stood at over Rs. 200 crore and the company refused to get back to profitability. A few of its executives left and joined Ess Dee. They fed him with
the details.
Vedanta changed the profile of India Foils from being a maker of specialised foils to a feeder unit for BALCO, a Vedanta group company. A caster unit in Hoera, near Kolkata, which converts aluminium ingots into foils, was closed down and foils were instead sourced from BALCO, which also made the same product. One of India Foils’ most profitable market was the neighbouring Bangladesh, but the company left the country.
It also missed market opportunities. Prasenjit Datta, an India Foils veteran and now a director at Ess Dee, says that it failed to move in line with the change in the domestic pharma industry, which was going through regional diversification. But India Foils remained a player limited to the market in east India. Adds Ess Dee’s chief financial officer Rajaram Shanbhag: “The essence in packaging industry is how close you can be to your clients. Pharma industry is very competitive and sometimes we are given just a few hours notice to supply material for a new product launched by them. Moreover, transportation costs can be high if your unit is far off.” In short, India Foils completely moved out of the industry radar.
With more than 20 other former India Foils senior managers with him, Dutta exactly knew the problems. And he had also found the solution by the time India Foils came under the BIFR (Board for Industrial and Financial Reconstruction) fold in 2005. To make things easier, Dutta made sure that Ess Dee didn’t get the burden of the Rs. 230 crore debt that was on India Foils’ books. Instead, Vedanta Resources agreed to “assume” the debt. “On hindsight, the asking price of Rs. 130 crore came cheap for Ess Dee Aluminium,” says Vijay Dave, analyst at Mumbai-based Sunidi Securities & Finance. Not only that, Ess Dee’s integrated business model suited India Foils, he adds.
Ess Dee Aluminium works on a hub and spoke model, which helps it to cater to most of its clients with a delivery time of six hours. Its unit in Daman and India Foils’ unit Kolkata now serves as the two hubs with rolling mills and caster. These two cater to the printing, coating and laminating units, or spokes, in Vasai, Goa, Baddi and Sikkim. “There are thousands of converters in India, who do the basic printing and coating work. But Dutta had the foresight to integrate his operations and that is helping him now,”
says Bhattacharya.
And while reopening the first of the three units of India Foils in Kolkata, which added 6,000 tonnes to the capacity, Dutta also proved his soft skills by coaxing almost 200 workers to come back to the factory. He is quick to admit, “Being a Bengali has helped.”
At the same time he adds, “I go there and work with them on the shop floor. They know my story, where I come from and how I have grown. I am one of them and they call me dada (elder brother).”
It helps that Dutta has an “elephantine memory,” and remembers many of his workers by name. He has also elicited support from political groups in the area and also from the state administration.
Now armed with India Foils, Dutta is hoping to break into the FMCG, or fast moving consumer goods, packaging sector. Despite bagging its first order from Cadburys and Wrigley’s last year, Ess Dee is yet to completely break into the lucrative sector. It might be able to do so now with India Foils, which used to supply foils to cigarette and contraceptive-making companies.
Another leg-up from India Foils will be the new markets for Ess Dee. “Bangladesh is just a few hours away from Kolkata and with Haldia port nearby, we also plan to enter the South East Asian markets,” says Dutta. He now wants to open the Hoera unit of India Foils which will further integrate his operations and meet about 10 percent of the in-house foil requirement. “This will be a major push for us and will show in our balance sheets in the next financial year,” says Shanbhag.
Though Ess Dee officials assert India Foils will come out of the BIFR fold by next year, industry analysts think Dutta might need a year more to do that. “Ess Dee has met the targets for India Foils that it had spelt out in the beginning of this year. At the same time, the Kolkata unit needs more investment to open the Hoera plant and much more to open the third unit,” says the executive from the financial institution who was quoted earlier. Dutta had earlier announced investments of up to Rs. 200 crore to revive India Foils and this could add burden on the already Rs. 120 crore debt that the company has piled up, quite significant for a Rs. 500-crore company. Almost half of this debt is working capital loan, reflecting the long payment cycle — almost 150 days — that Ess Dee has to deal with.
Dutta also has international plans. A recent announcement of plans to raise Rs. 500 crore has got the tongues wagging. While the entrepreneur himself is tight-lipped, company officials hint that he wants to follow the same hub and spoke model internationally and could make an acquisition either in Europe or in a nearby region like Turkey that will give him access to the developed markets.
The self-made millionaire is unconcerned about the financial burden, comforted by Ess Dee’s market capitalisation of about Rs. 950 crore. India Foils has a market capitalisation of nearly Rs. 250 crore. And it is not surprising that Dutta is flooded with offers from financial institutions who want to participate in the Rs. 500 crore fund raising exercise. It is a far change from those early days when he had to face “bad language and attitude” from bankers when he had gone for his first loan, of Rs. 40,000, in the early 1990s.
“The bee will only come where the honey is. Then I didn’t have honey, now I have,” says Dutta.
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