Latha Venkatraman
Shyam G. Menon

Mr M.S. Banga

Mumbai , May 2

THE last time Mr M.S. Banga repeated his usual slogan - first comes volume growth, then value growth, then profits - the cynicism in the press was palpable. For some years, the company's top line had stagnated at around Rs 10,000 crore though its profitability had inched forward.

With a sluggish FMCG sector, brands too well known to dance afresh and four years of chasing an elusive growth story, HLL looked tired and its investors, lacking the patience to sit through business cycles for a return to good times. In retrospect, not regular fare for India's biggest FMCG outfit and probably makes for Mr Banga to be remembered as one chairman in the hot seat after quite a few predecessors remembered for acquisitions and business growth.

Arguably that image of the company as a hotspot of action was at its zenith in May 2000 when he took over at the age of 45 as the company's youngest chairman from Mr K.B. Dadiseth. His fate appeared foretold when Mr Dadiseth cautioned HLL shareholders in May 1999, "We are aiming to grow as fast as we can. But doubling turnover in four years will not be sustainable." Until then, the company's stated policy had been to double turnover in four years and profits in three years.

HLL ended 1999 with a PAT of Rs 1,070 crore on sales of Rs 10,142 crore. For three of the next five years, it kept its head above the Rs 10,000 crore-mark, for the rest two, it dipped into the Rs 9,000 crore-realm. The company did better on the PAT front touching Rs 1,771.79 crore in 2003, but neither parameter was anywhere close to the once targeted goal of doubling sales in four years and profits in three.

Mr Dadiseth was wise in re-examining it; Mr Banga, perhaps unlucky to inherit the expectations HLL's erstwhile hyper-growth raised. In 2004, HLL's sales was 6.4 per cent lower than in 2000 (Mr Banga's first year as chairman) and its PAT, down 8.6 per cent. It is ridiculous to expect a chairman to transfer a company from grass to gold. His capability to lead is outstanding and that is clear from the faith Unilever has reposed in Mr Banga.

"If you look at HLL's growth chart over the last 15-20 years, the last five years have been difficult. But other large companies worldwide have also been struggling," Prof S. Ramchander, an independent strategy consultant, said. Mr Banga's tenure was noted for focused business restructuring - power brands, business divestments etc - and new business strategies for HLL, including suggestions of required changes to government policy.

Thus that AGM speech on agricultural reforms (which got preserved at media offices as a primer) and the revisit of FMCG categories from the perspective of market penetration as opposed to the conventional angle of growing market share. There was even the odd punch delivered to competition - as in lasting out P&G's price war. Yet on the whole, Mr Banga's tenure would seem overshadowed by the flourish of earlier HLL helmsmen.

A senior FMCG industry official who did not wish to be named said, "Apart from markets being sluggish and input costs rising, the earlier HLL managements had gone on an acquisition spree with scant consideration for long term growth. Mr Banga was therefore left with a lot of baggage. Further, the previous HLL chairmen were non-marketing people who made it a management conglomerate, less a consumer goods company. They set up a huge distribution network and pampered their dealers but did not pay attention to consumers.

"In that context, Mr Banga was different as a marketing person. I think he did a great job of pruning businesses, reducing brands and realising HLL's true potential. But history won't show him as a great chairman as numbers won't show the true picture. Quite like Australian cricket - Mark Taylor did much of the work but the credit will go to Steve Waugh because he has far too many victories."

However, it isn't as though Mr Banga's lot was entirely to grin and bear. Last month end, as HLL declared its 2005 March quarter results the pall of gloom surrounding it appeared to clear a bit. There was a 14.6 per cent decline in PAT, but net sales were up 6.5 per cent. Time then, for Mr Banga's slogan to start bearing fruit?

With input costs still high and the company unable to raise prices, the market is keeping its fingers crossed.

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