Several years of hard work and long-term vision builds a vertically integrated business....
For
a man who heads one of India's earliest conglomerates, Mr. Shashi Ruia
is disconcertingly devoid of much public attention, at least, when
compared to his contemporaries. However, one will not be very surprised
to know that this man, with a business pedigree that dates back to the
18th century, and who began as a first generation entrepreneur of India,
is miles ahead of many later contemporaries, when it comes to knowledge
of market, and of the industry in general. In fact, he would, without
doubt, rank as one of the most enlightened, aware, and
close-to-the-reality business leaders of the country (more about this
aspect later).
He, along with his brother, Ravi, inherited a
well-settled construction business that had its hands where its mouth
was. And so, the brothers took-off from where their father had left and
over time saw their group (which had begun as a construction firm later
diversified into many other areas of business) emerge as one of the
country's most successful conglomerates with a truly global presence.
Today, the group businesses have a presence in 25 countries spread over
five continents, employing close to 75,000 people, in businesses ranging
from steel, oil & gas, power, communications, shipping ports and
logistics, to construction and minerals. The brothers' net worth is
reported to be around USD 17 billion. Now that is something truly
remarkable, for not even a handful of Indian companies have been able to
come close to having a successful global presence, and impact, like
that. Mr. Ruia is widely recognized for promoting India's industrial
growth and the expansion of the nation's infrastructure sector; so much
so that some even go on to say that the group's growth mirrors the
growth of the Indian economy!
Early Days
Mr.
Shashi Ruia was born in 1944 in Mumbai, where the Ruia family
(originally from Rajasthan) was involved in the construction business.
His father, though, moved to Chennai with the aim of starting a new
business altogether and set-up a shipping and exports firm in the 1950s.
Shashi was the eldest of the two sons, and often accompanied his father
to his work place. This activity proved to be an early apprenticeship
for the young Shashi who, it is said, picked up quite few interesting
aspects about running the business, which he would employ to great
effect in due course. He is a commerce graduate but, as we have seen,
had most of his mentoring done by his successful businessman father, the
Late Nand Kishore Ruia.
The Spark
Business acumen was deeply rooted in the Ruia family who had been into
the construction business, it is said, for well over two centuries. So,
naturally, it wasn't any surprise that Mr. Shashi Ruia had inherited all
that, plus the enviable situation of his father mentoring him and
keeping him (along with his brother) upto date with all the intricacies
of the business, and along the way sharpening their sense of
entrepreneurship. His father had also, apparently, done more than just
mentoring his sons: by the time he breathed his last, he had well and
truly established the business contacts as well as negotiated some deals
and projects to be taken forward (with contracts previously negotiated
for the construction of various ports and jetties). It did not take Mr.
Shashi Ruia (and his brother) to make good of this. They began the
group's (founded in 1969) first active business venture when they
completed constructing an outer breakwater in the Chennai port. Not long
after, the Group seized the prevailing economic atmosphere in the
country, and successfully capitalized on many emerging business
opportunities.
The Journey
The brothers shifted base to Mumbai which had, in time, become the
commercial capital of the country. It augured well for the Group lead by
Mr. Shashi Ruia, all through the 1980s when the hereto state-controlled
shipping and drilling sectors were opened to private players. The group
was successful in using this opportunity to succeed and grow by
investing in diverse shipping fleet and oilrigs.
Likewise, the group continued to seize upon every opportunity presented
and continued to invest in diversified markets. Taking advantage of the
opening up of the Indian economy in the 1990s -in the wake of
liberalisation-Essar entered into steel, power, telecom, and refining
(port and deep-sea pipeline construction) businesses. The group set-up
the first iron sponge plant of the country in the coastal town of
Hazira, Gujarat (India). This proved to be a crucial decision as it also
paved the way for the brothers to utilize the first-mover advantage in
many such other businesses. The group followed it up with a pellet plant
in Vishakhapatnam (Andhra Pradesh) that, eventually, led to the
construction of their fully integrated steel plant in Hazira. They were
also India's first private company to buy a tanker in 1976.
Not one to miss a business opportunity resulting from the now
liberalized economy, Mr. Shashi Ruia then ensured that the group was
always a front-runner in the many sectors that were opened up for
private participation. Thus, all through the 1990s, one saw that the
group diversified its shipping fleet, and ventured into oil & gas
exploration as indeed production, which lead to the foundation of its
oil refinery at Vadinar (near Jamnagar), Gujarat (some say that although
work on this started at the same time as that of its competitor
Reliance's refinery, it did not quite take-off like Reliance's). Essar
also set-up a power plant near their Hazira steel complex. It is said
that the construction business of the group helped it in building most
of the group's assets.
As mentioned earlier, the Ruias were always alert enough to make good
of an opportunity, and succeeded in most of their endeavours with the
first-mover advantage, Essar entered into the telecom sector where also
the government had allowed private players to operate. As a result,
Essar started the country's first mobile phone (GSM) service in Delhi
(in 1994) with Swiss PTT as a joint venture partner, and branded it as
‘Essar Cellphone.' (Essar sold 67% -amounting to about USD 5 billion- of
this arm of their empire to Vodafone).
This venturing into the mobile telephony business is also believed to
have brought about a turn-around in the fortunes of the company which
had run into financial trouble owing to a downturn in the global steel
industry. With the success of the GSM operations, as also the lessons
learnt from the debacle in the steel business, Mr. Ruia thereafter was
successful in leading the group onto a path of continued growth and
consolidation. Taking tough decisions, restructuring of their steel debt
(aided by a rise in steel prices), acquiring new businesses, and
ensuring that the group was able to spread its foot-prints across the
globe, reflect the resoluteness of Mr. Ruia as indeed that of the group
itself.
Apart from being the Director of the Board at Essar Steel, and the
Chairman of the Essar Group, Mr. Shashi Ruia was also, at one point, a
part of the Managing Committee for the Indian Chamber of Commerce.
Expansion and Diversification
It is pertinent here to throw some light on the geographical expansion
as well as the diversification of the group's business, as they reflect
Mr. Shashi Ruia at his shrewd best.
In 2000, Essar reached an agreement with Hong Kong tycoon Li Ka-shing
(one of the promoters) to form Hutchison Essar. When Li Ka-shing sold to
Vodafone in 2007, the value of participation of the Ruias skyrocketed
by 33%, making Hutchison-Essar the third largest operator in India.
Although the Group plies its trade in many diversified businesses from
retail to refinery to BPO, the main focus was always on building Essar's
international oil and energy business. Essar acquired Algoma Steel
(Essar Algoma Steel) and Minnesota Industries (Essar Steel Minnesota
LLC) five years ago to build large low-cost bases of steel products in
North America. The Minnesota unit is a Greenfield project with a
reported production capacity of 7 million tons pelletization plant.
Having moved strongly into North America, they have acquired refineries
in the UK (from Shell for an amount reported to be around $350 million)
and in Kenya. They have also expanded their Jamnagar refinery. Their
group turnover is set to almost double this year, largely because of the
refinery business as Essar Oil which accounts for 10 percent of the
country's total refining capacity and now operates India's
second-largest 405,000-barrels-per-day Vadinar refinery. The company
also owns 1,600 retail oil outlets throughout the country and has 2.1
billion barrels of oil equivalent in its portfolio.
In 2010, the Essar Group floated the Essar Energy on the London Stock
Exchange, which then accounted for 25% ($2.5 billion at the time) of the
Group's worth. It was the second largest overseas IPO ever floated by a
company of Indian origin, and is now part of the FTSE 100.
Understandably, it drew attention from many investors, some
apprehensive, some skeptical but ultimately many investing in this Ruia
venture leading to a handsome capital infusion into the company.
Also, Essar Ports recently (May 2012) announced a strategic pact with
the Belgian company, Port of Antwerp International. The tie-up is
expected to help promote port traffic between Essar Ports and Port of
Antwerp and also help the company in developing world class port
facilities in India.
In
addition, the group is also said to have entered into a binding
agreement in May this year to buy automobile sealing system
manufacturers, one each in Turkey and Germany.
Family
Both siblings, Shashi & Ravi Ruia have two children each. Both have
homes in Mumbai, India, but live part of the year in London due to
their regular business with UK companies. The family is believed to be
free of infighting, and for years the brothers shared an office, sitting
at opposite ends of a long room with mahogany wall panelling and
paintings.
Under the expert guidance and leadership of Mr. Shashi Ruia the group
has gone from strength to strength over the four decades of its
eventful, if not tumultuous, sojourn. The group now has many companies
under its umbrella, operating in varied fields of business namely steel
(Essar Steel), minerals (Essar Minerals), energy – oil & power
(Essar Energy), infrastructure (Essar Ports & Essar Projects),
services (Essar Shipping), BPO (Aegis), communications (Essar
Communications), realty (Equinox Realty), publishing (Paprika Media),
and agri-business (Essar Agrotech).
Failing to mention here one of the traits of Mr. Shashi Ruia that
reflects the characteristics of a visionary would make this write-up,
about a man who is considered by many as one of the architects of modern
industrial / corporate India, lose its sheen. This trait is calling a
spade a spade, irrespective of who he is facing. For example, it is said
that during one of the international business summits held in India,
everyone apparently went gaga over how India is emerging as a regional
economic power comparable to that of China, Mr. Ruia (who was a
participant) was quick enough to blatantly quash this myth by spelling
out at least half a dozen statistics that showed that India is miles
behind China and, needs to buck-up and do more than it has been so far,
instead of just trumpeting some nice falsities. This was the visionary
in him that saw through the lines, and was willing to face the reality
and, yet, was hopeful of a bright future provided we put in the efforts
required. Another instance being his harangue (well almost) on the huge
road-blocks or obstacles faced by industries in general owing to delay
in clearances and /or restrictions imposed by the state. Whether or not
such a strong reaction was called for can be debated, nevertheless, he
is reported to have said, without mincing words, "Natural resources
cannot be in the exclusive domain of the government. "(There is a need
for resources like iron ore, coal, crude, gas, power and water ..."
This was, obviously, a reference to the group's captive coal block,
imploring the government to relax such blockades if it wanted more
private sector participation in crucial sectors.
With a persona like that, and his capacity to steer clear out of
difficult situations successfully, it can be expected that his guidance
would be sought by many other organizations of significance. Mr. Shashi
Ruia serves on several important national bodies and industry
associations, including the Federation of Indian Chambers of Commerce
and Industry (FICCI) the Indo-US Joint Business Council and the Indian
National Ship-owners Association (lNSA).
Philanthropy
As much as he has been shrewd and enterprising in running successfully
one of India's successful multinational conglomerates, he has also
proved to be a man of heart. From putting in a word to help some young
stranger wriggle out of a tricky situation with a state-owned company
(which was the result of a freak interaction), to becoming a part of a
select group (called the ‘The Elders') of renowned personalities who
have come together to fund initiatives aimed at tackling at least some
of the many difficult problems facing the world, his efforts have been
really exemplary.
That besides his group, as part of its social responsibility
initiatives established the Essar Foundation. Its activities, divided
across six focus areas -- livelihoods and entrepreneurship, women's
empowerment, health, education, infrastructure and environment -- are
based on the principles of good governance and equity. To improve its
reach, it engages with government institutions and local NGOs as part of
its fundamental strategy, runs community outreach initiatives at all
its plant locations, with a focus on education, healthcare,
environmental and agricultural development, and self-employment. The
Group says it is committed to sustainable business practices. Its
Health, Safety and Environment (HSE) management system is on par with
global standards. The Group is also actively undertaking climate change
initiatives to reduce its carbon footprint. This includes several Clean
Development Mechanism (CDM) projects that earn the company 'Certified
Emission Reduction' credits'.
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