N. Srinivasan sells his stake in ICL to UltraTech, cements his gritty legacy

This observation of Ramanathan had stayed true with respect to Srinivasan for six long decades – the way he fought to regain control of ICL in the 1980s, grow its capacity through acquisitions, at times hostile, and establish himself as a powerhouse when it came to cricket administration in India.

On Sunday, 28 July, driven by age, poor health and the humongous challenges that lay ahead in reviving India Cements which is in the red, he finally chose to hang up his boots. He sold the promoters' 32.72% stake in ICL to UltraTech Cement Ltd, a subsidiary of Kumar Mangalam Birla-controlled Aditya Birla Group, for a consideration of ₹3,955 crore, ending an era in the cement industry. An innings that was built on grit, determination, aggression and controversies – traits that are rarely associated with South Indian businessmen.

It was baptism by fire for Srinivasan, quite early in his life. His father T.S. Narayanaswami, who had co-founded ICL along with another entrepreneur S.N.N. Sankaralinga Iyer, died when Srinivasan was just 23 years old and pursuing chemical engineering in the US. He returned to India and was made deputy managing director at ICL. His approach to business was very different from that of K.S. Narayanan, son of Sankaralinga Iyer who was the managing director. He was eased out in 1979. “I was young, alone and wronged," Srinivasan recalled to this writer many years ago.

He went to court challenging his ouster. Srinivasan spent a lot of time in Delhi, building his political contacts in the government and outside in a bid to regain control of ICL. As the legal battle wore on, financial institutions which had a sizeable stake in the company took control. In 1982-83, Cigarette maker ITC evinced interest in the company and bought out the stake of the financial institutions. It appeared ICL would be permanently lost, and Srinivasan accelerated his fight. He went to courts and appealed against the move in the Company Law Board forcing ITC to return the shares to the financial institutions. It was in 1989 that he finally regained control of ICL thanks to a favourable political climate. The coalition government in Delhi had Dravida Munnetra Kazhagam, a regional party from Tamil Nadu, as a crucial partner and his close friend and DMK leader Murasoli Maran was an important minister. He became the managing director of ICL.

At that time, ICL’s cement capacity was just 1.6 million tonnes per annum. In 1991, India liberalized its economy and scale became important. Srinivasan undertook a series of acquisitions and in less than a decade its capacity had risen to 9 million tonnes. These acquisitions were predominantly funded by debt. It was then he learnt a crucial lesson – never expand in a fractured market using debt. With no control over prices, servicing debt would be a challenge.

The turn of the century saw massive capacities, as much as 40% of the overall demand, being set up in the south and that created a massive oversupply and the prices crashed, especially in Andhra Pradesh where the company had most of its capacity. ICL incurred losses and it was unable to service the debt. It entered the corporate debt restructuring (CDR) programme in 2002-03. He went for a global depository receipts issue as well. Fortunately, cement prices bounced back in a few years and ICL came out of CDR by the end of the decade.

Choosing the inorganic path gave ICL a quick growth but it came at a cost – efficiency. Each plant was of a different vintage and technology. That meant that ICL was not among the most efficient producers of cement. Srinivasan preferred to deal with the lack of efficiency by managing prices rather than investing heavily in modernization. He preferred to keep the prices high. Cement industry in south India, including ICL and many others, have been penalized by the Competition Commission of India for colluding to manage prices. The case is winding its way through the Indian legal system.

Srinivasan, by 2005, began to take an active role in cricket administration – first as secretary of BCCI and then as its president. In 2008, when the Indian Premier League was launched, India Cements bid and won a franchisee – the Chennai Super Kings (CSK). CSK is today one of the most successful teams in IPL and its valuations are estimated to be more than ICL. It remains with Srinivasan. His stint as president of BCCI ended in 2013 when his son-in-law, Gurunath Meiyappan, was caught in a betting scandal.

His leadership qualities meant that he held the cement industry in the south together. For years, he has been the point person nationally for periodic wage settlement for the industry with the trade unions.

But ignoring modernization proved to be his ultimate nemesis. When Russia invaded Ukraine, input prices went through the roof. With poor cost structure, ICL could not absorb the increased cost and sank into losses. Its cash flow was hit, causing capacity utilization to drop. The company began selling its non-core assets such as land to improve cash flow, but it remained in the red. To add to these challenges, a botched-up cataract surgery a couple of years ago left Srinivasan blind. Parting with ICL would not have been an easy decision for him but under the circumstances, it was the best possible thing to do. “The South Indian cement industry will never be the same again..the man who held the industry together officially quits the scene..their (Southern cement industry) golden era is as good as over.." tweeted Shyam Sekhar, a leading investor and portfolio manager. The tweet says a lot about the man who dominated the cement industry for over 35 years.