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From Archive: Escorts -Fending off hostile takeover, surviving family split

Bhupesh Bhandari/ 06 Aug 18 | 10:10 AM

Rajan Nanda | Photo courtesy: Twitter handle @SoniaChopra

This article was first published on November 5, 2014. Business Standard is republishing this article as Rajan Nanda passed away on August 5, 2018. 

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Driving around Faridabad, on the outskirts of Delhi, is a lesson in the evolution of Indian industry. There is row after row of small unkempt factories. Quite a few have become automobile showrooms or shopping malls. The buzz that envelops the other suburbs of Gurgaon and Noida is nowhere to be seen. Yet, Faridabad was the original industrial hub of Delhi. The government had acquired land, cut these into industrial plots and allocated these to people who had come to India after Partition on which they set up factories. These factories were geared to the 1960s, and had become too small to be commercially viable by the 1990s. Many shut down. Others moved out. One of the companies that have stayed on is Escorts, a maker of tractors, construction equipment and automotive components. Like Faridabad, it is a pale shadow of its old avatar when it was counted amongst the country's blue-chip enterprises: it has been dumped by partners, sold and shuttered assets, seen a sibling dispute and faced controversy.

ALSO READ: Escorts Group Chairman Rajan Nanda passes away; condolences pour in

Escorts started life as a small agency house in Lahore in 1944 started by the Nanda brothers, Har Prasad and Yudi. After Partition, Har Prasad came to Delhi with only Rs 5,000 in his pocket and two cars. Instead of staying with relatives, he booked a suite of rooms in The Imperial, Delhi's most expensive hotel, so that he could revive his business contacts. The trick worked. He was back in business soon, making tractors, motorcycles and components. With ample protection provided by the Licence Raj, the going was good for Escorts. Murad Ali Baig, author and automotive expert, who worked with the company for 18 years, had recounted an incident in 2012 which showed that Escorts' engineering skills were second to none. Escorts had engaged Ricardo of England to suggest improvements to its Rajdoot motorcycle. "At the end, Ricardo said 'this is such a beautiful piece of engineering; please don't change it'," Baig said.

Socially too, the Nandas were second to none. Har Prasad's older son, Rajan, got married to Ritu, Raj Kapoor's daughter. (Rajan's son, Nikhil, is married to Shweta, Amitabh Bachchan's daughter.) A motorcycle Escorts made, the Rajdoot GTS, was made famous in Raj Kapoor's Bobby (1973), in what was perhaps the first instance of in-film brand placement.

But Har Prasad had left one flank unguarded: he was running Escorts with a stake of 7.5 per cent. So, when Swraj Paul attempted a hostile takeover of the company (also on his radar screen was DCM) in 1983, his vulnerability was exposed. But the pugnacious Punjabi industrialist wasn't ready to give up without a fight. Hectic lobbying followed, and after several anxious months, Paul backed out. It later emerged that it was only after Vivek Bharat Ram of DCM requested Rajiv Gandhi to intercede (the two had studied together at the Doon School in Dehra Dun) that Paul let go of Escorts and DCM. However, it isn't clear what gave Paul the courage to raid the two companies. At that time, government-owned banks and financial institutions held a substantial stake in all large companies, Escorts included. No raider could have dared to go ahead without the government's tacit support. In an interaction in July 2008, Rajan had said that Paul was backed by two powerful politicians, one of who was a minister in the first United Progressive Alliance government (2004 to 2009).

The next blow came with liberalisation in the 1990s. Most multinationals found local partners of little use and were keen to be on their own. Escorts thus exited ventures with Yamaha (motorcycles) and JCB (construction equipment). Its partner in tractors, Ford, sold the business to New Holland which had its own plans for India. Escorts had diligently built the Ford brand in the Indian tractor market, yet it couldn't use it anymore. That's when it introduced a brand called Farmtrac. Actually, Ford had offered the global tractor business to Escorts. But the country's precarious foreign exchange position made it a tough proposition. In later years, there was some talk that Escorts will sell its tractor business to Mahindra & Mahindra but it remained a rumour.

Subsequently, the company, in an attempt to clean up its balance sheet, offloaded its telecom business (it operated mobile telephony in West Uttar Pradesh, Haryana and Kerala under the Escotel brand) to Kumarmangalam Birla's Idea Cellular (it had first initiated talks with the Tata group) and the iconic Escorts Heart Institute in Delhi to Fortis Healthcare of brothers Malvidner and Shivinder Singh. Some businesses were folded up after they failed to live up to projections. The Nandas had launched consumer electronics under the Niky Tasha label and the Nanz chain of retail stores (much before Kishore Biyani, India's current retail king) but had to shut both the ventures. "You can't fight destiny" Rajan had said matter-of-factly in an interview.

And then controversy struck. Har Prasad's second son, Anil, disclosed that Rajan had converted the Escorts Heart Institute from a charitable trust to a company with the aim of selling it off. Anil said not only was the act illegal, it was also done surreptitiously behind his back. Rajan, on his part, said the conversion was done to unlock the value of the investments in the hospital and everything was above board, everybody was kept informed. Soon thereafter, the two brothers parted ways. Anil exited from Escorts but took with him the very profitable automobile component maker, Goetze. "You are supposed to live together. But if you are not happy, it is best to separate and go your own way," Rajan had said in 2008.

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