The memorandum of family arrangement TVS announced gives it a chance to remain as an entity and seek new vistas
TVS, the pre-eminent industrial group and business family of south India, has always been known for being conservative in its business, traditional in its approach and low in public profile. With the memorandum of family arrangement announced on Thursday, the group has proved that it is not just all of the above; it is also pragmatic and rooted in reality, without romanticising that it can stay together as a family even as it enters the fifth generation.
Idealistic notion vs. reality
The memorandum is only the first step and there will be many trickier ones to take as the group untangles family holdings across its estimated 45-50 companies in the months ahead. But what is important is the realisation and acceptance that it is difficult to align the vision and priorities of a bunch of 40-45 people of varied age profiles, from their 20s to their 80s, with differing aspirations, outlooks and risk profiles, by the sole agent of family glue.
How often have we seen family businesses falter at the altar of competing ambitions, conflicting views on business and the desire to be unfettered by historical baggage? The Ambanis may come to mind first when we think of conflicting ambitions among family members leading to trouble, but there are several other prominent business families in India that have come to grief due to their inability to manage the pulls and pressures of newer generations.
The problem is the idealistic notion that familial ties and bonding at the personal level can handle any friction on the business side between family members. As the Ambani saga showed, it is impossible to manage aspirations even in the second generation among own brothers. It is naive to hope that this can happen at the level of cousins, twice or thrice removed from each other in the fourth or fifth generation. There is bound to be conflict even in the presence of a patriarch whose will may not always be respected.
The TVS group, all of 109 years old, faced this predicament. Indeed, there have been minor rumblings in the past inside the group but they were well managed by the family. With the fourth generation entering stewardship roles across the major companies in the group such as TVS Motor, Sundaram Clayton, Sundram Fasteners, Brakes India, Wheels India, Sundaram Brake Linings and Lucas TVS, the pitch was laid for conflict. The elders in the group, prudently, decided to not bat on this pitch.
Situating the new generation
We have to remember an important point here. The generation that is now taking over the controls is born in a new India that is confident about itself, an economic powerhouse, and it is exposed to tectonic changes in technology and approach to business. It is not fettered as the earlier generations were by government controls or a low self-esteem caused by backwardness of the country labelled with the Third World tag.
This is a generation that believes that the world belongs to it and is unhesitant to take risks in business, risks that their fathers and mothers would shy away from. The best way to handle them then is to give them the freedom and tell them that the world is theirs to conquer. Shackling them with family business traditions and values will only lead to disaffection. They are not going to align on a single path just because that path has been laid out by the family.
Missing the bus
Let us look at the other pluses of this move. If one were to write the history of the third generation of the TVS group which boasts of stalwarts such as Suresh Krishna, Venu Srinivasan, Viji Santhanam, K. Mahesh and Gopal Srinivasan, to name just a few, what would stand out is that they did not take the group into sunrise sectors such as information technology, pharmaceuticals and renewable energy. Or into capital intensive infrastructure, which was a growth area.
More than a decade ago, in an informal conversation with this writer, Venu Srinivasan acknowledged that it was a missed opportunity to have not entered information technology in the 1990s. “The infotech wave is in many ways exactly like what TVS does — ethical businesses, organised people, engineers, manpower at the doorstep… I think TVS did miss that bus. Today, even if not a $4-$5 billion business, we should have had at least a $1 billion business in the knowledge sector,” admitted Mr. Srinivasan during a chat over lunch for a column that was published in Business Line under the ‘Table Talk’ series.
Even as he acknowledged that it would have made a big difference to the group if it had caught the IT or pharma wave, Mr. Srinivasan could not be persuaded into giving a reason for the failure. But one could sense remorse over a missed opportunity that was most likely due to the conservatism and risk-aversion of the group. It is possible that minus the family fetters, one or more of the otherwise highly successful generation would have set out on a new path. The family re-arrangement now would make such things possible for the fourth generation leadership.
Second, and this is the biggest plus, the pragmatism shown on the business side will hopefully ensure that the family stays together at the personal level. The diversity of opinion and professional aspirations will now be neatly separated from family relationships. With all the group companies now free to use the TVS brand without royalty liabilities, the franchise of the group can be built independently by each of the constituents.
On a new highway
To be sure, these are early days and the real challenge will be in operationalising the sentiment behind the memorandum. Given that many of the group companies are listed, there will be market expectations to manage. Some companies also have foreign collaborators that have to be aligned with the group’s decision. There could also be some cross-holdings among the companies that need to be untangled. And then, of course, are the legal formalities to be gone through and approvals that need to be secured. But there is little doubt that the group’s elders have given it a chance to survive as an entity in the next generation.
During the chat with Venu Srinivasan mentioned earlier, this writer had asked him why there was no documented history of the TVS group. His reply was characteristic of the group’s philosophy: “It came from a feeling that you should not remain rooted in the past. We could not get our elder generation to document because of this thought.” This philosophy is again on display now, and hopefully it will give the group a chance to last the next 100 years serving India’s development.
Raghuvir Srinivasan is Editor, The Hindu BusinessLine