PALE SHADOW OF THE PAST - UP & DOWN THE HILLS

By M H Ahssan

Twenty years ago, the first name that came to mind while talking of corporates in Hyderabad was the Nagarjuna Group. But that was then. It is now a downhill journey for the group whose boss K S Raju is cooling his heels in judicial custody these days.

It was a bright star that shone on the business horizon of Hyderabad in the early 1970s when the city was dominated by public sector units and there were hardly any private businesses in the reckoning. The Nagarjuna group is still synonymous with a prominent locality in the upmarket area that goes by the name Nagarjuna Hills where many of the groups offices are located. Superfluous though, employment in the group was a prize job for the youth in the state.

Founded by KVK Raju, a first generation technopreneur, the group’s first foray was into steel with Nagarjuna Steels. Then came Nagarjuna Fertilisers and Chemicals Limited (NFCL), that became the flagship company of the group which commissioned the first gas-based fertiliser plant in south India at Kakinada in 1992 and currently has a capacity to produce 12 lakh MT of urea per annum.

However, the now-beleaguered Nagarjuna Finance Ltd (NFL) was established in 1982 to foray into the financial services business. Interestingly, at one point of time it was a highly respected company. “It was a solid company with branches all over the country and at one point of time was the top financial services company in south India,” recalls an old timer. But what went wrong? “I think later, by the time they gained momentum in collecting deposits, there was heavy competition with interest rates being paid going really high. So they couldn’t service the deposits and that did it in,” explains a former senior executive of the group.

Even as the group’s chairman K S Raju is facing criminal charges for fraud at the moment, there are supporters who feel that he was surrounded by the wrong kind of people whom he trusted. They in turn misled him with their advice. But then the leader has to take responsibility for the consequences of both his right and wrong decisions. “The group’s luck ran out and many of its plans did not fructify,” quips another employee.

The group had a very good run for many years as it slowly diversified into packaging with Nagarjuna Signode and later into power and oil refining. “The group had a lot of futuristic ideas and was probably ahead of its times. In 1995, the group employed almost 40 IIM graduates, perhaps the highest in corporate India,” says the executive.

The group’s foray into oil refining saw the emergence of Nagarjuna Oil Corporation, a sixmillion metric tonnes per annum (MMTPA) petroleum refinery at Cuddalore at an estimated cost of Rs 4,790 crore. But later it sold off 20 per cent of its holdings to the Tatas.

Further, after starting Nagarjuna Power Corporation with a bang, setting up a Rs 4,300-crore, 1,015-MW, coal-fired, Nagarjuna Power Plant at Mangalore in Karnataka, the group sold a 74 per cent stake to the Hyderabad-based Lanco group two-and-half-years ago. The first company in the group, Nagarjuna Steel, has been sold off to Pennar Steels.

One wonders why such high-profile projects the group got into seemed to simply lose steam after a while necessitating selling off stakes to others. One, it reveals that the projects are fundamentally sound. If not, there wouldn’t be buyers for that. “But what’s missing is a commitment and the necessary drive to see the projects through. It’s basically lethargy.

Moreover, over the years many retired bureaucrats have been appointed in key positions as advisors and consultants. And many of them were actually a drag on the company, both financially and on its pursuit and focus. This prevented fresh and innovative ideas from being pursued for better results,” points out a senior executive who was with the group. However K S Raju now nearing 60 and presently cooling his heels in jail is responsible for these half-hearted initiatives. “In a way he lacks the drive his father had and that zeal to implement projects right to the last T,” says a former senior manager of the company.

Today, some of the group companies include a part from the flagship Nagarjuna Fertilisers and Chemicals, Nagarjuna Agri Chem, Vijayalakshmi Insecticide and Nagarjuna Agri Research Institute and of course the Nagarjuna Foundation in Kakinda.

After all the highflying growth now the group seems to be heading towards a downward path and away from its founder’s vision. It has become a pale shadow of its fine past.

WHAT DID K S RAJU DO?
K S Raju, chairman, Nagarjuna group, after his arrest on Monday was sent to 14 days of judicial custody by a city magistrate at Nampally court on Tuesday. His partner in crime is P K Madhav, who is presently President and CEO of Maytas Ltd. The charge by the police was that Nagarjuna Finance Ltd has failed to return depositors about Rs 100 crore that was due to them.

They were arrested under Section 5 of the Andhra Pradesh Protection of Depositors of Financial Establishments Act and under Sections 420 and 406 of the Indian Penal Code after scores of complaints were filed by aggrieved depositors.

Interestingly, Madhav was finance director on the board of Nagarjuna Fertilisers and Chemicals Ltd for nearly two decades during 1982-2001.

In fact, this is a culmination of a fiveyear battle wherein Raju has been fighting lawsuits filed against him by the ministry of corporate affairs through the Registrar of Companies, which moved the economic offenses court against him and other directors responsible for raising public deposits that were not returned. However, Raju has been arguing to absolve himself of the responsibility of paying the depositors. Since the group had divested its equity holding in NFL in favour of the Mumbaibased Mahalakshmi Factoring Services Ltd (MFSL) in September 2000, the onus now lies on MFSL to pay dues by way of realising receivables, he says.

As the case takes a new turn and the court takes its time to deliver its verdict on Raju and Madhav, there are different opinions. “I give Raju a clean chit as I believe he had no malafide intentions to cheat anyone. However, he had neglected the running of the company and left it to others. Moreover, people deposited their money with faith in the name of Raju and Nagarjuna Fertilisers, which enjoyed good brand equity. So, one cannot escape that responsibility,” explains a banker who was associated with the company. He adds that to say NFL and NFCL are two different companies is not entirely correct as there was an association. The fact that a PSU bank got a letter of comfort from NFCL for the bank’s exposure to NFL some years ago proves this beyond doubt, though this was not public knowledge.

But a former executive of the Nagarjuna group says, “You have not returned the hard earned money of middle class and lower middle class people. But you live in a mansion and move about in swanky cars. How do you justify all this?” he asks.