The Man With The Faltering Midas Touch

Despite having enjoyed success with the legendary fund manager George Soros, Purnendu Chatterjee's Indian projects have hit roadblocks.

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He's India's most globally-networked man. He was groomed by the legendary maverick George Soros, and is married to the daughter of Viren Shah, West Bengal's governor. His buddies include Rajat Gupta (of McKinsey) and Vinod Khosla, the Silicon Valley venture capitalist. Meet Purnendu Chatterjee, a.k.a. PC, the 49-year-old fund manager and entrepreneur whose first mega-project, the Rs 5,170-crore Haldia Petrochemicals, was commissioned last month. But that still hasn't removed doubts about his entrepreneurial abilities. The reason: despite a long-time association with Soros' Quantum Fund, which is valued at $8.20 billion, and successful stints in growing companies like R&B Falcon, the largest manufacturer of drilling rigs, many of Chatterjee's India plans have run into roadblocks.

His well-wishers might argue that Haldia Petrochemicals, in which Chatterjee has a 22.5 per cent stake via the Mauritius-based Chatterjee Petrochem, has proved his mettle. And his $20-million investment in auto company, Toyota Kirloskar-which recently launched the Qualis MPV-will pay dividends in the near future. But that's just a minuscule part of Chatterjee's entrepreneurial history in India. For every success on paper, there is another one that is yet to take off. More importantly, his image is still that of a fund manager who is not interested in managing companies but only in booking profits and moving on to the next project. A fund manager who likes to constantly juggle his portfolio-be it shares or entrepreneurial ventures.

In fact, whenever opportunity knocked, Chatterjee-who quit McKinsey to embark on his career as an investor-entrepreneur in 1984 and whose personal worth is estimated at over $500 million-has lost no time in grabbing it. Last year, when Indian Oil Corporation was trying to enter the race to take over Indian Petrochemicals Corporation Ltd, the Chatterjee Group, which had bid for the company, joined hands with the former. Earlier, when India opened up the power sector, Chatterjee quickly inked a partnership with ABB in 1994, to set up a 500-mw coal-based unit in Madhya Pradesh. That explains why, in the past six years, Chatterjee has announced plans to invest Rs 3,000 crore in 17 projects in diverse industries like power, software, telecom, petrochemicals, financial services, and real estate.

Of course, Chatterjee has a rationale for his eagerness to invest. Says he: ''Some of our earlier investments were opportunistic. For instance, if a project like Toyota Kirloskar came up today, I would not invest in it.'' Neither would he look at huge infrastructure projects like power that have large gestation periods, and generate low returns compared to sectors like software. But, back in 1994, when Chatterjee looked East, infrastructure was the buzzword and every entrepreneur worth his salt was jumping on to the bandwagon. Only later did he realise that investing in such projects ''tied up the funds for twice as long (as in the US), cost twice as much, and yielded only half the return.''

The main hurdles to Chatterjee's proposed mega-projects have been political in nature. Take the case of the power project. Between 1994 and 1997, the Chatterjee Group was unable to get the requisite clearances from the Central Electricity Authority (CEA) despite being the first one to sign a Power Purchase Agreement with the Madhya Pradesh Government. Later, it got saddled with a lawsuit questioning the project's coal-pricing methodology. Although Chatterjee has won the case in the Supreme Court, the CEA clearances are still not forthcoming. The group's proposed six-million tonnes per annum refinery project at Haldia has been stuck for six years due to land acquisition delays.

A few critics also question Chatterjee's entrepreneurial ability and commitment. But that is denied by most of his friends and colleagues. ''Haldia is a milestone for us since it has tested our skill and commitment to a project,'' says Swapan Bhattacharya, 44, coo, Chatterjee Group, India. Adds the Paris-based corporate identity consultant, Sambit Sengupta, 48, Advisor, Chatterjee Group: ''He is serious about his investments in India. What is often not perceived is that he is also trying to bring in professionalism in the area of project management.''

There are no doubts that the Indian experience has changed Chatterjee. For one, from being just a passive investor who only concentrated on high-profile corporate decisions, he has acquired the ability to hang in when the chips are down. An indicator of this tenacity is the manner in which he pushed through the Haldia project. When Chatterjee walked in as the co-promoter along with the Tatas, the project had been delayed by 17 years. Despite this, he decided to commission it within 40 months from zero date. To achieve that he pushed the contractors by insisting on a penalty clause of Rs 4 crore per day. The result: Haldia was up and running in just 37 months.

That was a far cry from what he had done in the US. His first investment of $3 million in Beall Technologies, a switch manufacturing firm, was in partnership with Soros. But when he realised that the company had technology, but lacked in distribution and marketing, he attempted to buy out the main competitor, Tbar, which was 20 times the size of Beall Technologies. The move failed, but it revealed Chatterjee's aggressive streak. Similarly, while handling the Soros Fund in the emerging markets, he took on risks that could generate huge rewards. And his own Winston Fund, valued at $2 billion, has earned profits by constantly investing in tech stocks across the world.

In India, this mindset cannot work since each bureaucratic delay has to be dealt with personally. And an entrepreneur has to acquire a philosophical outlook towards his investments. Agrees Chatterjee: ''In India, patience is required for success. Things do not move at the same speed as in the developed world.'' He is still unwilling to give up the power project which, according to him, is viable and fundamentally sound. ''It will come up one day or the other. Let it take whatever time it takes,'' he says in a reflective mood. And that smacks of a new Chatterjee who, rather than taking the bull by the horns, is willing to wait for the wind to blow in his favour.

At the same time, he has decided to change tack and evolve a new strategy for future projects. No longer will the group look at projects, each of which can absorb between $10 million and $100 million. Instead, Chatterjee will now look at smaller projects in select sectors where investments will be below $10 million each.

One of them would be in the software industry, where apart from TCG Software, he has existing joint ventures with Computer Associates to develop customised software for exporters and with United Airlines of the US to develop aviation-related software.

Similarly, the Net start-ups Chatterjee will finance will primarily have a technology focus, as is the case with his overseas investments in Selectica and Exodus Communications.

No one denies Chatterjee's ability to spot opportunities. Nor does anyone doubt his ability to make money. Agrees Pradip Shah, 44, the CEO of IndAsia Fund Advisors, who had been an investor with Chatterjee in the IndOcean Fund: ''What is most striking about Chatterjee is his insight. By that, I mean his ability to add value to any project, and to assess its viability.'' But what is questionable is Chatterjee's skill in handling greenfield projects, and taking the right decision as an active investor rather than a passive one. The progress of Haldia Petrochemicals will be a test case for him.

At another extreme, Chatterjee the investor will need to exit from most of his projects in India. As he has done in the past. That is where he likes to earn his money from-by adding value to the companies in the medium term, and then exiting with a profit.

In fact, he is already talking of getting out of Haldia Petrochemicals once its bottomline becomes healthy. But in India, where the secondary market is not mature enough, building up a business is tough, and investor-promoters are scorned, Chatterjee will have a hard time ahead. Agrees Shah: ''In India, we are not yet comfortable with the concept of a value-investor.'' The advantage is that Indian promoters like Ramesh Chauhan, who sold off his soft drinks brands to Coke, are also getting into this game.

Clearly, Chatterjee faces the dilemma of choosing between the roles of the investor and the entrepreneur. Between following the footsteps of his mentor, Soros, and treading the path of his hero, Dhirubhai Ambani.

No wonder then that Chatterjee's India plans have constantly vacillated between investments where there is an easy exit route, and in greenfield projects in sectors such as petrochemicals and petroleum-areas where the Ambanis have a strong presence. But, to replicate Reliance's success, Chatterjee will need a lot more than mere ambition.