was 12 years since Anurag Galgotia had breached the green ribbon
to qualify for the finals of the 100-metres dash in the national
inter-univ athletic meet. He never thought he'd experience the same
mix of elation and tension again, and that too, in his business
life. Yet, here he was, all of 29, already CEO of his 50-year-old
family textiles firm, Galgotia Cotton Looms (GCL), his heart pumping
to the thrill of a turnaround.
"Still relishing the numbers?" asked
the CFO, Sadashiv Godbole, referring to GCL's q1 results for 2002,
which showed a Rs 1.5 crore profit against a Rs 21 crore loss for
the same quarter of 2001. "We're back in business," said
Godbole, sinking into the upholstery.
Nearly twice Galgotia's age, Godbole was a
20-year GCL veteran. He had signed up with Anurag's father Kishorilal
Galgotia, who'd started the firm in 1952, in Ludhiana, to make cotton
textiles. Cotton sheets, shirtings, cambric, and mazril were the
first products, and it seemed like only yesterday that the firm
went public-before getting into synthetic fibre and even steel.
By the early 1990s, the GCL tapestry, once richly interwoven with
natural, synthetic and steel threads, had started fraying. First,
the polyester division became a drag, and then, steel-as competitive
dynamics started changing.
By 1998, GCL had got to what then seemed like
a point of no return. Debt had mounted to a staggering Rs 1,300
crore, almost equivalent to the group turnover. Financial institutions
threatened to pull the plug on the company, and the pink papers
went to town with obituaries on GCL.
The diversification was unnatural to start
with, said critics. In his time, Galgotia Sr., a cotton loyalist
himself, used to respond philosophically, arguing that so long as
people were discerning of what was natural and what was man-made,
and the business was not deceiving anyone, there was no cause for
"We have big stake in tomorrow's clothing
trendsand we should be out there, shaping them"
Galgotia Jr., who'd just returned from Wharton,
had only hard options left. Painful as it was, he had to restructure
the group. The uncompetitive polyester division was sold off to
the Keshwani group for Rs 620 crore. Financial institutions got
a chunk of preference shares. At the end of it all, GCL came out
lean, mean and still weak-with residual debt of Rs 510 crore.
In spite of all that, young Galgotia had defied
the doomsayers, and managed to haul GCL out of the red. "Ask
Vishesh to see me," Galgotia told his secretary. Godbole knew
what was coming. A three-way brainstorming session with Vishesh
Pradhan, the Group Marketing Head. Galgotia preferred such informal
sessions to pretentious board-room antics.
"Terrific results," began Pradhan,
on entering the corner office "To be frank, I did not expect
our cost-saving efforts to show results so soon."
Galgotia could see that his top honchos had
been motivated by GCL's showing. But he was keen on knowing what
his best minds thought of GCL's future. "We all know that this
recovery was due to three factors: the staff optimisation drive,
coupled with aggressive technology implementation in the plants;
the performance of our textiles division, which was mainly due to
the 25 per cent slump in cotton prices; and the successful diversification
of the filament division into lucrative thermoplastic and engineering
grade nylon. My question is: where do we go from here?"
Cost-cutting couldn't be a perpetual strategy,
nor could GCL expect cotton prices to remain low forever. Pradhan
spoke: "I think it's time we decided what GCL is. I don't think
we can continue being a textiles-nylon-steel player, and still work
"Be direct," said Godbole.
"I'm talking about steel," said Pradhan,
"We'll never be a steel major, so why are we making steel?"
"You must be joking," interjected
Godbole. "Our debt is off the danger mark, and if only you'd
read the balance sheet carefully, you'd have noticed that the steel
division was our productivity topper. Besides, we'll never fetch
a half-decent price for it."
Pradhan cleared his throat for a response:
"I still think we should stick with cloth fibre and cloth,
that's it, but integrate the business either backward or forward.
Backward routes are blocked by heavy competition in polyester-it's
a scale-of-operations game. That leaves cotton farming, which could
be complicated. But forward? Shouldn't we redouble our efforts in
getting closer to the consumer? It's almost an axiom now. The link
closest to the consumer sits on the fattest margins."
"What's wrong with GCL as a consumer brand?"
"Nothing, it's just that textiles aren't
what people talk about anymore, even if we have product distinction.
They talk about Fashion Weeks and all that, and those are the actual
brands young people have in mind. Value-addition has moved forward,
from cloth to the design-that's where we should be headed as well."
"We're a high-volume industrial group,"
said Godbole, "not a boutique for the urban brat-pack."
"Well," retorted Pradhan, "I
meant a mass-market initiative. The market's cotton versus synthetic
balance affects our bottomline directly, and we have a big stake
in tomorrow's clothing trends-we should be out there, shaping them.
Cotton's a winner, so long as consumers turn discerning and see
clothing as a means of communication rather than a shield against
"We have no power over that," said
Galgotia looked unmoved by either of them.
"Now, let me suggest something," said the CEO, "I
understand you guys are keen on some radical strategies. But let's
realise that we're barely out of the woods yet."
The group fell silent. Godbole and Pradhan
recognised the tone of voice the young chief had spoken with. Some
soul-speak was on its way. "I think we should begin with the
basics," Galgotia began, leaving his seat and walking up to
the window overlooking the crowded central Delhi market. "First
of all, we should infuse some much-wanted capital into the textile
and filament divisions. Let's replace old looms. On the front-end,
let's go after exports, big time. We mustn't miss the 2005 world
trade opportunity, and the natural versus synthetic trends are clearer
in the high-margin western markets. Cotton wins."
"Great," muttered Pradhan, turning
to Godbole. "Now if only we had that much-wanted capital to
"I think we have," smiled back Godbole.
"We have been current for the last one-and-a-half years with
all our financiers. I have it covered"
"Getting the priorities set is the first
task. I have just spelt out a survival strategy. Something we must
do. But what we need next is a clincher. Something that will tell
our shareholders that GCL is game for the long haul. I suggest we
break up and reassemble on Monday with an imaginative plan on everybody's
Galgotia turned around and gazed at the horizon.
He'd given himself another green ribbon. But were Pradhan's ideas
the ones that would propel him to it?