The survivor: Chaturvedi's lonely struggle seems finally to be nearing its end

His gym at his farmhouse in Gadaipur, near Delhi's Mehrauli-Gurgaon road, can beat any five-star fitness centre. It's equipped with the most advanced treadmill (9500 hr) from Life Fitness of the US, has the latest cross trainer equipment, the leg press, extension and curl machines, abdominal crunch, the works. Ashok Chaturvedi, Chairman of packaging giant Flex Industries, is working out like a maniac. In the background is a Hindi number flowing from a 7,000-W Panasonic Super Woofer. After jogging for 30 minutes at 11.5 km per hour on the treadmill, Chaturvedi gets down to chatting. Surprisingly, he shows no signs of gasping for breath. Then, without wiping his sweat, he starts working out on dumb bells (weighing 30 pounds each) to pose for photographs for BT.

After the photo session, Chaturvedi slips into a Dilip Chhabria-modified Toyota Camry-the extended car enables a face-to-face seating arrangement-to go to his headquarters in Noida, leaving behind his favourite Mercedes S Class, a Lexus, and a Hyundai Terracan on his 3.5-acre estate. A posse of Uttar Pradesh policemen pilots us in two Gypsies, just in case "there is any trouble as the chairman returns home late", says an aide. Chaturvedi's Noida office too is equipped with a gym where he works out whenever he misses his daily regimen at home. And it seems his athletic body, the six pack abs and the slim waist (32 inches) are doing the trick. Forty-six-year-old Chaturvedi, who had been going through a rough patch after mounting business losses and a high-profile bribery case in 2001, is showing all the signs of fighting back to shape.

Till recently, all his four companies but one were making losses. Today, three of them are in the black and the fourth could turn around next year. Flagship Flex Industries-India's largest flexible packaging company, which makes BoPP and BoPET films and then converts them into laminated pouches for FMCG and tobacco products-has recorded profits for the past two consecutive years (2001-02 and 2002-03), after a five-year losing streak. The company is expected to register a net profit of Rs 45 crore from sales of about Rs 800 crore in the current financial year, says R.D. Gupta, Vice President (Corporate Affairs). Flex Engineering, the company that makes packaging machines, continues to make profits while Flex Foods, a company that exports freeze-dried mushrooms, made profits last year for the first time after it started its operations in 1992. The only losing venture currently is FCL Technologies (it makes polyester chips, the raw material for the pet film), which is expected to turn around in 2004-05.

ABOUT THE MAN

ASHOK CHATURVEDI CMD Flex Group AGE: 46 GROUP TURNOVER: Rs 1,090 crore. COMPANIES AND THEIR SALES (IN 2003): » Flex Industries Rs 672 crore » FCL Technologies Rs 325 crore » Flex Engineering Rs 70 crore » Flex Foods Rs 23 crore EDUCATION: B.Sc. Chemistry, Christ Church College, Kanpur (1978) CAREER TIMELINE: » Became a commission agent for Rollatainer in 1980 » Started a tiny flexible packaging unit in Noida in 1983 » Achieved Rs 1 crore turnover for the first time in 1985 » Friend of MP Amar Singh since 1986 » Set up a packaging unit in Malanpur, Gwalior, in 1992 » As part of backward integration set up first line of BoPET 18,000 tonnes in 1995 » Second BoPET line 18,000 tonnes in 1996 » Third line in BoPP 18,000 tonnes in 1997 » Arrested in a bribery case involving former Delhi Chief Excise Commissioner » Someshwar Mishra in November 2001 and later released on bail » CBI files chargesheet against him and Mishra in October 2003 » Inaugurated the fourth film line in BoPP in December 2003 » Case will be heard in the court of Special Judge in Delhi's Patiala House » To spend most of his time in R&D to focus on product innovations » The fifth line in BoPET to go on stream from April 2004

Growth Mode

Having consolidated his empire, Chaturvedi is now shifting into growth mode: On December 12, 2003, Chaturvedi got back into action when he opened a 15,000-tonne BoPP line, which will make him the largest polyester film maker in the country. An 18,000-tonne BoPET line is also expected to be operational by April 2004, which will take his total capacity to 84,000 tonnes (BoPP: 30,000 and pet: 54,000). "Now I am focussing on the business completely. I have left behind the bad days," gushes Chaturvedi, who will be financing this Rs 180-200 crore investment purely through internal accruals.

Clearly, Chaturvedi has had enough of debt, which in 1999 had bloated up to Rs 700 crore, almost double his sales at that time. Mercifully, Flex recently reached a one-time settlement with the financial institutions (ICICI Bank, IFCI, IDBI and UTI), which envisages a part-payment of the principal through cash, partial conversion of debt into equity, and a long term zero per cent loan. "We have become wiser," he smiles, adding, "I will never borrow money again." From a precarious debt equity ratio of 2.3:1 in 1999, Chaturvedi claims that it's now 1:1. His aim is to make it to make it 0.5:1 in the next couple of years.

Five years ago, Chaturvedi was almost written off. His Rs 600-crore investment in two polyester film lines in 1995 turned out to be massive errors of judgement (in hindsight); it coincided with a crash in international polyester prices. Chaturvedi's game plan was sound, on paper: To have control over his raw material (there was a shortage of BoPET films in 1993-95). Unfortunately, he wasn't the only one with the same idea. As his plan came on stream, so did capacities of several others, including Garware Polyester, Jindal Polyester, and Polyplex Corp. Result? Supply outstripped demand by almost two times. To compound his woes, prices internationally crashed from $5 (Rs 230) a kg to a little over $1 (Rs 46). Along with the debt, the losses too kept mounting, up to Rs 121.69 crore for the 15 months ended December 1998. At that time Chaturvedi even contemplated hiving off his polyester film business as a joint venture with his two competitors Polyplex and Ester Industries. "But they couldn't agree on the stakes," says an executive with a competitor.

Bribe Charges

The biggest blow, however, was yet to come. In November 2001, Chaturvedi, along with a close aide Navin Francis John, was arrested for paying Rs 5 lakh allegedly as a bribe to Someshwar Mishra, the then Chief Commissioner of Central Excise in Delhi. Chaturvedi was accused of paying the money to Mishra for favours on behalf of pan masala manufacturers (they buy laminated pouches from Flex). Chaturvedi is out on bail, while Mishra lost his job. The industrialist, however, denies it was a bribe and says it was just a "personal loan" to a friend whom he had known for years. The case claimed political victims too. Chaturvedi told the Central Bureau of Investigation (CBI) that he hosted parties for the former Jharkhand Governor Prabhat Kumar when he was the Cabinet Secretary between March 1999 and July 2000. Kumar finally quit in 2002. The then Finance Minister Yashwant Sinha also came under fire thanks to reports alleging that Flex Industries supplied election publicity material like flags and posters to him for the Union elections. Chaturvedi defends it as "purely a business deal as Flex's business also includes printing. We were the first to invent plastic flags". The bribery case is currently in the court of the Special Judge in Delhi's Patiala House Court. In October 2003, the CBI filed a chargesheet against Mishra and Chaturvedi.

All these charges couldn't have come at a worse time for Chaturvedi. For, his competitors-many of them new kids on the block-were racing ahead. Delhi-based Cosmo Films (promoted by Ashok Jaipuria), the largest BoPP film manufacturer in the country with a 46,000-tonne capacity, has been making waves globally. In October 2003, Cosmo made it to Forbes magazine's list of 200 successful companies outside the US with annual sales of just under $1 billion (Rs 4,600 crore). By February 2004, the company will add a ninth line, which will take its capacity to 60,000 tonnes. Another company, Noida-based Polyplex Corporation, owned by Sanjeev Saraf, an old pal of Chaturvedi, has a pet films capacity of 15,000 tonnes in India and 30,000 tonnes in Thailand (through a 100 per cent subsidiary mainly aimed at the export markets). Both Cosmo and Polyplex fare better than Flex in the stock market too.

Fighting Back

What's still in Flex's favour, though, is that it's an integrated flexible packaging player with a presence in both raw material (BoPP and pet films) and end products (laminated pouches). Cosmo Films on the other hand makes only BoPP film, and Polyplex is present only in pet film. Besides the traditional customer base like tobacco and pan masala manufacturers, Flex has buyers like Hindustan Lever, Nestle, Procter & Gamble, and even international customers like Max chocolates and Wrigley. Flex is also the largest in sales with a turnover of Rs 682 crore in 2003 compared to Cosmo's Rs 315 crore and Polyplex's Rs 142 crore. Says Kuldip Balasia, Head (Research) of Kolkata-based broking firm SKP Securities: "With the economy booming and an expected recovery in the FMCG sector, Flex is likely to do well." In fact, Flex Industries' shares have improved from a 52-week low of Rs 13 to Rs 50 levels now, even though volumes are low.

Balasia says the biggest concern with Flex is related to the management and corporate governance. "The group per se is good. But it has to show that the companies are shareholder-friendly." The group hasn't declared a dividend in the last five years. But Chaturvedi says that all his four group companies will come to the dividend list at the end of the financial year 2004-05. He even plans to hold analyst conferences some time in October 2004. Chaturvedi insists that the bribery case is "personal" and has nothing to do with the business.

Chaturvedi, a graduate in chemistry from a Kanpur college, had a phenomenal rise, from a sales agent of packaging company Rollatainer to become one of the largest industrialists in UP. In 1983, Chaturvedi started his packaging unit in a 300-square feet room in Noida, then an upcoming industrial town on Delhi's fringes. He pioneered the concept of small pouches for Kanpur-based Ashoka Spices and Kothari's Pan Parag pan masala, which revolutionised packaging in India. His group sales are now in excess of Rs 1,000 crore.

Chaturvedi, though rustic, is flamboyant (he knocks back only Chivas Regal, and lights up an occasional Davidoff). He networks with senior bureaucrats and politicians and throws parties for them. You can't find him in the company of the city's business elite like the Burmans, Shrirams or Nandas, but he can be spotted hanging out with some large garment exporters in Noida. Also, he doesn't tee off in his free time, but prefers to work out in the gym or play cricket. "You play a dead ball in Golf, but in cricket you hit a moving ball," says Chaturvedi. Samajwadi Party MP Amar Singh and journalist-turned-MP Rajiv Shukla were on his board. Singh, who rubs shoulders with the Ambanis and Bachchans, has always been open about his proximity to Chaturvedi. In fact, it was Singh who inaugurated Chaturvedi's latest BoPP line last month. "I am a friend of Flex and will remain forever," Singh was heard telling the gathering. Now only if Chaturvedi's shareholders could be as brave!