For a man who claims he can earn his livelihood by playing the flute-he is a trained flautist-53-year-old Venugopal Dhoot, Chairman of the Videocon Group, has quite an ambition, to head a global business empire. He played this out to perfection last fortnight. First, on June 28, Videocon sewed up the euro 240-million (Rs 1,248 crore) acquisition of French media and electronics major Thomson sa's Colour Picture Tube (CPT) and CPT glass business across China, Poland and Mexico (the company had acquired Thomson's Italian CPT plant a month ago, in a separate $100-million or Rs 440-crore deal). Then, on July 7, it announced the much-anticipated takeover of Swedish white goods major AB Electrolux's loss making Indian operations, Electrolux Kelvinator Limited (EKL).

With the two deals (see The Tale Of Two Deals) Dhoot has broken into the rarefied reaches of India Inc., hitherto the preserve of Old Money like the Birlas, Tatas and Ambanis or new-age upstarts such as K. Anji Reddy and N.R. Narayana Murthy. That should give the son of a sugar-mill owner from Gangapur in Maharashtra some satisfaction. Videocon and Dhoot have been around in public consciousness since 1987 (that was the year Videocon International, the consumer electronics firm was born), but neither has received the kind of respect groups of that size and individuals heading such companies do. The group's success in consumer electronics and appliances has always been attributed to such things as price or dealer-incentives and Dhoot, despite his track record at running Videocon and sterling connections (Finance Minister P. Chidambaram, Railways Minister Laloo Prasad Yadav and Civil Aviation Minister Praful Patel were all present at the party he threw to celebrate the Thomson deal) has always been seen as a bit of an outsider in Mumbai's business circles.

The Thomson and Electrolux deals should change some of that. The Videocon Group has suddenly become a Rs 17,500-crore entity with a global manufacturing footprint. And Dhoot, who has spent nothing on the deals, (see Deal Mechanics) is increasingly being seen as a finance whiz. "I like what he's achieved with Thomson and Electrolux," says Lakshmi Mittal of Mittal Steel, a close friend and advisor. " Videocon has today emerged as a strong player, both in India and globally." Indeed, Videocon's global CPT capacity of 19-million-units-a-year compares favourably with LG-Philips Display's 38 million, Samsung's 32 million and Matsushita's 12 million. And in the Rs 20,000-crore Indian consumer electronics and appliances market, Videocon has held its own against the Koreans, thanks largely to a multi-brand strategy that should now get a fillip with the acquisition of licensing rights to Electrolux, Allwyn and Kelvinator brands.

With contracts worth $300 million (Rs 1,320 crore, and this is Electrolux's estimate; Dhoot claims it is much higher at Rs 6,000 crore a year) for the supply of components, even finished products, to AB Electrolux, Videocon looks all set to thrive. And buoyed by a hugely successful domestic oil and gas business that has become a cash cow for Videocon, Dhoot has taken the global plunge, bagging and hunting for exploration and production rights as far as Sudan, Jordan, Yemen, Ukraine and Niger (see The Oil & Gas Story). Yet, there is much that can go wrong with Dhoot's global gamble.

There are three things that Dhoot seems to be gambling on: that the sourcing contracts from Electrolux will provide a steady revenue stream and shore up the topline; that the benefits of scale will help him compete in the commoditised CPT market and that CPTs themselves will be around for the 10-15 years he expects them to be; and that prospecting oil in global pariah-states such as Sudan (where Western companies fear to tread) will pay-off.

Simple Man, Simple Models

"On a recent visit of the Italian President to Rashtrapati Bhavan, our President (Abdul Kalam) pointed to me that I was perhaps standing on the wrong side of the table, with the Italian business delegates," grins Dhoot. "The fact was, for this meeting, I was introduced as an Italian, not an Indian businessman." (Dhoot has considerable interests in Italy). "When I recently met the Prime Minister, I briefed him that during his upcoming trip to China he can avoid the same mistake, for in Beijing, I will be introduced as a Chinese entrepreneur." Dhoot has interests in China too.

THE TALE OF TWO DEALS

It's a deal: Dhoot (L) with Thomson SA Chairman Frank Dangeard In November 2004, when Videocon entered the race for the colour picture tubes manufacturing capacity (19 million units a year across four plants in Europe, Asia and North America) of Thomson SA, not too many people gave the company a chance against the likes of LG-Philips Display, Samsung and Matsushita. Yet, not just has CMD Venugopal Dhoot pulled off the deal, he has done so on terms that are favourable to his company. "The word is out in the world that India and Indian companies are not just a good bet by themselves, but also a hedge against China." Fine, but surely, Thomson SA is likely to have looked at the right price, not just a feel-good notion about the units it was selling off being able to stand up to the might of Chinese competitors? Fact is, Dhoot agreed to pay the asking price of euro 240 million (Rs 1,248 crore) without batting an eyelid (and net of cash and debt, which continue to be Thomson's); the deal was completed through a special purpose vehicle, Eagle Electronics. Then, he managed to sell his oil and gas story to Thomson as a great investment. Sure enough, after a due diligence study by UBS, Thomson agreed to invest $295 million (Rs 1,298 crore) in Videocon Industries for a 15 per cent stake. The Electrolux deal was struck pretty much the same way; in return for taking over the company's 91.85 per cent stake in its loss making Indian subsidiary (losses as of December 2005: Rs 118 crore), Dhoot got the Swedish major to agree to invest $94 million (Rs 413.6 crore) in Videocon Industries for around 5 per cent stake. And since Electrolux wanted to stick to its business of consumer products (and not invest in anything else), he agreed to merge Videocon International with Videocon Industries.

The anecdote itself may be apocryphal, but there is adequate proof that Dhoot has fully bought into the global business mindset. Ask him why, if the aim was to vertically integrate Videocon's 17-million-units-a-year CPT glass business into a CPT manufacturing facility, he did not look for an acquisition in India (there are enough companies, such as Hotline, Samtel or JCT) and pat comes the answer, "Since all companies are family-owned in India, acquisitions are problematic. Globally it was easy, as Thomson is run by professionals."

Then, and Dhoot understands this all too well, the Thomson acquisition has positioned Videocon with global heavyweights in the 151-million-units-a-year worldwide CPT market, not in terms of just capacities, but also R&D capabilities, one area where an Indian acquisition would not have helped. The Thomson buyout brings almost 2,000 patents into Videocon's fold, something it can leverage to fight the global display battle as the market moves out of CPTs to Liquid Crystal Displays (LCD) and Plasma. "Videocon can leverage the Thomson buyout to be an aggressive price warrior in the CPT market globally, though it remains to be seen how it actually plays the game," says Ravinder Zutshi, Deputy Managing Director of the Rs 4,900-crore Samsung Electronics India.

"As Indian businesses start to go global, Videocon has proved that it is right in front" Lakshmi Mittal Chairman & CEO/Mittal Steel

"He is a simple man who conducts business based on simple models that he constructs in his mind," says Vallabh Bhansali, Chairman, Enam Financial Consultants, an investment banker and a good friend. Only, Dhoot has now expanded his horizon. "As Indian businesses start to go global, Videocon has proved that it is right in front," adds Mittal. Little wonder, then Dhoot's rationale for the Thomson buyout is simple. "We are the world's lowest cost producer of CPT glass and that's what gave us the confidence to go in for Thomson." The deal provides a ready market for Videocon's 17-million-units-a-year domestic CPT glass capacity (under expansion to 24).

Most of Dhoot's recent moves can be explained as simply: with the Electrolux deal, Videocon acquires licensing rights to sell a global brand, Electrolux in India; it also bags the Kelvinator and Allwyn brands in the bargain; and a $94-million (Rs 413.6 crore) investment by the Swedish firm in the company more than makes up for the Electrolux Kelvinator losses it takes on. Then, there's the sourcing contract.

As for oil, Videocon has had some experience in the business, and this is a great time to go shopping. "Well, if we don't leverage this huge opportunity in countries where Western companies can't or won't go in, we are not entrepreneurs then, right?" says Dhoot's Man Friday and the financial wizard behind Videocon's deals with Thomson and Electrolux, S.K. Shelgikar.

Dhoot makes it his job to travel and network with the powers that be to enable his group access global oil and gas markets. Five days before signing the deal for EKL, he flew to Amman to meet the King of Jordan, whom he had written to for an appointment (he was granted an audience). "My sense is that the King wants us to be more than just an oil and gas company in Jordan," says Dhoot. Though Videocon picked up four on-shore oil and gas blocks in Jordan, Dhoot says he may even look at putting down manufacturing facilities for consumer electronics and appliances in Jordan, a move that will strengthen his Africa and West Asia East play. After all, it would fit very well with his $40-million (Rs 176-crore) manufacturing facility in Oman and the new Rs 80-crore plant in South Africa.

The Global Gamble

"There is money to be made even in ship wrecking. Videocon may asset strip Thomson," says an industry watcher in India. While that accusation may be a bit far-fetched, Dhoot has enough things to worry about. Analysts punch holes in Videocon's Thomson buyout, pointing out that CPT technology is on the decline, especially in European and American markets where Thomson has its facilities. "Globally, almost 89 per cent of the display market is still CPTs, and the market is here for at least 15 years," defends Dhoot. He also points to that fact that Thomson factories already run a Plasma line and will start making LCD displays within the next two years, helping him stay ahead of the technology curve. Then, there are the slim CPT displays that most CPT majors, much like Videocon-Thomson, are banking on; Samsung launched televisions based on this in India in the first week of July.

But what about losses at Thomson? Surely Dhoot doesn't expect it to turn around by merely sending cheap glass from India? And even in the domestic market, Videocon's monopoly in CPT glass is under threat with Hotline all set to roll out its integrated 12-million CPT glass line at Gwalior by May 2006. "We're not afraid of Videocon," says Anil Gupta, Chairman, Hotline Group. "By July next year, with an integrated CPT-CPT glass line in place, no one will be able to compete with us on price." Dhoot claims that Thomson CPT's losses stem from the high capital cost of its Mexican plant (the capital cost component, obviously, does not affect him). "As the television market in India moves to bigger screen sizes and slims, which no one makes here, we can start importing these from our global factories," he adds, already looking to the future.

"Videocon can leverage the Thomson buyout to be a price warrior in the global CPT market, though it remains to be seen" Ravinder Zutshi Deputy MD/Samsung Electronics India	"If we don't leverage this huge opportunity in countries where Western companies can't or won't go in, we are not entrepreneurs, right?" S.K. Shelgikar Advisor/Videocon Group

Videocon's biggest challenge, however, could come from closer home, its lack of bench-strength in management. The family is actively involved with the business, with Dhoot's younger brothers Rajkumar Dhoot, a member of Indian Parliament's upper house and Pradeep Dhoot, and son Anirudh Dhoot taking care of several parts of the empire. "He is the entrepreneur, the go-getter and the strategist," says a close business associate. "But to run a global business empire he has to bring in professionals who can become credible faces of his diversified global business."

Today, all Dhoot can point to in terms of professionals is Shelgikar, the head of corporate affairs Kuldip Drabu, and the head of the group's oil and gas business, S. Padmanabhan. As he turns his attention to managing 19 factories across four continents, in culturally diverse environments, the lack of management bandwidth could prove a serious handicap.

Dhoot's gambit is an opportunistic, risky play. Then, the man has always been a gambler of sorts (see Videocon's Failed Diversifications). "Revenues from oil and gas have substantially funded Videocon's electronics and durable business for some time now," says Nikhil Vora, Vice President (Research) at Mumbai-based brokerage SSKI. His reference is to the fact that had Dhoot not gambled on oil and gas and CPT glass shells way back in 1994, Videocon would have probably gone the way of other Indian consumer electronics firms.

Videocon's washing machine plant in Aurangabad: The company has not recived the respect a firm its size normally does

For all the risks associated with Videocon's global oil foray, the fact remains that its international exposure is still limited to just $150 million (Rs 660 crore) currently ($100 million or Rs 440 crore in Sudan and $50 million or Rs 220 crore in Jordan) much less than the $300 million (Rs 1,320 crore) of yearly sourcing contracts that the company hopes to bag from AB Electrolux.

With 10 brands in its portfolio, and 19 factories globally, Videocon is proof of Dhoot's ability to think big. "Dhoot has proved that with strategy and fire in the belly, you can achieve much," says Mittal. With a global empire to manage, the next two years will be a critical period for Dhoot and Videocon. The man has established himself as a global entrepreneur in his own right. Now, he has to prove himself just as global a manager.