Only if its controversial CEO, Bijon Nag, agrees to focus on a strategy.

By Avijit Ghosal

For over two decades, from the time it started operations in 1974 to 1997, the Rs 236.25-crore IFB Industries (IFB) did not have a trade union or a labour officer to manage its industrial relations. "I want the workers to think of me as God," Bijon Nag, the 54-year-old chairman of IFB, told BT in November, 1995. But now, IFB has as many as two trade unions--one in its factory in Calcutta, and the other in its head-office--which have already signed up over 60 per cent of IFB's workforce.

How the gods have fallen. Crucially, the financial institutions too appear to have lost faith in the once-open technocrat-CEO, whose diversifications have proved to be the bane of IFB. For instance, when the Industrial Development Bank of India (IDBI) sanctioned a Rs 20-crore loan to the company in June, 1997, it imposed a set of stringent conditions, which could dramatically alter IFB's business plans.

What ails the company? Actually, Nag's problem-list is long: his failure to find a buyer for IFB's loss-making home appliances division; falling profits, which forced Nag to extend IFB's financial year by six months to December 31, 1997; the lack of resources to finance the expansion of the company's automotive sub-assemblies and air-conditioner-making facilities; financial irregularities et al. According to an IFB spokesperson, the problems faced by the group are more "an upshoot of the political and economic milieu rather than a phenomenon of corporate decisions."

Unfortunately, the IDBI does not think so, and its stipulations--vide its letter ERO 2208/PFD.50.b dated June 10, 1997--appear to be aimed at ensuring that Nag takes the right decisions. Although senior managers in the IDBI refused to comment on the issues involved, BT tried to analyse the impact of the three conditions in the letter of intent on IFB's future:

• The IDBI has insisted that "the agreement to be entered (into)..." must be ratified by it. Since last year, Nag has been trying to sell off IFB's home appliances division, which makes washing machines and micro-wave ovens in Goa, to the $27.34-billion Bosch of Germany--a company with which IFB has a long and controversial association. Not only are those talks stalemated, IFB's negotiations with the Rs 650-crore Whirlpool India and the Ankara-based bbl Group have also fallen through. Obviously, the IDBI is trying to ensure that a pressurised Nag does not initial a contract detrimental to IFB's interests.
• The IDBI has stipulated that Nag "appoint a qualified/experienced professional as finance director" replacing IFB's present finance director, Ranendranath Sen. Apart from the fact that IFB's net profits fell by 45 per cent in the first six months of 1997 over 1996--one reason being its interest costs, which shot up by 43.61 per cent from Rs 9.47 crore to Rs 13.60 crore--there is also the matter of the maze of closely-held investment and trading companies controlled by Nag, which was exposed by BT.
• The IDBI has asserted that a consultancy company should be appointed "to examine the feasibility of an appropriate restructuring plan" for IFB. Rightly too, since, despite Nag's recent posturing that the company will focus on its core fine blanking business, he, simultaneously, announced another diversification into the air-conditioners business in November, 1997, with two Japanese companies, the $39.98-billion Fujitsu and the $13.54-billion Itochu. Obviously, the IDBI is not entirely convinced by the feasibility of this business plan.

If IFB became what it was, it was because of Nag's strategy of being focused and globally-competitive. And if it is to survive, IFB must, once again, replicate that strategy by merging together companies which have synergies. What has changed is that it is the IDBI that is now leading IFB's charge into the future--not Nag, who seems to have drawn a fine blank with his well-diversified ways at IFB.