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Thursday, November 29, 2012

Ponty's World
Slain businessman Ponty Chadha built from scratch a Rs 10,000 crore business and forged close ties with many politicians. His son, Monty, wants to steer the business in a new direction
Surajeet Das Gupta / New Delhi Nov 24, 2012, 00:15 IST Source: Business Standard


Gurdeep “Ponty” Chadha, liquor baron, real-estate developer, sugar mill owner and Coca-Cola bottler, could tell with accuracy the outcome of elections in Uttar Pradesh. He was the first to sense the rise of Mayawati in the state. So Chadha built bridges with her before anyone else — a relationship that may have helped him gain control of liquor distribution in the state years later. A few days before Diwali, he had told a friend that the Samajwadi Party would lose at least 15 seats to Mayawati’s Bahujan Samaj Party if general elections were held right away. The liquor vends he and his associates ran in the state gave him valuable insights into the popular mood. His people were instructed to observe and report what they saw and heard. Chadha would tell friends this was his “Gallup poll”.
But his intelligence network failed last Saturday when he went down in a hail of bullets allegedly fired by his younger brother, Hardeep, who was also killed in the gunfire. A week after the ghastly shootout in a south-Delhi farmhouse, there is still no clarity on the chain of events that day. The presence of musclemen, personal security officers and hangers-on has muddied the picture.

What is certain is that the dispute between the brothers was not just over one farmhouse — it was over dividing the around Rs 10,000-crore business that their father, Kulwant Chadha, had started and Ponty had assiduously built over the years. (Ponty did nothing without his father’s advice, except when he decided to celebrate his wedding in style, which included booking a south-Delhi five-star hotel. Kulwant didn’t approve that he had borrowed money from friends for the bash.) Friends of the Chadha family say Hardeep wanted to opt out of the family business. Sources say a Rs 1,600-crore settlement was being worked out for Hardeep. But the two brothers died before it could be closed and signed.
At the moment, it seems that a division of assets is not the family’s priority. The Chadha family put out one advertisement to announce the two deaths. The Bhog ceremony, held at the historic Rakab Ganj Sahib Gurdwara in Delhi, not far from Parliament House, had the entire family in attendance. If there are undercurrents of tension in the family, these weren’t visible at the ceremony. Ponty’s younger brother, Rajinder, aka Raju, is expected to be chairman of the group. He was Ponty’s trusted lieutenant and used to look after the day-to-day affairs of the liquor business. The business will be driven by Ponty’s son, Manpreet, or Monty.
Thirty-something Monty is a school dropout but suave, polished and courteous to a fault. In contrast to his father who would go to office only late in the afternoon, preferring to work in the morning from his 10-acre farmhouse in Chattarpur, Monty reaches office at 9 o’clock in the morning. Monty has engaged international consultants for his key projects. He took the help of an international consultant when he decided to change the name from Chadha group to Wave group. The consultant also gave the group a new logo. When he wanted to sell his ambitious 152-acre Wave City Centre in Noida, he hired Dubai-based Modelcraft, a creative solutions company, to come up with an interactive model of the project that he could show to prospective buyers. He forked out over half a million dollars for the model, it is learnt.
Monty is not a control freak. When Gurdeep Khandhari, Coca-Cola’s bottler in Amritsar, needed financial help to run the unit, Ponty picked up a majority stake in it. Monty, who is married to Khandhari’s daughter, had the option of becoming the managing director, but he refused and asked his father-in-law to continue running the business. Sources in the soft drinks industry say: “They were keen that the business be run by professionals and took the help of Coca-Cola to identify somebody to look after the plant.”
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It is difficult to picture Monty running the family’s liquor business. No consultants, no sophistication, fear holds the key in this business. “In a system where the person at the liquor vend has to send cash to a centralised location day after day, any breakdown can lead to havoc. So you have to instill fear that no one will default or break the rules,” says a businessman who was close to Ponty.
Ironically, country liquor was the family’s first business in the 1960s when Kulwant, Ponty’s father and Monty’s grandfather, got the licence to run a shop in Moradabad. The turning point came in 1997, during the Akali Dal regime in Punjab, when Adesh Pratap Singh Kairon (now food and supplies minister) was excise and taxation minister, and Ponty got the licence to run the liquor trade in the state. It was a win-win situation for both: the government wanted to replace the existing syndicate and Ponty wanted to expand. Yet, he was not beholden to just the Akalis; Ponty’s good run continued when the Congress came to power in the state. People close to him say that he offered to double the Punjab excise department’s revenues from liquor every year in return for distribution rights in the state. His monopoly ended only in 2006 when a new excise policy was introduced.
The big break came in 2008 when the BSP government gave Ponty the exclusive rights to distribute country liquor as well as India-made foreign liquor in almost the whole of Uttar Pradesh. The 54 distilleries in the state vied with each other to stay in his good books. He also came to control 40 per cent of the 17,000-odd liquor outlets in the state.
Still, Monty wants to give the group a new direction by reducing its dependence on liquor. “Today, liquor constitutes 70 per cent of our group’s topline, I want to reduce it to 30-35 per cent in the next five to six years,” he had told Business Standard a few weeks before his father’s death.
Actually, the liquor contracts in Uttar Pradesh come to an end in March 2013. Since Ponty was close to Mayawati, there has been speculation that the Samajwadi Party government in the state, led by Chief Minister Akhilesh Yadav, may end the group’s monopoly in distribution. Lucknow Sharab Association spokesperson Anil Agarwal says that the state government could revert to the earlier practice of a lottery, wherein there were 20-25 wholesalers in the state. He says that will “bring in more competition”.
The group has certainly faced some turbulence in Uttar Pradesh. Ponty had bought five sugar mills of the Uttar Pradesh Sugar Corporation in 2007. The Comptroller & Auditor General has said that these were sold at throwaway prices and caused a loss of Rs 1,200 crore to the state. Chief Minister Yadav has referred the matter to the Lokayukta for a probe.
That apart, Ponty had built bridges with the Samajwadi Party. He attended Yadav’s swearing-in ceremony held in Lucknow earlier this year, and met Samajwadi Party chief Mulayam Singh Yadav in Delhi to wish him on Diwali. Insiders say that tension was brewing between Ponty and another well-known Noida industrialist who is known to be close to the Samajwadi Party and who didn’t approve of Ponty reaching out to the senior Yadav directly. But his annoyance meant nothing to Ponty.
It is worth noting that True Value Food, a Wave company, has been contracted by the Uttar Pradesh government to supply food supplements to over 28 million children and pregnant women under the Integrated Child Development Scheme for three years. The contract is worth over Rs 9,000 crore. (At the moment, the scheme is in limbo in the absence of clear directives and a rival challenging the award of the contract in the Allahabad High Court.) Ram Gopal Yadav, the chief minister’s uncle, was at the Bhog ceremony at Rakab Ganj Sahib Gurdwara on Thursday. “There are 35,000 families that Ponty looked after,” he was reported as saying. “His death is a loss for society.”
Ponty had suffered reverses in Uttarakhand too. His group was allotted over a dozen hydro-power projects, out of the 56 up for grabs, in the state with capacity ranging from 5 Mw to 25 Mw in 2010 when Ramesh Pokhriyal Nishank of the Bharatiya Janata Party was chief minister. Ponty had planned to invest over Rs 1,000 crore in these projects. Controversy erupted when the media reported allegations that the government had favoured companies owned by Ponty in awarding the projects. As the matter reached the courts, the government abruptly cancelled all 56 projects within months of allotting them. Ponty had challenged the decision in the Supreme Court.
Notably, in his last moments, Ponty was accompanied by Sukhdev Singh Namdhari, chairman of the Uttarakhand Minorities Commission. It was Namdhari’s bodyguard who is said to have brought down Hardeep. Namdhari, of course, has been removed from his job by the Uttarakhand government. He was arrested on Friday.
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It’s not that Monty wants no part of any regulated business. He may not be enthused by liquor, but he is upbeat on sugar — a highly politicised industry where the government controls the input (sugarcane) price and also the output price (through its monthly sugar release order). Monty says the sugar business will only grow in the days to come and does not rule out acquisitions. His plan is to eventually list the sugar business on the stock market. That would be the first group business to list and open itself to public scrutiny. “We want to be amongst the top five sugar companies in the country” says Monty. That might be too ambitious, but he has finalised a blueprint to double capacity to 50,000 tonnes (of sugarcane) crushed per day.
But Monty is aware that he needs new businesses which will reduce his reliance on liquor or sugar, in case something goes awry. That is why he is aggressively pushing two key new business areas — real estate and retail. Monty says that the group already has a land back of over 3,200 acres, mostly in north India, and is scouting for private equity funds or other investors to bankroll real estate developments. He hopes this business will generate sales of over Rs 15,000 crore in the next five to six years.
He is also getting into the hotel business and talks are on with Jumeirah of Dubai and Swissotel for a partnership. He also wants to leverage his connection with hundreds of thousands of sugarcane farmers to support a retail chain for fresh vegetables called Wave Fresh. “The farmers with whom we have a long relationship plant sugarcane in only half of the 150,000 hectares of land they cultivate. We are telling them to grow vegetables which we will buy from them and supply to our vegetable retail chain”, elaborates Monty.
It’s nothing short of a DNA change for the group — a tough call for its new leader. But Monty will not have his father to advice him. He is left to his own devices.

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