Chapter 11A: India is not an easy place to do business. For some strange reason, a particular DNA strain in business does very well here.
Companies whose actual business is very different than the stated one.
Many decades ago, Hindustan Ciba Geigy and J & J came to India to buy opium. India was the only legal source of medicinal opium. Opium and it’s extracts in turn went into various profitable medical formulations. The stated business of Ciba Geigy was to sell Binaca toothpaste and they are well known for the Binaca Geet Mala on Radio Ceylon and Amin Sayani. J&j sold baby talcum powder. But besides opium, they also promoted bariatric surgery and sold stents.
ITC, before cleaning up its act, in the late eighties was a cash machine like no other – rumoured to be stealing excise. A Rs 0.06 stick of cigarette sold for Rs 1. And after extensive raids, a lot of their highly paid staff went to jail in 1987.
There is a common end to many of these. The MNC disappears. No one ever gets convicted. Suddenly it becomes a professionally managed Board run company. And to be fair, ITC is now a great food and hospitality company. Just like Dharampal Satyapal of Rajnigandha Pan Masala fame is now a food company with a solid private equity business. They own hotels, rubber processing, aquaponics and the pastry chain L’opera. Mothers Recipe is a great brand of pickles – run by a Beedi King. Wave is a great real estate company owned by a country liquor family.
T series has a billion dollars in music royalty revenues. They started off as music pirates. ABN AMRO tried to do gold smuggling.Nova Scotia tried too. It is a myth that prostitution, drugs or gold are profitable. Google is a better business. With similar dynamics and lower risk.
Why did the Citi HDFC duo succeed where everyone else failed. The reason is entity structure and strategy. Exporting a few hundred billion dollars from India is hardly easy. On the face of it, India is a democracy with strict laws. We now have the National Investigation Agency and PMLA. We have had COFEPOSA forever. The havala trade and the financing of Terror are closely inter related. Running terrorist organisations is a fairly expensive exercise. Running religious conversions is even more difficult. And expensive. They all need high quality banking. As does smuggling.
The shear genius of Citi HDFC was in the brilliant structuring. At the very top was Citibank NA – the worlds largest global bank. With close ties to governments around the world, they helped dictators, terrorists and politicians to steal and manage money.
It was not a side business. This was THE business:
https://lnkd.in/gvCxN_z2
And HDFC Bank was the perfect missing piece which completed the jigsaw.