B

Growth of Bannari Amman Group- A Family Owned Enterprise Group 4

S a r a n g B n a u b a k d e & M a n p r e e t S i n g h

Page 1

B

Growth of Bannari Amman Group- A Family Owned Enterprise Group 4

S a r a n g B n a u b a k d e & M a n p r e e t S i n g h

Page 2

Synopsis : Bannari Amman Group (BAG) was one of the largest industrial conglomerates in South India

with manufacturing, trading, distribution and financing corporations in the group. This group had

the legacy of conducting business ventures over the past 40 years. Starting as a group of related

and unrelated businesses in a purely family-owned entity, now the group had three publicly listed

companies and over 15 family-owned businesses in its fold. Following the tradition that the

eldest in the family headed the group, the group performed under the leadership of the chairman.

Manufacturing and trading units involved goods such as sugar,liquors,granite and cotton yarn, as

well as distribution of renowned brands. The service sector units were compromised of winds

power energy, education, healthcare, real estate, and financial sector companies. The group’s net

worth exceeded from Rs 12,073 Million with sales turnover crossing Rs 25,513 million.

Under the BAG there are three listed companies:

Bannari Amman sugar Ltd,(BASL)

Bannari Amman Spinning Mills Ltd(BASML)

Shiva texyarn Ltd(STL)

They started as Coimbatore Alcohol and Chemical Ltd near Erode District Tamil Nadu in

1978.Used alcohol for industrial and portable use using sugar industry molasses as raw material.

This led to birth of Shiva distillers Ltd, in Coimbatore in TN, which was leading producer of

Indian made liquors. In 1983 Bannari Amman Sugar ltd was incorporated which have IPO in

1983 which was oversubscribed by more than 16 times.

They recived huge funding from bnks and public to start with their projects. This was due to

creditworthiness of Balasubramaniam, chairman of BAG. He believed “if you need to run a

business, you should be conversant with all aspects of business”. He was qualified CA,CS and

had hands on experienced in sales, export, finance and administration.

They extended their business to Sugar, alcohol, food, textile, health, finance, transport, granite

and cogeneration, developing synergies in all its business. For example. Waste of sugar industry

was used in alcohol and alcohol waste was used as manure in agriculture and all transportations

was taken care by their owned transport companies. They generated additional revenue sources

being in collaboration with TN& Karnataka power grid provided them with power generated

from bio waste. It provided 245.42 million units of power in 2009-10.

Balasubramaniam established strategic units and implemented decentralization where his highly

qualified brothers helped in achieving this family managed consortium. They went into huge

diversification on interrelated industries and developed great supply chain to manage the whole

business.

B

Growth of Bannari Amman Group- A Family Owned Enterprise Group 4

S a r a n g B n a u b a k d e & M a n p r e e t S i n g h

Page 3

Problem Definition The chairman of BAG had a day long meeting with the unit heads of BAG on January 6, 2011 to

review whether the business heads were capable of handling their units by themselves, what was

the appropriate method of hand holding for the new generation of entrepreneurs and how would

the unit heads act to optimize performance of their units. He observed that the business group's

units emerged as independent entities, but the businesses were complementing each other to a

certain extent. This was especially true for the logistics. Due to this, the group's businesses

enjoyed an inherent advantage. As he looked at the challenges that the units would come across

under new leadership in the forthcoming years, he was also aware of the need to develop the

vision across the spectrum of units big and small, flagship companies and the smaller stragglers.

The chairman looked for processes to keep the group synergies in place and identify the

businesses that could be strengthened over time. The main question remains as How will this

private regime that turned into a reputed corporate structure sustains its operations and advance

future in all corridors?

Situational Analysis In 2010, share price at NSE stands at Rs,1365 (Exhibit 1)

Total Capacity of BASL 21,500 TCD

Cogeneration of power, capacity 84.8 MW, producing 244.52 million units of power &

exported 168.78 million units in 2009-10

119 wind turbine generators totaling 44.53 MW of power

Total equity of 37.5 million INR with debt of 57.5 million INR

Authorized dealer for Ambassador cars for more than 30 years along with Lancer,

trekkers RTV utility vehicles, GM India, Yamaha Motor(motorcycle) in south India.

Total Capacity of 160 Klit, of alcohol per day

Major private sector sugar producer in south India with capacity 19,000 TCD.(exibit2)

Implemented famer friendly programs, provide financial incentives, technology

education, insurance against accidents and did prompt payment to farmer within 14 days.

Satyamangalam unit of BASL stood number one in country’s sugar industry.

Developed synergies between all its businesses.

Granite division is one of the best in Indian stone industries.

SDL has annual production capacity of 6.6 million cases and turnover of RS 4050 million

Kerala Alcohol has capacity of more than 1 million cases

Shiva textile awarded with ISO 9001 exported 40% of its capacity of approx. 18 tonnes per day.

Coimbatore Agro produce 120 metric tons of wheat products.

They also had presence in cargo, education industry, healthcare industries

They have “Philanthropreneurs “ approach .

B

Growth of Bannari Amman Group- A Family Owned Enterprise Group 4

S a r a n g B n a u b a k d e & M a n p r e e t S i n g h

Page 4

Conclusions/ Recommendations Bannari Amman group is diversified conglomerate in South India with vast presence in

many industries.

They have very well used their synergies to coordinated between their supply chain of

various industries.

They have good decentralization approach which gave freedom to many top mangers to

create value for their stake holders.

Current ratio of company stands at 1.72 and cash profit turnover ratio is 27.9%, which

implies that company need to utilize their available assets in more better way.

Try not giving dividends and using the amount for sustainable growth.

Can foray into international cargo business.

Enter into dairy farming and food products which is current trend, as they have good raw

material availability from their own industries like wheat & sugar.