I remember I was at home when the phone rang. It was Keki Dadiseth, Hindustan Lever’s chairman. He didn’t waste a lot of time, got straight to the point and said he wanted to buy us out. “Agree and all your future generations will be taken care of. If you decide not to, you will be left with nothing,” he said in that clipped accent of his. When I said I wasn’t interested, it was clear it wasn’t the answer he was expecting.
True, it was not the first time Lever had reached out. Bankers had sent many feelers and believed I would sell out without a fuss. Little did they know that the incident only hardened my resolve to build the business. It’s been two decades to that call. When I think of it now, it seems logical. Lever was coming off a big victory in oral care. Their brand — Pepsodent and Signal, had taken away market share from Colgate. Hair oil was the next stop and they had Nihar (from the Tomco buyout) in their arsenal apart from Cococare (a brand they had acquired). With deep pockets, which came in handy in oral care, we were an easy target. I certainly did not bargain for this two years after we went public!
I had said no without any hesitation, but my next thought was how much would Lever spend on advertising? Marico didn’t have as much money, but we had to take them on. With Parachute, our weak link was rural distribution. We decided to work on that. The decisions that followed were not easy. Our P/E multiple at the time of going public in 1996 was 13. During the battle, it came down to seven. But there was no other option. I had to increase ad spend and drop prices. We told investors, it would be a short-term impact only. I’m glad it turned out to be so.
The attention then shifted to getting analysts to view us as an FMCG company and not a commodity one. We had two successful brands in Parachute and Saffola, but even that was not good enough to get the P/E multiple other FMCG companies