The Dhingras' relentless focus on the business has taken Berger Paints to the second spot in India's paint industry
Everybody wants to be in the paint industry, or so it seems when Kuldip Singh Dhingra, chairman of Berger Paints, rattles off a long list of competitors who’ve fumbled. They all belonged to reputed houses too: Think Tata-owned Goodlass Nerolac, Kirloskar-owned Kirloskar Paints or Thapar-owned Thapar Paints. “You name the business house and I will tell you the paint company they owned,” quips Kuldip. But, though in jest, he is making a serious point. The paint industry has proved to be a stumbling block for many established corporate houses that have made it big in a host of other industries.
In contrast, the Delhi-based Dhingras, who are originally from Amritsar, Punjab, have been paint sellers for the last five generations. And the two brothers, Kuldip (69) and Gurbachan Singh Dhingra (66), have drawn on that experience to take Berger Paints to the position of India’s number two paint company.
When the duo acquired Berger Paints in 1991 from United Breweries chairman Vijay Mallya, its financial position was precarious. It was, at the time, the country’s smallest paint company and hadn’t made money in years. But Gurbachan estimates that since 1991, the market cap of Berger Paints has risen 2,200 times to Rs 18,072 crore as of May 3, 2016. The company, established in 1923, is favoured by both domestic and foreign institutional investors who have taken its stock price up from Rs 44 on March 31, 2011 to Rs 244.5 on March 31, 2016—a compounded annual growth rate of 41 percent.
Apart from 20 factories across India, Berger Paints also operates in Bangladesh and Nepal. So committed are the Dhingras to the paint business that, through the years, they’ve taken their shareholding to 75 percent, the maximum allowed under Indian law. (When they bought it from Mallya, they owned 32 percent.) They also own 95 percent of Berger Paints Bangladesh Ltd.
It is noteworthy, then, that the owners who are so close to the company they have built, are able to distance themselves when it matters. And that separation has proven to be the first key to Berger Paints’s success, maintain the Dhingras.
Separation of Ownership and Management
In the 1980s, the Dhingras had a thriving paint business under Rajdoot Paints which was sold in India. They had also started exporting to the Soviet Union. Kuldip would handle sales and marketing while Gurbachan was in charge of the factories. Given the tax incentives, the brothers discovered that exporting was far more lucrative—they also started dabbling in soaps and detergent exports. But with the collapse of the Soviet Union, that business went bust and they were left with only the domestic market.
Around that time, Berger Paints came on the block. The brothers bid for it and, in 1991, the company was theirs. The business, however, was based in Calcutta (now Kolkata) while the Dhingras had spent all their lives in Delhi. How were they going to handle the management, in that context?
Now, delegating and hiring professionals had proved successful for them in Rajdoot Paints. “We realised pretty early on that if we had to grow, we had to get in professionals,” says Kuldip. It was this principle they decided to apply to Berger Paints. While the brothers have steadfastly stuck to this, some would argue they’ve taken the principle too far. They only travel to Kolkata for board meetings and for the board committees they chair. They don’t interfere in the day-to-day functioning. Even dealers they know are encouraged to deal directly with the company.
“This degree of separation of ownership and management in Berger Paints is rare compared to other companies,” says Abhijit Roy, MD and CEO, Berger Paints. He explains that while the promoters take care of broad strategic issues like partnerships and joint ventures, they are not involved in the day-to-day running of the company.
(This story appears in the 27 May, 2016 issue of Forbes India. To visit our Archives, click here.)