windFall Guy

For the tradition-bound Marwari business community — which builds and feeds relationships over generations, but draws a lakshman rekha between ownership and the place of subordinates — it’s an anomaly that has to be corrected.

While the Birla family chalks out strategies, legal and otherwise, to give Priymvada Birla’s estate to charity, it realises its opponent is a formidible one. ‘‘You don’t fight a man who knows so much about you,’’ says a leading CA of Kolkata.

On the other hand, even if one assumes Lodha has done his legal homework — most contemporaries have no doubt that he has a watertight case — the ‘‘thorough gentleman’’ cannot escape the ‘‘moral pressure’’ that will be put on him by the Birla stalwarts.

Relationships will thus hold the key to negotiations between the Birlas and the Lodhas. At the same time, Lodha is not going to walk away from it all. ‘‘He’s been a decision-maker for the M.P. Birla group ever since Priyamvada took charge and knows the Birlas inside out. He won’t take anything lying down,’’ says a retired Kolkata-based professional.

Adds another acquaintance of Lodha, ‘‘He will be no pushover, legally or otherwise. He would have ensured things legally.’’ That’s because Lodha knows exactly what he’s dealing with.

LODHA practically grew up in the lap of the Birla family. Originally from Udaipur, his father Jaswant Singh Lodha knew the legendary Ghanshyam Das Birla well and established an independent audit practice in 1941. In those days, the tradtional Marwari firms refused to deal with the ‘‘Engo-Bongo’’ audit firms — international audit firms that had been bought into by Indian proprietors — and, instead, sought to cultivate relationships of their own.

Eventually, for legal work, the Marwaris turned to Khaitan & Co. For auditing, it was Lodha. So, after schooling at St Xavier’s (classmates found him ‘‘sharp and intelligent’’), it was but natural that the younger Lodha become a chartered accountant.

He achieved this with distinction in 1963, getting the Dandekar Gold Medal for standing first in eastern India. Lodha, like his father, nurtured relationships with the Birlas. He was close to Aditya Birla, and his younger son Harsh Vardhan Lodha has grown up with Kumar Mangalam Birla.

Right from his articleship days, Lodha worked on the accounts of the Birla family. He is also said to know the traditional Marwari acounting system ‘‘like the back of his hand’’.

THIS relationship continues to this day, though the current situation could ensure a lower exposure of the Birlas to Lodha & Co. As things stand, Lodha audits over a dozen Birla group companies, from Hindlaco and Grasim of the Aditya Birla group to Mysore Cements and Birla VXL of the Sudarshan Kumar Birla group.

‘‘He’s been brought to eminence with great help from the Birlas — and he played an instrumental role in their bifurcation in the early 1980s,’’ says a person who worked closely with him in those years.

Of course, Lodha & Co is not just a Birla preserve. Auditing over 150 firms, Lodha & Co — which has tied up with BDO International, the sixth-largest global accounting firm — is currently among the top 10 auditors in the country.

The size of the national audit cake is Rs 700 crore. By rotation, Lodha has audited all the PSU banks. There were no reliable estimates of Lodha’s billings from auditing, but it is learnt that the bulk of his earnings comes from the consulting business.

THAT said, you still can’t separate Lodha, the professional, from Lodha, the Birla man. They are both inter-connected. He was the Birla nominee at industry lobbyist Federation of Indian Chambers of Commerce (FICCI) a couple of years ago.

If there are snide remarks like that Lodha is ‘‘living in reflected glory’’, there’s also respect — lots of it — for his abilities. Lodha was on various corporate and taxation committees, and was seen to have performed in an efficient but understated manner.

If there’s a unanimous view that Lodha is a competent professional, there’s also an acknowledgement that he knows how to work relationships . ‘‘You could even say he’s cunning,’’ adds a professional who has worked with Lodha closely. Says an employee at a Kolkata company where Lodha provided consultancy work: ‘‘He can get through the stomach and win your heart.’’

On the subject of body parts, this correspondent met Lodha a couple of years ago and remembers his eyes — revealing little, keepers of secrets.

Could, then, have Lodha used his proximity to Priyamvada Birla to his advantage? ‘‘All this (the will) must have actually happened, particularly as he was so close to her,’’ says a leading Kolkata-based CA.

M.P. Birla, visionary though he was, did not leave a heir. Priyamvada Birla, basically a housewife at the time of his death in 1990, relied increasingly on a close group of advisors — led by Lodha — to manage the eight group companies. Remember, stressed one observer, Lodha wasn’t a paid consultant — he was co-chair of the flagship Birla Corp, a non-executive post.

IT’S not that the M.P. Birla group companies are in great shape. The turnover of eight companies — operating in cement, jute, and cables — was just Rs 1,691.53 crore for the year ended March 2003. The combined profits for the group companies works out to Rs 8 crore.

The group has not built up scale in its cables (power, telecom, fibre optic) businesses and has basically stayed within the mainstay cement business. There’s also been no significant restructuring of business processes. The market capitalisation of the group’s five listed companies is Rs 817 crore.

What makes the M.P. Birla group richer — and has the Birla family worried — is a 25 per cent stake in Pilani Investments, a holding company for the entire Birla group. Retaining full control of this company within the family-fold will be a key concern for the Birlas.

The general feeling is that Lodha will not be averse to returning M.P. Birla’s 25 per cent share in Pilani to the Birla family. ‘‘I feel there’s going to be a settlement,’’ says a Kolkata-based Birla watcher. This is also one issue where tremendous moral pressure will be put on Lodha, and he is likely to oblige.

ANOTHER contentious area would be control over the various trusts — educational, medical, and religious — that have been set up by the M.P. Birla Group and sit on vast tracts of land all over the country. While Lodha is on the board of these trusts, he has not been involved in the day-to-day running. From Belle Vue Clinic to South Point School — in terms of pupil enrolment, the world’s largest school — the M.P. Birla trusts preside over both prime real estate and impressive cash flows.

And then there’s emotion. Birla Corp is the successor to the old Birla Jute, a family jewel, set up by R.D. Birla in the early 20th century in the teeth of opposition from the British jute barons. The family would be loath to see it go to an outsider.

The vast expanse of Birla Park on Kolkata’s genteel Gurusaday Road has been with the Birla family since the 1930s, bought from the Tagores for Rs 19 lakh. The original house in now a science museum but the adjoining grounds host three bungalows. K.K. Birla and B.K. Birla live in two of them. Till his death, M.P. Birla lived in the third; for 14 years thereafter Priyamvada Birla stayed there alone.

Will the two surviving patriarchs, brothers Basant Kumar and Krishna Kumar, entertain a new neighbour at Birla Park? They would not want to share what is heritage property, in more senses than one.

FOR now, the waiting game is on. The contents of Priymvada’s will only be known when Lodha applies for a succession certificate. A legal battle could follow, but experts say there’re unsure of the Birlas winning that one.

Reports say the family is likely to produce an earlier will, in which M.P. Birla apparently left his fortune to his wife and, following her, to charity. Yet, as some observers argue, it is impossible to leave companies to charity. Somebody has to run them. This is where Lodha may get lucky.

So, finally, it will boil down to relationships and ‘‘doing the right thing’’. Will Lodha honour a past built by the family or will he carve out a professional future for the M.P. Birla group? As of the moment, that’s a Rs 5,000 crore question.