TT Jagannathan - Bankruptcy to a Billion


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TT Jagannathan is from a storied family. His great grandfather was one of the rebels who founded ‘The Hindu’ paper in India. His grandfather, TT Krishnamachari who was the founder of the TTK Group, quit it to join politics. He eventually became the Commerce Minister of India and later Finance Minister after independence. After his appointment to the Centre, TT Krishnamachari was at the forefront of many decisions which hurt the group he set up.

Mr. Jagannathan’s father was a visionary who introduced products way beyond their time in India - condoms, pressure cooker, etc. But Mr. Jagannathan did not want any of that. The IIT Madras gold medallist wanted an academic life and was all set to become a teacher in the US. He was in Cornell finishing his Master’s degree and had landed a great job when in 1972, his father, asked him to return to India as their businesses were collapsing.

So TT Jagannathan returned to India to help his father turn around the businesses of the TTK Group that were on the verge of bankruptcy. He turned around the Maps and Atlas business of the group before taking over the pressure cooker business by the name ‘Prestige’.

From being on the verge of bankruptcy, Mr. Jagannathan turned around the TTK group to an enviable position today. Today Prestige is a household brand in India known for its kitchen appliances. The company today has sales of $250 million, a market cap of ~$1 billion and has generated returns on capital of more than 20% consistently over the last ten years.

In this video interview Mr. Jagannathan talks about his background and his journey in entrepreneurship. We’ve attached the full transcript below the video.

INTERVIEWER: Thank you so much for inviting us to your beautiful facility. Before I talk about the business the one thing that always fascinated me was that you always wore suspenders. Tell me a little about this. Where did this come by and how did this become your trademark?

TT JAGANNATHAN: It is not really a trademark, it is a necessity. This happened because I was in the airport once. And my pants fell off (laughter). And I discovered that my body shape was such that if I don’t wear the suspenders however tight I wear the belt my pants will fall off. So that was when the suspenders came.

INTERVIEWER: You were living a good life in the US. Why would you back to India to manage a family business which perhaps was not doing that well.

TT JAGANNATHAN: 1972. My parents came to see me in Cornell and told me the bad news that the business was bankrupt and we owed a lot of money to a lot of people and that they needed help from me to come back and manage the business. I had an elder brother but by that time he was an alcoholic and so he could not help. My father joined business when he was 17 and by this time he was 50 and was burnt out. So he wanted my help and though I did not want…I had chosen life of academia - I wanted to be a professor, but as luck would have it I landed up here to look after the business with no experience at all in business. And what I found was a disaster much larger than they had informed me. We were borrowing money at 40%. Now when you borrow at 40%, you enter a downward spiral you rarely get out of. I didn’t know what to do, I was an engineer. I was not a financial genius, I was not an MBA. I was none of that. So it was a tough go.

INTERVIEWER: So what were the things that you did and what brought you to the kitchenware business?

TT JAGANNATHAN: What happened was I came to Chennai. It was a disaster. Then I decided to tackle the various losses and started with the worst loss. The biggest loss came from the business called Maps & Atlases. This was started as the company to make maps and atlases for the country. It started with a collaboration with a German company and they calculated- 800 million people, 300 million children, and they calculated 100 million atlases and 300 million maps. So the factory to print that quantity was set up .Surprisingly today, 40 years after that we still less than 1 million atlases. So that company went bankrupt obviously. SO I went there first, and so as luck would have it I turned it around.

INTERVIEWER: And then after that you came to Bangalore?

TT JAGANNATHAN: After that I was actually on honeymoon in the US, and got a telegram from my father saying ‘Come back immediately.’

INTERVIEWER: What is with you going to the US and every time you go there…

TT JAGANNATHAN: I know (laughter). So I came back and my father was waiting in Chennai airport with a ticket for Bangalore. He told me ‘Tomorrow morning you are going to Bangalore’ to take over what was then called TTK Ltd and today is called TTK Prestige.

INTERVIEWER: So how was your reception in Bangalore. Were you well received?

TT JAGANNATHAN: No, it as not. Actually I was considered a Madrasi by the Bangalore people. This company in Bangalore was making profits. All the companies in Madras were not making profits. So they thought what I will do is take all the money from the profitable Bangalore company and send it to Madras and destroy the company. So when I came to TTK Ltd they did not let me inside. I had to use police protection to go inside. They would let me sit in the MD’s chair. So I was sitting on a small chair in the corner. And I had to gain their respect. It was not possible sack everybody. First, I did not know what the pressure cooker was, I did not know how it was made, I did not know how it was sold. I had never a pressure cooker.

INTERVIEWER: So how did you gain their respect?

TT JAGANNATHAN: So what happened was that as soon as I joined, there was no aluminium. There was huge shortage those days. We got 10 tons a month and our requirement then was 70 tons a month. we currently use 700 tons a month. And so factories were not working. So the first thing I had to do was go to Delhi sit there for 3 months to get an appointment with the Aluminium Controller. Those days it was all license permit raj. It was horrible. And when I finally got there and represented the figures, convincing them that the old figures were wrong, and so we got allotted 35 tons. That could only supply South India. But we at least had something to start supplying south. So that was one thing, because I got the factory working again, and the people in Bangalore said, ‘Ok this guy will do something for us.’ Then came the GRS story and that is where I really got…

INTERVIEWER: What is the GRS story? In fact I read a lot about the ‘Gasket Release System’. So I would like you to exactly explain to me what the story is. Because it was saving a million lives.

TT JAGANNATHAN: We found that we were not selling outside South. There was no market because there was something going wrong. So I decided to find out what was going wrong. I traveled UP extensively and discovered that our pressure cookers were known to burst. And a pressure cooker bursting is dangerous and could even kill. I went to one of our dealers in Lucknow and he showed me his store- he had dozens of Prestige pressure cookers that burst. So we were losing market share because of the reputation ‘Don’t buy Prestige, it will burst.’ I couldn’t believe that we made pressure cookers that burst. We were very good at manufacturing, no question about that. So something else had to be the reason. So when I analyzed the reason I found out that it was a spurious safety block. A pressure cooker has a weight valve but it sometimes got blocked. When it gets blocked, the safety device is supposed to open up and release the pressure. But the safety device was made of a Tin-Bismuth alloy which is very expensive. So the spurious guys use to make it with pure Aluminum which won’t melt. And so when the weight valve gets blocked, the pressure cooker bursts, and Prestige pressure cooker bursts very violently. And so people were just off pressure cookers. And the company would have gone bankrupt if people knew that. And so, thank God that I am an engineer, and I put on my thinking cap on and came up with what is today called a GRS. Actually it is such a simple thing looking at it now, that you wonder why nobody discovered it before. It is just a hole in the lid. But the hole in the lid, what it does, it does not depend upon the safety plug or secondary safety. The gasket comes out through the hole in the lid and releases the pressure if it exceeds the cooking pressure.

INTERVIEWER: You did not patent it.

TT JAGANNATHAN: No, it was in fact not a good idea to patent it for two reasons. One is that in the US it used to happen. The pressure cooker used to burst. So the US market went away from pressure cookers. That is something I wanted to avoid in India. And India is the largest market in pressure cookers in the world today -15 million pieces. If we allowed pressure cookers to burst, it would not have happened. That was one- I did not want pressure cookers to get a bad reputation. The second is if a pressure cooker burst anywhere everybody thought it was Prestige. So I had to avoid that consequence also. So we gave up the idea of patenting it.

INTERVIEWER: You said people would say don’t buy a Prestige pressure cooker, it will burst. And now, cut to ’ Jo Biwi se kare pyaar, woh Presitge se kaise kare inkaar’ (The one who loves his wife, how can he say no Prestige). How did that shift happen, and how did that iconic line happen?

TT JAGANNATHAN: We had to communicate the fact that Prestige is safe. And you can do that using the engineering method but that does not help the common man. They need to see the difference, so we said we will use the emotional route and my then agency did not agree with me. So I went to my friend and I said I want you to do this for me and I want an iconic campaign that will emotionally express the safety of the pressure cooker. His wife was then the Creative Director of the firm and she came up with this beautiful line. We have used this line since and it has been paraphrased nearly by everybody. I mean, in 2014 campaign, it was ‘Jo Desh se kare pyaar woh Modi ko kaise kare inkaar.’

INTERVIEWER: Let us talk about the present and the future of the business. At one point just a few years ago, nearly 60% of your revenues would come from cookers. Now the company has become much more than that. From a Prestige in every kitchen, to a Prestige in every home. 35% from cookers, 45% from appliances - where do you see the company going forward, say 5 years from now, how does the revenue mix look?

TT JAGANNATHAN: It would not be very different. We want to venture into the home space. And we are looking at possible alternatives to acquire a company. But I can’t really predict what will be there five years from now. We have decided that we will be 5,000cr (~$800 million) in sales, and only 5% of that will come from home.

INTERVIEWER: Sir, 5,000 cr revenue is what you have guided for. You also spoke about 700 tons of aluminum and 120 tons of steel that you use every month - input costs is constantly increasing, there is competitive pressure all over the place. How are you looking to maintain and grow your margins?

TT JAGANNATHAN: Input costs are growing not only for me. They are growing for the competition also. So we pass on the input costs increases to the market. However as the cost goes up dramatically, the market growth slows. Because the common man does not have more money to spend just because aluminium costs more money. So, hopefully it should not happen that it goes out of pocket of common man.

INTERVIEWER: At a 5,000 cr revenue profile of the company, which you say should happen in the next 5 years, what kind of margins will you be working at?

TT JAGANNATHAN: Similar margins to what we work with today. We make 13.5% EBITDA margin. I think that should continue.

INTERVIEWER: You are not looking to grow it to 15%…?

TT JAGANNATHAN: Very unlikely. In fact, we have the highest margin in the world in our business currently.

INTERVIEWER: And, in the future what innovations are you talking about. Because, I remember you saying that you are very close to a breakthrough in the microwavable pressure cooker space. Also, in home appliances there are opportunities. What is the size there? And how close are you to the innovations?

TT JAGANNATHAN: There are a lot of things we are working on- lots and lots of things. I don’t think I can throw light on what will come to market. The problem with innovations is that you can never predict when they will come to market, and if they will come to market at all. You might finish 99% of the work on the product and the last 1% will fail. So you won’t come to market.

INTERVIEWER: Let us talk about individual brands then. How big is the Judge right now. Where do you see 5 years from now?

TT JAGANNATHAN: Judge is very small rioght now. It is about 5 cr a year. So it is really, really small. How fast do I see it going- very slow. We don’t want it to cannibalize the Prestige brand. And people are under the wrong impression that the rural markets want cheaper brands. THey don’t. The rural markets want the best brands and they are prepared to pay for it. The Judge brand actually for urban market to compete with the unorganized sector.

INTERVIEWER: So in that case you have a product offering to compete with the unorganized sector in the lower end. You have Prestige which is mid-high higher end. Premium, what are you doing out there?

TT JAGANNATHAN: We are looking at that too. We are looking at Horwood brand, and we will bring them in at the premium end.

INTERVIEWER: They have not come to India yet?

TT JAGANNATHAN: Not yet. Work has to be done.

INTERVIEWER: And Horwood does about 10cr per quarter in revenue. Where do you see that going forward?

TT JAGANNATHAN: Where do I see Horwood revenue? In the UK markets grow about 2% a year. If Horwood is very good it will grow at about 2.5%. So that’s about the rate at which they will grow.

INTERVIEWER: But the Horwood brand coming into India that would…

TT JAGANNATHAN: That could be big. That could be big.

INTERVIEWER: And when is that going to be?

TT JAGANNATHAN: I think before the end of this financial year.

INTERVIEWER: And in terms of your cleaning solution business, you said it should contribute about 5% to the revenues. Apart from Hero what are the products that you are…?

TT JAGANNATHAN: Oh, we are in everything. We are the only complete cleaning solutions player in the country. We are in mops, we are in buckerts, we are in air purifiers, we are in water purifiers, we are in vacuum cleaners, floor polishers, we are in everything.

INTERVIEWER: But there is so much more competition in there as well right? In cookers and cookware you have limited competition, the minute you go into home appliances space, the range of competition increases.

TT JAGANNATHAN: I may correct you there. The largest competition is in the cooker. There are 600 brands. Absolutely the largest competition…

INTERVIEWER: So if you guys can manage your leadership incooker…

TT JAGANNATHAN: That’s right. Also there is nobody in the cleaning solutions business. There are people in vacuum cleaner, there are people in water purifier, in air purifier, they are all separate. THere is nobody who approaches cleaning as one segment.

INTERVIEWER: Ujwala. What is the opportunity. And how have you seen the growth so far?

TT JAGANNATHAN: Major opportunity. You see, you don’t need pressure cooker if you don’t have gas. You see in coal or wood, you neither save money, and the time saved in village is of no consequence. So till gas reaches, a pressure cooker does not go on. That is the first appliance that goes. But after the Ujwala scheme we found major increase in sales in the rural markets. Wherever the Ujwala scheme is implemented effectively, we have seen demand for pressure cookers go up.

INTERVIEWER: Your revenue growth then was muted due to demonetization, GST related disruptions as well. 19% is what you did in the last year. Going forward, 20-25% is that on the cards?

TT JAGANNATHAN: I think low 20s. And that will be very, very good, if it happens.

INTERVIEWER: In appliances, which is the appliance that is gaining maximum salience right now?

TT JAGANNATHAN: Mixies and gas stoves.

INTERVIEWER: And they will continue to lead the growth going forward?

TT JAGANNATHAN: Yes. Also most of our innovations are in those areas.

INTERVIEWER: Sir, let us now wear your TTK Healthcare hat now. That company has about 20 different verticals. You have some verticals likes the foods business and such as well. Is there scope for restructuring there?

TT JAGANNATHAN: There is actually. Actually we are thinking of demerging foods from TTK Healthcare and setting up a a separate company which would concentrate on foods. It is a big market in India and growing very rapidly. And we want to concentrate on that.

INTERVIEWER: How much of revenue do you make from the foods business?

TT JAGANNATHAN: Currently about 100cr. But it has the potential to do 1,000cr in 5 years.

INTERVIEWER: And you will demerge that before that?

TT JAGANNATHAN: Yes, before that. I think so in the next fiscal.

INTERVIEWER: Mr Jagannathan. 40 years in the business already. You were supposed to retire in May this year. You still are an active part of this business. Have you retired officially or not?

TT JAGANNATHAN: Actually I proposed to my board that I retire as the Executive Chairman and continue as the Non-executive Chairman on my birthday which is in May. My board refused. They said, ‘No, you are not going now. You have got lot of life left in you. Company needs you. So you stay on for another 5 years.’ They gave me an extension. So I still come to work every day.

INTERVIEWER: So, you know for a business like this which is so centered by the person who is running it, which in this case is you, how do you make the structure muych more institutionalized and how do you reduce the dependence on you?

TT JAGANNATHAN: The last twenty years has been that effort. Now, today I involve myself in product development and export. I don’t run the company. It is completely under professionals. And even in these two areas I am slowly getting out.

INTERVIEWER: So, you know you inherited the company from your father, who inherited from his father. Your children are not active part of the business. Any particular reason why you did not want them to come into the business, or they did not want to come in.

TT JAGANNATHAN: Ahh. It is more like they did not want to come into the business. There is a reason. We sat together one day. They are all from Cornell. And, we were talking about this. And, the conversation went like this that what gives me the impression they will be as good as me in this business. And when i can get good professionals to run this, why not do that? They are the beneficiaries. They are the shareholders of the company. So better the company runs, more money they make. That story is everywhere. Take for example Walmart. Not a single Walton runs the business. THey are all on the board. THere is six of them. None of them run the business. And in India, Marico, Dabur, there are a lot of companies like that.

INTERVIEWER: So you have no qualms with the family not running the businss.

TT JAGANNATHAN: I have no qualms at all.

INTERVIEWER: All right. 40 years in the business. You are past 70 now. How do you look back at your life?

TT JAGANNATHAN: I took every day as it came. I did not have a master plan that this was gonna become this big. If somebody had asked me 40 years ago if I will be talking to a TV channel, billionaire, what have you…I would have said, ‘No. No chance.’ So everything was by taking it as it comes. What will I be doing, what I am, it is all…I don’t like to use the word fate. It is chance.

INTERVIEWER: You have described your father as the man who never hurt anybody. How would you like to be remembered?

TT JAGANNATHAN: I don’t know whether I want to be remembered at all. That I think is too much of an ego. I think other people should tell me what did they think of me. I don’t want a legacy, I don’t want this to be a legacy and so on. The company will run.

INTERVIEWER: Any regrets?

TT JAGANNATHAN: No. Actually no. In fact I have a bucket list which is empty.

INTERVIEWER: That is the best bucket list to have. There is a lot of trivia that the world does not know about. I will say ‘Did you know that…’ put a character in front of you, you have to give me trivia. This is about your great-grandfather.

TT JAGANNATHAN: My great-grandfather was one of the ‘Triplicane Six’, the rebels who started the ‘Hindu’ to oppose the British press at the time.

INTERVIEWER: Your grandfather?

TT JAGANNATHAN: My grandfather was in fact a character. He started the business. He quit and joined politics. And he was one of the six members of the Constitution Drafting Committee which wrote the Constitution. And one of the hand-written copies is in our library.

INTERVIEWER: Your father?

TT JAGANNATHAN: My father was a visionary. Everything he thought of was 30-40 years ahead, which was the problems we had. Like condoms, pressure cookers, toys, ball-pens. THe list goes on and on.

INTERVIEWER: So he was the first person to bring all these to India?

TT JAGANNATHAN: All these to India. Manufactured in India. Great visionary. But a man who was so soft and gentle that you know to run a business you cannot be too soft and gentle.

INTERVIEWER: Tell us a little about your famous classmate. You went to school with someone.

TT JAGANNATHAN: (Laughter). Yeah, I went to school with Jayalalitha. I don’t know anything much about her. We were all children. And in those days, boys did not speak much to girls. I just remember a very pretty, very smart girl.

INTERVIEWER: And then you met her later when she became the Chief Minister.

TT JAGANNATHAN: Yeah. She was invited to my cousin’s wedding. She came and she sent for me. SO I went to see her. She said, 'Do you remember me?. I said of course I remember you. And that is all the conversation we had.

INTERVIEWER: You were quite a tennis player as well. You played with the Amritrajs?

TT JAGANNATHAN: Yes, I did. And I was coached by the same coach - Mr. Ramarao. Again, I continued playing tennis thought IIT, but after that I stopped and switched to golf.

INTERVIEWER: Finally, one message that you would like to share with all entrepreneurs who are watching right now.

TT JAGANNATHAN: Don’t ever give up. Look at the details, big picture will look after itself. Go to work everyday and work very hard. The harder you work, the luckier you get.

INTERVIEWER: Thanks a lot sir.


Intelligent Fanatics July 2018 Digest