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GM RaoFounder of the Billion-Dollar GMR Group! Published On: Monday, July 20, 2015 Views 4712

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Born on the 14th of July 1950; Grandhi Mallikarjuna Rao or better known as GM Rao is the billionaire industrialist and the founder of GMR Group.

GMR Group is a global infrastructure developer and operator which now holds presence in 7 countries, actively involved in energy, highways, large urban development and airports sectors, and is also known for building and operating world class national assets.

As per Forbes magazine, G M Rao is not only the richest Telugu man in terms of wealth but at the same time, he is widely known for his grounded nature and simplicity. To add to that, GMR Group is also known to be one of India’s most trusted and respect brands.

Highly inspired by Warren Buffet; GM too has donated huge amounts of his wealth for the betterment of the society and its people. His CSR wing, GMR Varalakshmi Foundation is present in more than 22 locations and helps the underserved sections of society. He donated had Rs.1540 Cr. in 2012 for charitable purposes and he also became the third most generous donor of corporate India by donating Rs.740 Cr in 2013, reported by China’s Harun Report Inc.

Talking about his personal life; he is a Mechanical Engineer by qualification and his business is currently managed by his two sons – Kiran Kumar and GBS Raju.

How did he begin his journey?

GM was born into an upper-middle-class family in the Srikakulam district of Andhra Pradesh. His family’s had was involved in commodities trading and a small scale jewellery business started by his father in Rajam.

He was asked to leave his further studies and join the family business, after he failed his 10th class examination. After doing as asked for the next two years, he requested his mother to let him join school once again, after which , went on to pursue Mechanical Engineering from Andhra University.

He also happened to become the first graduate in his family in 1972. Soon after that, his father divided the family assets and each of them got roughly Rs.3 lakhs and a house.

Once that was done, his father wanted him to get a job for himself, but he and his mother wanted GM to do business. He wasn’t really sure of what business could be done with just Rs.3 lakhs; hence, he took up a job for the time being. But his other brothers, unlike him got into trading.

He joined AP (Andhra Pradesh) Paper Mills as a shift engineer. During this stint, he got the opportunity to learn business first-hand from a highly experienced Marwari businessman. But in not much time, he left that and joined the Public Works Department as a Junior Engineer for a few months as well.

While he was at it, after receiving a constant push from his mother, and the fact that his entrepreneurial nature was making it difficult for him to stay content with a mere day job, GM finally decided to leave his job and get into the trading business with his brothers.

And from here onwards, started the Saga of GMR Group!

The Saga of GMR Group!

GMR Group

FORMATION YEARS

While trading into commodities, gradually, the brothers had also started their own Oil Mill, Rice Mill and had also got into the Transport Business.

In 1978; during the License Raj days, when it was next to impossible to get a licence, they happened to come across a someone who was selling a jute mill licence in Chennai and the factory was closed.

Quickly, they purchased the licence and machinery, and after of lot of hassles and struggles which required getting all the permissions from the state government and also the Jute Commissioner at Kolkata, they managed to shift the plant & and set-up the factory by investing around Rs.40 lakhs from their own pocket.

Now, the business was collectively managed by them, GM used to look after the jute mill, another brother of his used to take care of the transport business, the eldest of them all was in trading and the last brother was in charge of a rice mill and oil mill.

After working for a long time into his diverse business portfolio, GM decided to divest his stake in all the businesses he held, and got into Vysya Bank in collaboration with ING. The main reason he was roped in by the Bank was because they needed someone who was from the Vysya (trader) community in Andhra’s coastal belt and had deep connections, which obviously he did.

During the same time, say around 1987-88, all the brothers had different views of using the cash that was earned from the businesses. They felt that it should be divided and distributed rather than redeployed into newer businesses, but GM had a different view, he believed that it was always better to start new industries. Hence, they mutually agreed to separate the businesses and parted on a good note.

Soon after that, GM also briefly got into the Cotton ear-buds business as well. He had setup an export project in Chennai and used to export the ear-buds to various countries. During that time, Johnson & Johnson was surprisingly the only player in this business. But after not so long, he sold this business.

Over the period of time, since the time he go into the entrepreneurial world, GM had given a shot & exited 28 businesses, only to grab on to the opportunities that were about to be unveiled with the opening up of the Indian economy in the early 1990s.

This blessing un-disguised was The Turning Point of his career!

THE TURNING POINT!

The beginning of the 90’s was when India liberalized its market and a huge storm of opportunities had come in.

In the year 1991, GM had applied and managed to win the bid for the Hyderabad airport, out- beating competitors like L&T. But this time it was different, building an airport was not his area of expertise, he felt unsure about how to go about next.

So he took a call, which he considers as the most important step that any entrepreneur should take — he called in the experts in this stream of the business. He put in most of his time, energy and money in learning, the process from experts in airport construction, management from Germany, Singapore and Malaysia, etc to teach himself and his team members.

At the same time, as the business was growing rapidly, he also laid down the “Values & Beliefs” the group functioned on and will follow in the future.

Meanwhile, a Malaysian company and a Chicago-based company had got four barge-boat licences for a barge-mounted project in Mangalore but because the Malaysian economy was going through a difficult time, they were not able to implement them, and hence GMR Group purchased the licences from them and implemented the project.

During the same time, GM also tried his hands at the Outsourcing Industry and started a BPO, but Information Technology being an altogether a different ball game, within seven or eight months, he sold it off at a very good price to I-Gate.

After that, National Highway Authority of India (NHAI) had identified six roads which would have to be built and financed by the private sector via a roads annuity scheme, and in the first phase, three roads were offered, under a BOT (build, operate, transfer) annuity model, wherein NHAI would pay an annuity (allowance) for 15 years. GMR Group bagged the contract for all three roads.

The group managed excelled NHAI’s expectations and completed both the projects before time, and also received an early completion bonus and made good money too. This opened another genre for them and, due to this success they also managed to win four more road projects in the near future.

While all this was on, his Vysya Bank was going through a very difficult phase. Cutting the long story short – somehow, GM had managed to keep the show running for a very long time, and to top that, he had at a point even put in all the money he had (including his wife’s jewellery).

But due to increasing competition, huge capital requirements, and most importantly changing of times, he eventually was forced to sell his 23.99% stake to the ING Group for about Rs.340 Cr during the late 90’s.

That is when GM took a call to restructure his entire business and diluted his stake in this business and decided to enter into the field of energy and infrastructure full-fledgedly.

Another reason to get into the infrastructure asset development was that, their closest competitor was GVK, who happened to be 6 times smaller by market capitalization, hence, making GMR Group a clear winner.

And from here onwards started The Grand Expansion!

THE GRAND EXPANSION!

After shifting his entire focus, in 1999, he saw that the Andhra Pradesh Government had called for a global tender to set up a Greenfield international airport. While 26 companies showed interest, but finally one three placed their bids. GM tied up with the Malaysian Airport Authority and placed his bid too and won the project.

Around the same time, the government also started thinking about the modernisation of Delhi and Mumbai airports in 2003. But this time it was different, it was a far bigger game.

GM spent over Rs. 34 Cr. on the bidding process itself and put together a team that began to study airports, and also included 15 international consultants to bid for the Delhi and Mumbai airports. This gave them the upper-edge amongst the other competitors and also helped them bag the projects.

In 2004, GM happened to attend a conference and heard MV Subbaiah speak of the Murugappa group on family succession. Upon realisation that many family businesses have existed for more than 300 years, he quickly put together a team, which included senior bankers, HR consultants, etc., to write a family constitution for his family.

It literally took him more than 570 hours to work on it over a four-year period. The constitution was just like how a country’s constitution is. It laid down everything from the selection of my successor which would be selected by the next generation and not by GM, the system of good family governance, how to resolve a conflict and valuation of the business, the process of inducting new family members into the business, their level of induction and qualifications required, etc!

In April 2009, in an unusual move, GMR bought English Premier League’s Liverpool F.C for 500 million pounds.

And yet again, in 2013, everyone was taken by a surprise when GM stepped back from the day-to-day functioning of the company and handed over the reins to his younger Kiran Kumar Grandhi by making him the Managing Director.

Now that the responsibilities had greatly reduced from his head, he moved towards working for the greater good of the society, by actively participating in the functioning of his CSR Foundation. Furthermore, a year later in 2014, he also got appointed as the Chairman of AP (Andhra Pradesh) Skill Development Corporation, by N Chandrababu Naidu – Andhra Pradesh Chief Minister.

More recently, the company since the economic downturn in India, had been going through a difficult time, and had opted for ‘asset-light and asset-right’ strategy. Under this strategy, they sold their 40% stake in Istanbul’s Sabiha Gocken airport for $285 million to their partner Malaysia Airports Holding.

In the same month itself they placed and won a $320 million joint bid with Megawide Construction to expand the Mactan-Cebu International airport at Philippines along with a 25- year concession. Additionally, GMR has also recently signed a $1.4 billion deal with Nepal’s Investment Board to build a hydropower project.

Achievements

  • Conferred with the honorary Doctor of Laws by York University, Toronto, Canada (2011)
  • Awarded as the ‘First Generation Entrepreneur of the Year’ at the CNBC TV18 India Business Leader Awards (2009)
  • Received the ‘Infrastructure Person (Infra Person) of the year award’ at the Infrastructure Journal Award Ceremony held in London (2009)
  • Received the “Sir M. Visveswaraiah Award – 2008″ by the Federation of Karnataka Chamber Of Commerce and Industry (FKCCI)
  • Awarded as the “Most Inspiring Entrepreneur of the Year – 2008″ by National Institute of Industrial Engineering (NITIE), Mumbai
  • Received the Entrepreneur of the year Award by Economic Times (2007)
  • Awarded as the “Most Promising Entrant to the Big League” by CNBC TV18 at its “Indian Business Leader Awards (2007)

Author:

“A businessman by blood, but a business writer out of passion”! As a Business Writer; Karan’s forte lies in writing some really interesting Case Studies about Companies/Eminent Personalities covering aspects which certainly, would not bore you to death!

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