G M Rao

Founder of GMR Group

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G M Rao

Introduction:

If you believe that richness brings pride then read on to know about Grandhi Mallikarjuna Rao popularly known as GM Rao. The founder of GMR Group is a billionaire industrialist who has been listed by Forbes as the richest Telugu man along with possessing grounded nature and simplicity. Born on the 14th of July 1950; Mr. GM Rao has established GMR Group as one of the most trusted and respected brand of India.

GMR Group acknowledged as a leading global infrastructure developer and operator has contributed to a wide array of sectors including energy, highways, massive urban development and airports sectors. The group has made its mark in 7 countries and is recognized for building and operating assets that have proved to be world class national assets.

Similar to the deeds of Warren Buffet, GM has also donated stupendous part of his wealth to ensure security and better future of the people and society. The GMR group runs a CSR wing known as the GMR Varalakshmi Foundation that has been set up to fulfill the needs of the underserved sections of society. The organization located in over 22 locations and GM been acclaimed by China’s Harun Report Inc as the third most generous donor of corporate India in 2013. He donated Rs. 740 Crores to achieve this position and in the year 2012 donated Rs.1540 Crores to serve various charitable purposes.

A Mechanical Engineer by qualification. GM Rao’s sons Kiran Kumar and GBS Raju manage his business.

Early Life

On 14th July 1950, GM Rao was born into an upper-middle-class family residing in the Srikakulam district of Andhra Pradesh. His father, Rajam was a small scale jewellery businessman and also traded in commodities.

Unfortunately, GM Rao failed in his class 10th examinations, and his family made him leave his further studies. Thereby, he joined the family business and continued to work for two years. After this, he requested his mother, and she allowed him to continue his schooling, and soon enough GM completed his Mechanical Engineering from the Andhra University in 1972 becoming the first graduate in his family. After all this, his father divided the family assets among his sons, both of whom got approximately Rs.3 lakhs and one house.

After the division of property, GM’s father advised him to find a job but GM wanted to start a business, and his mother supported him in this endeavour. But just Rs.3 lakhs were not enough to set up a business and therefore to GM decided to take up a job whereas his brothers embarked on to the trading business.

GM Rao woked as a shift engineer in the  Andhra Pradesh Paper Mills. The highly experienced Marwari businessman gave him a taste of the first-hand experience of running a business. Eventually, he started working as a Junior Engineer in the Public Works Department for a few months.

But his entrepreneurial nature and his mother’s driving force encouraged him to leave these jobs, and finally he started working in the trading business along with his brothers. Who knew that this decision would be a turning point for him.

Entrepreneurship

Rise

  • GM started working with his brothers in their trading business and soon they expanded to set up an Oil Mill, a Rice Mill and a Transportation Business.
  • 1978 was a time when India was battling with the License Raj. During this period, procuring a license was an impossible task. GM Rao and his brother met a person who was interested in selling his Chennai jute mill’s licence as he was planning to shut down the factory. The brothers grabbed this opportunity and went on to purchase his licence and the machinery. Finally after struggling for a long time, they managed to get all the permissions from the state government as well as the Jute Commissioner at Kolkata and invested about Rs. 40 lakhs to set up and shift their plant.
  • With the inclusion of many sectors in the business, they decided to manage the business collectively. GM took up the task of being in charge of the jute mill while the second brother was assigned to see the transport business. The eldest brother took to trading, and the last brother was made to look after the rice and oil mill.
  • GM Rao was a part of this collaborative business for considerable years but gradually, he decided to dissociate his stake from all the business. He was roped in by the Vysya Bank, which was working in collaboration with ING. The Bank took his expertise because they were looking for someone who belonged to the Vysya (trader) community in Andhra’s coastal belt.
  • The period from 1987 to 1988 saw the brothers having varied views on the use of the business profits. Most of them wanted to divide and distribute the profits, but GM Rao wanted to reinvest the profits in newer business. Eventually, the brothers mutually decided to part businesses on a good note.
  • Soon after, GM invested his money into a Cotton ear-buds business. Soon enough, with his export centre in Chennai, GM’s business became a fierce competitor for Johnson & Johnson, which was the only player in this business.

In a short period, GM had taken and given up 28 businesses to grab the new opportunities, which were waiting for the Indian economy in the early 1990s.

Expansion

With the advent on 90’s, Indian markets were getting a sense of liberalization and ready to cater to the huge storm of opportunities.

  • In the year 1991, a bid for the Hyderabad airport was scheduled; GM applied for it and managed to win by out-beating competitors like L&T. But it was a risky stake as GM had no experience in the field of building airport and was unsure about the proceedings.
  • He decided to call upon the experts in aiport business and prepared a team of expert and highly qualified team comprising experts from Germany, Singapore and Malaysia, etc. He invested most of his time, energy and money to hone his team’s skills and learned the process airport construction and management from these experts.
  • Considering the rapid growth of the business, GM decided to lay down the “Values & Beliefs” of the group so that the group can function in an efficient and ethical manner in the future.
  • During this time, a Malaysian and a Chicago-based company roped in the barge-boat licences for 4 barge boats. They wanted to set up a barge-mounted project in Mangalore. But this time was not very profitable for the Malaysian economy and the company was not able to implement the project. The GMR Group realised the underlying opportunity and swiftly purchased the licences from the companies and implemented the project.
  • GM was looking forward for new opportunities and decided to give a try to the Outsourcing Industry. He started a BPO but realised that this was not his genre and sold the BPO to I-Gate at a very good price.
  • Within few years, GMR group happened to bag a contract for three roads from National Highway Authority of India (NHAI). The group worked hard and managed to excel the expectations of NHAI by completing the projects before the allotted time.
  • This helped them make good money and earn a completion bonus. Now, they had stepped into a new genre and soon managed to grab four more road projects.

Fall

While the GMR group was basking in unprecedented success, the Vysya Bank was facing a very rough phase. GMR group tried to sustain the bank for a significant period of time and to achieve this he staked all his money including his wife’s jewellery. But the drastically increasing competition, enormous capital requirements, and the constantly changing scenarios forced GM to sell his 23.99% stake for about Rs.340 Crores, to the ING Group during the late 90’s.

Comeback

  • By 1999, GM had shifted its entire focus. Around this time the Andhra Pradesh Government called for a global tender for establishing the Greenfield international airport. Along with the support of the Malaysian Airport Authority, GM managed to be among the 3 bidders for this project and he finally emerged as the winner.
  • The Indian government was planning to modernize the Delhi and Mumbai airports in 2003. GM was quite adamant to bag this deal and invested over Rs. 34 Crores on the bidding process and came up with a team of experts who were studying the airports. The team included 15 international consultants who were up for the Delhi and Mumbai airport’s bidding. Through the expertise of this competent team, GM bagged these projects.

In 2004, GM Rao attended a conference headed by Mr. MV Subbaiah. In this conference Subbaiah talked about the family succession of the Murugappa group. GM realised that many family businesses have been a part of the industry for over 300 years. Realizing this, he put together a team of senior bankers, HR consultants, etc.  to write a family constitution for his family. After working for more than 570 hours in a time span of over a four-year period, the family constitution was finally laid. It said that the selection of my successor would be done 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.

Joint ventures and Acquisitions

  • In April 2009, GMR unexpectedly bought the English Premier League’s Liverpool F.C for 500 million pounds.
  • In yet another unexpected move in 2013, GM handed over the reins of the Managing director position to his younger son Kiran Kumar Grandhi.
  • With the reduction in burden, GM started participating in the functioning of the CSR Foundation.
  • In 2014, the Andhra Pradesh Chief Minister, N Chandrababu Naidu appointed him as the Chairman of Andhra Pradesh Skill Development Corporation.
  • Recently, the company opted for the ‘asset-light and asset-right’ strategy. They have sold their 40% stake in Istanbul’s Sabiha Gocken airport for $285 million to their partner Malaysia Airports Holding.
  • GMR group has also 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.
  • 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)