Professional, practical, adaptable: Success and succession in India

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Sreekanth Reddy - Executive Director, Sagar Cements, Cement manufacturer, India

Sreekanth Reddy is Executive Director of Sagar Cements, a second-generation Indian business initially founded by four friends forty years ago.  It’s split several times since then, most decisively in 1992, when Sreekanth’s father and brother took control of the business as it is today.

Sreekanth spent some time working for Sagar after college, then went off to pursue other interests, before returning in 2002, when his father was looking to retire. As he says, “in any family business, the change from first to second generation is always the most painful, and many don’t make it. I don’t think the second generation are entrepreneurs, they’re only followers. The danger is that they’re usually in a hurry, so they go for a quick fix. But most of the time, a quick fix is not the best solution. And there’s a challenge, too, in sustaining the same commitment, and carrying on growing without diluting any of that.” 

Sagar Cement was lucky in that the succession process worked extremely smoothly. So what’s the secret of their success?  “The short answer is that we had professional management. We had that already, and some of them had shares too. In that sense we were never a ‘family business’ in the strict sense – we always had professionals running things, and my father was very astute and understood the distinction between ownership and management. In fact, for us, the issue of management succession is just as important as family succession. Many of the key professionals have worked in the firm from the start and are now retiring. We’ve had to do a lot of practical forward planning to ensure we have a pipeline of good people in the right positions, who are ready to take over.”

Sreekanth Reddy - Executive Director, Sagar Cements

Sreekanth Reddy - Executive Director, Sagar Cements

All this took place in parallel with the family succession process, as Sreekanth’s father took a back seat, and his older brother became the key decision-maker. Sreekanth then stepped up to fill his brother’s former role as operations manager, and take a seat on the board. Some of the third generation are now coming into the business too, and that process is being carefully managed.

Sagar cement works, India

Sagar cement works, India

Growth is the goal now: “We’re doubling our capacity roughly every ten years. And every five years we take a long look at the business and decide what we need to achieve the next phase, whether that’s people, funding, skills, or a new organisational structure. Thus far, we’ve focused mainly on growing within India – we’re not averse to becoming more international, but the domestic market has been good for us. And we always approach each expansion within defined parameters – for example, we keep a close watch on our debt equity ratio, though most of our growth has been funded from our own revenues, with the wider family shareholders foregoing dividends to reinvest in the business.” 

The next phase of growth will bring a lot of new challenges: like all businesses, whatever their sector, Sagar Cements will need to confront the global megatrends, and even a traditional heavy manufacturing sector like cement could be disrupted by new technology. But Sreekanth is confident: “I think you have to adapt. It is more to do with adaptability than disruption. We are dealing with a product which hasn’t really changed for 200 years. But on the other hand, we now have a robot running the plant today. So you could call that disruption, but I call it adaptability.”

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