What lies ahead for Zandu-maker Emami as the next generation takes over?

The change of guard marks a generational shift in the history of the 48-year-old business, which competes with the likes of Hindustan Unilever Limited, Dabur India Limited and Patanjali Ayurved Limited.

The management rejig, however, does not signify any major change in the running of the company because Harsha Agarwal and Mohan Goenka have been running the business for several years, some analysts said.

One analyst said on condition of anonymity that the passing of the baton to the scions was a missed opportunity for Emami, which could have hired a professional CEO to lead the company and prepare it for the next leg of growth.

A business forged in friendship

Emami was founded in 1974 by childhood friends Radhe Shyam Agarwal and Radhe Shyam Goenka in Calcutta (now Kolkata) as a cosmetic manufacturing company. In its initial days, the company was named Kemco Chemicals and was renamed Emami after its public listing in 1995.

The company remains a family-owned and family-run cooperation to date and over the years has diversified into other businesses such as paper manufacturing, edible oils and hospitals. The children of the two founders run these businesses. Radhye Shyam Agarwal’s son Aditya Vardhan Agarwal and Radhe Shyam Goenka’s son Manish Goenka are directors of Emami Group and head its paper, edible oil, and biodiesel businesses.

Emami, the fast moving consumer goods unit, is run mainly by Harsha Agarwal and Mohan Goenka, who joined it about two decades ago. Priti A. Sureka, daughter of Radhe Shyam Agarwal, also oversees a few brands and manages the research and development wing of Emami. Prashant Goenka, Radhe Shyam Goenka's nephew, heads the international business.

The business has not seen any major differences in almost half a century of its existence and the founders say that keeping the company’s interest above narrow self-interest has helped in its smooth functioning.

“We are not Agarwals and Goenkas—but Emamiwalas,” R.S. Agarwal and R.S. Goenka wrote in a column for Mint newspaper in 2019.

The scions

Harsha Agarwal and Mohan Goenka, the new leaders at Emami, have played an instrumental role in building Emami into a major FMCG maker after joining it two decades ago, investors and company employees told Moneycontrol.

Harsha Agarwal, for instance, was one of the major forces behind the acquisition of Zandu Pharmaceutical Works in 2008 and the subsequent demerger of its FMCG business into Emami Ltd in 2009.

“It was a hostile takeover and the process started somewhere in 2006. Harsha would fly to Mumbai to negotiate with the Parikh family. He turned around things so much so that towards the end, it was not a hostile takeover but a friendly one,” a source close to the development told Moneycontrol.

The Agarwals and Goenkas made a play for Zandu Pharmaceuticals after recognizing the potential of the brand that was then languishing amid a feud between the two promoter families – the Parikhs and the Vaidyas. The company bought the 24 percent stake owned in Zandu by the Vaidyas, but ran into resistance from the Parikhs, who eventually relented and sold Zandu to Emami for Rs 750 crore in one of the most expensive takeovers in the Indian FMCG space.

Today, the brand contributes 80 percent of Emami’s sales along with other leading brands like Navratna, Kesh King and Boroplus.

The younger Agarwal, similarly, was the driving force behind the acquisition of Kesh King’s hair & scalp care business from Himachal Pradesh-based SBS Biotech for Rs 1,651 crore in 2015 and strategic investments in new-age startups such as The Man Company and Brillare. He now oversees the Zandu healthcare business and Navratna Oil, among others.

Mohan Goenka, meanwhile, takes care of Emami’s pain-relief portfolio and the Fair And Handsome brand that was his brainchild.

“Mohan in one of his trips to South India realised that several men also apply Fair & Lovely, a fairness cream targeting women. And this led to the launch of the first fairness cream for men in India in 2005 -- Fair And Handsome,” said the source cited above .

Hindustan Unilever rebranded Fair & Lovely as Fair & Glow in an attempt to make its skincare portfolio more inclusive.

Goenka currently leads functions like marketing, sales and investor relations at the company.

“Nothing changes but a missed opportunity”

As the younger generation takes over the company, most analysts are of the view that nothing changes at the company as this just marks the formalization of their roles.

“They were already running the business and the development does not change anything. It is just formalisation with a title. It is sons taking over from fathers, but the younger generation has been running the business for several years now,” said Abneesh Roy, executive director at Edelweiss Securities.

“We see this as a routine development of succession planning as the next generation formally takes up top roles,” he added.

Another analyst called it a missed opportunity for Emami.

“A company needs one kind of skill sets to reach a valuation of Rs 500 crore but to scale further to Rs 1,000 crore, another set of skills is needed,” said the analyst with a top securities firm who did not wish to be identified.

“Not to say the young generation does not have these skill sets but their time is divided between other businesses too,” he added.

According to this analyst, the induction of a professional CEO would have helped Emami in its next leg of growth and helped it scale new heights. “Case in point being Dabur and Marico, which have evolved to become top FMCG companies since their professionalization,” he added.

Marico Limited founder Harsh Mariwala passed on the baton to Saugata Gupta and appointed him CEO in 2013 and MD in 2014. Ninu Khanna joined Dabur as its first professional CEO in 1998 after the founding family – the Burmans – ceded control of the company.