Thomas White Global Investing
Emerging Leaders

Emerging Leaders

March 2012

Azim Premji, Chairman, Wipro Limited


“I think some of us who were early in a sunrise industry and have done reasonably successfully get an undue amount of credit. We caught the wave at the right time.”

— Azim Premji in an interview to Forbes magazine.


Fifty years ago, the sight of an Indian housewife buying cooking oil from a neighbourhood shop was not a pleasant one. The shopkeeper would dip his hands into a small tin can containing a yellowish-white hydrogenated fat called ‘vanaspati’, and then he would scoop up the required amount with a stainless steel bowl, weigh it on an open scale and pack it for his consumer. Indians were a resilient lot. If they had any displeasure in sharing their cooking fat with mosquitos and flies that hovered around the tins containing the vanaspati, they did not show it. Probably they did not have a choice.

But this sight did bother a teenager, Azim Hashim Premji, not the least because it was his father’s company, Western Indian Vegetable Products Limited, that made the vanaspati so cherished by his fellow Indians for use in their sweets and biscuits. Even as he lamented the primitive nature of India’s consumer markets, Premji’s father dispatched his son to Stanford for a degree in engineering. Premji, a brilliant student at the outset, was planning for a career in the U.S. after his studies.

With only a few months left to complete his engineering degree, Azim received a phone call from his mother that turned his world upside-down. Premji’s father had passed away from a heart attact at the young age of 51 and his mother made a tender appeal to her son to return back to India to take on the family’s business. Premji, not yet 21, left his graduate degree to the winds in the mid 1960s and rushed back to Bombay, better known today as Mumbai.

Back in Bombay, even as the city’s elite Khoja Muslim community put on their pristine white kurtas and gathered to mourn the sudden demise of their brethren, the younger Premji hardly had enough time to even grieve his father’s death. He was anointed the CEO of his father’s cooking oil company almost immediately. The business worth almost $2 million was extremely complex and volatile. When Premji chaired the company’s first shareholder meeting, a gentleman stood up and addressed Premji, saying “young man, my strong advice is that you sell your shares to a more mature holder. There’s no way you can run a complex company like this.”

In the face of such discouraging words Premji had one simple but powerful idea for the company: to wean away the mosquitos and flies that hovered around the tins of hydrogenated fat. Premji introduced the idea of packaging vanaspati in hygenic packets. For a 1960’s India with socialist leanings, the small innovation was indeed a revolution, and Indians took to the branded ‘vanaspati’ in droves. Soon the company started producing and branding baby soaps, oil, and diapers.

Within three years of Premji’s return, the company regained a solid footing. But the Stanford dropout was not content to run just an commodity-based oil company. He soon began diversifying the business to manufacture light bulbs, and before long, a company once known solely for vegetable products expanded into engineering components, producing hydraulic cylinders that powered construction vehicles such as cranes.

Still, it was the early 1970’s and India was experiencing the ‘Hindu rate of growth’, a derogatory term used to describe India’s sub-4% GDP growth between 1950 and the 1980’s. As if economic troubles were not enough, Indian political landscape was entering a period of profound change. India lurched more to the left in the late 70’s, electing socialists.

The newly elected socialists, wedded to ideology rather than to pragmatism, seemingly did not understand the repurcussions of their economic decisions. They instituted employment quotas in the private sector. One such rule required foreign firms to employ at least 60% Indians in their operations. That rule proved particularly onerous to many foreign firms. Companies like IBM and Coca Cola packed their bags and vacated India. IBM’s departure in particular was particularly felt by India’s technology sector. Nearly 1,200 engineers and scientists were left unemployed.

He (Azim) is a fighting general, who despises headquarters. He is constantly meeting troops, pumping flesh, evangelizing, asking tough questions and more important, asking people to ask tough questions.

— A former colleague in an interview to Outlook Magazine.

Premji, who sat on the sidelines until then, quickly jumped into action. He swiftly moved into alliance with the technical talent abandoned by IBM and assembled a technology company. In 1977, he renamed his company Wipro Products Limited, derived from Western Indian Vegetable Products Limited. Wipro initially started producing its own brand of computers in partnership with Taiwanese firms, but later transitioned into software, which was a more profitable business. Premji aggressively courted western financial and telecommunications firms to outsource their information technology needs to his company in Bangalore.

Meanwhile, the business enviroment in India was changing too, thanks to a series of reforms in the early 1990s. The country was producing thousands of engineers a year, albeit struggling to produce as many jobs to satisfy this newly educated group. Engineering graduates who in the past had queued up for visas to seek jobs offshore in Western nations, now started hearing about homegrown IT champions such as Wipro that were recruiting by the thousands.

Premji who had started a small revolution in the 60’s by packing vanaspati, was one of the key drivers of India’s information technology business. Only this time, the industry he was empowering was huge in scale, promising to halt the brain-drain of young talented minds from India. Wipro now employs 120,000 people and has operations in more than 50 countries. Premji is India’s third richest man, with a personal wealth of $13 billion.

Wipro’s growth story not only can be attributed to Premji’s hard-nosed business sense but also to his steadfast frugality and unyielding integrity. Once during the late 80’s, when a bureacrat from a government-owned power utility demanded a bribe to supply electricity to Wipro’s facilities, Premji not only refused to pay the bribe but instead spent 150 times the bribe money to build a captive power plant. Premji’s mantra for Wipro has been clear–“integrity is non-negotiable”. Partly because of its commitment to transparency, Wipro is the preferred technology partner in many defence and space contracts.

The 66-year old Premji is also different from several Indian businessmen who have been criticized for their lack of philanthropic initiatives. Premji has donated more than $2 billion to the Azim Premji Foundation that focuses on primary education. The foundation envisions starting two schools in each of India’s 640 districts and has already set up a university to train teachers. Premji considers this initiative a way to give something back to the country that has given him everything. When Muhammad Ali Jinnah, the founding father of Pakistan, insisted that M. H. Hasham Premji, Azim’s father, become Pakistan‘s first finance minister, the elder Premji refused the offer calling India his home. Indians cannot be more thankful for that refusal, as they would have had to part with perhaps one of India’s brightest minds, Azim Premji.

 

 

 

 

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