Why are the makers of Fevicol handing over the reins to outsiders?

As a business family, the Parekhs of Pidilite Industries – the makerof Fevicol – have done pretty well for themselves. Pidilite’s sales have doubled to Rs 3,878 crore in five years with profits rising by 60% to Rs 469 crore. Brand Fevicol has become synonymous with glue; new variants like Fevistik for paper glue and Fevikwik, an instant, one-drop adhesive have done well giving the brand entry into one million retail outlets. The Pidilite stock has gained 97% in the past year, compared to the 26% gain registered by the BSE Sensex. And, the Parekh family wealth, based on their 70% shareholding in Pidilite, has grown from Rs 4,125 crore to Rs 21,584 crore in the past five years. “It is impressive how the promoters take their consumers so seriously.

I give credit to their intelligence,” says Piyush Pandey chairman of O&M. So, why fix what ain’t broke? In February 2015, the Parekh family decided that chairman and managing director M B Parekh would step down as MD and hire Bharat Puri, the global category director for chocolates at Mondelez International, to run Pidilite as its new MD. Puri was most recently based in Zurich in his earlier role had moved out of India 10 years ago after spending almost 18 years with Cadbury’s India.

“This is not an overnight decision,” says M B Parekh. "It is best that none of the family members is in operational roles except if a situation demands it. Our roles will be to help with strategy talent and values,” he adds. Parekh will hand-hold Puri until he makes the transition and focus more on building talent pool and strategic planning. With this, all five members from three generations of the Parekh family have withdrawn from the management. M B Parekh, chairman and managing director will step down from position of managing director on April 10 and will become executive chairman, while Mr N K Parekh, joint-managing director, will step down from the position on April 1 and become non-executive vice-chairman.

Mr. Ajay Parekh, executive director, and Mr. Apurva Parekh, executive director, will work with Mr Puri on key strategic matters and also help oversee and strengthen various business divisions and functions. "The Parekhs have been exceptionally progressive in their thinking from Day One,” says O&M’s Pandey. He has worked with Pidilite for 33 years and gave Fevicol its oldest and most popular tag line "Dum lagake haisha”.



The Insider Outsider:
Puri is not new to Pidilite. He has been an independent director on the board of Pidilite since 2008. Back then, M B Parekh flew to Singapore to convince him to join the board. Since then, comfort levels between the professional and the promoter have reached a stage that Parekh saw Puri fitting the MD’s role perfectly.” I am the perfect insider-outsider,” says Puri. "His understanding of Pidilite, his ability to reach out to people, his commitment that always went beyond his call of duty even as an independent director (all counted),”says Parekh. The Parekhs have been inducting professionals into senior roles for the last few years, but this is the first time that an outsider will occupy the corner office at the company. The board of directors had more than a small role to play in encouraging the Parekh family to relinquish operational control in favour of professional managers. Pidilite’s board includes independent directors like telecom industry veteran Sanjeev Aga, Ranjan Kapur, the country manager India of WPP, and banking veteran N J Jhaveri.