Shriram Group founder R Thyagarajan bets on math and mathematicians for business success, not that much on B-school grads

n the nearly four decades of shepherding the Shriram Group, R Thyagarajan, 75, has come to be recognised as an outlier. For long, he has been making a success of used-trucks financing targeted at truck drivers and cleaners, a customer base few others deem creditworthy.

His Shriram Group was one of the few non-banking financial companies that survived stringent norms imposed by the Reserve Bank of India ( RBI) in late 1990s to control fraud. And he has never been overwhelmed by private equity (PE) - scores of whom have invested in his group companies - while the evidence in other business groups is different.

In two years, if his latest prediction is on the dot, Thyagarajan might be able to add one more to this list. And that is: "We will make the biggest profit in the general insurance industry in 2014." Then, for effect, he says, "No other company can come close." Why is the usually forecast-shy Thyagarajan so certain about this? "Because," he says, "I am a mathematician." The implication being that he has worked out certain things in that business based on math insights that will give him the edge.

Thyagarajan, who did his masters in math from the Indian Institute of Statistics more than half-a-century back, now wants to make sure math and mathematicians will play an important role in decision-making in his group going forward.

Number Support

The broad idea must have been in force for years now. While many top names in India Inc have been donating millions to Ivy League institutions, Thyagarajan and Co has been supporting the Chennai Mathematical Institute and the Hyderabad-based CR Rao Advanced Institute of Mathematics and Statistics.

He and his friends have donated close to Rs 10 crore to the former. Plans for donating another Rs 10 crore are on. "Ten years from now," Thyagarajan says, "we will take 5-6 people from the institute who will be part of our management team." He also wants to recruit mathematicians for number-crunching skills.

Thyagarajan has now asked the institute to introduce specialisation in applied mathematics. CS Seshadri, director-emeritus, Chennai Mathematical Institute, says, "Thyagarajan's love for math has been seen all along. His buddies like MS Raghunathan [who heads the IIT-Mumbai's National Centre for Mathematics] have become great mathematicians." Seshadri goes on to add, "Rajeeva L Karandikar, the director of the Chennai Mathematical Institute, has been advising Thyagarajan on recruitment of statisticians and in analysing business."

Thyagarajan's belief is math can help create certain yardsticks, with which decision-making becomes easier. "This isn't available in B-schools. There thought is half-baked," he says, giving an example where numbers worked in their favour. "The entire general insurance industry was 100% convinced that commercial vehicle insurance industry is unprofitable. I collected information and found it was a good business. I tried to present it to the insurance industry but they said they are not interested." Now, Shriram makes a good profit on that.

Group director S Natarajan says the group has developed the ability to analyse and solve industry problems. He gives the example of general insurance where settlement time was brought down to two months (compared with the then norm of a year).

"That's why we don't listen to credit-rating agencies, we have our own yardsticks," Thyagarajan says. The key for him is to collect statistical info and then analyse, not arrive at conclusion from existing data, which is the norm. "People just jump to conclusions. Everything should be measured, and there should be objectivity in quantification. I have been trained like that."

That's also why he believes he would rather look for talent in Tier II, Tier III towns rather than B-schools. "Talent doesn't reside in B-schools," he says. That approach also works because Shriram has never believed in being a big paymaster. "Many of our people who are doing well hadn't done well academically." R Duruvasan, for example, an undergraduate, joined the group 34 years back. He went on to head the life insurance business.

The Low-Key Boss

Years before he became an entrepreneur, Thyagarajan knew about the pitfalls of poorly collected data. While working with New India Assurance, he was amongst the statisticians asked to collect data on an unprofitable line of business. "Looking at the format, I said I will not collect this information because with that information you cannot come to any conclusion." When the boss was almost pleading with him, Thyagarajan decided to just fill up random, fictitious figures for the study.

Decades later, he doesn't have the reputation of a go-getting businessman who runs an empire with over Rs 40,000 crore under management and has 6.5 million clients. He's soft-spoken, his conversation tinged with humour, and works out of a nondescript room in an even more nondescript building.

He sits in one corner of an eight-seat meeting table, almost always attired in a safari suit, with a few files, a diary and a landline being the only things to work with. He doesn't carry a cellphone. Once, he asked visitors to sit on one side of his work-table, so that he can make do with just one light rather than two.

Thyagarajan says he doesn't spend more than Rs 100 on his medicines each year and hasn't had an ECG in 35 years.
His entrepreneurial foray started with the chit funds business, gradually branching out into many other streams of the finance business such as transport finance, SME finance and insurance. He also found enough reasons to invest in non-finance businesses such as contracting, IT and realty while putting monies in a slew of small ventures that deal in everything from guitars to stem cells.

"I am always fascinated by people who have failed in entrepreneurship because of lack of money," says Thyagarajan. "So I support them, because you need people who don't look at risk. If everybody focuses on risk, nothing will happen."

HR Srinivasan, vice-chairman and vision holder, Take Solutions, a group company, says, "You can never find him tense or emotional. That is because he is very clear about what he wants. He can argue both ways about a situation and bring out the best in you. But he never enforces his views on others and gives room to try out their own idea."

Language of Science

One of the recent efforts of the group in which Thyagarajan's math know-how came in handy was one that created a novel ownership trust structure. The Shriram Ownership Trust, as it is called, was set up to recognise as owners 36 top officials who built the numerous financial businesses of the group. While senior-most members have been given a 2.5% stake each, others have been given a 1% stake.

Until they retire at the age of 60, the trust doesn't yield them anything. They just have to draw remuneration from their respective companies. Once they turn 60, they immediately get a 20% return on what they are eligible for.

The remaining flows to them over eight years. That still left an unallocated 45% stake. So, the group decided to allocate 20% for future leaders and the remainder 25% was transferred to a new trust that would have as members all the top brass of Shriram's non-finance businesses.

"I told all the businesses should be valued conservatively when compared to the market value," Thyagarajan says. "Science is my religion. In 100 years, mathematics will be the language of science. If you do not understand advanced mathematics, you will not be able to understand science," he says.

"Like man emerged from monkey, mathematician should emerge from man. That is the second evolution." The quote pretty much sums up the man.