On the eastern bank of the Cauvery in Erode, Tamil Nadu and surrounded by a cluster of trees, Seshasayee Paper and Boards (SPB) is in a picturesque location. The 50-year-old company does not have a conspicuous history. Unlike many Indian companies, which have a strong promoter background, SPB has been management run since inception. It was promoted by V Seshasayee, whose dying wish was to set up a paper mill in the state. 

The task was entrusted to his protégé and labour lawyer S Vishwanathan in 1957 who laid the foundation of SPB in 1961 with a paid up capital of Rs 6 crore. He mobilized Rs 1.75 cr from 14,500 people and convinced institutional promoters including the Tamil Nadu Government, SPB's technical partner Parsons and Whittemore, ICICI and the Exim Bank of Washington to invest Rs 4.25 cr in this venture. 

However, SPB's recent success can be attributed to the leadership of N Gopalaratnam, a Mechanical Engineer from the University of Madras who took over as chairman in 2000. "Making paper is an interesting science. I never knew that I would be group chairman when I joined as a management trainee in 1969," says Gopalaratnam. The 64-year old Gopalaratnam resides within the factory complex and is a bachelor. His interests include music and philosophy. "I already have a succession plan in place because I have another two years to go," he says. No wonder his dedication to the mill has created billionaires out of a management run company.

In BW's Super Rich list, the SPB promoters have made it to the rupee billionaire list. They are ranked 421 with a worth of Rs 162 crore. During 2010-'11, SPB recorded a profit of Rs 65 crore on total sales of Rs 574 crore. 

SPB survived the License Raj days, ranting union troubles, obdurate government bureaucracies and environmental pressures before emerging among the Top 10 paper companies in India. To achieve that, it had to re-orient its strategy. "To know our mistakes sometimes one must suffer to know what we must do," says Gopalaratnam. He adds that the company almost went sick but for his timely action between 1991 and 1995.

The problem area was the product mix. While it manufactured bleached paper reels, duplex boards accounted for 45 per cent of the production. These were not remunerative in India. So it gradually shifted to making paper for stationery and institutional copiers. That involved replacing old machinery. Gopalaratnam identified efficient boilers in Germany and bought them to India. 

The other issue related to the legacy of carrying employees. It had 2700 employees, where many of them were hardly contributing to the firm. The unions were offered a deal. The heirs of existing workers could join the plant if a worker who had put in 3 years of service volunteered to retire, provided the heir was qualified. This helped to almost halve the staff strength to 1400. At the distribution level, SPB increased the dealers from 20 to 50. To generate cash SPB began focusing on exports. Now, at least 15 percent of the product portfolio is exported. 

The remaking of SPB did not stop there. It needed to control the supply of key raw materials-wood pulp and bagasse. It was the first paper mill to experiment with bagasse as pulp for paper almost 30 years ago. To control the supply of this by product of sugar, SPB set up its own captive sugar mill over 100 acres to procure sugar cane only to create bagasse for the mill. This reduced the dependence on bamboo. However, the primary ingredient to make paper is still wood pulp, which constitutes almost 75 percent of the paper. It depends on farm forestry and has contracted work in 6000 acres. 

However for Gopalaratnam nothing matters more than his company's well being.  

(This story was published in Businessworld Issue Dated 25-07-2011)