Meet R Thyagarajan, the man who donated his wealth to employees

One of the world’s most distinctive financers, R Thyagarajan, who founded the Shriram Group, has impacted several lives by lending to low-income borrowers.

Content with his small house and his $5,000 car, Thyagarajan gave away a major chunk of his wealth to his employees. A pioneer in providing loans to India’s poor for trucks, tractors, and other vehicles, Thyagarajan turned Shriram into a conglomerate that offers services ranging from stockbroking to insurance.

Shriram’s share prices recorded a record high in July after rising by over 35 per cent this year -- more than four times as much as India’s benchmark stock index.

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Now 86, Thyagarajan has taken up an advisory role.

In an interview with Bloomberg, he claimed that he got into the business to prove that lending to those without credit records or steady incomes was not unsafe as it is thought to be. He maintained that his method of doing business is relatively ordinary.

“I’m a bit of a leftist,” Bloomberg quoted Thyagarajan as saying in Chennai, where he founded the company in 1974. “I was never enthusiastic about making life pleasanter for people who already have a good life.” Rather, I “wanted to take away some unpleasantness in the lives of people who are getting into problems.”

Thyagarajan’s career illustrates the unrealised potential in the country with the largest population in the world, where an increasing number of its 1.4 billion citizens aim to join the expanding middle class.

However, roughly 25 per cent of Indians lack access to established financial systems. The World Bank estimates that one in three people, who have bank accounts in India, never use them.

Thyagarajan stated that lending to the poor is a sort of socialism. But he has attempted to show that the business can be secure and successful by providing a less expensive alternative to the heavy rates accessible to the unbanked. By doing so, he has convinced other businesses to lower borrowing costs.

The industry is now quite profitable. There are around 9,400 so-called shadow banks in India, most of which provide financial services to borrowers who are passed over by traditional lenders.

Building an Empire

For a man who was raised in a wealthy family in the state of Tamil Nadu, surrounded by servants, founding a lending company with socialist ideals may seem like an odd career decision. However, Thyagarajan asserted that he has always had an analytical and egalitarian mindset.

Before spending three years at the Indian Statistical Institute in Kolkata, he completed his undergraduate and graduate studies in mathematics in Chennai.

He began a 20-year career in finance as an employee at New India Assurance Co., one of India’s leading insurers, in 1961. It included employment at reinsurance broker JB Boda & Co. and local lender Vysya Bank.

People in Chennai approached him along the route looking for money to purchase used trucks, and he provided loans to them from his inheritance. That side business eventually turned into his primary venture. He co-founded Shriram Chits with friends and family when he was 37.

The unbanked frequently relied on “chit funds”, a form of group savings where each participant contributes a certain amount each month. One investor receives a portion of the amount each month until everyone has gotten a certain amount. The funds are used to pay for farm equipment, tuition, or other substantial purchases.

Thyagarajan established additional businesses over time, and Shriram eventually expanded to include more than 30 companies.

Living Modestly

Tyagarajan drove a Hyundai hatchback for many years. He also does not own a mobile phone, which he regards as a distraction.

All of the tycoon’s shareholdings in Shriram firms were transferred to the Shriram Ownership Trust, which was established in 2006. Beneficiaries of the perpetual trust include 44 group executives. When executives retire, they take millions of dollars with them.

The entire worth of the trust’s holdings exceeds $750 million and has increased in recent years.

Thyagarajan told Bloomberg that he did not need the money then or now, and that he enjoys simple things.

Thyagarajan’s only regret -- the manner in which he gave away his wealth. He said he would have split the bounty if he had known how profitable Shriram would become.

“I did not imagine that so much money was going to be distributed to so few,” he says. “I’m not very happy about it. But it’s okay. I’m not very sad either,” he said in the interview.

(With inputs from agencies)

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