Sharp business lessons from the Chettiars

This is a crisp and insightful deep dive into the history of one of India's most successful yet lesser-known business communities, writes Soumya Gayatri.

Raman Mahadevan’s Fortune Seekers offers a deep dive into the history of one of India’s most successful yet lesser-known business communities: the Nattukotai Chettiars of Tamil Nadu. It is crisp and insightful, providing a rich understanding of the numerous intricacies that contributed to the successes and failures of a community-driven business framework.

From studying the Chettiars’ innate ability to establish performance-based organisations and ‘funds-accumulating-and-distributing’ temples to exploring the effects of colonial commercialisation policies and World War II on businesses of the time, Mahadevan thoroughly investigates the highs and lows in the Chettiar business over the course of his 40-year research.

The Nattukotai Chettiars, also known as the Nagarathars, were a prominent mercantile community concentrated in 78 villages in the Chettinad region of Tamil Nadu. They were astute businessmen, trading everything from salt and grains to pearls and textiles. In the early 19th century, the Chettiars gradually transformed into overseas bankers, playing a key role in the credit lending industries of Ceylon, Burma and the Malaysian Peninsula.

Exceptional organisation

The opening of the Suez Canal in 1869 and a boom in plantation economies in Ceylon and Southeast Asia paved the way for the movement of Chettiar capital into these countries. The Chettiars were already present — albeit on a small scale — in these regions, owing to centuries of overseas trading, so they had no problems capitalising on the opportunity.

One of the key features that enabled the Chettiars to make a rapid foray into rural and quasi-urban areas where demand for credit was growing exponentially was their exceptional organisational structure. The author also provides a clear picture of the Chettiar agency structure, which included hiring and training agents to manage capital deployment in their respective markets. This visionary system, which remains a key learning for businesses even today, not only kept costs at a minimum but also enabled them to implement a performance-based payment system that linked agent salaries to business volumes and profits.

The decline of Chettiar supremacy in the Indian Ocean began shortly before the Great Depression of 1929, when the prices of commodities such as tea, rice, rubber and tin fell, and European banks began recalling their loans, leading to strong cascading effects in the tea plantations of Ceylon and the paddy fields of Burma. World War II and the Japanese occupation of Burma and Malaya sounded the death knell for the Chettiar business.

However, apart from these macro factors, the book reveals some nagging fault lines within the Chettiar business structure that also contributed to their downfall. Mahadevan discusses a general scepticism in the industry regarding the Chettiars’ ability to diversify. The money lending industry yielded very high returns, to the tune of 30-40% and the Chettiars weren’t willing to settle for anything less.

He also points to the weak social and cultural assimilation of the Chettiars in their work country, which was a prime reason for the intense backlash they faced from the local population. In the words of the author, “With growing nationalist sentiment in Burma, which was distinctly anti-immigrant and against the non-locals, the Chettiars received bad press, being portrayed as exploitative, fiery dragons and land grabbers.”

The book concludes with mixed feelings about the Chettiars’ difficult comeback in India after World War II, with some never fully recovering from their losses. Mahadevan’s Fortune Seekers, the fifth book in Penguin’s series about India’s business communities, provides valuable insights for businesses today. Unlike the Marwaris and the Gujarati Baniyas, the Chettiars were not as nimble in shifting investments to safer ventures when a crisis came. Overseas credit lending (with its high returns), which was once their strength, ultimately became the cause of their decline, demonstrating how important it is for businesses to be nimble and willing to change when necessary.