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The mushroom magnate.

How Baljit Nanda's engineering expertise turned around his fungi empire

In 1983, the Alamosa Mushroom Farm went into receivership after losing $2 million a year for two years. Baljit Nanda's entrepreneurial appetite was whetted by the news, and he approached his bank, Denver-based Metro National. Bank officials asked the turbaned entrepreneur if he had mushroom farming experience. He said "no." Then why, they wanted to know, did he imagine that he possibly would be a likely candidate for such a sale?

"I figured I could solve the problem because I was an engineer," Nanda said. "So, I visited the farm looked around and realized right away what the problem was. I knew I could turn it around."

His analysis, which involved oxygen and altitude, led to a two-year negotiation to persuade the bank that his engineering knowledge and management, sales and marketing skills were credentials enough to buy the business. Sixteen years, six mushroom farms and one international joint venture later, Nanda is managing partner of Littleton-based Rakhra Mushroom Farm Corp., the United State's fourth-largest mushroom producer, and the third-largest outside the United States.

The quiet, gentle engineer and mushroom magnate grew up in Darjeeling, India, watching American cowboy movies, dreaming of becoming a white-hatted Colorado cowpoke.

Nanda eventually expanded beyond Alamosa to become a real estate developer and owner of the King Mountain Ranch, the well-known dude ranch and conference center near Granby that once belonged to the Colorado wheeler-dealer John King.

Most mushroom production, however, is small-scale. Barriers to business entry are high. Setup costs run $14 million to $15 million, while low product prices, potential crop loss costs keep growing.

In 1983, when his bank first turned Nanda down, he sought out the nation's top three mushroom-growing experts to confirm his turnaround theory. The first two had no answer and less interest, but the third, from the Princeton Mushroom Farm near Chicago, agreed to come look at the farm. Once onsite, the expert agreed with Nanda's assessment.

By coincidence, the expert, Karmjit Salh, hailed from India. "I told him I didn't know the growing, but I could handle all the management part, sales and marketing," Nanda said. "I offered him a partnership if he would stay and make it happen."

Emboldened, Nanda went to the bank holding the note and again offered to buy it.

The bank refused to sell to me that time and many more," Nanda admitted. For the next 1 1/2 years Nanda repeatedly approached Metro National,. The bank eventually had to take over the farm, and lost even more money. Finally Nanda visited one last time.

"What does it matter?" Nanda asked. "You are losing money holding on to it, and the owner lost $2 million a year. What is the difference whether the bank loses the $2 million a year or I do?" As a last plea, Nanda said, "Give me a chance - if I can't turn it around in one year. you will still have the property."

The idea struck pay dirt.

Nanda got the mushroom farm and made his changes. Three months later it was in the black. That first mushroom farm's success lead to other acquisitions of troubled mushroom farms. Today Rakhra's worldwide mushroom production is 43 million to 44 million pounds annually, while its North American production is 35 million to 36 million pounds.

Three years later, the U.S. Department of Energy approached Nanda about an experimental mushroom farm in Vale, Ore, that had lost $1.5 million a year for more than two years. Nanda flew up to look at the geothermal energy operation and was concerned that he couldn't turn it around as fast. He worked out a five-year lease with an option to buy It took only six months to make it profitable.

By 1992, Nanda had purchased two unprofitable Canadian mushroom farms in Manitoba. A year later, a near-bankrupt farm in Park River, N.D., carne to his attention.

"It was a very good acquisition for us. The farms in Canada are only 120 miles from one in North Dakota," Nanda said. "If we need more product in Canada or North Dakota, we have the production just across the border. It is very cost-efficient."

In January Nanda took over a San Diego farm that had shut down. "It was like starting from scratch. It took 3 1/2 months to clean it up and get it into production by April 15," Nanda said.

Besides the U.S. and Canadian farms, Nanda since 1993 has been involved in a joint venture with a farm in his native India. "We provided the design of the farm, and helped with construction and acquisition of all the equipment. Now we are providing them the growing technology, and our partners are doing the management part and hiring."

Nanda called his turnaround business formula the same as other industries' cost controls and increased efficiency, and careful management of employees, combined with effective sale s and marketing.

Meanwhile, Nanda raced off in other directions, driven by his desire to get back to engineering, construction and design. By 1992, he had created Summit Investments to buy and develop land. Now, the company is building townhomes at Lone Tree Country Club south of Denver

In 1994, Nanda had the opportunity to buy a ranch he'd heard fascinating tales about from an employee. When King Mountain Ranch went into foreclosure in 1993, Nanda saw his chance to become the cowboy he had dreamed of being as a Child. After extensive renovations. Nanda reopened the ranch as a dude and guest ranch in 1995. The following year, he opened another building for meeting facilities, executive retreats and conferences. The ranch, at a 9,000-foot elevation, became a luxury resort by 1907, with programs for executives, honeymooners and families.

Then, "Last year, we redesigned the King House for family reunions or groups who wanted to stay together," Nanda said. The house, with eight bedrooms and a children's bunk room, opens onto a lighted tennis court at the end of its 4,500-foot landing stop. A second strip in nearby Granby, for less experienced pilots, contributed to the ranch's revival as a conference center, as it was in its heyday, when then-President Richard Nixon and Fortune 500 CEOs were regular guests.

Despite his heavy travel schedule, Nanda eagerly welcomes guests at the ranch for special events. What few realize, however, is the return he gets: The bearded man in boots and jeans is living his childhood dream as a Colorado cowboy.
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Title Annotation:Baljit Nanda of Rakhra Mushroom Corp.
Author:Fleet, Jheri
Date:Aug 1, 1999
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