Success story: the path from commercial firm to the creation of powerful industrial and financial group of companies
One of the leading manufacturers of industrial products of the petrochemical complex of Russia — TAIF — began with Kazan VTNPO
In September 2021, TAIF JSC, the company that began the formation of one of the largest diversified groups in Russia, is celebrating 31 years since its foundation. It was on September 17, 1990, that the Executive Committee of the City of Kazan signed the decision on the creation of the Kazan Foreign Trade Scientific and Production Association (Kazan VTNPO). What the first steps of the company that became the forerunner of TAIF JSC were, and how from a small business, whose first steps were connected with the supply of cigarettes and essential products to Tatarstan, it was possible to grow a giant whose name is known all over the world — read in the material of Realnoe Vremya.
Period of change
The beginning of the 1990s. Serious passions are running high on the territory of the Soviet Union — the political system is changing. Numerous rallies are gathering and raging on the squares and streets of cities in all corners of the recently unified state, there are enough reasons for which: the economy, which has been recently united by the iron hand of state power, is being shaken: warehouses are filled with products somewhere, and somewhere production are is halted due to non-delivery of raw materials. The criminal situation is deteriorating everywhere. The seemingly unshakable ties between enterprises, regions, republics, and countries are being torn. Parts of the recently unified state are striving to acquire the status of independent countries and states, not yet fully realising: what is an autonomous economy and building interstate relations?
The infrastructure is being destroyed, city roads and highways are decaying, for the maintenance of which neither the republic nor the state simply has no funds. Store shelves are getting empty. Coupons are introduced for food and basic necessities in most regions. But even these crumbs are difficult to redeem — wages are delayed for months, and at some factories entire teams are on forced administrative leave. And all this is happening against the background of a rapidly depreciating national currency.
In the era of a disastrous shortage of everything, while some were panicking, others were acting. If there are not enough products, goods, for example, sugar and cigarettes, because of the absence of which (today few people remember this) there were even strikes and riots, then they needed to be found and brought. Then little-known Albert Shigabutdinov went with this idea to Kamil Iskhakov, the chairman of the executive committee of Kazan (today corresponds to the position of mayor — editor's note).
The proposal to create a foreign trade organisation that would supply the population with essential products was received favourably. The situation with supplies was getting worse, and the city administration had to puzzle over what to feed the Kazan residents with, what to put on and dress them in. Empty store counters made people sad, and the coupon distribution system helped only partially. Just at this time, the government of the country, headed by Nikolay Ryzhkov, issued a decree opening the regions the opportunity to independently engage in foreign trade operations. On September 17, 1990, the chairman of the City Executive Committee, Kamil Iskhakov, signed the decision: “In order to create conditions for improving the provision of consumer goods, food and services to the population of the city by activating exchange operations with other cities and districts of the republic, territories, regions and foreign countries... To establish the Kazan foreign trade scientific and production association (VTNPO) under the Executive Committee of the Kazan City Council of People's Deputies. This moment became the starting point in the history of TAIF Group.
The enterprising businessman who opened a modest office in semi-basement premises on Kirova Street (the company was located there in 1990 and 1991, today this building is demolished) faced the difficult task: to create a team of like-minded people who, like himself, were ready to take a risk and start a business from scratch.
Guzelia Safina was the first to respond to the invitation. Although, as she shared in one of her interviews, this did not happen immediately, and she categorically refused the first offer to work together. She agreed to help with opening a bank account and drawing up the balance — but not to become one of the co-founders of the company… Having seen enough of the numerous “moneymakers”, whom people half-contemptuously called speculators, “striving” to make quick money on compatriots exhausted by the deficit and escape with a profit — she did not want to. She doubted that someone was really ready to work, not profiteer.
“I am a healthy conservative in life, I did not believe in any commercial enterprises then. Cooperators located on the territory of the art products factory where I worked, and I, as a person of the Soviet school, was simply annoyed by their approach to business," she honestly admitted. She changed her opinion only after she was convinced of the seriousness of Shigabutdinov's approach to the case.
In the case of Rustem Sulteev, it should be noted that the grain fell on fertile ground.
“We had constant conversations, the essence of which was reduced to a short idea: we can't waste time, we need to create a company and finally start our own business. Not a one-off, but a serious company that would combine various types of activities and, receiving commercial benefits, would be able to observe both the interests of the republic and have a long-term perspective," Sulteev himself recalled the events of 30 years ago.
“We decided to start with a simple and win-win promotion — to give smokers a good start and fill them up with cheap, high-quality imported cigarettes and tobacco," Albert Shigabutdinov said in an interview about one of the very first trading operations of the newly created company. “If we managed to do this, we could turn around further — think about how to fill empty store counters with other goods.
The trading operation was so successful that Kazan VTNPO was engaged in deliveries from Bulgaria and Yugoslavia for several more years. Then it was granulated sugar. Then — phones. Later — scarce clothing and shoes. As many as 14 more than 40-foot containers brought them from Singapore, Malaysia and Hong Kong. Against the background of a sharp jump in the dollar, the deal quickly paid off, and the company was able to afford to give part of the goods to charity. Namely, it gave clothes and shoes to the pupils of several orphanages.
Life is at an accelerated pace
“We started working in business at a very difficult time. Our generation entered the business, to put it figuratively, as they enter a terrible dark forest. Here are thickets, there are windbreaks, then swamp under your feet, then steepness, you may break your neck here... It doesn't matter, we've overcome everything!” Albert Shigabutdinov remembers now, after decades.
Gritting the teeth, making mistakes and correcting themselves on the move, sometimes they worked at the limit of human capabilities, met, agreed, convinced and proved, bought, changed, sold and took for sale. They managed to do so much that they were surprised at themselves:
“Life was going at an accelerated pace. We managed to do so many things in a day that would have been enough for others for a week. We drove up to a thousand kilometres a day. In the morning, we went to Samara, Syzran, from there home, the next day — to Ufa. Just returned from Bashkiria and again behind the wheel — to Moscow... There were such frenzied moments in life that they did not believe our speed: they say, it is physically impossible to move in space like this. But it's quite possible! What is more, no one pushed us, forced us. There was the active desire to live, work and prove to ourselves that we were so simple. We were initially confident that our people were no worse, and maybe even better, in terms of knowledge, education, hard work and entrepreneurship, and could be more successful than businessmen in the West. Life has shown that this is really so.
“There were such moments that it got scary: men went on business trips, sometimes they were gone for weeks, and I was alone in the office. By that time, we had already changed our address — we moved to a mansion on Mushtari Street, where we occupied the second floor. There was no one even to sign the documents. They was a call: prepare the bills, go to the bank and pay faster. But how? I had to get out of it myself. Then we had only one car, and I ad to walk. You rush to a bank, ask for a loan. There was nothing to offer for the loan, everything was on on a wing and a prayer: we said we would definitely earn money. We get a loan of 30 million rubles, sign the bills — and that's it. One moment, and the money was immediately gone. Not a penny on the account. I return from the bank, collapse from exhaustion on a chair and find myself trembling inside, as if in a fever. But it was already unthinkable to leave the race, and the same thing was repeated he next day. It was incredibly difficult. Contracts were concluded, but they did not go. The money was stuck somewhere. In short, we lived like on a volcano, not knowing a minute of peace," Guzelia Safina shared.
But we continued this crazy marathon, gradually gained experience, grew, moved to new levels and scales of transactions. It's hard to believe today, but at the very beginning of the 1990s, even with money, it was almost impossible to buy a car. At the same time, both the AZLK and VAZ were filled with finished products. The crumbling ties between enterprises and regions paralysed the economy. Kazan VTNPO had to undertake the restoration of at least some of them. AvtoVAZ, with which the company had already established business cooperation by that time, asked to organise the supply of tyres and polyester films for the production.
“To do this, we first went to Nizhnekamskneftekhim, which produces rubber, the sale of which was also hampered," Albert Shigabutdinov recalls. “Through barter transactions, we exchanged it for tyres from Yugoslav production. We took these tyres to AvtoVAZ and set up the supply of new raw materials for rubbers to Nizhnekamskneftekhim itself.
The business model built by the company turned out to work in other niches as well, helping to fill in the missing links in the producer-consumer chain.
“It was not always possible to avoid barter moves. There was even such a scheme: for example, the director of a plant, completely upset by the lack of 'ready' money, calls and asks to give some boxes of cigarettes in exchange for the plant's products. 'Why in exchange?' we answer him. 'Give us your products, we will sell them, and we will return the revenue minus a small percentage. Then buy cigarettes from us.' 'Is it really possible?' the delighted director is surprised and takes his products to Kazan VTNPO. This is how the sale of tyres, rubber, diesel fuel, everything that enterprises could not sell independently entered into business circulation. In this situation, the main thing was to uphold the trust of the management of enterprises, to sell the goods faster and return the money to the producers that, first of all, went to pay salaries to the labour collective," said Albert Shigabutdinov.
Other companies, starting with the import of cigarettes, would need a whole life to reach the sale of thousands of cars, special equipment, establishing large-scale wholesale supplies (including for export) of rubbers and refined petroleum products. The evolution of Kazan VTNPO took just a couple of years. Someone would say — destiny's favourites. But it's not like that.
There was neither crime, neither 'silver spoon in the mouth' — none of this. Only the desire to work towards a result. At the first stage, there were only three people: Albert Shigabutdinov, Rustem Sulteev and Guzelia Safina, who sometimes, in the literal sense of the word, lived at work and got ridiculous money — exactly as much as they not only earned, but were able to withdraw from circulation without loss to the business. There were so few of them, this spare money, that they had to carry pens, rulers and lunch in jars from home. But what is surprising is that these people continued to be obsessed with ideas and the desire to achieve results at all costs, with even greater force. They not only forced themselves to believe in the reality of achieving new goals set for themselves, but also infected others with this confidence. By 1993, the business had gained momentum so much that the company began to hire new employees. However, there were no fewer troubles and tasks.
“Contacts with officials at the government level began later, when our company, Kazan Foreign Trade Scientific and Production Association, actively helping Tatarstan producers in the sale of their refined products and petrochemicals, began to understand that the quality of these products leaves much to be desired. Besides, supply delays were quite common: enterprises experienced serious difficulties with raw materials, there were power outages… There were a lot of problems. More resolute ways and support at the state level were needed to improve the economy of the republic, to bring petrochemical enterprises out of the deep crisis. At that time, the activity of Kazan VTNPO was far from the purely trade transactions “buy-and-sell” and increasingly acquired an investment character. This became known in government circles, in particular when the company entered into correspondence with the Cabinet of Ministers on the subject of improving the quality and increasing the volume of petrochemical products," Albert Shigabutdinov tells about that time.
But how to increase the volume and quality if huge funds were needed to improve the production technology and expand the capacities of the same Nizhnekamskneftekhim, and they were not there. Moreover, the complex did not even have money to pay its own employees. Delays reached six months. The issue of corporatisation of the giant production became acute, which would not only save it from the increasingly real danger of bankruptcy, but would also make it possible to attract additional funds for the development of the complex, increase freedom of action in the organisation and reorganisation of production processes, attract borrowed funds for the implementation of projects for modernisation and the upgrade of capacities. Finally, the staff of the enterprise, who became shareholders, that is, the collective owner of the share of Nizhnekamskneftekhim, would be personally interested in improving the efficiency of the complex. The leadership of the republic attracted Kazan VTNPO, which already had experience in restoring the chains of interaction between manufacturers, to the study of this issue.
Despite the complete absence of any relevant legislative framework in the country, by August 1993, the specialists of Nizhnekamskneftekhim could prepare and defend a privatisation plan. The laws adopted later at the state level showed that everything was done correctly. Moreover, the conditions of privatisation were thought out with maximum benefit and in the interests of the company's employees. We conducted a clear assessment of the value of the entire property of the complex at the time of privatisation, including social facilities, the economic condition of factories and production facilities, and determined the amount of the authorised capital. According to the privatisation plan, over 50% of the shares were to be received by the labour collective (partly for Russian and Tatarstan privatisation checks, partly at no cost, in accordance with the work experience at the enterprise, and partly for real money). Thanks to this decision of the republican authorities and the management of enterprises, employees of the privatised plants received much greater rights than their colleagues in other regions of the country — the shares went to those who worked at the factories and were really interested in their successful economy and development. The state sold the remaining securities through specialised funds. But since there was no money, Kazan VTNPO was asked to help in solving this issue.
“Money was needed for privatisation. 3 billion 400 million rubles. And Kazan VTNPO was assigned to find them. But we were in a stalemate: not a penny on the account. Every day they called us and asked how much money we had transferred. We started borrowing money on the side. They got out of it by selling cars. Getting them in 1993 was not just difficult, but extremely difficult. But we managed to do it, quickly carried out the operation and managed to pay off the debts," Guzelia Safina shared her memories.
Albert Kasafovich spoke about the situation of that period in more detail:
“Then 3 billion 400 million was an unaffordable amount for us, but it was decided that our company had to pay them. At first, the conversation with me was: 'Albert, help me pay, otherwise the team may be left without shares.' But we had no money. We partially agreed with the banks — we took out a loan. We directed all money from circulation — we in VTNPO were engaged in buying and selling cars at that time and transferred all the proceeds from there for several months for the purchase of shares from the state by employees of Nizhnekamskneftekhim. It was a difficult period, there was not enough money, the salaries of all VTNPO employees were cut, the business stopped for several months. Nizhnekamskneftekhim promised us to cover this amount with the money from export supplies. You remember, in the late 1980s-early 1990s, Tatarstan closely cooperated with Yugoslavia. Nizhnekamskneftekhim exported rubbers to the tyre factories of Yugoslavia, where Tigar tyres were produced. The rubbers, the proceeds from the sale of which were supposed to partially cover the amount of the sale of shares to the employees of the enterprise, were sent in wagons to Yugoslavia, and the war began there. And the cars loaded with rubber came under fire and bombing. They were completely destroyed — everything was burned down. By that time, we had already paid for the shares of the labour collective, Nizhnekamskneftekhim had no other opportunities to return them to us. And we found ourselves with billions of dollars in debt on our hands. For a long time we tried to return the money from Yugoslavia, but the war dragged on, then Yugoslavia collapsed. So it turned out that the Nizhnekmskneftekhim labour collective received the shares as gratuitous assistance from Kazan VTNPO," Albert Shigabutdinov recalls.
According to him, it is still horrible for him to remember those years, it was so difficult to solve this problem.
“This is one of the many particularly difficult moments of the beginning of the formation of VTNPO, it still trembles me when I remember that period, not every person could stand it. At the same time, we still managed to save the company.
From Kazan VTNPO to the creation of TAIF
The restoration and development of the republic's economy required new technologies, modernisation of equipment, and huge investments. But no bank in the world would risk issuing multimillion-dollar loans without an independent assessment of the assets of enterprises and a government guarantee. With the support of Kazan VTNPO, the leadership of the republic decided that it was time to fill the gap that hindered the development of Tatarstan and seriously addressed the issue of creating and developing full-fledged stock market instruments in the region.
“On April 11, in the Kremlin, President M.Sh. Shaimiev received Chairman of the Board of Directors of Komliz Inc. D. Mckennis (USA), President of NKS Trading Inc. A. Friedman (USA), Deputy Prime Minister, Chairman of the State Committee of the Republic of Tatarstan for State Property Management F.R. Gazizullin, Director General of the Kazan Foreign Trade Scientific and Production Association A.K. Shigabutdinov, who told that they had reached the agreement on the creation of the international investment company to attract capital and invest it in the economy of our republic. This company intends to do a lot of work to accelerate the integration of the Republic of Tatarstan and the Russian Federation into the global financial system, develop the stock market of these republics, attract investment resources for the implementation of promising investment projects in Tatarstan, increase the value of enterprises' assets, ensure their liquidity. In particular, to organise an independent international expertise for the assessment and analysis of the assets of enterprises, to sell the company's shares on the stock market, to hold international auctions in Tatarstan for the sale of shares of our enterprises, shares of US and EU corporations. The company also plans to create an international stock exchange in Kazan on the basis of existing radiotelephone companies — a developed telecommunications and satellite communications infrastructure, to develop a regulation on the creation of zones with preferential taxation to stimulate investment in the economy of the Republic of Tatarstan. The American guests stressed that the political and economic stability in Tatarstan, the competence of personnel in this sphere in the Republic of Tatarstan, as evidenced by the already established ties, served as a convincing argument for making such a responsible decision. M.Sh. Shaimiev approved the idea of creating the international investment company and wished it to gain credibility in the business world as soon as possible," such message appeared on April 12, 1995 on the pages of Respublika Tatarstan newspaper.
It was at this time that the idea of creating Alabuga special economic zone, Innopolis SEZ and science city and other points of investment and economic growth of the republic was also formed.
The main founders of the company were the republic and the American company NKS Trading Inc. The government paid for participation in small blocks of shares of enterprises of the republic, and the American side contributed $10 million to the authorised capital. At that time, it was the largest investments. On August 10, 1995, TAIF was entered into the State Register of Joint-Stock Companies established on the territory of the Republic of Tatarstan.
In February 1996, the company received a certificate of registration and entry into the State Register of Commercial Organisations from the Ministry of Economy of the Russian Federation.
“The young company was founded on the personnel basis of the Kazan Foreign Trade Research and Production Association, its general director was Albert Kashafovich Shigabutdinov, although young, but already quite mature and experienced. He was appointed the head of the new association TAIF. At the beginning, the company itself actively invested in those areas of the economy, the absence or underdevelopment of which seriously hindered market transformations in the republic. For example, the lack of rapid and high-quality communication. The company started creating the market for modern telecommunications, including multimedia, services. It launched mobile and fixed-line communication projects, created terrestrial and satellite television. Or, for example, when the complex of the primary oil refining plant was reconstructed and built, it became obvious that there were no modern construction capacities in Tatarstan. Such companies were also created. And so one after another," in an interview with Realnoe Vremya, the first president of Tatarstan, current state adviser of the republic, Hero of Labour of Russia Mintimer Shaimiev reminded about that period.
Everything is related in life, and solving some issues, it is absolutely impossible to ignore others. The young company experienced this itself. Faced with a shortage of qualified personnel, TAIF organised the training of specialists abroad and ... Many young employees, having never started working or having worked for a very short time and having received practical experience, suddenly left for Moscow or abroad. Not because of the salary. The company could have already offered quite a decent one by that time. It turned out that the reason for everything was the lack of conditions for a normal life: at that time, there were problems in the republic in the field of medical care, and in the absence of services, and there was nowhere even to distract from work — no clubs, no sports centres, no urban spaces. So TAIF had to get involved in the construction and development of the service sector. Not only for the sake of their employees: thousands of families who previously lived in dilapidated housing, as a result of the fact that the company joined the implementation of the presidential programme, moved to new comfortable apartments, the specialists of the group itself also received comfortable housing, and the Piramida culture and entertainment complex grew in the centre of Kazan — today one of the most recognisable architectural objects of the capital of the republic. Oil refining, oil and gas chemistry, energy, gas filling business, construction, telecommunications and media, entertainment, social programmes ... Probably, there is not a single industry or direction of economic development in the Republic of Tatarstan where TAIF does not take an active part.
“Certainly, the most important point of application of the company's forces is petrochemistry and oil refining. The Group accounts for the main part of the production of products of the chemical, petrochemical, and oil and gas processing industries of Tatarstan. The current modern level of production capacities of the enterprises that are part of the Group is a successful implementation of the competent investment strategy of the TAIF team, well-coordinated joint work of the company's specialists and employees of all interested enterprises and services of the republic. TAIF is always on the move and continues to invest its own and attracted resources in the further development of the petrochemical complex of the republic. Investments in the enterprises of TAIF Group are measured in hundreds of billions of rubles. In its work, the Group relies on innovations. There is a clear focus on the structural restructuring of petrochemical industries, on ensuring advanced oil refining and the creation of a large petrochemical complex with a large number of processing operations on this basis," Mintimer Shaimiev notes.
“At the same time, TAIF Group has neither oil nor gas, but large complexes are competitive. Our well-being lies in the fact that Tatarstan has managed to preserve the oil complex, both oil refining and petrochemical — and all this works for the benefit of our republic. Certainly, TAIF has a great merit in this. Today, the group of companies represents not only oil refining and petrochemistry, but also construction, banking complexes, and telecommunications. All this forms the basis of our republic, this is the foundation and the base that we have today in the republic. Every year we open some new production facility. It is not for nothing that today Tatarstan is the largest producer of plastics, the largest producer of synthetic rubber. We still have very big plans for the future," Tatarstan President Rustam Minnikhanov adds to his words.
“The concept of 'socially responsible business' is not an empty phrase. Moreover, I am referring not only to the company's large contribution to the budget of the republic through tax payments and fees, and they are sometimes comparable to the budgets of some regions. TAIF makes a huge contribution to the implementation of social 'presidential' programmes, provides great charitable and sponsorship assistance to educational and socio-cultural institutions, actively supports leading Tatarstan sports teams, participates in the restoration of historical and architectural monuments of native Tatarstan — the revival of Bolgar and Sviyazhsk. The company takes care of war veterans, 'Afghan' soldiers, people with disabilities, orphans, families who have fallen into a difficult life situation," said Chairman of the State Council of the Republic of Tatarstan Farid Mukhametshin.
Over 30 years, from a small company, with a team of only three people and scanty turnover, if compared with the current scale, Kazan VTNPO has grown into one of the largest multidisciplinary groups in Russia with an annual output of about one trillion rubles in monetary terms. TAIF today consists of 30 subsidiaries and dependent companies, an army of thousands of employees and large-scale plans for the future. And, looking back and evaluating what has already been achieved, you can be sure: there are simply no unattainable heights for the Group.
The Group has never had and does not have a goal to take over these or other assets completely. Created as an investment company, TAIF is part of a company that needs an impulse for development on market conditions, and on a planned basis, with a clear elaboration of long-term development programmes, it is actively working to increase its economic efficiency, strengthen the production and material-technical base, improve technologies. But when a business is firmly on its feet, it either acquires independence and becomes 'autonomous', or is transferred on market conditions to a new owner who is ready to continue its development. This was the case with the construction company Kazan PSO, TVT shopping mall, insurance and banking directions, TAIF-Telkom mobile operator, and a number of other businesses. In 2019, in one of his interviews, at that time the CEO of the Group's parent company, and today chairman of the board of directors of TAIF JSC, Albert Shigabutdinov, emphasised: “we will try to realise the dream of my partners who dream that TAIF should become an exclusively investment company from the TAIF management company that exists”. A company whose goal, by investing its own funds and attracting borrowed funds, is to develop important and necessary areas of the republic and Russia's industries, including oil refining, petrochemistry, chemistry, energy, and, without stopping on what has been achieved, to be able to switch to even greater and more ambitious projects.