Saturday, February 6, 2016

BOOK REVIEW: THE STORY OF HAVELLS



BOOK REVIEW

Title:                HAVELLS: The Untold Story of QIMAT RAI GUPTA
Author:            ANIL RAI GUPTA
Publisher:       PORTFOLIO PENGUIN, 2016
Price:                 281 pages, Rs.599/-


The Quest For A Japanese Memsahib

When I was working in Public Relations, Havells was one of my clients. I remember thinking at the time, that for an innovative but home-grown company, not a multi-national, it had good branding and high quality electrical products.

The management style however, was more dealer-oriented than suggestive of one driven by an R&D backed corporate culture, following an international template. Not quite like Siemens, for example.

In fact, it was a dream of the founder of Havells, revealed in this book, that one day it should indeed resemble Siemens, the company multi-faceted, high–tech, and market dominant in various segments; bigger by far than its promoters and shareholders, with a life and salience of its own.

For now though, reading this fascinating memoir tells me how Havells was built up into a Rs. 17,000 crore plus midcap company. It was with a judicious blend of savvy organic and inorganic growth. The organic part developed a powerful distribution and dealer network, backed by  a manufacturing backbone, using the best available equipment, automation and human resources, placed across multiple locations around the country.

Havells went in for inorganic growth for the force-multiplier, via a constant series of astute and ambitious joint ventures turned outright acquisitions, or straight purchases, both domestic and foreign. 

Qimat Rai Gupta (QRG), the late founder patriarch and visionary of Havells, was homespun but driven, despite being of delicate health later in life. But QRG was essentially different from the start. As a child when asked what he wanted as a present, he allowed he would like a Japanese Memsahib.

This instructive book is written by QRG’s second son and successor, Anil Rai Gupta (ARG). He writes of several negotiated and amicable partings along the way, with stakeholders, relatives, and partners, including QRG’s eldest son Ajesh, who chose to separate from the family business in the nineties. But none of it was ever forced to go to court.

Indeed, the broader importance of this tale, lies in its being almost a primer for how to grow a family-owned, traditional bania trading business, into something much greater.

This David to Goliath story is very significant in today’s climate of seeking comers, both domestic and foreign, to “Make in India”, but the QRG spirit is more often seen in biographies of early American enterprise.

This book is also written partially as a tribute, by a doting son. It tells the story of how a small trader from rural Punjab, a person of rudimentary education and very limited means, began his business career by trading in kerosene. Later, he graduated, via family connections, to an electrical cable dealership at Bhagirath Palace in old Delhi.

QRG parlayed this modest beginning, in stages, into a large enterprise. The book tells of how he learned the ways of branding, manufacturing, finance, personnel, management, banking, distribution, dealer motivation etc., via his acute observation and innate vision, taking Havells public along the way, and even turning it into a multi-national, towards the end of his life.   

The blurb quotes feature notables that reflect the progress  of Havells: banker Naina Lal Kidwai, Ashish Dhawan, prominent Private Equity (PE) player, and Mohandas Pai, erstwhile financial director of Infosys, who is now an independent board member of Havells, alongside ARG, who took over after QRG died in 2014.

The most fascinating part of the biography, because it more or less doubled the size of the Havells Group at one go, is the account of how it acquired Sylvania, a large lighting manufacturing company,  that had originally, in a previous avatar, invented the tube light in 1939.

Sylvania, not unknown in India because of its Sylvania Laxman offshoot, had manufacturing plants and operations in various countries of Europe and the Americas.

When Havells came upon the opportunity, Sylvania was owned by a  clutch of international PE Funds. Estimates suggested that for an investment of Euro 60 million from Havells in India, plus a borrowing of Euro 140 million by leveraging Sylvania’s own balance sheets, the acquisition could be made. And it was, in 2006, after hectic negotiations, two years before the global financial crisis of 2008; but at Euro 227.50 million.

Havells bought Sylvania, but with bank loan liabilities massive enough to potentially sink the thriving parent company. Sure enough, in 2008, Sylvania went sharply into the red, alarming the lending banks, who wanted Havells to put in more money to keep things going, or sell out.

Instead, Havells dug in, negotiated some time from the bankers, and clawed the company back to health. They did so, by firing the incumbent CEO, directly taking charge of the top management, effecting sharp cost cutting measures, including a 40% personnel reduction, collapsing a number of the storage warehouses, closing  a couple of the European  manufacturing plants, shifting part of the manufacturing to China, and other back-office operations to India. This, along with a new, but lesser, equity injection, and better terms of credit from Hong Kong banks for the Chinese raw material/component purchases and the manufacturing operation there.

This scalpel action was combined with motivating the operating managers to target better pricing and margins. The combined raft of similar initiatives rescued both Sylvania and Havells, which also ran into a sharp downturn in business post 2008, necessitating similar belt-tightening and 40% cost cuts, inventory management etc. in India.

Sylvania and Havells were both making good profits again by 2010, thanks to this timely intervention.

In recent times, Havells, ever-conscious of brand equity, has ramped up its adspends - the 2015-16 budget is Rs. 200 crores. This,  to leverage sales of its line up of household products such as fans, CFL lamps, LEDs, switches, geysers, wires, other appliances, as well as traditionally commoditised items such as cables, MCCBs, RCCBs, and distribution boards.  It uses the personal services of Balki, the famous Hindi movie directing Lowe Lintas chief, to make high quality TV advertisements.

Under Anil Rai Gupta (ARG), the Havells Group stays committed to the founder QRG’s business philosophy. But ARG, the US educated MBA, likes process rather more than QRG ever did; but this, without killing the original entrepreneurial spirit and focus on objectives. So read this book and learn.

For: The Sunday Pioneer, AGENDA, BOOKS
(1,027 words)
February 6th, 2016

Gautam Mukherjee

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