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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