After studying law I vectored towards journalism by accident and it's the only job I've done since. It's a job that has taken me on a private jet to Jaisalmer - where I wrote India's first feature on fractional ownership of business jets - to the badlands of west UP where India's sugar economy is inextricably now tied to politics. I'm a big fan of new business models and crafty entrepreneurs. Fortunately for me, there are plenty of those in Asia at the moment.
Award: Next Generation Entrepreneur
MD, Varroc Engineering
Interests outside of work: He has a collection of 400-500 lithographs; many are hung along the stairs leading to his office. He also reads widely; his last book: Conquering the Chaos by Ravi Venkatesan.
Why he won this award: For his foresight. He de-risked his business, not leaving it overly dependent on one customer, and ventured outside India at a time when companies were busy looking inside.
It was 2005 and business couldn’t have been better at Tarang Jain’s Aurangabad-based Varroc Group. Thanks to growth at its largest customer, Bajaj Auto, sales had grown rapidly in the last five years. The company was raking in Rs 800 crore a year, an eight-fold rise over the last five years. It was a heady time for the sector—a booming Indian auto industry meant that margins were in double digits. Varroc sold whatever it made and furiously expanded capacity.
Jain had come a long way since he set up Varroc in 1990. Back then he hadn’t hoped to grow so big. But when times are good, there’s always the fear that things won’t last forever. And so, while on a high, Jain began to look for answers.
“I saw super-normal growth and knew it just wasn’t sustainable,” he says at his office in Aurangabad’s Waluj industrial area. While Varroc had expanded, there were several chinks in its armour. First, the company was too dependent on one customer—Bajaj Auto. (Jain’s mother is Rahul Bajaj’s sister.) Second, it was making a lot of polymer-based products where margins are typically low. Orders are produced as per customer specifications and there is no premium for research and development. In short, it wasn’t Varroc’s proprietary technology. Last, the company had grown too rapidly, without adequate systems and processes in place.
Even as Jain made the most of the boom that lasted till mid-2008, he also began to set the company on course for the next phase of growth. To make his a mature auto components business, he would need proprietary technology, a diversified product and geographical mix. He decided to step outside his comfort zone and look for acquisitions that would help Varroc on this journey.
In 2005, he bought Imes, a small Milan-based company, which gave him a toehold in Europe. In December 2011, he bought Triom in the two-wheeler lighting space. But Jain’s big break came in June 2012 when he paid $95 million (Rs 450 crore then) for Visteon’s lighting business. A subsidiary of Ford Motor Co, it had manufacturing facilities in low-cost countries like Mexico and the Czech Republic and would give Varroc better margins. It also gave Varroc access to a global list of customers. More importantly, it afforded Varroc with the means to make proprietary products—the key to its next growth phase.
Jain seems to have played it well. The initial results are for all to see. Varroc will end this fiscal year with Rs 7,000 crore in revenue.
What really sets Varroc apart from others—and here he is in a small league of component-makers with global ambitions, like Minda, Sona Koyo and Motherson Sumi—is that Jain had begun to think global when others were thinking local. So when the Indian market slowed down, he was ready to take the next step and go global. It is something others in the industry are just waking up to as sales in the Indian market slow down.
Jain feels his stand is vindicated when he sees the present state of despair in the industry. Says Ravi Damodaran, president, technology and strategy at Varroc, “When I see the present state of the industry, all I see is despair. Everyone wants to run to the government for help rather than seeing how they can grow the business themselves.”
The Early Years
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(This story appears in the 01 November, 2013 issue of Forbes India. To visit our Archives, click here.)