Billionaire-entrepreneur Qimat Rai Gupta’s second son, Anil, was appointed chairman and managing director of the $1.4-billion Havells India in November following his father’s demise. At the helm of India’s leading electrical goods company, this mild-mannered 45-year-old looks to double its domestic business, increase global footprint, upgrade manufacturing facilities and branch out on ecommerce platforms. Excerpts from an interview:
Q. Now that you are in charge of the business, what is your plan ahead?
Havells is an excellent platform. We will generate close to Rs 5,500 crore in revenues from the domestic business and about Rs 3,000 crore from overseas operations. Our main focus would be to grow the Indian business aggressively. And to strengthen the profitability of Sylvania (a German lighting company it acquired in 2007) from 6 percent operating margins to at least 10 percent over the next two years. Finally, we would want to grow LED to 90 percent (from its current 30 percent) of our overall business.
Q. How do you plan to improve operating margins at Sylvania?
We have planned some changes. Some restructuring in the company is still pending. We have to turn around loss-making units first.
Q. Will you now use Sylvania’s distribution network to introduce the Havells product range in the European markets?
We have already introduced Havells in some European markets (like the UK). But only some product categories such as switchgear have been introduced. Sylvania will be our brand for all lighting products. Though we are focusing on Sylvania’s growth in Europe, we are also looking to grow Havells’s presence in the Middle East, South-east Asia and Africa.
Q. How aggressive will your international strategy be? Will manufacturing capacity double?
Our major thrust would be on the domestic business. We plan to double that in the next four to five years. We possibly have the largest product portfolio for an [electrical] company. And we have built capacities for the future; those would suffice our needs even if we double our turnover. But we will certainly upgrade some of our manufacturing facilities.
Q. Where would you direct maximum attention and the majority of your spends?
I spend 70 to 80 percent of my time on sales and marketing because that is the bread earner for Havells. But if you visit a Havells plant, you will feel that manufacturing is our core, as we have spent enormous amounts of time and effort in building the plants. Our major expenses would be on sales and marketing and branding. [We’ll also spend] on increasing our distribution reach to new geographies, adopting modern platforms like ecommerce, going into modern retail formats, and expanding our retail reach in smaller towns.
Q. You are investing in distribution networks when business is being disrupted by ecommerce companies. How do you see ecommerce affecting your dealer network?
Some of our products are ready to go on ecommerce, and we are already selling them through platforms like Snapdeal and Flipkart. But many of our products cannot be sold through an ecommerce platform. We have also been discussing that if we become too aggressive on ecommerce, it might affect our traditional distribution channels.
Hence, we have to strike a balance between traditional dealers and ecommerce companies. We will create our own platform and serve customers with a mix of internal and distributor channels.
Q. Are you hinting at creating your own ecommerce platform?
Yes, for a product like an air fryer or a steam iron, the current platforms might work. But for the rest of our products, like switchgear and cables, these platforms won’t work. At least, we don’t see them working right now. That is the reason we have decided to create a balanced platform [for all kinds of products].
Q. The industry you operate in has been threatened by low-priced Chinese products. Many large companies have exited manufacturing completely. How difficult is it to expand in such a scenario?
The market for electrical products is very competitive, so the industry has always been looking at ways to reduce costs of production. Besides China, in the last few years, we have seen large, branded companies outsource their manufacturing to the small-scale industry [SSI]. Several companies have even shut down their manufacturing units. This has led to the hollowing out of the industry. The overall quality of products has come down. Initially, outsourcing to the SSI happened only for fans or low-tech consumer durables. Now, it is happening for even switchgear and other products.
There is a difference between outsourcing to quality players in China and to low quality SSI units in India. Chinese companies have built very large capacities and they produce good quality products. The SSI in India does not invest in quality goods. For example, Airtel has outsourced its administration, so that it can focus on its core business. And the other extreme is where you outsource your core business. That is not sustainable in the long run. Even outsourcing to China is no longer sustainable as the Chinese currency is under pressure, their export subsidies are dwindling. We pre-empted a bit of this [outsourcing] trend. We acknowledged Chinese dominance in lighting, so we set up a joint venture in China. But for fans, we have always believed that we can do a better job in our own facilities in India.
Q. How has your role in the company evolved in the last five years with your father being unwell?
He was not well but he was very much in control of the business. In every organisation, the buck has to stop somewhere. When he was there, it stopped with him, even though he was not the kind of leader who would take decisions all by himself. He insisted on building consensus. In the last few years, he had built a top leadership team that would jointly run the business. That team included me. I don’t think my role would change much now. Since I occupy this seat, I would look to empower more and more people and would work on his vision of building entrepreneurship for the long term.
Q. How is your working style different from his?
My father was a born entrepreneur and you would categorise him alongside leaders like Dhirubhai Ambani or Brijmohan Lall Munjal. I have always differentiated between born and trained entrepreneurs. A born entrepreneur will always take more gut-driven decisions. I am more analytical and have even debated with my father on things where, perhaps, analysis fails. Though we will look to make this organisation more analytical, the spirit of taking fast decisions will continue.
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(This story appears in the 09 January, 2015 issue of Forbes India. To visit our Archives, click here.)