"Inorganic growth through  acquisitions have helped them gain new clients"

"A little more support for star exporters will fuel their revenues"

Hyundai Motor India Limited

“Exports depend on unforeseeable factors”

Y. K. Koo
MD & CEO, Hyundai Motor India Ltd.

Hyundai Motor India Limited (HMIL), the second largest car manufacturer in India, has been surprising the industry with its spectacular performance year after year. What's more? HMIL has been India’s biggest car exporter for the last 10 years consecutively. In an exclusive interaction with The Dollar Business, Y. K. Koo, Managing Director & CEO, HMIL, reveals the road ahead for this exporting giant.

Interview by Anishaa Kumar | April 2017 Issue | The Dollar Business



TDB: In February 2017, Hyundai Motor India Limited registered a sales growth of 4% year-on-year in the domestic market. You also managed to pull off record sales in November last year despite demonetisation and other policy challenges. Did you take any specific measure to boost sales?

Y. K. Koo (YKK): In February 2017, Hyundai India reported domestic sales of 42,327 units and in November 2016 it recorded highest-ever monthly domestic volume of 50,016 units. Despite low customer sentiments due to demonetisation, Hyundai India posted a steady growth and good customer response. Unique and innovative customer benefit schemes were offered across India to excite customers and boost sales.
 
TDB: In FY2016, Hyundai India sold 6,43,269 cars, of which 1,67,268 cars were exported. How is FY2017 shaping up?

YKK: FY2016 was a year of excellence for Hyundai India. We continued to build upon our strength of innovation through customer centricity and strengthened our product portfolio with models such as Elantra and Tucson. This year looks promising with the entire industry optimistically looking forward to a good growth. Realising that, Hyundai recently launched the 2017 Grand i10 through an innovative digital launch. The digital launch received an overwhelming response of more than three million views across all Hyundai’s social networking sites. We have seen growth across all models, especially Grand i10, Elite i20 and Creta.

TDB: What are your major markets when it comes to exports? Which range of products do you export more?

YKK: Hyundai Motor India is currently exporting to 87 countries across the globe. The models that are being exported are Eon, Grand i10, i20 and Creta. The major markets for us are Latin America, Mexico, Chile, Peru, Panama, Africa and the Middle East, South Africa, Algeria, Tunisia, the Asia Pacific, Philippines and Nepal. All the cars that are exported from our plant are customised as per market requirements of the destination country with respect to safety features, design, government regulations and customer demand. Going ahead, we are exploring the opportunities to export to Australia as well.
 
TDB: In terms of exports, what challenges does Hyundai Motor India face?

YKK: Exports are dependent on several unforeseeable factors including the political and economic conditions in the destination countries. Also, changes in government regulations related to banking, financing, imports taxes, etc., have an impact on exports. However, despite these challenges, our exports have been growing continuously because of the quality and design of our cars.
 
TDB: Hyundai has been very successful in India over the last two decades. What are your plans for the future?

YKK: Two qualities have defined Hyundai’s last two decades in India – learning and innovation. Utilising these qualities in the next four years, we plan to expand and strengthen our product lineup with eight new launches that will be equipped with new technologies. Out of these eight models, three will be new segment products and five will be full-model change products, apart from the regular product enhancements with facelifts and special editions. We are also refreshing the price value equation of our existing products to enhance the reach of our modern premium portfolio. We also expect exports to go up as exports from India play an integral role in the overall global operations of Hyundai Motor Company.
 
TDB: How has the Union Budget 2017 been for the sector?

YKK: We had a great start in 2017. Hyundai has recorded a growth of 7% in the domestic passenger vehicle segment for the month of January and February, over the respective months last year. Such pragmatic results are due to an increase in customer visits and conversions at the dealership on the strength of improved customer confidence generated by the Union Budget, which has further positively impacted the customer disposable income and overall sentiments across the industry.
 
TDB: How has the 'Make in India' initiative impacted Indian automobile sector in general and Hyundai Motor India in particular? Will the initiative be able to establish India made cars in developed markets?

YKK: Hyundai India has always believed in the “Make in India-Made for the World” philosophy since its inception and we have retained our export lead for the last 12 years. We have made our brand synonymous with global customers’ aspirations and offered products that are made in India and conform to the global benchmarks of quality. The initiative has resulted in customers around the world being able to access the best global technology and quality at an affordable price.
 
TDB: Premium hatchbacks, mid-size cars and SUVs seem to be the flavour of the season. What is your strategy for these segments in the year ahead?

YKK: All Hyundai products are either trendsetters or benchmark creators. Three of our products – the Grand i10, Elite i20 and Creta – offer unmatched value to the customers, backed by performance and Hyundai’s assurance of global quality. Being the winner of Indian Car of The Year (ICOTY) for three consecutive years, the Grand i10, Elite i20 and Creta have redefined their respective categories. While the new 2017 Grand i10 rewrote the rules in the hatchback segment, the Elite i20 has captured 44% market share in the premium compact category. Creta, on the other hand, has raced to over 100,000 bookings within eight months of its launch. To further strengthen the brand image of Hyundai as an innovative and progressive brand, in Auto Expo 2018, we will showcase our strong hybrid IONIQ. In the second half of 2018, of the three new segment products, we will be introducing a new family-oriented concept and design-led product, followed by a sub 4-meter SUV in the first half of 2019.
 
TDB: Besides manufacturing good cars, Hyundai is also known for its CSR activities such as the Chakka Chakka Playground, children safety quiz, children safety fairs, etc. Are there any new initiatives on the anvil?

YKK: As a caring and responsible manufacturer, it’s our duty and responsibility to apprise the masses about the importance of road safety. In November 2015, in association with the Ministry of Road Transport and Highways, we had launched the Safe Move campaign. Safe Move campaign is a mega initiative and we aim to spread the awareness through different platforms to make it a mass movement. This traffic safety campaign reached out to over 90,000 students across 142 schools and 100,000 residents across 146 RWAs in 11 cities. We also released #BeTheBetterGuy, innovative safety awareness videos on various digital platforms, featuring Hyundai's corporate brand ambassador Shah Rukh Khan. In 2017, Hyundai will work aggressively towards developing an ecosystem of safer roads through our road safety programmes and we will also look forward to spreading the message of heritage conservation through our Happy Move 2017 initiative.

TDB: The company is also contributing towards 'Skill India'. Could you elaborate a bit more on this?

YKK: When it comes to ‘Skill India’, we have adopted 33 government ITIs and 5 polytechnics – with at least one institute in each state and in each zone. Students from the ITIs would have an opportunity to be absorbed as technicians in our company. Near our factory, we have completed three 'Dream Village' projects, with the last one being inaugurated on February 3, 2017. This year, we have ambitious plans to adopt 60 villages in Sriperumbudur taluk in Tamil Nadu.

Bajaj Auto Limited

“We don't Customise our Products for Exports”

Rakesh Sharma
President − International Business,
Bajaj Auto Limited

Having established itself as the largest exporter of two and three wheelers, Bajaj Auto has already become a common noun across many markets. Rakesh Sharma, President of International Business at Bajaj Auto, talks about the automaker's approach to exports, need for localisation across markets, cost advantage that India offers, adverse movements in currencies, and the impact of Trump on world trade.

Interview BY Steven Philip Warner, editor-in-chief | April 2017 Issue | The Dollar Business



TDB: Bajaj Auto is the largest exporter of motorcycles and three wheelers. What factors, according to you, contributed to the company’s success in the global markets?

Rakesh Sharma (RS): In the last 10-12 years, the company has seen a stellar growth in foreign markets. And, I would say that there have been three major factors that have strengthened our position in the international market. First is our technology, research and development, and manufacturing strength. Be it the design or the performance, Bajaj vehicles remain unmatched when it comes to delivering quality at competitive pricings. And by no means, this is a small measure as it demonstrates the universality of our technology. Second, for any business to succeed overseas, it requires commitment from the top management. It requires the acceptance that things are not going to be as smooth as they are here at home. Making the organisation respond to customers and getting people interested in your product requires a lot of patience and dedication. And finally, the partners and teams that have been working on the ground. Our partners in various countries have done a wonderful job. It’s their efforts that have made a relatively unknown brand a market leader.

TDB: In your opinion, what is  the key to a profitable growth in the overseas market?

RS: Well, in the international business, Bajaj Auto has a wide range of products that cater to various segments of customers in different countries. For instance, we have products for utility sector largely in Africa and the commuter sector in South Asia and other countries. We also have the sporty segment that caters to a different set of customers. So, the strategy is determined by the market and not by any single product. Besides, our attempt is to sell more profitable and premium products in each segment, thus enabling us to command a premium pricing, resulting in a better margin and brand equity.

TDB: Despite legal issues in India, exports for Bajaj’s quadricycle Qute started last year. How has been the response to the product so far in the global market?
 
RS: Yes, we have already commenced exporting our four-wheeler mini passenger vehicle to almost 21 countries. Since Qute is a light four-wheeler, many countries are yet to recognise it in the new category. Our challenge has been to get that category approved in the respective country and we are currently in talks with them, governments, to get a separate category created for Qute. Alongside, in the overseas markets, we are feeling the market pulse and consumers are being made aware of the product and its utility. We are hopeful that in at least half of the export countries we will be able to accomplish the task in six months and then start aggressive marketing, distribution and promotion.

TDB: Now that you have mentioned you export Qute to 21 countries, are they your traditional markets or have you tapped into some new markets?

RS: Quadricycle Qute is being exported to various countries, ranging from Russia to Turkey. But the true potential for Bajaj Qute lie in the destinations to which we export our three wheelers and two wheelers. However, we have selected a few markets in Latin America, Africa and South Asia, just to get  a different kind of experience in different continents. And, once we achieve some desired level in these markets, we would then go for further expansion.

TDB: Do you customise or localise your products for different export markets?

RS:  We don’t localise or customise our products for any export market. Frankly speaking, we have not felt the need to do that. Yes, we have certain platforms that are more suitable for a certain market, but we do not start with a country. Product development considers the general trends of several markets in different segments in these countries. Then we develop a platform that is taken into the market. Localisation is considered only after we have brought out a product and gone ahead it, and later feel the need to localise certain components either for cost or statutory reason. Well, we operate in more than 65 countries across the globe, which means our global volume is large. But because of the kind of cost structure that we have been able to achieve here in India, we are able to also meet a certain standard of quality that cannot be matched by any other country. So, if we shift our production elsewhere, it will only increase the cost. However, there are many countries where there are statutory reasons. For instance, the governments in many places promote utilisation of local products and offer competitive duty. And for those reasons, depending on markets, we do treat with localisation.

TDB: India’s exports of automobiles saw a steep decline in FY2016, as compared to FY2015. What do you think was the reason behind the fall?

RS: Emerging markets took a huge knock, following a series of factors including tumbling commodity and oil prices. Revenues of many of these countries were dependent on the revenues from the exports of commodities and oil. And the steep fall in their prices severely affected emerging markets. On top of that, forex volatility in emerging markets due to euro weakening and dollar strengthening also took a toll on export numbers. This has created a huge amount of uncertainty in the foreign exchange evaluation, making imports expensive in many countries. The demand slide in African countries, led by a dollar shortage and currency devaluation weakened the markets. And that is why business has been reduced. On the contrary, Bajaj’s market share has grown in almost every market. It demonstrates that customers regard us as a trusted brand. I must point out that during such difficult situations, people tend to move towards trusted brands. We have sacrificed margins, but our market share has improved and profitability has remained intact.  

TDB: Recently, many African countries were unable to make payments in dollars after receiving the goods. Did you face any such problem?

RS: Like I said, there is a low dollar availability in many African countries and so establishing Letters of Credit or financial transactions is a problem. However, since we have a policy that we only ship our goods after receiving 100% payment, so far, we have not faced any such situation where our client has stopped payment due to adverse movements in currencies. But of course, we faced troubles due to shortage of foreign exchange and political situation in markets like Nigeria and Egypt.

TDB: Do you expect the commodities market to rebound any time soon?

RS: Some major countries, led by US, are taking a restrictive and protectionist stance. So, I feel that we may either observe an adverse impact of globalisation or some kind of trend reversal. When one major country becomes more restrictive, what happens is that it sets off a tit for tat response. And as an outcome, international trade and globalisation suffer. At this point of time, it is very difficult to say if things would reverse. I think things will continue in the same direction for a while.

TDB: So, you believe US President Trump will continue to have a big impact on trade?

RS: Yes, I think so! And it’s because whatever US does has an impact on the WTO. As the US dollar is the international trading currency, any movement in the dollar is expected to have an impact on trade and countries across the globe, both on the basis of currency and the trade policy. But, we are hopeful that matters will only improve in the days ahead.

Ashok Leyland

“DUBAI WILL BE OUR HUB FOR GLOBAL OPERATIONS”

Arijit Dutta Chowdhury

Business Head - Projects & Defence, International Operations, Ashok Leyland

With a turnover in excess of $3 billion and a footprint across more than 50 nations, Ashok Leyland has been amongst the frontrunners when it comes to exports of commercial vehicles. In a candid interaction with The Dollar Business, Arijit Dutta Chowdhury, Business Head – Projects & Defence, International Operations, Ashok Leyland, explains how exports will account for one-third of its total sales by 2021.

Interview BY Kanchi Batra | April 2017 Issue | The Dollar Business



TDB: Ashok Leyland has been on a roll since last few years with both sales and profits growing at a steady pace. What differentiates you from your competitors?

Arijit Dutta Chowdhury (ADC): We are in the business of moving people and goods, and in the process are touching millions of lives across several countries since 1948. Ashok Leyland, a Hinduja Group flagship company, is the second largest manufacturer of medium and heavy commercial vehicles (MHCVs) in India, the fourth largest manufacturer of buses in the world and the 16th largest manufacturer of trucks worldwide. In truck-making, we are focussing on volumes and would like to see ourselves in the top-10 in the world over the next five years. We are dedicated to providing transport solutions that offer the best operating economies without compromising on comfort and safety. We offer an inclusive range of modular and scalable services based on an ‘end-to-end’ solution approach. The bottom line is that our sales and service network forms an important link between us and our customers, however distant they may be positioned. We offer quality service so that customers derive the best from our products, day after day.
 
TDB: Is Ashok Leyland leveraging the government's 'Make in India' initiative?

ADC: We are gratified to participate in the ‘Make in India’ drive. Our defence-related business is being re-evaluated with a two-pronged approach of growing traditional tactical vehicles as well as expanding the offerings to address the government’s ‘Make in India’ requirements. In commercial vehicles, our emphasis on economically and ecologically feasible transport solutions, operating economies, customer profitability and consumer comfort has helped us bring happiness, convenience and prosperity to millions across the world.

TDB: You have been aggressively focusing on exports. You have also opened a bus building facility at Ras-Al-Khaimah in UAE. What else are you planning to further strengthen your global presence?

ADC: We are very strong in Middle East and SAARC markets like Sri Lanka, Bangladesh and Nepal. Recently, we have opened a new assembly plant in Bangladesh in partnership with IFAD Autos Limited, and very soon we will have an assembly facility in Kenya as well. We have a fairly strong presence now in Russia and we are planning to start our operations in Latin America very soon.
Given the optimistic outlook for MHCVs with the revival in global economy and our emphasis on exports and growing the light commercial vehicle (LCV) segment, we anticipate a huge improvement in the company’s performance going forward. To ensure that we have a good presence in export markets we have identified six clusters – West Asia, East Africa, West Africa, CIS, ASEAN and Latin America and are aggressively focusing on them. In ASEAN countries, we see a lot of potential for LCVs too. In overseas markets, our concentration has been on the bus segment as that’s where we can have an edge. Our strategy has been to enter a market with buses and then introduce our other products at a later date. As far as our global business is concerned, we have identified our target markets and now operate our entire international operations out of Dubai. The company is steadfast to work towards enhancing its offerings there. It will be a hub for our international operations. We are clustering ourselves more strongly and we have a dedicated vision that our exports will be one-third of our total volumes within the next five years.
 
TDB: Africa seems to be the go-to continent for many auto makers. Tell us about your operations and new product launches in the African continent.

ADC: We are extremely strong in Africa. In the last five years, we have been the best emerging company in terms of exports to the region. Soon, we are going to introduce RESLF and JAN Bus, the perfect city/tarmac bus which has been designed and developed to suit the tough operating conditions in Africa. We have also introduced the Falcon range for use in Africa's Bus Rapid Transit Systems (BRTS). The range is furnished with powerful aggregates to deliver enhanced performance. We have clustered Africa into four important regions, viz. Kenya, Ivory Coast, Egypt and South Africa. The Kenya and the Abidjan (Ivory Coast) clusters are doing very well. Additionally, we are enhancing our network base in markets like Ethiopia, Nigeria, Ghana, Burkina Faso and Cameroon, among others.
 
TDB: What challenges do you face in Africa?

ADC: Africa is indeed a land of huge opportunities. That said, we have challenges with logistics, challenges with countries that have a foreign currency crisis and, of course, we have countries that are suffering from civil unrest. To top it all, the oil crisis has had a huge impact. Countries like Nigeria and Angola are dependent on oil and therefore are highly prone to currency fluctuations when oil prices drop. It is difficult to sustain operations in these countries. Having said that, the opportunities far outweigh the risks and challenges.
 
TDB: Your LCV joint venture with Japanese auto major Nissan is over. How are things shaping up on the LCV front?

ADC: We have now resolved all issues and the joint venture is behind us. The production line is now established (Ashok Leyland's Hosur facility) and we are all set to embark on a new journey. We have drawn up an all-inclusive game plan to usher in a renewed revolution to not only stay healthy as a company in the context of evolving market dynamics but also move up the value chain.
 
TDB: How is Ashok Leyland reciprocating to the challenges posed by the rapidly changing global business and economic environment?
 
ADC: To respond to challenges globally, we are investing in new and appropriate products and technologies. We are focusing more on the profitability of clients and providing best-in-class service. We have also taken ourselves closer to the clients by setting up our cluster bases in different regions.
 
TDB: Ashok Leyland is known for its high quality and diverse product mix. Are there any new product launches for the global market in the offing?

ADC: We present a smart and strong solution for urban and rural transport. All our vehicles are equipped with traditional safety features like the emergency door, fire extinguisher, first-aid kits, improved safety features like passenger door alarm and overhead grab rails and anti-skid floor. We have an extensive range of 18 to 80 seater buses. We have introduced a revolutionary concept in urban mobility – the Jan Bus (Jan as in janata), which is an innovative, feature-rich and technologically advanced transportation solution engineered to deliver a smooth ride for passengers. It is the world’s first single-step entry, front engine, and fully flat floor bus. Standing 650 mm above the ground, the fully-built Jan Bus gives you an even floor height – from the driver cabin to the rear of the bus. This patented product from Ashok Leyland is for both domestic and overseas markets.
 
TDB: What can the government do to further facilitate exports of commercial vehicles?

ADC: More than providing export incentives, the government needs to make the process of exporting easier in terms of documentation, etc. Logistics also continue to be a huge challenge. Ports and infrastructure are yet not up to the mark. If the government addresses these issues, exports from the country will definitely get a boost.

Cyient Ltd.

“Exports will account for 95% of revenues”

Krishna Bodanapu
MD & CEO, Cyient Ltd.

Companies the world over are aggressively investing in futuristic technologies such as Internet of Things, analytics, virtual reality and unmanned data. These also define the existential purpose of Cyient. Krishna Bodanapu, CEO, Cyient Ltd., elaborates upon how solutions-driven growth around aerospace, healthcare and defence will drive the company's revenues in the years to come.

INTERVIEW BY Niladri S. Nath | April 2017 Issue | The Dollar Business



TDB: From about $200 million in FY2016, Cyient is confident of a five-fold jump in revenue in the next few years. How do you plan to bring about this growth?

Krishna Bodanapu (KB): From the vertical perspective, I anticipate aerospace, defence, rail and communications to lead our growth in the next four to five years. While medical and healthcare is a relatively new space for us, we are excited about the opportunities. We recently invested in Israel, particularly for defence opportunities including offsets. The Asia-Pacific region should also continue to deliver a high rate of growth, the way it has been doing over the past four to five years. While developing East Asian markets took time, we see an increasing shift towards engineering services outsourcing that should also contribute to our growth.

TDB: In FY2016, exports accounted for 94% of Cyient’s revenue. Do you expect any changes in FY2017 and FY2018?

KB: In FY2017, export revenue is likely to drop by a couple of percentage points over the last financial year as the domestic revenue from our design-led manufacturing (DLM) business was unusually high. In FY2018 we expect export revenues to be at about 94-95% of total revenues.

TDB: The company has been working towards increasing the contribution of the solutions division to annual revenues. How has been the progress so far?

KB: In FY2015 we introduced our S3 (Services, Systems and Solutions) strategy, which articulated the roadmap to move from services to systems and solutions, to drive and sustain growth. DLM is one example of the manifestation of the S3 strategy. It offers our customers the benefits of value engineering, obsolescence management, seamless transition from design to manufacturing, and single ownership and accountability across product lifecycle. DLM is getting positive traction across industries. Thanks to S3, we have been able to differentiate our value proposition as a design-build-maintain (DBM) partner capable of solving more problems, fulfilling more needs and providing solutions to our clients’ value chain. S3 is resonating positively with our clients and the outcome is reflected in the evolving mix of our business.  Solutions-driven growth should contribute to 30-40% of the revenue in the next 4-5 years.
 
TDB: What role will digital technology play in Cyient’s growth strategy?

KB: Digital technology is fundamentally redefining how products and services are designed, manufactured, operationalised and supported by our clients. Digital technology is also driving new efficiencies, new revenue streams and providing the basis for continuous improvement and innovation. At the same time, it is defining new business models like ‘product-as-a-service’ and new commercial models like risk and reward sharing that essentially reflect how businesses must respond to the changing needs and expectations of their customers. Additionally, digital is also an integral part of the S3 strategy. For example, we are leveraging analytics and big data capabilities to help a global leader in passenger transportation systems deliver real-time, cloud-based predictive maintenance for intelligent asset monitoring and improved equipment reliability.

TDB: Rolling stock, rail control and operations will continue to be your principal focus areas in rail transport industry. How are you gearing up to become a reliable global partner?

KB: Over the last few years, the growth of this industry has exceeded various forecasts and expectations. And, this is driven by investments across all segments with enhanced emphasis on rolling stock and signaling. Rolling stock and signaling have been recording annual growth rates of 5.8% and 4.9%, respectively. We have intensified our focus on rail by bolstering our long-term strategy. We have made significant investments to strengthen our DBM proposition for this segment and have expanded our global engineering footprint by establishing an engineering centre in Prague.

TDB: You have carried out several strategic acquisitions. How are these acquisitions furthering your goals?

KB: Our investment in Cyient Insights, in late 2014, was a decisive first step to bring digital capability into our industry offerings. Cyient Insights has helped us develop new businesses with our aerospace, rail, healthcare and industrial clients and will be a key element to our growth in 2020. The acquisition of Rangsons Electronics (now Cyient DLM), in early 2015, helped us complete our DLM value proposition. It has also strengthened our presence in the defence sector. I expect DLM and defence to contribute significantly to our growth. Our recent acquisitions have been in the geospatial and avionics segments. Blom Aerofilms comes with a reputation for high-quality data acquisition and helps to round out our acquire-build-maintain value proposition for the geospatial industry. Certon gives us proven IP tools that support safety-critical engineering of products in the avionics value chain. IP can also be leveraged for industries like medical, transportation and defence and we will be focusing on those synergies too.

TDB: How do you plan to leverage opportunities from the government’s thrust on defence manufacturing and export?

KB: Cyient has been investing in technology, IP, design, manufacturing and system integration capabilities to address critical technology requirements of the Indian defence sector. Our initial focus is in areas like communication systems and unmanned surveillance systems that align very well with the Defence Procurement Policy’s preference for indigenously designed, developed and manufactured solutions. I believe we are well-placed to capitalise on the opportunities in the Indian defence sector. We expect this sector to contribute about 15-20% towards our revenue in the next 5-7 years.

TDB: What’s your view on futuristic technologies like IoT, mechatronics, analytics, automation and robotics?

KB: We are aggressively investing in IoT, analytics, additive manufacturing, virtual reality or augmented reality and unmanned data acquisition systems. We have also invested in resources, training and capability development. We have a strong development-led focus on digital labs, infrastructure and equipment, as well as technology and research partnerships.
 
TDB: Protectionism has been the buzz word across the globe. How do you think it will impact the export business?

KB: While globalisation is a great concept, the responsibility of any country’s government is to first protect the interest of its citizens. In US, we are an American company and US citizens comprise a significant portion of our employees. We have made over $60 million of investment in US over the last decade and each year we spend over $200 million in US on salaries, purchases, rent, etc. Hence, we are very well-positioned to support the growth that will be fuelled by the spend on defence, infrastructure and energy – all of which are our focus areas. We also export about $100 million of technology solutions each year to US to support the business we do there.

TDB: A NASSCOM-Booz Hamilton study highlights that outsourcing of engineering services may reach $38-50 billion by 2020. What will be the key drivers for growth?

KB: The roadmap for growth in engineering and R&D exports points towards exploring new markets, industries and service offerings. While sustaining growth in existing markets, we can find new opportunities in East Asia, Europe and India. Energy, utilities and infrastructure represent fast-growing verticals that can complement our traditional growth base of aerospace and transportation. Being able to offer integrated design and manufacturing capabilities definitely give us a competitive advantage.

Dabur India Ltd.

“Globally, we've grown Organically”

Lalit Malik
Chief Financial Officer, Dabur India Ltd.

Generations have grown up on products bearing the popular 'leafy-tree' logo. Now, the brand's custodians have given it a new twist – ayurvedic. Dabur continues to grow with a dual-focus of being 'localised, globalised' and despite a host of new 'ayurvedic' brands hitting shelves across the world, Dabur understands that every fruit takes time to ripen; it has its 'leafy-tree' brand to serve 'natural, ripe' new products to the world.

Interview BY Anishaa Kumar | April 2017 Issue | The Dollar Business



TDB: Over the last decade, Dabur’s sales have quadrupled to Rs.8,436 crore in FY2016. What has contributed to this big jump in topline?

Lalit Malik (LM): Ayurvedic and herbal heritage combined with our deep understanding of consumers' needs have helped us stay relevant and drive demand for our products, year-after-year. Dabur has been working on a three-pronged growth strategy of ‘Expand, Innovate and Acquire’. We have been focusing on strengthening presence across existing categories and markets while entering new geographies. This helped us maintain a dominant share in categories where we are category builders like health supplements and others. In addition to expanding market shares in other categories, we have also undertaken calibrated international market expansion with a focus on local manufacturing and supply chain to enhance flexibility and reduce response time in the face of a changing market. Acquisition, or inorganic growth, has been the third key pillar to our growth strategy and has played a critical role in building scale in existing categories and markets. The idea is to look for targets that are a strategic fit with Dabur. We have demonstrated this with our highly successful acquisitions like Balsara (2005), Fem Care Pharma (2008), Hobi Kozmetik of Turkey (2010) and Namaste Laboratories of US (2010).

TDB: FMCG is a high-competition and high-profit industry that attracts participation from players, new and emerging. How have you managed to thwart growing competition?

LM: Recently, we have seen a marked increase in awareness levels among Indian consumers. They are increasingly embracing ayurvedic and natural products. This has also led to the entry of several new players in this arena. We look at the entry of new players in this category as a facilitator in terms of growth and not as a threat. We feel that the entry of more players in this market would further promote ayurvedic and herbal alternatives and this will only work to our advantage in the long term.

TDB: Does Dabur embrace R&D investments as a popular, progressive strategy?

LM: Dabur has been investing in R&D and developing high-quality products to retain its leadership position in the market. Going forward, we will continue to do so to meet the ever-changing needs of our consumers. Dabur had initiated ayurveda R&D in 1976 when it was one of the first to undertake research in this segment. Our R&D centre is today equipped with state-of-the-art instruments as well as trained manpower needed for pharma-grade research activities. We continue to introduce a range of products that are value-added and in the premium category, and that has helped us improve on our market share despite heightened competition.

TDB: Overseas, the Middle East is key for Dabur. The market accounts for 33% of Dabur's international sales, followed by Africa, Asia and the Americas. Considering the next few years - how do you see your overseas business pan out?

LM: Dabur’s overseas business has almost entirely been built organically. We have established manufacturing units across the globe – locally manufacturing products that meet local needs and aspirations and marketing them to the local populace. Our exports from India are minimal and we have always focussed on locally manufacturing products in the overseas markets to be sold there and in other neighbouring markets. We have emerged as an India-born FMCG transnational through the organic route. In the Middle East markets, with the growing popularity of our natural products among the local populace and in view of the immense potential the market offered, Dabur set up a subsidiary in Dubai to cater to the growing demand for its products. We then established a manufacturing facility in Dubai to make tailor-made products for the local audience. Several of our products are among the top three brands in their respective categories, growing at strong double digits and winning market share from multinationals. We have also expanded to other emerging markets like North and East Africa, Europe and US. We are now exploring newer markets like Iran, South Africa and Myanmar.

TDB: Last year, Dabur signed a licensing agreement with the Government of India to produce two new ayurvedic drugs – Ayush 64 for the treatment of malaria and Ayush 82 for diabetes management. What is the latest update on that? Are you planning to introduce them internationally?

LM: Just this month, we've launched Ayush 82 powder as Dabur Madhurakshak Activ, a formulation specially developed for effective management of diabetes. The drug is a highly-advanced one, backed by several clinical studies and scientific tests, making it the most tested and effective remedy for managing diabetes. Going forward, we will look at introducing this across newer formats. However, the launch is currently for the domestic market only. Work is also underway to launch Ayush 64 in India.

TDB: Nepal and Sri Lanka have been important production bases for Dabur’s fruit juice segment. Political disruptions in Nepal last year impacted imports from the country. How advantageous has been manufacturing in Nepal and Sri Lanka?

LM: When Dabur pioneered the concept of packaged fruit juices in India, we established a manufacturing facility in Nepal as it offered a conducive environment for processing juice. As we expanded the juice business, we set up a packaged fruit juice unit in India too, which focuses on India-specific fruits like pomegranate, litchi, pink guava, etc. With the demand for our fruit-based juices and beverages under the Real brand reporting strong growth, we set up a new facility in Sri Lanka. Building a manufacturing facility in Sri Lanka gave us a competitive edge, making it easier to service the South Indian markets while de-risking the Nepal operation. The previous year had seen our supplies from Nepal being affected due to a blockade but the situation is back to normal now, which is reflected in the over 50% growth that the Foods business reported in Q3 of this fiscal.

TDB: Dabur is exploring rural-focussed packaging, anticipating an increase in demand from rural India. How are you going about it?

LM: This year’s Union Budget focused on giving consumption a boost and this will also lift rural demand which has been struggling. The good monsoon last year has already improved rural sentiments and a stimulus would drive consumption further. I am quite happy with the Government’s increased focus to boost rural economy and enhanced allocation to MNREGA to Rs 48,000 crore. A skill development initiative for the rural populace would help promote entrepreneurship in the hinterland. These initiatives would not just strengthen the hands of the rural poor but also help put more disposable income in the pockets of the rural consumer, improve their standards of living and ensure continued rural demand for branded consumer goods. Going ahead, we plan to step up our rural distribution enhancement programme and introduce special packs (Low Unit Packs) for the rural market.

TDB: From organic products, Dabur expanded into FMCG products. Now with a renewed focus on ayurveda and natural products in both domestic and international markets, will you redesign your strategy again?

LM: Dabur has always remained focussed on ayurveda and a bulk of our offerings is on the herbal and ayurvedic platform. While a lot of companies today offer herbal or ayurvedic products, Dabur enjoys the consumer’s trust because of its heritage. We continue to introduce a range of products that are value-added and in the premium category, which has helped us improve our market share despite heightened competition.

Su-Kam Power Systems Ltd.

 “SOLAR POWER WILL RUN CONNECTED APPLIANCES”

Kunwer Sachdeva
Founder and MD, Su-Kam Power Systems Ltd.

"A global brand based in India" is how Su-Kam introduces itself on Google. From selling pens and installing TV cables to filing patents for technology and design in the Indian power backup industry, Kunwer Sachdeva, Founder and MD of Su-Kam, set up a startup two decades back and turned it into a household name across 90 countries. The man speaks about a "power-packed" journey to global popularity.

Interview by Aamir H Kaki | April 2017 Issue | The Dollar Business



TDB: Su-Kam is a success story today. How did you charge it up?

Kunwer Sachdeva (KS): We started with the thought of bringing new and innovative technologies in the power backup industry, as I had personally experienced that inverters at that time lacked quality. I worked as hard as I could and gave almost everything to my work. That did help me and my team in making what Su-Kam is today. We then started introducing affordable ‘Make in India’ inverter solutions, especially to cater to the rural population. At the same time, our vision is to provide affordable backup power solutions to the darkest corners of India. I realise that people need to break the usual thought pattern. My approach to anything and everything is to provide a solution rather than cry over spilt milk; I think of how quickly I can sort out a problem and get back on track. This approach, I believe, has helped me the most in life.

TDB: From a startup in 1998 to now becoming India’s largest power backup provider with a presence in 90 countries - has the customer-centric focus changed in all these years?

KS: I started selling pens as my first startup business and even at that time, I knew I wanted to do something big. I was good at expanding my small pen business and I grew by learning from my mistakes. When I came into the power backup industry, my primary focus was the customer. And that focus has not changed till date, whether you talk about Su-Kam in India or Su-Kam in Latin America. I developed new technologies that made it easy for everyone to understand and use. I am happy to announce that we take innovation really very seriously, but centered around the idea of being able to make it easily available and usable. For instance, year after year, we've been rolling out one innovative product after another. And more recently, we have launched world's first touchscreen off-grid solar inverter. That's innovation that's easy to use as well.

TDB: We learn that you faced many challenges very early on. What were the prime challenges faced by Su-Kam in its path to becoming a respected brand?

KS: In the beginning, I faced a number of challenges to start this business and get the required investment. It was difficult to get a bank loan at that time. But I believed in my vision and worked hard to fulfil that. We also struggled with a lot of technical problems while designing inverters because we wanted to get it just right. We would not sit till our product was the best in the market. And once we did that, we again struggled with our technology being taken up by other competitors. That is when I started marketing my products. I carried out highway branding/OOH campaigns and in the process, successfully grew our market presence and made the required noise. But we never turned away our focus from what is called 'technovation'.

TDB: Su-Kam forayed into the solar power industry a decade ago. How do you see the change in demand for solar-powered solutions?

KS: Previously, demand was growing linearly but we are now seeing an exponential growth pattern. India is now looking at a massive solar industry expansion in the coming years. With India targeting rooftop installation of 40GW in the coming five years, that will open the market of a size of about Rs.12 lakh crore. We will see a huge demand for solar-powered solutions. The government is also coming up with new policies that will greatly help solar developers and users to make solar the primary source of power generation in the coming years.

TDB: How do you see the potential for solar-powered solutions across international markets? Which are your major exporting markets? How about China as a competition?

KS: Our major focus is on Dubai, West Africa and South-East Asian markets. We are not facing much competition in the off-grid market but we keep trying to learn and grow with the generation. As quality standards rise with the passage of time, we need to be consistent with technology innovation. There is huge demand and need for solar-powered solutions in countries affected by power shortages. Solar has a big role to play in energy independence, especially in countries like Afghanistan, Syria, Iraq, etc., that have been affected by wars. There is a great demand for Indian solar inverters, charge controllers and panels in MENA countries, as there are some painfully long power-cuts in those nations. [Imagine, in countries like Syria and Yemen, power cuts can last up to 16 hours a day!] Many of our solar products are sold in the war-torn regions of Middle East and Africa because they need an energy source other than the highly unreliable grid supply.
We started R&D for regular inverters in 2000 and we don’t have to do anything special for solar-powered products. I’m already dealing in batteries, which use DC (direct current). Solar panels also use DC. All I have to do is replace the battery in a regular inverter with a solar-powered one. It's that simple.

TDB: What percentage of Su-Kam’s revenues comes from overseas markets?

KS: Exports from Su-Kam have witnessed a steady growth in the last few years. Currently, exports make up approximately 20% of the company’s overall revenue. We are also taking several steps to increase exports of our Made-in-India products. For this, we are taking more dealers and distributors on board. We regularly conduct training workshops for all our global channel partners. We are also running several branding activities in our target countries.

TDB: We understand that the prime concern of MSMEs in India, especially in the goods sector, is that exports is regulated more by laws that are ever-changing. Have you experienced something very similar in recent months?

KS: Exporting products have been challenging with changing laws in customs regulations. The price of the dollar going up and down amid uncertain global political and economic environment aren't helpful either. We are trying to develop technologically advanced IT solutions so that we don’t get affected much by the dollar volatility. And we're making good progress on that front.

TDB: Tell us a bit about your future expansion plans. Is the company enhancing its product portfolio?

KS: Yes, especially in the on-grid market. We are coming up with hybrid solutions, i.e. connected appliances will run on solar power during the day on an inverter and in case, any extra solar power is generated that is not used by the load, then it can be sold back to the mains supply. We are also planning to incorporate bluetooth technology in all our inverters.

TDB: 'Make in India' – how has Su-Kam benefitted?

KS: The ‘Make in India’ initiative is a well-thought-out scheme by the Indian government. However, from the very beginning, we never looked at the government for support and we’ll continue to do that. Su-Kam has been making in India for over two decades now. Our state-of-the-art manufacturing facilities and R&D unit are based in India. Meanwhile, one of the pressing issues for which I have even written a letter to PM Modi is of India’s slow patent regime. We have filed the highest number of patents in the world in our industry but some companies continue to copy others’ products. It takes seven to eight years to grant a patent in the country and that defeats the purpose of ‘Make in India’.

TDB: What is your take on GST?

KS: We look forward to a reduction in taxes on solar products, so that more and more people can take up solar-powered solutions and make it a primary source of power generation. A true green-powered era is what we expect.

WNS Group

“We view disruptors as opportunities”

Keshav R. Murugesh
CEO, WNS Group

WNS started operations in 1996 as a captive for British Airways. Come today and this business process management services provider boasts of annual revenues of Rs.3,670 crore, with all of it coming from exports. In a free-wheeling interaction with The Dollar Business, Keshav R. Murugesh, CEO of WNS Group, lists the factors that have contributed to the success of this outsourcing giant.

Interview BY Niladri S. Nath | April 2017 Issue | The Dollar Business



TDB: From a captive for British Airways in 1996 to a major player in the business process management (BPM) segment, what are your key takeaways from the journey?

Keshav Murugesh (KM): The biggest takeaway from this experience is that the only way to survive and grow in this world is with specialisation. If you want to succeed, find a niche and develop deep capabilities in that niche. The other learning is to have an agile approach to business. No business rule or model is written in stone: review your business strategies and keep them aligned to the constantly changing business environment.

TDB: WNS disrupted the traditional business model of wage arbitrage by introducing a vertically-integrated outcome-based business model. How did you do that?

KM: Creating a vertical-focused model was a move based on strong market insights. We had developed deep domain knowledge and understanding of our clients’ businesses. Our clients had seen the benefits of outsourcing and they were ready to increase the scope of our partnerships. We created practices and solutions around several key industries, set up centres of excellence to design industry-specific business transformation solutions, and committed to further growing our domain expertise by setting up an in-house domain university, The Gateway. Today, we train and certify people in 13 industry domains. Over the years, investments in latest technologies have enabled us to move away from the traditional, input-based model to an outcome-based revenue model. Now, we bill our clients not for the number of associates employed in managing a client’s business process but for the outcome we accomplish.

TDB: During initial years, the company’s financials witnessed many whipsaws. Was restructuring to blame?

KM: When I took over the reins in 2010, the company’s financials were weak. Something drastic was needed to transform the business and take it to the next level. Verticalisation presented that opportunity and thus, we began a daunting internal transformation journey. Entire verticals had to be built from the ground up, starting with hiring people from clients’ industries with right domain knowledge who could help us design new service offerings. Hence, it took us time to start delivering vertical-specific services and return to a steady growth path.
 
TDB: You have incorporated all disruptors such as social media, mobile and analytics, cloud, robotics, artificial intelligence, etc., in your delivery and business model. What role have these disruptors played in the company's growth?

KM: We view disruptors as opportunities. On one hand, we have taken technology integration into BPM services to a different level, while on the other hand we have enriched our offerings through platform solutions, cloud enablement, robotic and automation solutions, and analytical tools. WNS has used the combination of technology, analytics and robotics (together and in parts in some cases) to create frameworks and products such as WNS Analytics Decision Engine (WADESM), an integrated service framework for data-driven insights; ProGenie, a web analytics tool; SocioSEER, a big data analytics platform to improve social media brand presence; and SmartPRO, a proration engine for our airline clients.

TDB: How has the role of a BPM service provider evolved in this competitive global market where businesses always look to capture new markets and consumer segments?

KM: Our role as a BPM partner to global enterprises is multi-layered because we impact their business at different levels. At a basic level, we offer our clients higher efficiency, productivity and customer satisfaction with superior service delivery. We also transform their business processes with the right use of process improvement and technology tools that offer them not just short-term cost gains but also sustainable profitable growth in the longer run. We support CXOs with strategic inputs for their business decision-making.

TDB: Is research and analytics a new growth driver?

KM: Business leaders today need incisive data-backed insights on the basis of which they can take decisions about various aspects of the business – sales and marketing strategies, acquisitions, market expansion, operations, etc. Our research and analytics practice comprises an entire gamut of services. It is not only a strong growth area for us, but also a key differentiator.

TDB: Are you eyeing any new market?

KM: We are targeting Australia and Middle East for BPM services. Asia Pacific will also continue to grow. Hence, we are working towards making inroads into these markets.

TDB: In the last annual financial report WNS had mentioned that offshore outsourcing is a politically sensitive topic in UK and US. How have such threats shaped up after Brexit and Donald Trump’s election as US President?

KM: As far as Brexit goes, though we saw some initial uncertainties, the signs are now positive for the BPM industry. Without free access to the EU market, businesses in UK will now have no option but to move to a smarter and more efficient business model. UK businesses will also need access to top quality, affordable talent since European talent will not be easily available. For both these requirements, they will need to rely on their BPM partners more than ever before. As far as Trump’s protectionist measures go, BPM companies will not be affected by any new policy on H1B visas as we do not use them. However, protectionist measures will only erode the competitiveness of companies. Moreover, unlike popular belief, BPM is not about offshoring but providing the companies a mix of sourcing options – with delivery centres nearshore and onshore.

TDB: How do you plan to counter protectionism threats?

KM: Protectionism is a reality today; businesses must be ready for these threats and be sensitive to the fears and sentiments of the communities around them. BPM companies are establishing large delivery centres in different parts of the world, creating job opportunities in those countries. Currently, WNS has about 22,000 employees in India and 12,000 overseas across 45 delivery centres in 13 countries. Hence, we hire local people from a specific country, depending on the requirements of the business and operations.

TDB: Which segments remain under-penetrated from your company’s perspective?

KM: BPM is still in its nascent stage and is under-penetrated in most industries. In the coming few years, we will see a big thrust towards BPM across industries as they embrace digitisation in a big way – whether it’s e-commerce, social media or cloud enablement. New industries that are aligning with business process management as an organisational strategy include retail, shipping, logistics, utilities, healthcare and professional services. We are looking at offering end-to-end solutions in all these sectors. Our latest acquisition of HealthHelp exemplifies our strategy.

TDB: WNS acquired two companies recently. What do you expect to gain from these acquisitions? Also, tell us more about your acquisition strategy.

KM: In 2016, we acquired Value Edge, a provider of commercial research and analytics services to clients in the pharma and biopharma industry. With this acquisition, we have gained access to mature pharma analytics solutions and talent. The acquisition of Denali Sourcing Services, a US-based provider of strategic procurement BPM solutions, in 2017, complements our existing financial and accounting (F&A) capabilities and fills a gap in our procurement service offerings. It has helped us become an end-to-end source-to-pay solutions provider.

Indo Count Industries Ltd.

“We are Expanding to new overseas markets”

K.K. Lalpuria
Executive Director,
Indo Count Industries Ltd.

With a 100% focus on B2B exports, Indo Count Industries Ltd. has made a mark for itself in a highly-competitive global home textile market. It today stands tall as a go-to-exporter for many international home decor retailers. In an exclusive interaction with The Dollar Business, K. K. Lalpuria, Executive Director, Indo Count, shares his vision for the company apart from discussing the benefits of FTAs for the textile industry.

INTERVIEW BY AHMAD SHARIQ KHAN | April 2017 Issue | The Dollar Business



TDB: You currently export to over 50 countries. Which are your largest markets?

K. K. Lalpuria (KKL): 70% of Indo Count’s revenue comes from US, which is also the biggest home textiles market in the world. The remaining 30% comes from UK, EU, Middle East, Japan, Australia and other countries across the globe. While we believe that the US home textiles market is expected to grow at 3-4% annually, we are also expanding into newer geographies. For instance, there are many markets within Europe which Indo Count is yet to penetrate. So, we are strategising to enter those new markets. Our presence in Japan and Middle East is expected to increase in near future and we already have offices, showrooms and design studios in UK, Australia and US. We have also expanded into three new product lines which would be sold across geographies.

TDB: Can you offer a summary of your marketing and branding strategies with respect to international markets?

KKL: Indo Count is a B2B player, so all our branding and marketing strategies are to be viewed in that respect. We have created three in-house brands – Boutique Living, Pure, and Revival – and acquired three licensed brands i.e. Harlequin, Sanderson and Scion within the fashion bedding segment. Each brand is targeted towards a specific group of consumers and keeping in mind their age, we work around the colour, design, pattern, etc. We conduct a lot of consumer and market research and incorporate the findings in our design choices.

TDB: What sort of competition do you face from Chinese manufacturers and how do you stay competitive?

KKL: In the last decade, there has been a structural shift in the industry dynamics. China was the market leader in the sheets business in US till India grabbed this position a few years ago. India currently has a market share of 50% in the sheets segment. Internationally, India is in a sweet spot as we are backed by cotton raw material availability, an abundance of skilled labour and a well-established textile value chain. However, in the newer segments of fashion bedding, utility bedding and institutional bedding, currently, China is the dominant player with an 85% market share. Here too, the country-wide advantage will play a major role and we believe that with India now focussing on these segments, it will be just a matter of time before we gain market share from China. Investments in the latest technology, processes, systems, people, R&D and marketing will bring in the best of our efficiency and productivity, thus help us sustain and enhance our competitive advantage.

TDB: What are your raw material procurement strategies?

KKL: We follow a simple yet prudent raw material policy. As our business is completely ‘Made to Order’, it gives us visibility to manage our raw materials better. We book our raw materials as soon as there is order visibility and we also hold an inventory for 3-4 months, in turn reducing any knee-jerk reaction at our end as well as any major impact due to cotton price fluctuations. We export all our products from our fully integrated manufacturing facility at Kolhapur in Maharashtra. We do import some of our raw materials and accessories.

TDB: Are there any challenges that are hindering the company’s growth in export markets?

KKL: Since we are an export-oriented company, macro global factors such as global warming, socio-economic and political changes affect our business. Besides that, acquiring raw material can become a challenge. For instance, price of cotton, being an agro-based commodity, fluctuates as per demand-supply. This may result in price volatility and availability constraints. Similarly, various global trade pacts between different countries dynamically alter the dimensions of world trade. In some countries, protectionism through tariffs compels us to find different ways to promote our goods. In Europe, both Pakistan and Bangladesh have a duty advantage which India does not have, i.e., we pay 9.6% additional duty charges vis-à-vis both countries. Fluctuations in currency needs efficient management as it requires us to constantly monitor the scenario.
 
TDB: What are the major factors that hinder the growth of Indian textile sector?

KKL: The rising labour cost and power cost, both of which are integral components of textiles sector, will continue to impact the growth and margins of the textile companies. Stable and proactive policies on solving power costs as well as some incentives could offset rising labour costs and lead to an increase in India’s competitiveness. Raw material required for textile industry should also be made available at competitive prices.

TDB: Are you happy with the support extended by the government, in terms of export incentives, to the industry? Is 'Make in India' initiative a step in the right direction?

KKL: Export incentives are adequate at present and our made-up industry is awaiting the new ROSL (Rebate of State Levies) scheme benefits. These benefits should be made available effective from the date as provided to the apparel sector. The incentives should be reimbursed in time. We also want the government to factor in transaction costs and internal logistics costs. 'Make in India' is a long-term vision of the government to utilise Indian resources and generate employment. We are exporters and we have been for long a believer of the 'Make in India' concept, as all our products are made in India and are sold on retailers’ shelves across the world. The government should provide ease of doing business, long-term focused policies and a level-playing field for exporters.

TDB: When you say ease of doing business, what exactly you want the government to do?

KKL: In some export markets India is at a disadvantage compared to its peer nations due to import duties and certain trade pacts. For example, as mentioned earlier, Europe offers duty waivers to Bangladesh and Pakistan whereas we [Indian players] are paying a duty of 9.6%. We face a similar situation in many other markets. Hence, we would like the government to work towards streamlining our FTAs so that we remain competitive across inernational markets. Cotton is a global commodity and the backbone of the Indian textile sector. There is a lot of volatility in price and availibilty. We would like to see the government streamlining such volatility. Also, adequate steps need to be taken to provide labour reforms, which we believe will go a long way in making us competitive.

TDB: What are your thoughts on Goods & Services Tax?

KKL: The duty structure is fair in the current framework but there is room for improvement. If the government provides an investment-driven allowance in the capital-intensive textile sector, we will find support and investment both for growth and competitiveness. If the government extends support, we will be able to increase our market share. Existing players in the sector would be more than happy if we can avail immediate deductions against ‘tax on exports’ as we could reinvest this into the sector to make it more competitive.
We believe GST should be applied to exports at zero rates or at the minimum slab rate, i.e. there should be no tax burden on exporters so that India’s competitiveness globally is not adversely affected. We believe, since textile is a low-value chain business and a need-based product for the masses, partly agro-based, and one of the largest employment generators in our country, taxes under GST should be applied with due care.
 
TDB: Do you agree that most FTAs India has signed so far have not benefited the textile manufacturers?

KKL: Any FTA is mostly a step in the right direction. We would like to see FTAs with EU, Canada and BRICS countries.

Intex Technologies (India) Ltd.

“We've exported to over 40 markets...”

Vishwas Agarwal
Head – International Business,
Intex Technologies (India) Ltd.

Homegrown mobile, electronics and consumer durables giant Intex Technologies (India) Ltd., whose annual revenues remained just shy of the billion dollar mark last year, has its eyes cast on the overseas markets. Vishwas Agarwal, Head – International Business, Intex, spoke to The Dollar Business on how building India as a manufacturing hub can go a long way in boosting its exports from the country.

Interview BY NEHA DEWAN | April 2017 Issue | The Dollar Business



TDB: We understand that Intex Technologies is looking at expanding into global markets in a big way. Could you elaborate a bit more on this?

Vishwas Agarwal (VA): We ventured into global markets in 2013 by first entering Nepal, Bangladesh, Sri Lanka, Myanmar and later to Vietnam. So, it was mainly the SAARC and South East Asian markets from where our global expansion started. In SAARC, Nepal has proved to be the biggest market for us. When it comes to South East Asia, we have sold over 250,000 phones till date in Vietnam.
We are also planning to expand into Indonesia, which is the fourth largest country in the world in terms of population and in terms of business volume for mobile phones. While exporting, we are primarily focusing on mobile phones. We have exported to more than 40 countries till date, including some African countries like Zambia, Malawi and Cameroon. In Europe, Intex Technologies is doing some business in Spain and it is looking at entering the UK market too. Eventually, we plan to focus on 12 big markets.

TDB: Are there any particular markets that you are planning to enter this year?

VA: We plan to start exporting to Russia and CIS countries from March this year. In CIS, we are planning to cover six countries, including Ukraine, Belarus and Uzbekistan. We are also planning to expand into Africa in a big way. In Africa, we already have a very strong presence in Somalia, Malawi and Zambia. The African experience has been very mixed – till the beginning of last year, we were not focused on the African market for one basic reason. The way to these markets is through Dubai and we did not want to shift our base to Dubai; and, unless you are physically present in Dubai, it is not easy to control the African market. Now we want to serve Dubai, and through Dubai, Africa, from our base in India. That said, we have been mulling steps to enter Dubai for some time now. As far as exports is concerned, we want ‘Make in India’ to be the pillar of our marketing and manufacturing strategy. We are talking to the government at the centre to get some benefits to facilitate exports. One of the major challenges while exporting from India is that 99% of the components come from China. And when you bring it to India, there are freight, insurance, carrying charges here and after which you have it released from Customs and then take it to the factory and after that manufacture the final product. A manufacturer in India adds about 2-4% to final cost for moving components from China and then assembling and exporting from India. And, of course, you can’t have the economies of scale of a Chinese vendor – they deal in huge volumes. So, what we are following is a 'Bill-To, Ship-To' approach. We bring the money here and we ship the product from China.

TDB: What is on your wish list from the government as an exporter of mobile phones?

VA: We want a clear advantage in terms of exporting from India. The government needs to come up with policies to encourage manufacturers like us to export from India. We should also be encouraged to procure from India. However, we do not have the component manufacturing ecosystem in India. Ideally, out of 26 components that are required to manufacture a handset, at least 10 components should be available in India at competitive prices. We can make excellent chargers, batteries, cameras, etc., but unless that opportunity or support is given to our manufacturers how will things move ahead? The opportunity starts with exports; the moment we start exporting, the entire backwards channel will get connected. Everyone would try to export from here if incentives such as export concessions, interest subsidies for material and capital equipment, and duty drawbacks were more readily available. Every company that is currently exporting has the potential to export way more than they do today.

TDB: How are you fending off competition from other mobile brands such as Micromax and Lava, which have also entered new geographies in recent times?

VA: In every market, there is a lot of space for organised players. I think they have their own share and we have our own share in every market. We are looking at Russia, Vietnam, Qatar and Kazakhstan this year as new markets – mainly four big countries to expand our footprint into.

TDB: Where does India stand in the mobile electronics domain vis-à-vis China or Vietnam? And what can India learn from these countries?

VA: In Vietnam, the cost of labour is very low and the professionalism is quite high. But the main learning from these countries is that governments there have been giving export incentives to foreign manufacturers to come into their country and set up base there. These countries are also providing tax holidays to foreign manufacturers. Interestingly, even though we are an Indian company, we do not get as many tax benefits and export incentives in India.  Our government is not doing enough to encourage and motivate manufacturers from India to invest and export. China is anyways the factory of the world. But in China, the cost of labour is going up faster when compared to that in Thailand or Vietnam. And yet, we are not in a position to compete with Chinese manufacturers since China is much stronger than us in terms of manufacturing, infrastructure, etc. What Indian companies are good at is organising the service infrastructure – we all have a very rational way of working and a primary, secondary and tertiary tracking system, which many of the businessmen in our competitor countries may lack. Hence, some manufacturers in these countries may prefer someone from India to come and shape up their brand so that they have the advantage of an expert running their business. Moreover, another interesting aspect is that Buddhism is common in many of these countries, a religion and culture that we Indians can very easily connect with. If you go to Thailand, there are links to India's historical past that we can relate with. Many roads also have Hindu names. And people like it when you say you are from India. This historical and cultural connect acts as a big selling factor for us. And in any business, we have realised that the cultural connect is most important; the commercial connect always comes later.

TDB: What kind of traction are you finding in international markets for your smartphones versus your feature phones?

VA: Last year, it was 70% feature phones and 30% smartphones  as far as exports are concerned. This year we planning to ship more smartphones. The world is moving towards smartphones. Every month, we ship approximately 50,000 feature phones and 20,000 smartphones to across the world from India. However, we do plan to increase these volumes by three to four times in absolute terms. We also expect an increase in the share of smartphones in exports.

TDB: Ministry of Commerce, GoI, data suggests that India's imports of electronic goods has been on a rise while exports of the same continue to decline. What has led to such lopsided trade dynamics?

VA: The reason for this unbalance is the advent of a number of new Chinese companies that have come to India in the last few years. These companies are pumping in a lot of investments into the country, most of which is being utilised for marketing and branding. That has increased our imports of electronic items. These Chinese companies have acquired a large market share and that has obviously hurt our domestic companies. So, if India is to safeguard its export revenue, the government must provide some protection and support to homegrown companies. The situation will not improve unless Indian manufacturers have a differential advantage at their home turf.

Sonalika International Tractors Ltd.

“WE HAVE A PRESENCE IN OVER 80 COUNTRIES”

Gaurav Saxena
President – International Business,
Sonalika International Tractors Ltd.

What started as a small agriculture equipment and implements manufacturing unit in 1969, is today the third largest exporter of tractors from India. The Dollar Business caught up with Gaurav Saxena, President – International Business, Sonalika International Tractors Ltd., to understand what makes Sonalika one of the most preferred Indian tractor brands in over 80 countries across the globe.

Interview BY Manishika Miglani | April 2017 Issue | The Dollar Business



TDB: How has Sonalika’s journey been so far, from selling one tractor in 1996 to becoming the third largest tractor manufacturer in India in 2016?

Gaurav Saxena (GS): Sonalika started operations in 1969 as an agriculture equipment and implements manufacturer. Interestingly, about the same time, we were also trying to understand the customer and associated market requirements. That led us to venture into tractor manufacturing in 1996 when we sold our first tractor. Today, Sonalika International Tractors Ltd. boasts of a wide product mix including tractors, engines and farm equipment. It is India’s only tractor manufacturing company that produces a wide range of tractors from 20 HP to 120 HP. A few players sell tractors only below 90 HP, while others deal with a range of up to 50 HP. We are the first Indian company to introduce a 120 HP tractor with six cylinders. We manufacture four series of products, namely Compact Tractor Series (20 HP & 26 HP), Utility Tractor Series (50 HP, 60 HP, 75 HP, 90 HP, 110 HP, 120 HP), Narrow Tractor Series (60 HP, 75 HP, 90 HP) and CRDi Tractor Series (75 HP & 90 HP). In fact, Sonalika sells the highest number of compact tractors in European market. Meanwhile, we have introduced the CRDi series and successfully built trust for these tractors in several overseas markets. Our success mantra has been a combination of three things: customer-centric approach, a wide range of product offerings and focused channel development.
 
TDB: What has been Sonalika’s growth trajectory so far and where do you stand currently when it comes to exports?

GS: Every year, we are growing at 20% and hope to maintain that trajectory in the coming years. This year, we grew by 27% y-o-y in the first 11 months itself. By 2020, the company aims to double its revenue from the current standing and become a clear leader in the tractor manufacturing industry. We are also planning to come up with a new range of tractors above 120 HP. Additionally, we are looking at manufacturing engines and aggregates as per the new emission norms currently prevalent in international markets. We are going to export over 12,000 tractors in FY2017. We began with six tractors when we had started exports 15 years ago in 2002.

TDB: Can we talk about specific export markets?

GS: Our first set of tractors was exported to a very small African country called Ivory Coast. Today, we have a presence in over 80 countries. In South America, we export our products to 14 countries and to another six countries in Central America, including strong markets such as Mexico. Recently, we have started shipping to US and Canada as well. These markets require different kinds of tractors that meet higher emission norms. So, it has been a time consuming process to develop customised products to enter these regions. We have scaled Sonalika’s availability in about 25 countries in Europe, making us the only company with such a wide presence in the continent. In Europe, we are present in countries such as UK, France, Germany and Spain, which are considered as high-end markets where customers are not bothered much about price but are rather focused on quality and performance of the machines. In Africa, we enjoy about 22% market share with a presence in 25 countries. We are the market leaders in most of the countries in Asia, namely Nepal, Bangladesh and Myanmar with 20-25% market share in each country. Our biggest overseas market is Algeria where we sell about 4,000 tractors each year, followed by countries such as South Africa, Argentina and Chile. We sell different products in different markets depending upon the requirement of each region. For example, in Europe, we sell tractors which are less than 30 HP and more than 75 HP. Similarly, we cater to the requirement of African markets that are more interested in 50 HP tractors. In South America, we sell our entire range of tractors from 20 HP to 110 HP, whereas in Asia we do a business for products between 30 HP and 90 HP. The company has aggressive expansion plans to tap Brazil, Ecuador, Peru, Surinam, Paraguay and Bolivia. It has tied up with Brazil’s major tractor and farm equipment manufacturers to sell products in Brazil. We are also looking at China, US, Thailand, Canada, Turkey, Brazil and Russia as emerging markets that we can explore going ahead. We realise that a company needs to have a local assembly set-up to penetrate successfully into these markets. Governments in these countries provide subsidies that vary from 20-30% if the products are manufactured locally. Without state assistance, survival in these markets is difficult if you operate against players who avail the benefits extended by the local government.
 
TDB: Talking about assembly set-ups, which are the countries where Sonalika has developed such facilities?

GS: Other than India, we have assembly set-ups in Algeria, Argentina, Brazil, Cameroon and a small assembly arrangement in Iran. We plan to start with 20% localisation and then scale up based on local policies. We have also recently tied up with the Government of Cameroon to set-up an assembly line in the country. Going ahead, we plan to set up such facilities in China, Russia and US, and expand the one we currently have in Brazil.
 
TDB: What challenges do you face while exporting?

GS: Currency fluctuation is one of the major challenges affecting our business. Appreciation of dollar makes the local currency extremely weak ,which in turn, decreases the price of the local products. For example, if we sell our products in Brazil after taking 60% parts from the local market and exporting 40% from India, then our business is affected for the percentage of parts we export to the specific country which is experiencing currency problems.
 
TDB: Lower oil prices have hit tractor exports to several Latin American and African countries. How did you escape almost unscathed and how do you plan to further consolidate your position in these markets?

GS: Our business was affected in many markets in Africa and South America, but we could compensate the loss with the markets where we have done better. We have also started working on the dealership network to improve our presence in other markets after the crisis. Even though selling tractors is our core competency, we would like to expand more into implements business. To that effect, we will broaden our product range. We have tied up with Yanmar of Japan to help us achieve this goal. Under this partnership, Japanese tractors will be manufactured in India and will be sold both in the domestic and international markets. Our focus will be to sell these tractors at Indian prices to become the world leader in our domain. Yanmar has 30% equity partnership with us and we have started working with them on various projects.
 
TDB: Sonalika boasts of world's largest integrated tractor manufacturing plant. Can you elaborate on this?

GS: Strategically located in Hoshiarpur, Punjab, the plant has a capacity of manufacturing 2 lakh tractors annually, with two minutes roll out time. We have invested over Rs.600 crore in the facility. Depending on future requirements, we are open to invest more in the plant. In the tractor industry in India, most companies are assemblers of products but we, at Sonalika, manufacture most of the components in-house, which is one of the major advantages we have over our competitors.
 
TDB: Is there any M&A in the pipeline and what kind of investment do you plan to make for R&D?

GS: If a company's portfolio is in sync with ours, we might opt for a merger. We have over 300 engineers working in our R&D facility. Our investments in R&D are huge as we manufacture most components in-house and hence require a team for product and process innovation

Kiran Gems Private Limited

“We are india's largest diamond exporter!”

Mavji Patel
Co-Founder & Managing Director,
Kiran Gems Private Limited

What started as a small diamond cutting and polishing unit in 1985 is today India's leading exporter of diamonds. 95% of the company's annual revenues of over Rs.7,500 crores come from overseas. Mavji Patel, MD, Kiran Gems Pvt. Ltd., talks about why his company is one of the most preferred diamond suppliers to the biggest and the most popular jewellery brands and retailers across the globe.

Interview BY Sairaj Iyer | April 2017 Issue | The Dollar Business



TDB: Could you take us through your journey of becoming one of India’s top diamond exporters?

Mavji Patel (MP): We started as a partnership firm in 1985 and then set up our first cutting and polishing factory in Ahmedabad in 1992. Today, we process over 5.8 million carats of rough diamond to yield over 1.6 million carats of polished diamonds annually. In terms of acknowledgements, DTC, Alrosa, Dominion and De Beers have all certified us to be among the largest buyers of roughs in the world. We have a trained workforce of nearly 35,000 professionals across 165 manufacturing units. Our in-house design team brings 30 new designs every day, and caters to 15,000 retailers across the globe.

TDB: Was export always the goal since the beginning?

MP: Not really, it happened over time. In fact, we had no clue that we will one day become India’s largest diamond exporter. We did not have any strategy in place, and growth and ethical business were the only things we had in mind. Later, we got into quality manufacturing processes. In 1967, the industry was about Rs.100 crore in size and diamonds would cost about Rs.4-5; today, it’s a $42 billion industry. The volumes initially were meagre because trading was just picking up in Mumbai and the factories in Surat were also small. Bombay, at that time, was about to develop as a zone for both local and international trade. There were two sets of players trying their hands back then: the Jains who were into trading and the Patel Samaj of Saurashtra, who were into manufacturing and had the domain knowledge of cutting and polishing. As such, it was quite a fragmented industry and the interaction between the two communities was also quite limited. From that kind of a premise, we have come a long way.

TDB: So, how have exports fared this year?

MP: In FY2017, till now, we have exported to nearly 41 countries. Our major markets have been US, Hong Kong, Europe and Middle East. Of our total turnover, just about 5-10% was from the domestic market while the rest was from exports.

TDB: Have you seen an improvement in topline growth because of new product launches over the past few years?

MP: In India, generally, the business is more in small and medium sized products. However, there has been a sudden spurt in demand for big size diamonds too, which is quite a big change. Nearly 30% of our sales is from US and we also have good traction in markets such as China, Europe and the Middle East. One noticeable change is that a good amount of exports is now going to Hong Kong to cater to the Chinese market.

TDB: You were recently at a Hong Kong trade show. There were concerns that sales had dropped by 50% and that had a cascading effect on the Indian diamond sector. Your take?

MP: Hong Kong has always been a big trade show, but in the last 3-5 years, the Chinese market was tapering. You would have seen similar sentiments in other commodities. Keeping that in mind, the average October-December quarter of 2016 was quite favourable.

TDB: Many market-watchers believe gold and diamond are not faring up to the mark. Does it worry you?

MP: I don’t think this is the truth. An index or a price-down is not a challenge per se. We have stocks in the range of 1-10 carats and the price of roughs does not necessitate a worry or cause concern for our unsold inventory.

TDB: To what extent have geopolitical issues such as Brexit impacted your margins?

MP: Brexit did not have a huge impact. Europe contributes to 7% of our export revenues and then there are nearly 28 member states. Our exposure is not beyond 2-3% to UK and hence we do not see it impacting the diamond industry as a whole or Kiran Gems in particular.

TDB: Do you think the policies of the Trump administration could take the sheen off the diamond trade?

MP: There are fears about a border tax and that President Donald Trump could increase the duty structure. Currently, the duty for diamonds and gems is 6-7%, and on jewellery about 15-20%. For raw diamonds, the duty is zero. Any additional duty could adversely impact India’s diamond processing. But then, India’s imports are more than its exports and hence Trump may not be enthused about adding a tax or duty.

TDB: How about currency fluctuations? Do they scare you?

MP: Yes, they do, but not as much as it would to companies in the gold industry. Diamond sector has a value addition as high as 30% and hence there is ample cushioning for its processors.

TDB: Lab-made diamonds account for about 1% of global rough diamond sales but their share may expand to 7.5-15% by 2020, per a Morgan Stanley report. The growth is likely to accelerate as more global marques may jump on the bandwagon. Comments?

MP: Lab-made diamonds and global marques jumping on the bandwagon? That 1% you are observing, there is no probability that it would touch even 2%. We too have conducted surveys and spoken to nearly 4,000 customers. Nobody asks for fake diamonds. One, there is no resale value of such products and secondly, if people want to invest their hard-earned money, why would they choose a fake? In fact, not one among our customers, wholesalers, distributors and retailers have asked us for lab-made diamonds. Real diamonds are forever and that will drive our exports too.

TDB: Electronic data interchange (EDI) has been a cause of concern for importers picking goods from Surat Hira Bourse. Customs hauled up Rs.40 crore worth of diamond for nearly 4 days and that impacted productivity. How is the ease of doing business at Bharat Diamond Bourse? What can be done to improve the situation?

MP: Why Surat Hira Bourse, EDI-related issues happen here (Bharat Diamond Bourse-Mumbai) too! Change is always
welcome but then it is also a matter of a sudden spike in the handling that is resulting in a load.
For instance, EDI servers can take a load of 500 parcels, but when there is a sudden load of 600 parcels, the system crashes. We have had days when nearly 700 parcels were being processed. Yes, it leads to a business loss, but I think businesses now cope with these challenges and most of them have been able to overcome these hurdles.

TDB: Coming to taxation, how do you look at GST? Do you think it would be an extra compliance issue or would it be helpful to the sector?

MP: Local businesses will be impacted but not the exporters. There are no duties on exports and hence there is nothing extra that an exporter would pay. There may be a case where companies may have to pay GST upfront and then seek refunds, and that will impact working capital requirements. Although I believe there is a remote chance of this happening, it cannot be ruled out completely. The council (GJEPC) has requested the government to leave the exim business out of GST because any new compliance could have adverse implications.

TDB: Apart from Belgium and Hong Kong, is there scope for a third trade centre?

MP: While Belgium is for roughs and Hong Kong for polished and cut diamonds, Dubai in recent times has come up as the third centre. Dubai as a centre is a probability but an unsustainable location. However, some raw material could always come from Belgium to Dubai.