Transcript
Speaker: Hi, I'm Majedhiti Singhanya, MD CEO, IPEC Durable Limited and founder of the IPEC Group.
Speaker: What is the story? that so you what What was your family business about? And you know when you were doing your ah graduation, post-graduation at that time, were you thinking of starting something or going into business? or so So first of all, I'll i'll start this way that I was born in 1975 in a very, let's see, a lower middle class kind of a family, wherein and my father but was working in one of his relatives shop as a salesperson.
Speaker: And somewhere around that time when I was born, he decided to move away out of his job and start his own business. So he opened up a motor parts, spare parts shop in Assam, Guwahati.
Speaker: So that was way back in 1974-1975 when he started his journey as a business person on his own. And then shortly he was joined by but of his friends as partner. So the two of them started doing the business and I was born in that time. So we were kind of a lower midi class family, making the ends meet and definitely slightly better than maybe that.
Speaker: So going to school was a very normal school. ah Just it was a missionary school I went to from nursery till 10th, school also was...
Speaker: A very normal school, no, not not like any... mes it It was a missionary school, so me, my brothers, so we have four siblings, my sister being the eldest, the older brother and a younger brother, all four of us went to the same school.
Speaker: And no it was such a school wherein even the fees were subsidized if you have your siblings. So, I mean, it was a very humble ah ah beginning and
Speaker: Somehow, right from the school days, all of our siblings, me, my brothers, sisters, we were quite, ah let's say, bright students amongst the lot.
Speaker: So and the teachers used to give us a slight more attention or were kind of expecting us from ah to do better than the others. So that gave us some attention and then also put some pressure on us and we wanted to do better.
Speaker: and So that way, school started. But I'll say something more interesting here is that there was always some sort of competition between the four siblings. So the gi gap between me and my brother is just one year and then my brother and my sister is two years.
Speaker: So there was an informal competition. Let's say because you know, when you join family, there is always this comparison going on. So somewhere there gap that was going There to draw more attention from the parents.
Speaker: ah I think not only me, my brother also, we always thought that I was a good one. How do I do something different to get more attention from the parents? So, the tenth,
Speaker: although we were from a business family, my brother joined the commerce college. So, in those days, we had 11th, 12th, we were done in college, after school. So when I completed my tenth a year after, obviously I didn't want to go to commerce and getting slightly better marks then because then I thought if I had commerce, didn't have to take science. really pro You know, I have to take science, not knowing after taking science where it would lead me i mean, the option up once I take science is either I become a doctor or an engineer that way, but just just to do something different and attention. I'm being very honest here.
Speaker: So that's how I ended up taking science in 2012. So once I got into one of every premier high secondary schools in Assam, I got out of that world where I know of the school and I was suddenly exposed to students who were much brighter than me, obviously, who were more exposed to the world.
Speaker: And I think that was when, two years when I learnt a lot about what are the options when you think of choosing a career or a professional journey in life.
Speaker: And those friends, they and started telling me that me i dli prepare ga I'm preparing for this. So, I mean, the world of opportunities opened up for me and I just started tagging along with them and taking those tuition, taking the classes for IIT entrances and all those things. And I think most of my learning into the world of professionalism started once I ended my school and got into the high secondary.
Speaker: So, 12th, I was lucky to crack the NIT Hamilpur and I got into electrical engineering. My four years of engineering journey started. Again, although in my engineering college, I was able to get good marks and somehow complete my engineering, but I always had that flavor that I wanted to use the practical knowledge of engineering, not for the sake of working for somebody, but doing something different. I don't know what.
Speaker: But in the fortune itself, I started preparing for my MBA. Now again here in came my second round of comparison with my brother. So he completed his BICOM. He went on to Australia to do his MBA.
Speaker: so happy ah By this time, were your parents earning enough to pay for Australian education? and Definitely, yes. So my father in last those 15-20 years the while we were growing up had scaled up his business substantially and had earned a good bit of reputation in the market and definitely from being a business.
Speaker: He had moved on to a high-medical agency. Okay. And what business was it? So this was an automobile spare parts trading business in Assam. And definitely had a lot of good reputation.
Speaker: So I talk about his journey separately. mean, that's something I um i mean, but for truth, journey of my parents and my especially my father is something very close to my heart.
Speaker: So I lost both my parents a couple of years ago. So... I'll talk about it separately because I think that's one of the most inspiring stories, not just because he was my father, but otherwise also it's something I love to definitely share with people.
Speaker: and So for first, going back to that journey of getting into an MBA thing. So my ah brother went on, did his MBA from St. Bande University, Melbourne, Australia. yeah He returned back to India and we check I was, so while he was doing his MBA, I was in my final year engineering.
Speaker: So I was talking to him on the phone and he inspired me that you should look at the US. And obviously I had no idea. no now Again, very honestly, I had no idea which part of the globe, United States, is actually living in a place like Khamepur, India, Assam.
Speaker: It was like a distant dream. There was no visa in the past. have never been out out of India. So, no, sound like a dream. And I started pursuing it.
Speaker: ah So I gave my GMAT, my TOEFL and I got admission into a good University of Scranton and Pennsylvania. syloveia All expenses paid with a proper scholarship.
Speaker: Not just an internship. and So it was a full scholarship thing. And I mean, I had no idea what different I had done. I was just, I got a dream and I followed it and I ended up in the US.
Speaker: and And I did my MBA from there and then again, while I was doing my MBA, I had no dream to stay back there. Whereas most of my friends who were pursuing the degree with me had plans to settle down in the US, as wanted their edge when B's done, were looking for the job. The day I finished my MBA, the next day I moved back to India.
Speaker: And so by then my brother had already been in Delhi for almost a year. So both of us, we never wanted to go back to Assam and join the family business of automobile shop. We had thought that no, having done this bit, we definitely wanted to do something bigger to make our parents feel proud and do something in Delhi, which we believe was the land of opportunities in India.
Speaker: And that's how I think our journey, the step one of our journey together started in Delhi from where on I think there's there's never been looking back. Okay. ah What was the, ah and how did the business start then?
Speaker: So you did your MBA in the US, that what? yeah so ah So since my brother graduated almost a year and a half before I did, so he was in Delhi looking for opportunities.
Speaker: And So, like I said, my father had partners with Bothra family. So, together we've known each other today, and now for almost five decades, 50 years. um So, the two sons of Bothra family, Mr. Bajrang Bothra and Lashvipath Bothra, they had already settled in Delhi in the 80s itself, Adhi 80s itself.
Speaker: Both of them had begun their entrepreneurial journey by starting some manufacturing industries in packaging. So when my brother landed up in Delhi, he met, so we call Buzrang B.I. and L.P.B.I., he met them and he, they were extremely excited. He told us, we have a fresh blood coming and joining in the business and let us start something together. Yeah.
Speaker: So like both parents were already together in the trading business, he said. So there was this thing that together also do something in mainif manufacturing in Delhi. And definitely you are the first one in our generation to have no.
Speaker: Then MBA from abroad and come back to Delhi. So, for almost a year and a half, they were looking at opportunities, did something small, small, small, small business, so there were a lot of failures obviously.
Speaker: And then we stumbled into an opportunity of starting a packaging, Thermo Cool Packaging EPS it is called, so Expanded Polystyrene Packaging for LG.
Speaker: So, the Indian economy had just opened up in the late 90s and we had these LGs and Samsungs of the world coming to India and putting up manufacturing facilities and they were looking to create their own supply base.
Speaker: And because Brazil and the ITPR were already into packaging for customers, they got easily introduced to LG and they asked Madhada Sanjayi, should we start this thermal factory together?
Speaker: And we said yes, I mean, seems like an opportunity and believe me LG at that point of time obviously was a new entrance. So we never knew how much we could scale this up, but seemed like an opportunity, let's do it together.
Speaker: And then we started and decided to start the construction. And when I joined in December, 99, it was already four months into the construction of this new come facility we were creating. And by January 2000, we were actually ready to start the business.
Speaker: Where did you build the facility, the factory? The factory we built in Gretanoida. It was just next to LG's own factory, like a common wall.
Speaker: So, somehow, I think here we got an opportunity that we were one of the first suppliers to move close to a company which ultimately grew to one of India's largest electronic manufacturers.
Speaker: Amazing. ah So, you joined in what capacity there? So, see, and me and my brother earlier, probably the first two employees of the company, to say so.
Speaker: So, when we joined, um The capacity, I mean, that there was nothing on the ground and the visiting card. It was just we are partners to this business having started together. And ah no i think there was a vision when we started this business.
Speaker: Because LG was a Korean company and we were already doing packaging in this other business from the Botswai family, which is their own business. We wanted to do something different now and to set up this new facility.
Speaker: And so my brother and LP, they went... all across Korea to look for latest test technology in this business. And we, I mean, we were the first one to actually import thermocool making machines in India, wherein it was like a cottage industry. I mean, we had more than 250 small and large companies already making thermocools in India, but we thought that, no, we want to put them an automatically imported plant from Korea which was like 10 times the cost of what we could have bought the machinery from India itself.
Speaker: And when we bought these machines, now you are asking me about the capacity. So when we bought these machines and we had these Korean engineers coming for an installation, we had no engineer hired to actually understand or talk to those Korean engineers.
Speaker: So my initial capacity was, I was interacting with those Korean engineers, translating the manuals they had brought and at times running the machine and then also teaching the operators who were like 10th, 11th past people ah how to run this machine. So for the first initial few months, actually I was also the operator for the machine, also the trainer and also the one who was kind of translating those manuals into English and Hindi for our own use.
Speaker: um The journey started from there. We had no office to begin with. We had just the factory car khana and fuel machines.
Speaker: Okay. ah Then what? So this thermocall packing me is like the molded thermocall in which like when you buy a TV or something yeah inside the cardboard box, is a molded part which goes inside and we used to mold those parts and then send just across the road to LG wherein they were making those appliances.
Speaker: but LG was making those appliances for themselves. You were supplying the Chamukkuri. And two years after that, in 2002, an opportunity came wherein excise exemption was announced in northeast of India.
Speaker: So Assam and the entire northeast states, government had announced excise exemption. Means anything getting manufactured there, there will be no excise duty. Now, at that point of time, the excise duty on air conditions used to be 48%.
Speaker: So that means if and the product was 10,000 rupees, it was being sold to the customer at 14,000 rupees plus the local sales tax and everything. So, LGO took the first mover advantage. They visited Assam and they thought that they should shift at least manufacturing of air gun conditions to Assam.
Speaker: When they went there, they saw the usualha the local environment in that place and obviously at that point of time, Assam was kind of a disturbed area with... a lot of inherent problems and they didn't have the... The vaxelite problem. Yeah, yeah, yeah, yeah.
Speaker: Kind of. So okay we had the terrorism and at its peak during those days and obviously they didn't want to get on their own manufacturing in Assam. So they took a step back and decided not to In one of the meetings, one of the LG senior person introduced to the management that we have these two young chaps, IJS and Jai, who are supplying as EPS and they are basically from Assam.
Speaker: Now, this is somehow the connection was established that they are the people from the Assam and so suddenly somebody asked us, would you be interested to put up a factory for us in Assam? And I must tell you most of the people within LG were shocked.
Speaker: What's going on? They're going to make a thermogol, they're going to make a thermogol, and where are they going from?
Speaker: My brother and buerb all they immediately got excited and they said, yes yes, we can definitely do. Let's go together to Assam and explore. And one thing we can assure you that our would parents have kind of good reputation there and you will see that we have connections to actually protect that.
Speaker: We will get enough support from the government machinery in case you put up a facility there. And we just bumped into a new opportunity of setting think up an air condition manufacturing for a multinational LG and then the rest is history.
Speaker: So this was a contract manufacturing arrangement. that yeah Okay. And this was like an exclusive 100% of your capacity is bought out by LG. This is a more interesting story, I should say.
Speaker: and we We started with LG and a couple of weeks after that, the news spread in the market and that somebody has put up a factory in Assam and is actually manufacturing air conditions for LG.
Speaker: And there's a huge ceiling in XISVT. So, within a few weeks, we had the other customers line up like the Samsungs and Electrolab, Hoosy and Rivers and everything. And we from one, we had a second setup, making conductivity, almost.
Speaker: Okay. And the market in itself was extremely small, but then we had almost four or five of the leading brands making air conditioning for them. And within a year actually, the same policy got announced in Uttarakhand and the Hilly states in North India.
Speaker: So Uttarakhand and Himachal as well. And we decided to shift our manufacturing from Assam because there was a lot of in and then out logistics involved, which was kind of setting off the entire excise benefit. I mean, from 48%, the actual benefit was of much reduced because of the in and out logistics involved.
Speaker: So we shifted the base to Deradun in Uttarakhand within a year of our setup Inusaha. Okay, like the the distance of Assam from the main hubs where the products are main markets was so much that the logistics cost ate up the difference. Okay. yeah okay go The moment we shifted the factory to Uttarakhand. you had one factory or you had one factory for LG and one factory for other customers? or We moved to LG two factories. Then we moved to Uttarakhand and Daradun. We had set up two facilities.
Speaker: Now, okay and in a month or so of how did you learn like how to manufacture an AC? You had no experience in that. Yes, so see, manufacturing of air conditioning, if talk about to begin with, it was more of an assembly operations.
Speaker: So, wherein the parts, isn't William, what happens is the customer gives you the entire bill of material, the sources from where the parts will be procured and you basically do a nut bolting. So, it's more of, I'll say, a glorified labor contractor, wherein you just have an assembly line and you put all the parts together.
Speaker: Okay, got it. Okay. So while we had now just moved Uttarakhand and to Deiradun, one fine day, the MD of LG called up Mr. Bothra.
Speaker: So Mr. Bothra, he is eldest amongst us and we, so but rua he called up early morning while he was having his breakfast. So the MD care came and that point of time called them Mr. Bothra and he said, Mr. Bothra, I understand you're riding on two horses.
Speaker: And I'm withdrawing my deal. We had no idea what it I am withdrawing my team, are riding on two horses. That no, he got confused. He called us, like, there's no phone.
Speaker: And he's like, what it means. let Let's go to LG and check. So, he went to the Indian top management there and said, sir, what happened? I mean, I'm withdrawing my team factory. You're making LG and Samsung.
Speaker: And you know, globally, LG and Samsung are not being manufactured by the same set of people. and And our MD got this information from the market. I'm going, yes, we have two facilities, but then there's a different facility.
Speaker: You know, you can't do, you can't ride on two horses. So I think that was one inflection point out or the first tough call ever in life we had to face. That gave us like almost a sleepless night and the whole night, you know, I talk to you, what do you do? And then I think Brazilian guy took a very bold call.
Speaker: He went ahead to the MD of LG and he said, Sir, we grow with LG. We believe in in the LG story. And here we are selling off our other unit to some of our relatives and we just moved out of that other business where we were doing other brands and we sold it off. We sold off that company to our friends and we embarked on a new journey with LG.
Speaker: From 2003 to 2011, almost 10 years, we remained a dedicated wife, a dedicated partner. And we grew together. We enjoyed the journey from air conditions. We started making televisions, microwave events, the entire set of range of products. And I think that was one big learning experience we got of not only assembling, but manufacturing the appliances, understanding the integracies and but the technology handover happened a very smoothly for us.
Speaker: Because you were dedicated to LG, so LG had ah incentive to train you, teach you, help you upgrade your technology.
Speaker: and The huge round of appreciation I have for the way LG not only trained us, but they actually changed the entire manufacturing ecosystem within India, especially for appliances.
Speaker: So they hand-holded almost all of their suppliers. They took them abroad. They showed us the vision that see how this is how world-class manufacturing is being done in Korea, in China. So that dream to be world number one, I think, was we saw when wherever we went with LG. And then they just nurtured us to believe in ourselves and then show us that what we can do. um Small small improvements can lead to bigger results. I think it was a great learning experience.
Speaker: Okay. How did you ah go beyond TV? Was it again the the duty ah benefit, exercise duty benefit, which caused them to give you more products? so like What was the reason for Beyond AC expansion?
Speaker: See, at that point of time, in those days, since we had the exercise due to regime and we had the local sales taxes also, so a lot of states had announced sales tax benefit as well. So most of the business which originally came to or which moved out from LG's or the other appliance manufacturers to one society was the tax sales centers.
Speaker: So, there were local tax incentives and etc. So, in their ah pursuit to balance the facilities of seasonality and all that, they started giving out more products and to draw more benefits.
Speaker: Okay, because AC is like a sour product mostly. and So, since they give you more products to balance. We only have overhead, so they give us other businesses to balance the production facilities.
Speaker: good Okay, okay, okay. ah How does the... relationship work in terms of the money here, the the pricing, ah do you oh Like, do you have freedom to price it at what you want? Or because you said they give you the bill of material, they are clearly aware of every item of cost of yours.
Speaker: And even when they're giving you other products, they're teaching you how to manufacture. So they have full knowledge of your cost structure. So how does the pricing work? Like the price at which you sell it to them, are you able to dictate that? Or do they say that this is your margin that we are giving it, this is the price you will sell it to us at?
Speaker: So now see in these days we have something very popular called yeah EMS, electronic manufacturing services. So this is broadly comes in the EMS services. Now within EMS, we have two categories of manufacturers.
Speaker: and the OEM manufacturers who are the one to whom the design and everything is owned by the principle and you just do the value-add in terms of assembling it or making some of the components. So that is where the original business which we started falls into.
Speaker: The entire knowledge of the material, tools, designs, everything belongs to the principle. And there's a second model called the ODM model. wherein the tools, designs belong to us as a manufacturer but we are no brand, will supply it to a principal who will then market it.
Speaker: So, the clear line of difference is that in one case the entire bill of material material is known, the other case it's a red box. And we actually moved out from being an OEM in 2011-12 to ODM in 2012-13. to an odm in two thousand and thirty
Speaker: Okay. What prompted that change? So till 2011, the price was decided by LG. They would say this is the margin that you will get. ah Okay. ah What prompted the change?
Speaker: So again, and the second inflection point in our life. but but before Before you tell me this, ah what was your revenue like by 2011? So, in 2011-12, when we were doing LG's AC, TV, microwave, other things, we beat a revenue of almost 300 crores, 270 or 280 crores in those days, 2011-12. And this is all 100% from LG. Okay.
Speaker: and this is really all hundred percent from lg ah single okay and in those During that time, LG was going through a turmoil globally. They had invested heavily into mobile and they failed and they were into pain and a change in management happened, a change of guards happened in the headquarters in Korea and the new management wanted to shift everything which was being manufactured outside to their own facilities which they believed were lying idly.
Speaker: or were not utilized and they actually wanted to undertake a huge cost-cutting steps and restructure the entire business because they have lost heavily.
Speaker: So, yeah yeah the knife fell on us. We were given ah five, six months kind of grace period that within five, six months this entire business is going to move out 273 million. So, there's like 300 crore revenue gone in five months.
Speaker: Zero. Wow. And thought we'll come back to the bank. I didn't even think about it. Ten years ago, when I was committed to that, I was going with you. We have Indian mentality. You have to live and live and live. And then suddenly, this is coming.
Speaker: Weeks, we could not see. I mean, this the deadline journey kept on ringing bells. We'll do how to do, what to do.
Speaker: What did you figure out as the solution then
Speaker: then? I'll say that this do few weeks wherein we were struggling, so our own team, the strength of the team and everybody knew came together to actually discover our potential here. What is it that we have learned in the last 8-10 years? Obviously, our old business was good.
Speaker: But we had almost no. 800,000 people working with us. And it is like, no, 1,000 families depending on us. We just can't work out if a customer is going. So we need to discover what is our cost and what is it that we have learned the last 8, 10 years.
Speaker: We sat together. We brainstormed. And the 1,000 people is in their durable business only. with Yes, yes, yes. So they start off their adult. So we just can't say... Let's do business and come back. It was a very tough call.
Speaker: so that and the packing material business was at what kind of turnover? So packing that point of time, we were doing probably around 100 or crores, 75, 80 to 100 crores.
Speaker: Yeah, yeah, yeah. but the revenue This was like three times the revenue. So our team, they sat together and they said, we will make this. Let us manufacture our own, this let us design our own product and select other customers.
Speaker: And obviously we were also looking at other opportunities because in manufacturing. we pe all the other so um shift plasticing mulin vi garo So we started looking at other
Speaker: So we moved out people from manufacturing to marketing. They said, we don't have manufacturing, everything important. You go to one area, you go to one area. And we formed teams of people to wander around that belt to find out what other businesses we can And we stumbled into an opportunity wherein Voltage was looking some for somebody to make air conditions for them.
Speaker: Yeah. Vultas in those days was at number two and was coming up very fast to catch up with LG. So they had started outsourcing products and at the same time they importing substantially.
Speaker: So we stumbled and they said, you can make LG, but we do only ODM, means we will not give you design, tools, technology, anything. You have to develop your own.
Speaker: And since you have been doing it for LG, we believe you can do it. That belief what they showed prompted us to actually get into our own design and within months we were able to come up with a product to their satisfaction and we onboarded a new customer.
Speaker: And the very following year, 2013, we almost touched the same revenue without LG H. Wow. Okay. well okay And this was purely with Voltas or you also then got other? Voltas obviously was our first customer, but then we also got other customers. And you were doing window AC, split AC, what kind of AC?
Speaker: So it was first of all an outdoor unit for LH. So those days, nobody was making the indoor units of AC in India. It was almost 100% important. So outdoor was one part which was getting manufactured to certain extent and windows.
Speaker: So being a low tech product, The window was there, which was getting. So we invested in the tourist technology for both the outdoor and kingdom. And our journey as an ODM started. yeah Outdoor means where that part of your, the the in the split AC part of the unit is outside and part is outside. that is yeah Okay.
Speaker: Which is part. Whereas indoor is something which is more aesthetic. So every brand will kind of have their own design indoor. That is outdoor is more or less a common thing because customer hardly pays attention to its look and feel.
Speaker: and so So you were doing the outdoor part of it. Indoor Voltas was either doing in-house or Voltas. At time almost all the brands were important. Oh, they were importing. Okay. Okay. Okay.
Speaker: Because there you also need more like chips and sensors and those kind of things. More investment into tools and designs. And if I have five customers, every brand would have like 10 different SKUs.
Speaker: So the investment keeps on increasing and those days the volume for the agency was too small to support any investments into two games to that extent. Okay. Okay. Okay. Understood.
Speaker: Okay. so So, you restarted with the this ah like ODM of air conditioner. Okay. So, air conditioner, our own design journey started and along the way, by then, the size of in line with all other normal conditions.
Speaker: So, we from being just an assembler, we had an embargo journey to become a manufacturer in true sense. So, we started making our own set of parts as well which goes into the assembly line. What are the parts? Like say the motor?
Speaker: The compressor, I think AC has a compressor, right? like What are the major parts of an AC? The more simpler parts to begin with would be the steel parts, the bondi, the GC, the bondi, the plastic parts of an indoor, again the bondis and all those things. so And then the heat exchanger.
Speaker: So these are technically the core part which the manufacturer does and then more standard part which are not, let's say, not only AC related would be the motor and the compressor because a motor is also you used in lot of other appliances.
Speaker: So that would typically be outsourced from a motor manufacturer or a compressor from a compressor manufacturer. But yeah, so largely we got into our making of our own heat exchangers, our own plastic parts, our own steel parts, that way. What's a heat exchanger?
Speaker: So heat exchanger is like in a car you have a radiator. So in a split AC you will have two heat exchangers, two set of heat exchangers, one on the outdoor and one on the indoor. and Blue color or a gold color steel, copper, aluminum part.
Speaker: ah What is the science behind How does it work? like and So typically what happens is in the compressor the refrigerant is compressed and then it is given to the indoor thing where the heat exchange happens, the air becomes colder The gas inside becomes hot and it goes to the outdoor unit wherein again the heat exchange happens from the condenser side back to the compressor and so it's a cycle.
Speaker: The CIP keeps on happening. Okay, okay. like Like the air is hitting the the metal part and the taking the coldness or rather giving the heat to the soap metal. then When you're getting the cold air inside the room, a second set of heat exchange happens on the outdoor side wherein the heat is being taken by the environment and becomes cooler.
Speaker: Whenever you go to the outdoor, you always find that the weather is coming in and the weather is coming in. This is how it's balanced. Okay, okay, okay. Okay, got it, got it. Okay.
Speaker: ah So you started doing the like that all of this in-house like like a proper ODM. So then what? Like from 2013, how did it progress?
Speaker: From 2013 to the last year, last 10-11 years, I think the journey has been extremely remarkable. and And we have grown to a true ordeal ah in the sense that, like I said, we started making all those parts, and the steel parts, the plastic parts, the heat exchanger.
Speaker: And in 2021, during pandemic again, when the entire world was going through a lot of pain, we got enough time to sit together and rediscover ourselves. I think so that pandemic period was golden period for us when we realized what is the potential inside because we were the world.
Speaker: We didn't leave anything, we were not able to re-collect, erase those pieces together. So we did our first round private equity raise in September 21 and we raised $20 million plus 260 odd crore. And invested into a second manufacturing location.
Speaker: So we expanded, we put up a factory in central part of India in Rajasthan, Dewadi. And then we did again a second round of private equity raise in September, just a year after that, September 22. We again raised $30 million, again 160 odd crores.
Speaker: And we put up a third facility in south of it, in Suri City, very close to Chennai in Andhra. And we also expanded our manufacturing footprints into the components.
Speaker: So we started now doing the ah controllers. We also had a lot of import substitution products, cross-flow fans, injection molded, the larger injection molded part. So we actually, what they said be salage is the person you like guy take u person in Simply put.
Speaker: okay And we yeah we expanded like anything. And this is what I think gave us a CAG of almost 45% in from 21 to 24. So previous three years we had a CAG of almost 45%.
Speaker: So the business view by lips and bounds, we expanded our capacity. What was your revenue in 2020? and twenty So 2020 our revenue was 500 crores I remember 550.
Speaker: And how much will you end this year at like current financial year? What will it be approximate? This year the market guidance because I listed company I can't give the exact numbers but the guidance you've given to the market is that will end up somewhere around 22 less minus 50.
Speaker: Wow. 1500. So 50% growth from last year to this year. Yes. At such a large base. Yeah. And this is Duribus. Wow. Okay. There is our second company also. this This is something our second company, the EPEC prefab. So ah from volume as the packaging business, they in 2008, we out another business, which is EPEC prefab. Then we do pre-engineered buildings and pre-fabic infrastructures.
Speaker: So that business has also grown in last 14-15 years and we just filed our DRHP last week and that's our second company which is on route to get your state pretty soon.
Speaker: ah Okay, how amazing. ah So, you know, in ah of staying with the durable business alone, um what is, so you said you started doing lot of import substitution. Can you help me understand what those products are that you started doing?
Speaker: See now, I think when the government of India took this initiative of Atmanin Barbarah and Make in India, think it has been a very well structured thought that they've not just made it a slogan.
Speaker: They've actually went inside it to connect with the people and realize that what are the roadblocks to make India? What are the roadblocks? What do want to make in India? It just can't be Make in India. You have to also understand what is making and why it does not be manufactured.
Speaker: So this is where I think the entire government machinery got together there and they started interacting with this Trade unions, would say. So, they have those um different bodies, different industry bodies ah like the Siamma, NASCAR, and SADAMA. So, we have lot of these associations, government is ah private dis associations of industries.
Speaker: So, they approached us, they onboarded us, they made us a party to this dream. And they shared us that on the date, these are again some references I'll give, on the date, these are the parts you are importing.
Speaker: Why are you importing it? Why can't you make it in India? but What is the problem? So, they even went, let's say for air condition that the government approached the industry and they asked the air condition, we are, it's a billion dollars is our outflow from India to China. What is it that you want to manufacture this products in India? And the industry said, we are, China is cost competitive, the pricing they give is so and so.
Speaker: ah We can't compete with them. So they went to step 8, they said, what are you happy with it? If we have to take head down or if we have to manufacture these products, what are the rule blocks? And then we said, okay, stage 1 we can do this, stage 2 we can do this and we made something called a phased plan. the As an industry, we made a phased manufacturing plan. Okay, first phase we can do this, second phase we can do this and to enable us to do this, want certain set of protections on the government side.
Speaker: And the government was... What protection? Sorry? What protection? Like... Protection is always in terms of... Tariff? Tariff rates.
Speaker: ah Okay. And also, you know, this tariff rate is one thing and also, then the government saying, if you do this, let's... So then they actually had and BCG, Boston Consulting Group, to put a plan in place.
Speaker: how big the market can grow we make in India, what are the roadblocks and what are the enablers, how can we enable these joint actions. So they came up with something called PLA, production link incentive wherein they said let's if the disability between India and China is 12%, the government will give 6% incentive and they ask us if you will give 6% of the industry da likey and will cover this distance.
Speaker: So that within the next five years, six years, we will become enough competitive and we will have access to export market to market outside India. And this journey of making India will become a heap. And today in three years, we actually see that whatever we dreamt of or whatever we intended to achieve, we have covered a lot on ground as an industry and as a country.
Speaker: Amazing. Amazing. ah And what are these products specifically, the which you were previously importing and now you do? See, ima especially if I talk about air conditions, 2019-20, when this first set of initiative was taken by the government, 25% complete units were imported in India. 25% of complete AC sold in India.
Speaker: So, that point of view, India was almost 7 million AC was the consumption and 2 million was imported as a finished product and of the balance, 5 million which was manufactured.
Speaker: And then 70% components were imported. So, if you make 50% of the company in India, 50% of the company be imported. That was the status. then we on When started this journey, and last year, based on the industry estimates and the reports published by various bodies, we realized that today, and zero almost close to negligible is the import of the finished product.
Speaker: The market from 7 million has become 15 million, double. And the domestic manufacturing of components from 25% has become more than sixty five seventy percent So, it has grown probably in four to five times in the last four years.
Speaker: So, things like the compressor used to be imported earlier, which now you make in-house. And it wasn't imported. Now, today almost close to 50% that is manufactured in India. oh The controller assemblies are almost 100% being manufactured in India.
Speaker: A lot of critical fans, heat exchangers. mean, these are like 100% now. Motors are like more than 50-60% being manufactured in India. So, and this, everybody's ramping up operations. So, I mean, keeping our fingers crossed, but definitely within the next couple of years, we'll be export ready as a country to take a lot of advantages in that direction.
Speaker: Okay. i mean How do you decide, oh you know, that, for example, say, maybe do you build a motor in-house or do you work with a vendor to buy the motors?
Speaker: You know, how do you take these kind of decisions? And some examples you can share with me of what you decided to do in-house, what some other Indian vendor is doing now instead of importing it.
Speaker: Now I think everybody has their own strategy. So and like within air conditioning manufacturers, it's safe. and We have some players who had acquired a lot of component of manufacturing capability by way of mergers and acquisitions.
Speaker: Okay, so we believe that has been their strategy to grow and mergers, acquisitions have their own inherent advantages and disadvantages both. So that is the way they have grown.
Speaker: Whereas for us, we embarked on a journey wherein we have tried to create manufacturing, larger manufacturing hubs. So like I shared, we today have three manufacturing hubs, the Deradun, Biwadi and Sri Siti. So each one of them is larger with almost the capability to manufacture each component within that setup.
Speaker: So that is like we can say a China model where everything is manufactured within the same setup and then the define as finished product is being rolled out. So for us, it was um learning a street and scaling it up. We believe that this will give us an opportunity by way of and um putting up the latest tests manufacturing technology, which otherwise would have not access to if we were doing something by way of mergers and acquisition.
Speaker: ah So we we went ahead and we there invested in the latest technology which is a forward cooking technology in terms that it has an extendable life over the next 8 to 10 years is more efficient both in terms of energy as well as efficiency in terms of water.
Speaker: And this definitely has given us a lot of advantages in terms of being ah efficient low-cost ODM manufacturing in the dental.
Speaker: And maybe say, for certain components like motors and all, we have done um strategic joint ventures. So we've entered into a joint venture with a group called Rambertna Group to make motors. So we understood that this would help both of us to leverage our um i would and strengths and put together so that we can create a larger opportunity.
Speaker: ah When you say manufacturing hubs, ah is it like... ah You plus your vendors or or only you? Like what do you mean by the hubs that you have these three hubs?
Speaker: Like you have your vendors also co-located with you who are doing some parts or this is all like your in-house? the area So actually, um it is mostly in-house because today, especially for AC5C,
Speaker: ex It takes a compressor, almost everything is getting manufactured in-house for us. So we are making close to 75% by value of parts in-house and then what balance remains every small small parts.
Speaker: For which ultimately we have found that the supplier score located nearer to us. So yeah, when I say hub, it's a combination that larger, I didn't company large and then we have our suppliers also moving closer to us.
Speaker: Okay, okay, okay. i'm just Understood, understood. Okay. And, got it. Okay. ah What is the, like, the compressor, you said you still buy it instead of doing it in-house? ah Is it complex to make in-house or like?
Speaker: So today, especially in air condition compression, we have two larger Chinese manufacturers in the world who command probably more than 80% of the global market share.
Speaker: So definitely they are too big to have and created an economies of scale which will be very difficult to match with the kind of volumes currently we are looking at. So, and today we find that we are more happy to collaborate with them at a strategic level and secure our suppliers and service our customers. So, currently, definitely, um and we are not looking at embarking on that journey of making compressions in the short term.
Speaker: yeah We are happy to collaborate at a strategic level with our suppliers. It's not so that the technology is not available, but we believe that the kind of economies of scale they've achieved is difficult to match in the short period of time.
Speaker: and Right. the The cost is not worth it, ah investing to make it in-house. It will be much costlier.
Speaker: ah In the Indian market, who are the other ah brands who manufacture on their own? Like lot of brands would be working with ODMs. Some brands would be doing their own. Like say, I think maybe My Dia has their own manufacturing.
Speaker: so So who are the brands who manufacture? LG also does their own manufacturing or... So Akshay, we have probably more than 60 brands who market appliances in India, especially air conditions.
Speaker: So we have more than 60 registered brands, big and small. Of these, the top 15 brands, they command more than 90-95% of the overall market.
Speaker: And out of these 15 brands, we have 10 brands who also so manufacture on their own. And... So 10 brands who manufacture on their own, almost everybody does a mix of somebody makes a 50%, somebody 30%, somebody 70% in-house and then balance the outsource to OEMs and ODM. So that's a typical mix at an industry level. And um we understand that it's like 60% in-house and is an overall average for the industry.
Speaker: Okay. Okay. And who are these five brands who don't manufacture at all? Who are basically selling? Yeah, yeah. You said out of top 15, 10 are manufacturing and using ODIMs. 10 who are manufacturing, it is easier to count the top 10 who are manufacturing.
Speaker: So it is LG, Samsung, Daikin, Carrier, Panasonic, Voltage, Bluestar, Hyer, Hevels. and Godrej. I think these are the 10 brands who ah whoeverfects have setup in India.
Speaker: the The others are mostly working with ODMs and they're more in Indian. if theyre okay yeah Right, right. Okay, okay, okay.
Speaker: Understood. So, you know, for a buyer of an air conditioner, what is some advice you can share that ah the this is the technology that you should buy, this technology you should not buy, what is a gimmick, what is actually worth paying for, any any advice you have, because you are you are the one who's actually manufacturing it, so you would understand really what is gimmicks, what is adding value, what is worth paying for.
Speaker: like I think I get this question almost every day from all my friends and relatives and I just in the way I say if you want to travel you have an option for a bicycle a rickshaw a scooter e-vehicle a car bus everything so it's the same thing ultimately end of the day the purpose is to get cooling it depends on what is the kind of cooling you want And I will not say that there's any gimmick. So obviously there's no gimmick. It is you get what you pay for, obviously. So there is value for money in every product. Every brand gives its value for money. Some by way of ah life, some by way of service, some by way of enhanced cooling. So i mean I think all the brands are worth it.
Speaker: So it depends on what we want. So what is our brand? didn't We long or we prove if few can say that love it because end of the day, i mean we are making it for everybody. So we understand everybody is giving right value.
Speaker: yeah like Like there's this technology, I think it's called the inverter technology in ACs. What is that technology? Is it worth paying the premium for it? Yes, and definitely yes. So, inverter is something which has helped us optimize the energy consumption today.
Speaker: And actually, just to give you some idea, an AC in 2010, if it used to consume 10 units of electricity, today a same, let's say a 1.5, 10 is consuming less than 5 units. So, the energy efficiency is more than double or triple in certain cases.
Speaker: So, or our half, let us say, the consumption. So that way, the affordable in terms of running these products is becoming more and more. And not just air conditioning, even more, most of the other appliances in India itself, the government has come up with something called BIS regulation, a BE, Bureau of Energy Efficiency Regulations, which has helped optimize the energy consumption.
Speaker: We are looking at global warming and all those case scenarios wherein we'll be able to save a lot of electricity. Otherwise, the way electronics are entering into households, our electricity requirement would double, triple every year.
Speaker: Okay. So the inverter technology, how does it work? How does it reduce consumption? See, now a typical room AC, which is a fixed-speed AC, it has two mores on and off.
Speaker: So either it is running or it is not running. So even, and so when the room set room temperature is achieved, it will go into an off mode. And then when again the room becomes hotter, it will switch on. So that's the mode it works on off mode.
Speaker: Whereas an inverter is something wherein ah it fluctuates between on and off. So it will learn at 10%, 20%, 30% and maintain the environment or the room's so ah desired set point without getting into on off mode.
Speaker: So that actually helps save close to 20-30% electricity.
Speaker: Okay, okay, okay. What are the other ah tech innovations in ACs? Besides the inverter technology, what are the other recent innovations, the tech innovations?
Speaker: The tech innovations, today we have connected appliances, so ACs today are connected, definitely. So we have those internet of things and we are on cloud ACs, we can all of them remotely, so that's something.
Speaker: ACs with air purifiers are things which actually help um clean the air at the same time while they are cooling. We have hot and cold ACs which are very useful for a place like North India wherein we have peak summers as well as peak winters. So definitely there are certain set of other innovative products give inverter ACs and
Speaker: We have something called variable ECs today, so which can like ah adjust themselves as per the load in the room, so they can work from 0.5 to 1.5 or 2.10 depending on the load of the place.
Speaker: yeah vr we So it's it's it's a continuously evolving industry. Okay. Okay. Fascinating. And the ah like i there's one thing I was curious about. So you're not the eldest brother, right? You have your elder brother.
Speaker: Why are you MDN CEOs?
Speaker: I think that's one thing I will say that shows the ah kind of relationship we have amongst ah the four partners who are into this business. And I'll put it to that they are appreciative of the fact that I was the one who put probably some bit of more energy or efforts to grow this business.
Speaker: So, okay, actually it's this way. um Like I said, we have three different businesses. um The appliances business, then the prefab business and the oil packaging business. So, and we have four co-founders in this business.
Speaker: So, Mr. Lakshul Patbotra, he is the one who actually started the packaging business has always been passionate about it. So, he leads the packaging business as the MDL CEO.
Speaker: And then we have my brother Sanjay who has been passionate about the pre-engineered PV business. So he has been single-handedly driving that business since 2008-2009 when we founded it. So he is the one who is doing it.
Speaker: And I was handed over the responsibility to turn around the appliances business in eleven twelve when LG was moving out. So I started looking at it full time. And so I became the NLCO for this business.
Speaker: And eldest amongst us, Mr. Bajran Bhutra, he is the chairman of all three companies. So he is our guiding force in that sense. Okay, okay, okay. This ah pre-engineered business, what is the turnover there?
Speaker: So, ah last year, we didn't close to 700 odd connoots in their business. Okay. Okay. And what do they manufacture? Who do they supply to? So, that's a pre-engineered PB building company. So, we do larger warehouses, airport terminal buildings.
Speaker: Yeah. There's something like Porta Cadence also. So, we'll do buildings, old rooms, cold storages. So, anything that needs plastic or... yeah it's a plastic or Made of plastic? So these are like ah generally if it is insulating, it will have a sandwich funnel and if it is non-insulated, it will be like you those large industrial sheds or terminal buildings of an airport or a bus stand or a railway.
Speaker: So those are pre-engineered buildings, steel fabrication. Steel, okay, steel fabric. Okay. And in this, is it a custom built for every order you custom build it or is it like a standard SKUs?
Speaker: So this is like a business exactly your opposite of our durable business. That in durable business, for us, it is a journey wherein we get associated with a customer, then it's marriage for life and other things.
Speaker: This is every new order is a new customer. So every day you need dig and drink. Okay. And you have to custom built it for each customer. but They will give you the dimensions and measurement. And so this is engineering. So we have a large team of engineers designing every building.
Speaker: okay okay Okay. Okay. Okay. Fascinating. Okay. So what is, uh, what are your focus areas, uh, for the durable business over the next few years?
Speaker: What are the things that you want to focus on? What problems do you want to solve?
Speaker: See, and actually for the durable business, definitely now we have a complete roadmaps ahead of us for next couple of years. So from being a 14-15 million dollar crores company last year, FWR24, they internally have drawn out the plan that you want to grow it to 3X, 4X in the next 4 years.
Speaker: And we we want to diversify into other appliances and definitely aspire to be India's number one appliances Odeon company. So and in this journey to diversify from ACs, we have already started making a lot of smaller home appliances.
Speaker: The kitchen appliances like the mixer grinders. water dispensers, induction cooktops, starting off with air fryers. We started making ah room coolers.
Speaker: So coolers are another interesting category we started making and yeah recently we started into washing machines. So we are expanding our product portfolio with the vision that and for us, it is important to acquire a customer. And once we have this customer, most of the brands are really product.
Speaker: So we can always enhance our relationship with them and cross-sell them a lot of products. So, and... Certainly in terms of dreams, um personally, I am devoting a lot of time to the product development side.
Speaker: So I'm very passionate about that. So this is where I use my bit of engineering net and that we get into designing products. So we want to remain in this journey of being in ODM, wherein we focus more on design side of things and then also ah manufacturing while serving our customers to offer them a complete build-up product.
Speaker: Okay. ah Who are your major like top three, four customers, brands that you work with? So we work with almost all the top 10 air condition brands in India. So we work with Voltas, Two Star, Avery's, Goagrage, almost every one of them to give them the complete finish product.
Speaker: In smaller places, we work with Philips, Bausch & Simmons, Bajaj, Cronton Fries, Usha. So again, the top, all the top brands in the... yeah Okay. good ah Do you ever want to and launch your own brand?
Speaker: Not really. No. Okay. We enjoy this bit of being the creator of the product. Whereas I think the brands, our customers have mastered the art of marketing it.
Speaker: And we are happy collaborating with them and creating the whole ecosystem. If you look at Mydea, Mydea is an interesting case study here, which was similar ODM in China, which ah in India, they are also selling through carrier or they have some tie up with carriers. so So in India, they are actually a brand. and not I don't think they are doing third party manufacturing in India, right? Yeah.
Speaker: so so So, they've taken that journey of directly becoming a brand. So, so that doesn't sound interesting to you, you you think? yeah and To give you some idea, and moving beyond my idea, think this is one way the entire manufacturing yeah partners have graduated gradually and in time.
Speaker: So, LG also used to be an way back in 1990.
Speaker: be back From a lucky gold star, OEM, they became a brand. Almost all the Chinese, whether it is Maidia, it is GRI or other the top 10 brands, if you look at it within China, they all started their journey as an OEM and then moved on to become a brand. I think that's one...
Speaker: That's the way you graduate ah from school to school. That's the way have. like to ring book but Will the same journey happen in India? and We are yet to see. Today, if you ask this, we are not very keen or we are not keen at all to look at um things in that sense.
Speaker: Will it be there? There's enough growth within this ODM business. There's enough growth. We don't want to distract ourselves. and Right. ah Who are the other ODM companies in India?
Speaker: See, almost the listed companies, if you look at the largest listed player in appliances segment is called Ambar Enterprises, Ambar. And then we have another listed company, PG, PG Retro Class. So, and then us. So, probably we are the top three larger ODMs in, ODM, VMs in India for appliances.
Speaker: And what is the relative sizes? Like what kind of turnover does Ambar do or PG do? So in terms of market cap or revenue, see, they are into a lot of other products. So they have other other ah verticals as well, which are in their entity.
Speaker: Whereas for us, we have the durable business separate, the TV business separate, the packaging business. ah So that way, we have divided them into separate entities. But yes, they are like four types, the size in terms of money.
Speaker: but Okay. Okay. okay Okay. Got it. Got it. Understood. And ah what is the... ah ah How do you, you know, you're not yet at that age, but eventually you will hand it over to the next generation.
Speaker: And ah there is always all these news headlines of ah family-run businesses. When the next generation comes in, then they fight with each other. And you are essentially a family-run business today. so So what is the way forward that you see?
Speaker: See, Akshay, last 25 years of this journey, wherein from being a 25-year-old
Speaker: new entrant into business today. I'm going to be 50 this August. So, not 25, last 25 years. ah VVA started this business, the four of us together. We have scaled it up to this level and definitely always have remembered certain things that what would be the way forward for us to keep on growing or like you say, the plans for us to hand over the better end of the next generation. or I think that's something which we we first of all, we look and around us and look at the reference cases where we have seen they have successfully been able to translate and keep growing the business that' within the family or also the family.
Speaker: For me and Sanjay, see we have all daughters, so I have three daughters. My brother Sanjay has two daughters. so And we have structured our own business in a way that this is I think why we also that got the listed that we want to continue a professional journey tomorrow, suitable people to look at managing the businesses if required and also looking at talent in-house within the company and within the families wherever we be.
Speaker: I think we are not bound or we are not keeping ourselves constrained that we will hand over the baton only to the family.
Speaker: oh Okay. Understood. and What are successful examples of transition that you are inspired by? See, and almost probably successful businesses at some point of time, they have family run and family start.
Speaker: At least in India. And whether it is Tata or Anis, everything, I mean, they they're all family. Even currently, Ammanis are for the land las of family run business. yeah So, we can always look at the way they structure things.
Speaker: And the way they um create opportunities within and outside. And we have enough um ah know mentors or guides or consultants available who help us create those structures in place.
Speaker: So like each of the company, we have key stops in place. So we are be looking to nurture talent within the company also. Okay. Okay. So shareholders can be made shareholders. The company can be run professionally.
Speaker: i think we can always create that distinction. If at all, what percent... Okay. ah What percentage of EPAC durable is like held by a promoter? Then how much is?
Speaker: Promoter, promoter. We hold it close to 48%. Yes. Okay. fourteen good And what is the market cap for the company today? hold ah On an average, it is 5,000 crores plus.
Speaker: Wow. Amazing. Amazing. Amazing. So in 25 years, you have created something like 2,500 crore worth of wealth through this one business alone.
Speaker: Amazing. Amazing. Amazing. Okay. ah Any last words of advice to young aspiring founders? See, each one of the young aspiring founders, I only give two bits of advice. I'll say one is follow your instinct.
Speaker: So, and don't try to copy anybody. You come genuinely within from inside. So whatever is your dream, whatever is your vision, whatever is your passion, you'll always find a way.
Speaker: So just keep dreaming and be original. Right, right, right. Amazing. Thank you so much for appearing on this interview. It was a real pleasure.
