SUC­CESS DE­MYS­TI­FY­ING

Marwar - - Cover Story -

Deven­dra Ku­mar Jain and his fam­ily have risen to ev­ery chal­lenge that their di­verse busi­ness in­ter­ests (in­clud­ing in­dus­trial gases, en­ter­tain­ment, re­new­able en­ergy and mul­ti­plexes) have thrown at them while set­ting up the $2 bil­lion INOX Group. Three gen­er­a­tions of the Jains talk to MAR­WAR about the in­cep­tion, ups and downs and future plans of the group one Sun­day af­ter­noon ...

A GRAD­U­ATE IN HIS­TORY FROM ST. Stephens Col­lege, Deven­dra Ku­mar Jain always knew that he would join his fa­ther’s pa­per firm, Sid­dhomal and Sons. “Even be­fore I grad­u­ated, I re­mem­ber at­tend­ing busi­ness meet­ings with my fa­ther, at the age of 18, in 1947. In those days, it was not unusual for sons to be­gin as­sist­ing their fa­thers in busi­ness and learn about it early on. So I learnt all about the pa­per busi­ness,” says 85-year-old Jain with a smile.

In the next few years, the com­pany which was set up in 1923, be­came one of the lead­ers in the In­dian pa­per in­dus­try, and Jain had many ac­co­lades heaped on him. As a mem­ber of the In­dian Na­tional Com­mit­tee of In­ter­na­tional Cham­ber of Com­merce, he vis­ited sev­eral coun­tries as an In­dian del­e­gate. He then went on to be­come the pres­i­dent of the In­dian Pa­per Mer­chants As­so­ci­a­tion in Delhi in 1964-65, even at­tend­ing a few meet­ings of the World Econ­omy Forum, along with a hand­ful of other top In­dian in­dus­tri­al­ists of the time.

It was not easy for D K Jain to set up what would later be­come the first com­pany of a di­verse group, de­spite the fact that there were very few in­dus­tries and man­u­fac­tur­ers, let alone com­peti­tors, at the time. One rea­son is that he did not have the nec­es­sary ex­pe­ri­ence, but the sec­ond rea­son, the blan­ket ban im­posed on In­dian manufacturing by the Bri­tish, was far more in­hibit­ing. “We had to im­port all sorts of pa­per as we were not al­lowed to man­u­fac­ture any­thing,” says Jain, adding, “In those days, the only In­dian com­pany which pro­duced gases was the In­dian Oxy­gen Com­pany, which was the In­dian sub­sidiary of Bri­tish Oxy­gen.” Luck­ily for him, he knew the com­pany’s gen­eral man­ager in Delhi. Keen to switch from trad­ing to manufacturing, Jain promptly con­vinced him to move to Pune where they had just set up a fac­tory for the re­cently launched com­pany In­dus­trial Oxy­gen. “The man­ager’s tech­ni­cal ex­per­tise cou­pled with our choice of sec­tor just made it click,” adds Jain.

In 1999, 50 per cent of the shares of In­dus­trial Oxy­gen were sold to Air Prod­ucts of Amer­ica (a lead­ing Amer­i­can com­pany that man­u­fac­tured a di­verse

port­fo­lio of at­mo­spheric gases, per­for­mance ma­te­ri­als and equip­ment) with whom they had en­tered into a joint ven­ture. Re­named INOX Air Prod­ucts Limited (‘Inox’ be­ing an ab­bre­vi­a­tion of ‘In­dus­trial Oxy­gen’), the com­pany man­u­fac­tures all sorts of in­dus­trial gases like oxy­gen, ni­tro­gen, hy­dro­gen, he­lium, ar­gon, car­bon diox­ide and kryp­ton, which are widely used in the steel and ce­ment in­dus­tries. Fif­teen years down the line, INOX Air Prod­ucts has no less than 50 units across In­dia.

Don’t bor­row, be happy

Ev­ery suc­cess­ful busi­ness leader fol­lows a phi­los­o­phy that guides him through all his de­ci­sions. For Jain, it was a strict ‘don’t bor­row’ rule book that was laid down by his fa­ther. “My fa­ther was a very con­ser­va­tive per­son, and as long as he was alive, he did not al­low us to take any loans. Even now, this is what I tell my sons and grand­sons. That’s why we didn’t ex­pand too much,” says Jain, al­though he ad­mits that it was “a very in­hibit­ing fac­tor” at times. To­day, the INOX Group has many di­verse busi­nesses un­der its um­brella. INOX In­dia, a cryo­genic en­gi­neer­ing com­pany that deals with low tem­per­a­ture stor­age and trans­porta­tion of gases, is man­aged by Jain’s elder son, Pa­van. A chem­i­cal en­gi­neer from IIT, Delhi, he also heads INOX Air Prod­ucts and the mul­ti­plex busi­ness, INOX Leisure, with which the group has for­ayed into the ser­vice in­dus­try for the first time. Gujarat Flu­o­ro­chem­i­cals Limited (GFL), on the other hand, is headed by Jain’s younger son, Vivek.

Ev­ery suc­cess­ful busi­ness leader fol­lows a phi­los­o­phy that guides him through all his de­ci­sions. For Jain, it was a strict ‘ don’t bor­row’ rule­book that was laid down by his fa­ther.

- D K Jain

Jain is happy to see the third gen­er­a­tion’s ac­tive in­volve­ment in the fam­ily busi­ness. “My elder grand­son Sid­dharth is as­sist­ing my elder son Pa­van; they live in Mum­bai. My younger grand­son De­vansh is as­sist­ing my younger son, Vivek, but for the last five years has been man­ag­ing his new ven­tures— INOX Wind, which man­u­fac­tures wind tur­bines, and INOX Re­new­ables, In­dia’s largest in­de­pen­dent re­new­able en­ergy power pro­ducer—as well,” he says.

Tak­ing the legacy for­ward

There is no doubt that scions of in­dus­tri­al­ist families do not have to strug­gle as much as oth­ers to get into big-ticket com­pa­nies. But in spite of that, Vivek Jain, man­ag­ing direc­tor of GFL, had his work cut out for him. Armed with an eco­nom­ics de­gree from St. Stephen’s Col­lege and an MBA from the In­dian In­sti­tute of Man­age­ment, Ahmed­abad, Vivek was at the fam­ily of­fice the very next day af­ter he fin­ished his stud­ies. “I think it was pre­or­dained that I would get into the fam­ily busi­ness as soon as I fin­ished my ed­u­ca­tion. We were look­ing at growth op­por­tu­ni­ties af­ter In­dus­trial Oxy­gen. Back then, the In­dian

econ­omy was also grow­ing. We wanted to ex­plore the re­frig­er­ant busi­ness as there was limited com­pe­ti­tion in In­dia, but the tech­nol­ogy was only avail­able with a few multi­na­tion­als,” Vivek rec­ol­lects.

Even though the size of the busi­ness was not very large in those days, they man­aged to set up a plant around 199091, af­ter having ob­tained the tech­nol­ogy from a US com­pany. But soon, they hit a snag. Un­known to the Jains, and many oth­ers, many of the gases that GFL was manufacturing were con­trolled by the Mon­treal Pro­to­col, an in­ter­na­tional treaty that pro­tects the ozone layer by phasing out the pro­duc­tion of nu­mer­ous sub­stances that are re­spon­si­ble for its de­ple­tion. “It hit us like a bolt out of the blue. As a re­sult, some of the prod­ucts like chlo­roflu­o­ro­car­bons (CFCs), which were the most widely used re­frig­er­ants at that time, had to be phased out in a span of about 10 years. We had to com­mence phasing out by 2000-01 and by 2005, it got phased out,” shares Vivek.

Turn­ing point

It was when the Jains dis­cov­ered the pit­falls of the busi­ness, in­clud­ing its limited life cy­cle, that they started look­ing for greener pas­tures and came up with a sur­vival strat­egy. “Luck­ily, ours was also a swing plant, which was ca­pa­ble of manufacturing HCFC (a re­frig­er­ant which has a low Ozone De­plet­ing Po­ten­tial and a longer life cy­cle). How­ever, this too has to be phased out by 2020. So again, around 2002, we started look­ing at prof­itable ven­tures to de­ploy our funds ... That was when we de­cided to get into the ser­vice busi­ness with INOX

Dad let me run the re­new­able en­ergy busi­ness the way I wanted to. This al­lowed me to fall and get up on my own strength. I had to solve is­sues and cre­ate my own team.

-

De­vansh Jain

Leisure, so as to di­ver­sify risks,” says Vivek. One of the early en­trants in the mul­ti­plex busi­ness in In­dia, it was the Jains who cor­po­ra­tised it while ex­pand­ing ag­gres­sively. To­day, they have at least 350 screens across In­dia. “We are cur­rently at the num­ber two po­si­tion, but we hope to re­gain the top slot, where we were about six months ago, very soon,” says Vivek.

Then around 2006-07, the com­pany de­cided to man­u­fac­ture poly­te­traflu­o­roethylenes (PTFE). This en­gi­neer­ing plas­tic has a niche ap­pli­ca­tion, but is used in fairly de­mand­ing in­dus­tries (chem­i­cal, food, wire, ca­bles, etc). How­ever, again, the tech­nol­ogy required to pro­duce PTFE was not eas­ily avail­able. Only a hand­ful of com­pa­nies like DuPont, Daikin and 3M had ac­cess to it. The multi­na­tion­als were not will­ing to share, so Jain ac­quired it from a Chi­nese en­gi­neer­ing com­pany. There was very lit­tle de­mand for the prod­uct in the In­dian mar­ket and the Jains knew that the greater part of their pro­duc­tion would have to be ex­ported, so the chal­lenge now was to meet the ex­pec­ta­tions of the western users. “We did a lot of re-en­gi­neer­ing, brought the prod­uct to a glob­ally ac­cept­able stan­dard, up­graded the tech­nol­ogy and set up plants here,” adds Vivek.

Op­por­tunely, once the fa­cil­ity be­gan run­ning in 2007, there was a short­age in the mar­ket, en­abling GFL to utilise its full pro­duc­tion ca­pac­ity in only about two years’ time. “The mar­ket was still fairly strong so we de­cided to ex­pand fur­ther and dou­ble our pro­duc­tion ca­pac­ity. Our busi­ness strat­egy fo­cused on an in­te­grated model in or­der to en­sure that we re­mained com­pet­i­tive, given the fact that there was go­ing to be stiff com­pe­ti­tion from the Chi­nese,” says Vivek.

The com­pany’s chem­i­cal com­plex in Da­hej, Gujarat, is one of the most in­te­grated PTFE pro­duc­ers in the world. Here, they con­vert salt (which is widely avail­able in the mar­ket) to dif­fer­ent prod­ucts like caus­tic chlo­rine, which is used to make chloro­meth­ane, which in turn goes into the pro­duc­tion of R-22, a re­frig­er­ant used in the manufacturing of PTFE.

Sus­tained ex­cel­lence

How­ever, when the com­pany started the large-scale pro­duc­tion of R-22, the mar­ket went down again. Fully aware of the hur­dles mir­ing the sec­tor, Vivek per­se­vered and once again man­aged to turn their luck around. Un­fazed by the road­blocks which would have made a less de­ter­mined man think twice, Vivek says, “To­day, we are prac­ti­cally the only man­u­fac­turer of PTFE in the coun­try, apart from a very small public sec­tor com­pany which has been around for the last 20 years. While our ca­pac­ity will shoot up to 15,000 tonnes, they sell about 200 tonnes in a year.” The

fa­cil­ity is now ex­pected to run at its full ca­pac­ity by the end of 2014.

Lead­ing in all ven­tures is a skill that the Jains seem to have mas­tered. “We are amongst the top three in ev­ery busi­ness we have got­ten into, whether it is in­dus­trial gases, cryo­genic en­gi­neer­ing (where INOX In­dia is clearly num­ber one na­tion­ally and amongst the top five in the world), leisure or re­new­able en­ergy,” re­marks Vivek.

Talk­ing about future growth, Vivek is con­fi­dent that each of their stand­alone busi­nesses will con­tinue to grow in the next five years. “We have reached a stage where our first set of in­vest­ments is over,” he says adding, “Even if there are new en­trants, you can main­tain your po­si­tion, as long as you are com­pet­i­tive and your prod­uct is tech­ni­cally sound.”

Bridg­ing the gen­er­a­tion gap

Most fam­ily busi­nesses face a chal­lenge re­tain­ing their strength and po­si­tion by the time the third gen­er­a­tion joins the busi­ness. But not the Jains. A case in point is De­vansh, the youngest of the brigade, who founded INOX Wind and INOX Re­new­ables. “The ex­pe­ri­ence gave me a lot of con­fi­dence as op­posed to get­ting into one of the group com­pa­nies, where I don’t think I would have been grilled to the same ex­tent, as they are al­ready es­tab­lished busi­nesses. At the end of it, there’s a huge group legacy to live up to. If you are in­vest­ing the kind of money that we are, you need to get it right,” states De­vansh.

Having grad­u­ated with a dou­ble ma­jor in eco­nom­ics and busi­ness ad­min­is­tra­tion from Carnegie Mel­lon Univer­sity (CMU) in Amer­ica in 2007, the young scion was ini­tially un­de­cided about whether he should work at a con­sult­ing firm or an in­vest­ment bank over­seas. “Af­ter a lot of de­bate and dis­cus­sion, I fi­nally came home. I spent the first few months work­ing on an as­sign­ment with McKin­sey & Com­pany to iden­tify a new busi­ness for us to di­ver­sify into. We ze­roed in on re­new­able en­ergy. I in­vested about a year and a half learn­ing about the group’s other busi­nesses as well,” says De­vansh who has been in charge of the re­new­able en­ergy busi­ness since 2009.

Pour­ing in fi­nance in a no-holds-barred move, INOX Wind has in­vested R200 crore in manufacturing plants and ap­prox­i­mately

R6,000 crore in build­ing wind farms across In­dia. They have also in­vested

Even if there are new en­trants, you can main­tain your po­si­tion, as long as you are com­pet­i­tive and your prod­uct is tech­ni­cally sound. - Vivek Jain

R1,500 crore in INOX Re­new­ables. “We de­cided to first in­vest in set­ting up wind farms. Then we also in­te­grated back­wards into manufacturing tur­bines. To­day we are build­ing wind farms across Gujarat, Ra­jasthan and Ma­ha­rash­tra. INOX Wind has three plants, one in Hi­machal Pradesh, two in Gujarat,” says De­vansh who ex­pects INOX Wind to be­come the top tur­bine man­u­fac­turer in the coun­try within the next two years.Ad­di­tion­ally, an IPO (Ini­tial Public Of­fer­ing) was filed last year and De­vansh hopes to list the young com­pany on the public mar­ket this year. Plans to ex­port wind tur­bines are on the anvil too.

Pos­i­tive dis­sat­is­fac­tion

High­light­ing his am­bi­tions, the young Jain says, “We are striv­ing to be counted amongst the top 20 busi­ness families, rather than the top 100.” And why not, when they have been “grow­ing larger and larger with ev­ery pass­ing gen­er­a­tion”!

When asked whether cre­at­ing his own ven­ture from scratch was easy, he breaks into laugh­ter, ad­mit­ting that the past three to four years have been fairly chal­leng­ing. “Dad let me run the re­new­able en­ergy busi­ness the way I wanted to. This al­lowed me to fall down and get up on my own strength. I had to solve is­sues and cre­ate my own team. We now have about 1,800 peo­ple across the wind busi­ness,” he says proudly.

It’s easy to see a com­mon trait run­ning through the Jains who have worked co­he­sively to cre­ate rev­o­lu­tion­ary ven­tures, egged on purely by a de­sire to test new wa­ters and scale new heights. It strikes us that while it is their keen re­search that helps them to choose the right busi­nesses, it is their cu­rios­ity, am­bi­tion, com­mit­ment and tenac­ity that makes them sec­tor lead­ers.

So what is the se­cret to their suc­cess, I ask, cu­ri­ous about what De­vansh’s take might be. “We are para­noid and col­lec­tively dis­sat­is­fied. Be­cause we are always dis­sat­is­fied in a pos­i­tive way, we are always think­ing of what to do next,” he says.

With their cryo­gen­ics and chem­i­cals busi­nesses now go­ing in­ter­na­tional, the Jains are look­ing for­ward to the new chal­lenges that await them. If I have learnt any­thing at all about them, it is that th­ese will only spur them fur­ther on. Be­fore I have a chance to ask De­vansh about their future plans, he con­firms my be­liefs. “I think we’ll be cre­at­ing an­other fairly large busi­ness within the next five years,” signs off the young Jain con­fi­dently.

Right: Vivek, son De­vansh and fa­ther D K Jain Be­low: Gujarat Fluro­chem­i­cals Limited’s Da­hej com­plex

Clock­wise from top: Pa­tri­arch D K Jain; Inox Wind tur­bines at the Mahi­dad site in Gujarat; Rev­o­lu­tion­ary Wind Tur­bine Gen­er­a­tor (WTG) blades in­side the blade plant at Ro­hika, Gujarat

L-R: In­te­ri­ors of the INOX mul­ti­plex at the Quest luxury mall, Kolkata

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