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.
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.
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.
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.
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