N K Ranganath, managing director, Grundfos Pumps India, aims to take the company’s revenue to Rs. 850 crore to Rs. 900 crore by 2017 through organic growth, localised production and maybe, one acquisition
“Sheer urbanisation in India will drive our growth,” believes N K Ranganath, managing director, Grundfos Pumps India, a company that was setup in 1998 as a 100 per cent subsidiary of Grundfos – Denmark. While Grundfos India grew at a compounded annual growth rate of about 10 to 11 per cent in the last five years, which was lower than its own expectations, it is all set to capture the future growth that the industry is likely to witness in the coming years.
A member of the CII National Committee on manufacturing, water, CSR and skill development and the executive council of Indian Green Building Council, Ranganath’s year is filled with travel. Aside from work, when he is not on the stage addressing a group on varying topics, he often spends his time browsing through The Economist magazine.
“The fact that you are doing something which is not the usual is enough to recharge your brain,” comments he. With over 34 years of experience in marketing, sales, design, project management, finance, and human resources, Ranganath is now completely focused on scaling Grundfos India to greater heights.
In this conversation with Poornima Kavlekar, N K Ranganath talks about the manufacturing sector in general and more specifically, about the company’s growth plans for the years ahead.
Where do you see the market going and, more specifically, where do you see Grundfos in the next few years?
The pump market always has a certain growth to it – a four per cent to a six per cent growth is a given. The largest growth rate will perhaps be from the domestic market as India has been urbanising at a fiery pace. Growth could also come from wastewater segment as right now only 35 per cent to 45 per cent of the city’s sewage is being treated or pumped. This percentage is even lesser in smaller towns. With all that emphasis on clean water, the growth rate in India would be on an average of 15 per cent CAGR.
We aim to close the year 2014 (in December) with a revenue of Rs. 380 crore and touch Rs. 430 crore next year. By 2017, we want to touch Rs. 850 crore to Rs. 900 crore in revenue. We will achieve this through organic growth per se, some new localised production and perhaps one acquisition. We would prefer an acquisition in the domestic buildings segment, which is basically the segment of small pumps sold to household individuals.
What are the customer industries where you see growth coming from over the next two fiscals?
Basically, any individual. As the economy grows, people will have more money, expectations will increase, quality of life will get better and there will be more development in smaller cities. These are areas where domestic pumps go.
We are also in many other segments. Water treatment will continue to do well, as quality of water is poor. We are getting into a situation where we could be lacking water in the right place leading to recycling of water and water treatment. Predominantly, we are looking at taking more market share from the existing market by making it more competitive.
Where does India fit into the scheme of Grundfos Global? I believe the Danish company called it the “second home market” for the company and you’ve been in India since the 90s.
India is a significant and a very complex market. The country has to play a significant role in the emerging markets and perhaps be a base for future production and development of pumps, which will go into emerging markets. We cannot really design these in Europe to a cost. But, even though we want to build it to a cost, we do not want any compromise in reliability and efficiencies. We might take some cost out on aesthetics, but we want something reliable and affordable. So, we are trying to position India on that platform for the Grundfos world.
However, we are not focussing much on the fiscal 2015 as far as India is concerned. Worldwide, we have taken the initiative to reduce our overheads and increase our profitability and hence, we’re not looking at much growth. Having said that, our focus for 2015 will be on four countries; China, Russia, Germany and the U.S. India will be among the top 15 but these are the top four markets. We have postponed everything for 2016 by which time we can increase our bottomline by moving certain processes out.
In this whole process, we could have something more in India. We are getting more R&D in software coming into India. We already have India as the designated centre of excellence for communication software. We also aim to keep the costs in 2015 within what we incurred in 2014. This apart, we also want to make sure our investments made in 2013 and 2014 offer results.
Take us through the ‘India development program’ that began a year and half back?
We were a focus country for a couple of years where we started a small development team. We looked at affordable pumps, which were not in the portfolio, or products that are in the portfolio and not affordable in India. We wanted to make these available to the general public and not just the top end of the market.
Demand side management, which is basically use of more energy efficient equipment, would make far more sense than trying to build capacity and then wasting it. So in that sense, what will happen is that whatever we are building now in India, we would like to then commercialise it. That is what we have started. Some existing products can be commercialised immediately.
Take us through the new products being developed at the company?
We are looking at solar and recycling products. Another one is on measurement, how can you make something more efficient if you don’t measure it. Today, measurement verification is an expensive process. We want to bring down the cost so that it becomes a part of the life of any equipment.
For the ‘Make In India’ campaign to be successful, what are some of the key changes needed in terms of policies and building a sound environment to boost manufacturing?
There are too many changes required. Every bit of law that we have today, which is creating a hurdle for manufacturing in India, has to be looked at. However, I must add that the current government is seriously looking at it. If, for example, one looks at newer sectors like IT, the environment is much friendlier. It is certainly not the case for the manufacturing sector, which has been around for more than 100 years.
The kind of bureaucracies that exist in labour laws, tax laws, licenses today and the kind of approvals one has to get, almost 60 to 80, is hard for a company. The worst of all is the cost of entry, which is sheer corruption in some states. Those states that remove this entry cost in corruption would attract a lot of brick and mortar industries. If you have to do make in India, although the government has said it will roll out the red carpet, at the ground level there is serious structural changes that have to take place. You cannot have inconsistent and backdated policies. There has to be a long term transparent view of what the government would do and what is expected of the private sector which is investing for ‘make in India’.
Please share a few ideas to boost talent availability in the manufacturing Industry in India?
People in India have innate talent; what they do not have is the experience and exposure to the right systems. We have in our DNA a lot of indiscipline, which is holding us back. We have to change that and introduce discipline and some amount of processes, which help these people to achieve potential that they have. This has to be started at the school level.
We have put too much emphasis in the last decades on working behind the desk and have belittled those who work with their hand and not understood that if you don’t work with your hands, there is no production. To correct that imbalance, we have to give school children the opportunity to learn vocational training subjects, which will help them get a job, instead of trying to push them in universities after the 12th or polytechnic after the 10th and making them completely useless to the society after 3 or 4 years. They still look out for the same jobs that they would have got after 12th grade if they had the right training.
Having said that, most parents do not want their children to do manual work. In that there is a huge mindset change that has to come about. If parents see that the kids who dropout of 12th grade get a decent wage which is no less than what a white collar employee gets, this mindset will change.
I would say automation should come in agriculture and not depend on labour. Labour should be trained to handle industry and industrial products, which means they are going up the value chain. You are also able to cater to the labour demand. All this is kind of interlinked. We need to approach this holistically, failing which you will be looking at one aspect only.
At the higher end, there is tremendous talent available in India. Having said that, I’d like to see an overhaul to the education system in the country.
Most of the entrepreneurship that is happening in India are in the IT, Internet and in new economy segments. Do you foresee a ‘manufacturing entrepreneurship’ movement that’ll come up through the Make In India campaign?
It is comparatively easy to get into technology entrepreneurship primarily because of the funding ecosystem of angel and venture capital investors. Moreover, technology development is people driven with minimal capital investments.
On the other hand, try to raise money for a manufacturing startup. First thing, banks ask for is collateral. The VCs and PEs are not so happy to go there, as the exit routes are difficult and it takes a longer time to make money.
But, if you see a place like Coimbatore, the entrepreneurship spirit in manufacturing is amazing; same in the case of Gujarat, Rakjot and Ahmedabad. So we need to understand how to replicate this system across. A lot of value can be created by the manufacturing sector and it is crucial to make this work.
What are some innovations you’re seeing in the manufacturing world?
The one thing I see is the Internet of things. Everything is networked and everything will be. There will be a stage where every little thing will have some embedded systems in it.
I see a huge amount of innovation in the measurement verification automation space which will bring consistency in manufacturing across which is more medium term. Over the long term, I am intrigued at the 3D printing prototype method. Someday, it will move from prototype to actual manufacturing.
I also see material technologies changing. The kind materials we use and its impact on the environment will change, where materials becomes lighter and more recyclable. For example, see how automobile industry has changed in the last 15 to 20 years. Manufacturing will really become completely different from what it is in terms of processes, the way it is handled and the materials that will be used.
WHAT ARE YOUR TOP RESPONSIBILITIES AT GRUNDFOS INDIA OVER THE NEXT 5 YEARS?
Topline to be driven to Rs. 800 crore (maybe a little more if we acquire a company)
Ensure profitability and have a healthy bottomline. We don’t want to do this at the cost of bottomline
Find a successor for myself who can run this organisation when I retire
Make the organisation dynamic, flexible and agile enough to ensure that we are able to react fast to any changes that are taking place in the market even though we are a multinational, which would mean a local approach with a global mindset.Grundfos Pumps India Make in India Manufacturing