The Wabag Group, now headquarted in Chennai, was recently recognized by TiECON Chennai as a Billion Dollar Baby. In this interview with us, Rajiv Mittal explains to us the company’s future growth strategies in the water technology space

S. MEERA

The story of The Wabag Group, a Chennai-based multinational company specialising in water and wastewater management, starts in Germany in 1924, and has since traversed to Austria and subsequently reached Chennai, its headquarters for the last 18 years. It is probably one of the rarest instances where a subsidiary ended up buying the foreign parent company.

“Towards the end of 1996, I came from London straight to Chennai and formed a six-member team to create the Water Treatment Division (WT),” reminisces Rajiv Mittal, managing director, Wabag. This division was one of the four divisions of Deutsche Babcock Group companies called BalckeDurr and WABAG Technologies Ltd. (BDWT).  In 2005, following a management buy-out, the first ever corporate coup in the water industry, the wholly-owned subsidiary became independent, losing the multi-national tag in the process, but attracting the attention of its competitors.  In 2006, the management granted ESOPs to all employees – the first company in the industry to do so – to commemorate the completion of a decade of operations and because of its record growth in that period.

In 2007, a reverse acquisition of the Austrian group was masterminded, again an industry first, and the headquarters shifted to Chennai. By 2010, Wabag became a listed company.

Success did not come easy to Wabag. As Mittal details, “The challenges were varied and many.  When the management buy-out took place in 2005 employees felt that we were losing the multinational tag and employee retention became a challenge.  The rest of the divisions started closing down one at a time. It was tough convincing our bankers and our customers. The long and established players in India were highly dismissive of Wabag.”

But he believes that because of his well-knit team, Wabag became the first pure-play water technology company in India to have achieved major milestones, crossing the Rs. 2,000 crore mark in eight years and still growing at a rapid pace. For its half-yearly, ending September 2014, the revenues were around Rs. 904 crore, up by 21 per cent for the same period, last year.

Focusing on research

Research has been Wabag’s greatest focus, as is evident from the fact that it has established research and development centres in Winterthur in Switzerland and Vienna in Austria. Additionally, in Chennai, it has tied up with the Central for Environmental Studies of Anna University for collaborative research programmes.

Its first and foremost aim is that advanced technologies are made available at affordable cost.  Secondly, the focus is on energy efficient technologies.  Thirdly, technologies that help achieve minimum footprint. Further, technologies address the need for environment friendly solutions.  Water reuse technologies provide the key for sustainability where there is acute water shortage.

One of the noted innovations introduced by Wabag in India is ultra filtration, a membrane based technology for solid liquid separation.  “For the first time in India, ultra filtration technology (UF) was introduced for the water treatment plant built by Wabag for Commonwealth Games, New Delhi, and again in the Nemmeli Desalination plant, Chennai,” says Mittal. Wabag had been commissioned to construct the 100 MLD sea water desalination Project in Nemmeli, Chennai, the first and the largest in India on EPC basis meant for 100 per cent potable use, in 2010 and this was completed in 2013.

Reestablishing a global footprint

As the company set up its base in Chennai there was a general perception that it will hinder Wabag’s positioning in the international markets. But, proving its detractors wrong, the company established an International Engineering Centre at Pune in 2008 to support design and engineering by utilising skilled Indian manpower for overseas projects.

Wabag also developed a business model comprising two major geography-linked revenue streams – Indian and international. While most companies would have considered it prudent to live status quo, Wabag ventured to do just the opposite by accommodating a third business line driven by India-International units – new direct subsidiaries, leveraging the parent’s leadership position in waste water and desalination markets.

Building on human capital

According to Mittal, Wabag’s growth has been possible because, being a people-driven business, the company’s greatest challenge is not only talent acquisition but also talent development and retention. It therefore lays emphasis on building employee competencies.  Leadership feedback surveys and periodic human resources surveys provide feedback for corrective action.  “We have streamlined the Graduate Engineer Trainee (GET) entry scheme.  We also have designed the Young Entrepreneurship Programme (YEP) wherein we identify talent and impart specialised coaching for young people to fast track their careers,” he explains. The company aims to focus on building a leadership pipeline to strengthen talent, helping in succession planning.

Agility is another critical reason for Wabag to maintain its lead. It has adopted the BOT contracting models typical of this industry to execute water projects globally.  Additionally, it also opts for Design, Build (DB); Design, Build, Operate (DBO); Transfer, Operate, Transfer (TOT); and Build, Own, Operate (BOO), depending on the requirement.

The company has also built energy-neutral wastewater treatment plants for municipal segments and water recycling and water reuse plants with zero liquid discharge (ZLD) for power plants, steel mills, refineries and petrochemicals.  The Indian government has also announced its National Water Policy laying special emphasis on water reuse and desalination, which is also an alternative source of water.  “Therefore, both will have significant impact on the overall growth of Wabag,” says Mittal.

In terms of focus, Mittal states that desalination and water reuse are the future growth engines not only for Wabag but also for the water industry as a whole.  “The Tamil Nadu Government has proposed two sea water desalination plants for Chennai and two more plants, one each in Tuticorin and Ramanathapuram,” he outlines.

Recently, the company signed a 10-year cooperation agreement with Switzerland-based engineering and project management consultancy Royal HaskoningDHV to deliver Nereda wastewater treatment technology to India and Switzerland. Nereda is an innovative wastewater treatment technology that uses the unique features of aerobic granular biomass. Nereda plants are up to four times smaller than traditional installations, are therefore cost effective, consume only half the energy and require no chemicals for the treatment process.

On a growth track

TIECON Chennai recently chose Wabag as one of the Billion Dollar Babies, a recognition of sorts for companies that could potentially soon touch billion dollars in value. It is poised to reach one billion Euro in the next three to four years by adopting the following strategies; growing the India backed subsidiaries, India International Units while focusing on technology and remaining asset light; ensuring profitable growth by increasing the share of the O&M business from the current 20 per cent to 25 per cent (top line); targeting high value orders funded by multi-lateral agencies backed by LCs; partnering with developers for large BOT/PPP projects and an increased  focus on industrial projects.

“We are the market leader in India in terms of waste water and desalination.  However, in order to stay ahead, we need to continue running as, otherwise, we would get run over by the competition,” Mittal says rather realistically. In addition to human capital and intellectual capital, the company’s technology and location are considered its differentiators. “Thirdly, our 90 year old brand with more than 6,000 plant references and more than 100 patents do add to our strength,” he concludes.

WHAT NEXT?

Reach one billion Euro in the next three to four years and grow the India backed subsidiaries

Focus on technology, remain asset light and increase  focus on industrial projects 

Increase the share of O&M business from the current 20 per cent to 25 per cent (top line) 

Target high value orders and partner with developers for large BOOT/PPP projects 

1996 – Started water treatment division

1999 – VA Tech, an Austrian Engineering conglomerate, bought Wabag from Deutsche Babcock

2003 – Crossed Rs100 crore mark.

2005 – Management buy-out

2007 – Reverse Acquisition of Austrian Group. Wabag headquarters shifted to Chennai

2010 – The company is listed in stock markets. Builds Wabag House. Bags order for Nemmeli Desal Plant

2014 – Bags Swiss 10-year Cooperation Agreement to deliver Nereda Wastewater treatment