In most homes, boiling water to rid it of its impurities seems to be the most common practice. It is this mindset that Mahesh Gupta is still trying to fight even after 13 years of setting up a water purifying company. “In India, penetration of reverse osmosis (RO) method of water purification is only about one per cent,” says Gupta, founder and chairman, Kent RO Systems Ltd. (Kent). “What most don’t understand is that boiling does not remove all the impurities, especially the dissolved ones. Hence, educating customers and building awareness about RO is one of our biggest challenges,” he adds.
Noida-based Kent has sold more than a million RO units since its inception. It has many models now, including Kent Grand and Kent Pearl, ranging between Rs. 13,000 to Rs. 17,000 per unit. About 80 per cent of its revenues are from its RO sales and the company holds around 40 per cent market share. For the financial year 2012, the company has closed revenues of Rs. 331 crore from Rs. 240 crore last fiscal with a top line growth of close to 40 per cent.
Building a brand
For the first six years, there wasn’t much of a brand building exercise at the company. “Initially, we sold our products through the direct marketing route. But, in 2005, I realised that to sell a consumer product, we need to turn it into a brand for consumers to recall it,” says Gupta. That’s when he started advertising and brought onboard a brand ambassador – actor Hema Malini. He considers this phase as Kent’s second innings as the product also was redesigned and RO’s technology was modified. “RO then effectively removed impurities but it also got rid of essential minerals in the water. So, we designed a product that would retain the minerals. And since then, we have been growing at an average of 30 per cent to 40 per cent every year,” shares Gupta.
Initially, we sold our products through the direct marketing route. But, in 2005, I realised that to sell a consumer product, we need to turn it into a brand for consumers to recall it.
Over the past three to four years, Kent has also diversified into other products such as air purifiers, vegetable and fruit purifiers and water softeners. Last year, it signed actor Boman Irani to promote its tap water purifier product. But Gupta admits that fighting for awareness for RO takes considerable time, that educating about its other products is twice as difficult. However, he knows that his promotions have paid off. “It is definitely easier to sell our products now – word-of-mouth has helped our cause. And once we educate people, they are ready to pay when it comes to securing their health despite the availability of more affordable purifiers in the market,” says Gupta.
Unlike its competitors, Kent does not do house calls. It undertakes visits only on request or through reference and is able to close 40 per cent of such sales. “Since it is a costly product, people like to discuss and debate about it. Instead of forcing it on them, we would rather make an impact through our advertising,” says Gupta. Kent has a strong distribution network with 400 distributors spread over the country with northern states providing most traction. In the next fiscal, it hopes to increase the number to 700 distributors.
Kent RO Systems Ltd.
Founder: Mahesh Gupta
Turnover: Rs. 331 crore for FY 12
Changing the game
For Gupta, Kent is his second tryst as an entrepreneur. An IIT-Kanpur graduate, he worked with the Indian Oil Corporation for 11 years before he decided to quit so that he could implement his ideas. In 1988, he started SS Engineering (that still functions) to test and conserve petroleum products. The origination of Kent happened by chance when both his children fell sick to jaundice. Having never used a water purifier at home and not satisfied with the ones available in the market, Gupta decided to make one by importing the components. Through his research he learnt that RO was an effective water purification method – a technology that was available in other markets. Water impurities include bacteria, dust, algae and others, which ultraviolet filters can remove but dissolved impurities such as salt, arsenic and chloride that one cannot see are removed with the help of RO. Though water wastage is high during this process, Gupta prefers to refer to it as water consumption or ‘reject water’. “Like how when one washes their clothes there is reject water, similarly water is consumed to clean water,” he says. Gupta also adds that, irrespective of groundwater or metro water, RO is useful due to the kind of impurities present in water now.
Gupta setup Kent with a Rs. 2 lakh as investment but his biggest challenge was to sell his product. “RO is a costly procedure. My product would cost around Rs. 20,000 while my competitors would price their products at Rs. 5,000. Also, I was fighting a big elephant, Aquaguard by Eureka Forbes, which was well established in people’s minds. To sell even a third unit became a monumental effort.” But as his small number of customers was happy with the product, Gupta knew it would be successful someday.
Now, with many models on its roster, the research and development for Kent’s products is a continuous process that takes place in Noida, with about four per cent of its revenues allocated to it. Kent has three manufacturing facilities in Roorkee with a capacity to produce 5 lakh units annually. A fourth plant is underway in Greater Noida with an investment of Rs. 10 crore that will become functional in two months time. With this, its capacity would increase to 7 lakh units per year.
A sustainable pace
While courting growth, Gupta made a conscious decision to not go the venture capital route. “I am not an aggressive person. Kent could’ve been a Rs. 1,000 crore company but I would rather move at a comfortable pace. We’re financially sound now and rely on internal accruals for further growth,” he says. Even today, some of his biggest challenges continue to be what plagued him earlier on – cost reduction, building awareness about RO and timely servicing. “It is a continuous exercise to bring down the cost, which is a setback because besides the initial high cost, RO technology is high maintenance as well. We try our best to be prompt in our service,” adds Gupta.
Gupta estimates the water purifying market to be around Rs. 1,500 crore and growing. The company is bringing in Rs. 5 crore worth of exports through its global arm and hopes to increase it further. But for now, his focus is on home ground. His target for fiscal ‘13 is Rs. 450 crore. “We still have a lot of potential to grow here but we want to do it at a sustainable pace – around 30 per cent to 40 per cent every year,” he concludes.
- Upcoming fourth manufacturing plant in Noida
- Turnover target of Rs. 450 crore for FY ‘13
- Strengthen traction in other regions
- Increase distribution network to 700 distributors
- Expand exclusive retail shops in the next two years