Interview with Sandeep Maini, Chairman, Maini Group

Growth with Values

Sandeep Maini, scion of the Maini family, is Chairman of the Rs. 500-crore Maini Group, manufacturers of high-precision components, material handling equipment ,warehousing systems and battery-operated vehicles. Best known for REVA, ‘“the electric car made in India for the world” in the words of the Maini patriarch and Group founder Dr. Sudarshan K Maini, the Maini Group extends its global trajectory as a leading exporter of automotive and aerospace components, and its domestic growth curve via material handling and storage, which surge ahead in tandem with Indian e-commerce’s own rapid growth. In this interview, Mr. Maini discusses his company’s journey, values and operating philosophy.

Dr S K Maini was a visionary entrepreneur. He ventured where few in 1970’s India dared to tread – into manufacturing high-precision industrial components.  What was his vision and what were the Maini Group’s early success factors?

My father, Dr. S K Maini, was working towards a professional degree and career. After graduating from the Institute of Technology, Banaras Hindu University, he went to the UK to study further, on a Burmah-Shell scholarship. Upon his return, he worked at GKW and Precision Fasteners before joining  the German engineering company Mico ( now called Bosch ) which was already established in Bangalore. There, very early on, he became the first Indian to replace a German Production Manager.

At the time, Indian professionals in foreign companies rarely, if ever, rose from executive to directorial board level. So when Dr. Maini, as a well-known and respected professional, was ready for greater achievement and growth, he took the first step of setting up his own manufacturing unit in 1973, as a supplier to Mico: Maini Precision Products  (MPP). And thus began the Maini Group story.

The fledgling company’s first product was a fuel injection tool for manufacturing diesel fuel systems. Initially, the tool was made for Mico’s India operations. However, as someone whose own rigorous quality standards lived up to those of his German client’s, before long, Dr. Maini was exporting the injection tools directly to Mico’s parent company, Bosch, in Germany.

In 1973, MPP started manufacturing in a rented 2,000 square foot shed in Bangalore’s industrial area, Peenya. Mico helped with machinery and their existing cast iron rod suppliers. The support was encouraging but growth from then on was spurred by Dr. Maini’s own business acumen and foresight.  

In 1994, thanks to its sustained focus on high-quality engineering production, MPP became the first Indian company to supply high-precision components to American auto giant General Motors.

Dr. Maini's vision for the Group was holistic growth, with ethics and excellence, which encompasses our core objectives and values.

You now have companies in metal and plastic components, consumer and industrial automotive and industrial appliances. What is the Group’s mission and what does success look like?

We have three core businesses: precision components and systems, material handling and warehousing solutions and electric vehicles.   Maini Precision Products is our flagship company, where we are global partners of the major automotive and aerospace components manufacturers, for components and sub-assemblies. Maini Materials Movement offers total solutions in Material handling. This includes in-plant loading and unloading, transportation, stacking and storage equipment. Armes Maini Storage Systems designs , manufactures and installs a complete range of warehousing solutions for all industry sectors. Our mission for the next decade is to continuously innovate using appropriate technology to improve the Indian Brand globally through products and solutions that exceed world class excellence.

The Maini Group is best known for the Reva electric car – which put you on the global map as an innovator. How has the Reva company sale to Mahindra panned out?

We started the electric vehicle program in 1996. We developed competencies in electric powertrain, battery, battery management systems and controls, battery chargers and telematics.

Keen that Reva should continue to be a success, we were on the lookout for a partner whose thoughts and values would resonate with ours. We also preferred to see an Indian engineering company take our creation forward, knowing the transition would be easier if the new owner shared our values and traditions and understood what we’d done as a family. The Mahindra Group shared similar values with the Maini Group. This led to the Mahindra Reva partnership. Reva's technology and innovation road map combined with Mahindra's strengths in manufacturing, supply chain and distribution set an ideal foundation for the growth and success of the company.  

Your customers are mainly overseas. How do you compete globally? Who are your competitors?

Quality, reliability and domain knowledge of what  works internationally: these are our differentiators. From the beginning, we were focused on quality. By working with the best customers, we developed the ability to meet the most exacting requirements. We became the largest exporter of high-precision products, by setting ourselves apart as a reliable partner, one who understood international business. On time supplies year after year established our credentials as a reliable partner. Logistics and just in time supplies to customers 10,000 miles away eliminated the advantage of local suppliers.

Since we manufacture to customers’ drawings and requirements, our competition is global. Acquiring a business for a particular component or an assembly means that we need to be the best in the world for that particular component.  

What technologies are you pioneering? Are you, for example, using fuel cells to power your industrial machines such as lifts and stackers?

We are now suppliers to most of the leading global automotive companies. In addition, we see an exciting future for our electric powertrain capabilities. Airport infrastructure is growing and we see greater and greater uptake for our e-carts and buggies. We have the capability to research, develop and integrate electric technologies – including fuel cells – when the commercials become meaningful. We are in the process of  developing and testing the relevant new technologies in our electric vehicles.

Thanks to the dramatic spread of e-commerce and the imminence of the Goods and Services Tax regime, warehousing, logistics and distribution together look ready to constitute the country’s next significant growth sector.

Ferretto Group, our Italian partner, has been in modern storage systems for 60 years. These systems include shelving, racking and mezzanine flooring, all designed in steel profiles. We are now ready to offer solutions to automate warehousing in the country.

Being a family business you have brought in professionals in your Group .What lessons and best practices can you share?

I would like to believe that we are moving positively towards a family-run but professionally managed business in various stages of transition depending on the size of the company. Being an engineering company driven by technology, it was important to bring in strengths in sales, marketing and finance to create a foundation for sustainable growth. We looked for professionals with strengths in these domains to augment the commercial aspects of the business. Having a core team that is a true sounding Board for the family has held us in good stead in the last decade.

Micro-management has given way to delegation, giving the family more time to think about strategy and growth, while operations are looked after by team members ably equipped to do so. The key here is to ensure that there is a regular review and audit process since I believe that there is a fine line between delegation and relegation, the latter leading to disastrous outcomes.

How large are your manufacturing operations, in terms of manpower?

The Group employs between 1,600 and 1800 people directly. We manufacture out of 14 units, located around Bangalore, including Nelamangala, Jigani, Bommasandra, Peenya and Chandapur.

How do you source and train manpower in technical manufacturing? What are the cost-efficient practices in this domain?

 Most of our technical staff have  ITI diplomas. We run a 12-month training calendar, including soft skills, technical and commercial modules. We look at engineers for specific roles. Our staff goes through a six-month probation and growth in competency is assessed is monitored at regular intervals. Process checks evaluate performance and the role of HR is to suitably deploy experienced technical staff, but also to source them externally as required.

What are your observations on the quality of technical education in India? Where should the focus be, for India to become a true global economic power? What are the gaps and how would you bridge them?

There is a big gap between what our technical institutions teach and where the industry has reached. Production associates are be trained in operating traditional machines while industry has moved on with high technology manufacture.. Unfortunately ITIs haven’t upgraded to keep pace with what the Industry requirements are and hence the enormous skill gap that exists in the country today.

Equally unfortunately, the resulting negative comments are directed at the ITI graduates, although they are not to blame. It’s the outdated curriculum that’s restricting them.

Users of technical manpower have to retrain and upgrade these graduates. They’re acquiring skills, not jobs. They don’t have the skills required for jobs. As employers, we do what we can, to re-skill the people we hire. But it needs to be done on the appropriate scale, for our workforce to be employable.

The concept of ITIs is excellent, but it has run its course. The ITIs have become white elephants. They’re facing the same problem as many other public sector enterprises. Their thinking is rigid, while the world has moved ahead. If they had the autonomy and could work directly with corporations, they would be able to re-invent themselves.

Given these challenges, how do you ensure the quality of your product?

In his day, Dr. Maini had only one warehouse, from which he supplied all his customers alike. He didn’t have dual standards for the same product – one for premium customers, another for local customers.  His maxim was: “The product is the same for everyone.” This maxim has imbibed our companies with an organizational quality culture.

Today, ‘good quality product’ is not the differentiator it once was. Today’s customer preferences have shifted to value addition, in terms of the processes we operate as well as ease of use for the customers themselves.

The right machines, the right tooling, and the right processes – all contribute to manufacturing quality. There is a substantial degree of automation – machines take care of most of the quality issues. For plant operators, though our production associates’ bandwidth of duties has become narrower, the competencies have become finer.  

What does a quality culture require? Do the Indian consumer, the Indian government, or the Indian industry; have a quality culture, in your opinion?    

Yes, but not a customer mindset. If we work towards having a customer mindset, the quality ignition will take place.

In India, we don’t give adequate importance to process, as results are in focus all the time, although in the Gita we are been told: “karmaṇye̒va adhikāraste̒, mā phale̒ṡu kadāc̣ana”, or in other words, “focus on the process”. We do in business exactly what we do in school and college, which is to focus on how to get 95% marks, i.e. on the result, not on the process. The result is that everything is in peaks and valleys.

Result orientation leads to knee-jerk reactions, without proper analysis and consultation. Planning a solution takes time and requires a lot of effort. We seem to have a mindset that says  we don’t need a process, because we’re super-intelligent individuals. In Denmark, where I trained in 1989, by contrast, I’ve seen fantastic production process output, because everybody is simply doing their job as a part of an orchestrated activity. Great quality is not about individual brilliance, but about the ability to orchestrate a process.

Process orientation and customer orientation – these are requirements for Indian businesses to achieve global success. These two between them cover everything that facilitates success.

Have you developed any trademark processes? As engineers yourselves, have you innovated in the  manufacturing process -- for example, in quality processes, waste management or customer satisfaction?

We continually innovate in our management process. For example, rather than general terms like “vision” and “mission”, our teams focus on keywords which help us identify and track the things that matter the most to us. The keywords include terms like: “customer-focus”, “profitable”, “global player”, “centre of excellence”, and “having fun”. These are not too high-level to be tangible, nor are they too detailed to grasp at the management level. Once the team buys in into these terms, we track how we are doing on what they signify.

The customer’s also looking for a reliable partner. Quality is an ideal, but reliability is something we can act upon. We have a “zero philosophy”, where we aim for zero-defective parts per million. As our processes are increasing in complexity, line-of-sight delivers only about 15% of the quality control. The reliability of machines then comes into the picture. We’ve instituted zero-defect awards, to promote a reliability culture.

We’ve also developed processes and internal competencies that could become our USP’s. We’re already among the top five-to-eight percent of global precision manufacturers. Globally, we’re also the largest exporter in our category,. We will use automation and technology to scale up competitively. Technology scale-up is required in order to avoid magnification of human error.  

How do these measures play into the brand and reputation of the Maini group? You are best-known for the Reva car; what would you like to be known for? Is brand important in a B2B business like yours?

Our electric buggy is also a B2C business. Brand is important in every business. Especially in today’s world, where communications, social media and networking play a large role in business success, brand is a vital asset. Our vehicles carry our brand on them – you’ll see “Maini” written on the airport buggies for instance. Yes, the Reva electric car became a household name which catapulted the Maini brand into public recognition. Our brand has thus always been associated with the ideas of value delivery, reliability, uncompromising quality, social responsibility, ethics, excellence and, of course, innovation. These values are reflected across our range of products, and they also rub off on one another.

Let’s talk about Corporate Social Responsibility or CSR. CSR has been a major focus for Dr Maini. What does it mean to you? Is the CSR law helpful or does it pose new challenges for industry?

My father fostered a culture of CSR long before it became a law. At the time, we weren’t even a corporation. It was then what I’d call ISR – Individual Social Responsibility.

When CSR is mandated, people finds diverse ways and means of fulfilling it. It ends up being CSR in name only, as for example, when someone merely writes a cheque to the PM’s Relief Fund.

To me, CSR is about the difference you can make as an individual and an organization to impact the life of the community in a positive way. It starts with the individual, and requires him or her to be willing to spend precious time, directly or indirectly, rather than writing a cheque.

It wasn’t called CSR earlier; it was ‘“giving back to society”’. My father started with small things, depending on what he could afford and the scope grew over time.

He didn’t believe that CSR should be a dole or charity. His idea was to proactively work in areas where he believed he could contribute. A simple donation is not, in my view, CSR, as it doesn’t make the connection that CSR should make, between the giver, the action itself and the beneficiary community.  

We’ve made education, environment and rural upliftment our focus. We’ve adopted 15/20 villages in one of the most economically challenged areas in Karnataka where the Gramothan Foundation  – which Dr. Maini set up to carry out our CSR initiatives  – works to make a difference in people’s lives.

Should CSR be linked to business activity?

Yes and no. We do use the competencies of our business, and our beliefs about giving back to society, in delivering CSR. For example, in the area of environment, we focus on waste management and restoring green cover. You can make use of your advantages to reach out, but I would not, for example, take an expensive soap to teach people about hygiene. I could indirectly leverage my business, but that cannot be the primary objective.

How would you describe yourself and the role you play in society? Let’s test out some terminology here – do you consider yourself a modern techno-preneur or a classic capitalist?

We are businessmen, entrepreneurs and technocrats. I think we should avoid words that are segmenting and potentially judgmental. We make and sell things we believe in, and work to make this happen. So we’ve many objectives that we pursue at the same time  – including wealth sharing and job-creation. In addition, I am associated with other enterprises:  Gallery G, an art space and resource that promotes traditional and contemporary art, including work by upcoming artists, and the Raja Ravi Varma Heritage Foundation. There are many overlaps between a private business and social benefit. We have to operate ethically and correctly.

How you use what you have, and create new value, defines who you are.

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Interview published in The Directorial, Jan 2017

Book Review: Rise of Rural Consumers

Rise of Rural Consumers in Developing Countries

Vijay Mahajan, Sage 2016, ISBN: 978-93-860-4232-3

Pages: 168, Hardback, Rs.795

The massive global trend towards urbanization is calling for a review of the definition of the terms ‘rural’ and ‘urban’. ‘Rural’ continues to be used in the sense of ‘not urban’, which is to say, without access to services and goods that are taken for granted in the city. Traveling through a dozen countries with the largest rural populations in the world, Prof. Vijay Mahajan encountered overwhelming evidence of the overlap of definitions, whereby predominantly agricultural communities are accessing modern communications, financial services and most importantly, from the standpoint of this book, modern consumer products.

In particular, the stereotype that rural correlates with low income, is highly out of place. Mahajan notes that in India alone, almost a third of non-urban households fall into the middle-class or higher-income segments and in general, the rural middle class segment is growing at the cost of the rural poor due to reduction in absolute global poverty levels. This has large implications for companies who wish to expand their markets. Many companies have developed successful marketing strategies that help them access the huge latent demand in non-traditional, non-urban, segments. In particular, accessing these segments requires companies to reconsider their advertising media and messages and to incorporate a larger share of local cultural content. Successful companies are forging partnerships with NGOs and tapping into the trends that are increasing rural incomes. Graphic representations are provided to illustrate rural spending cycles linked to agricultural patterns, religious festivals, etc.

Many factors enhance the ability of the rural consumer at all levels to spend, including better infrastructure, more income increasing opportunities, more inward remittances from family members working elsewhere, and more philanthropy-driven programmes for skills, services and small businesses. But equally important is the ability of companies to create demand and aspiration, leading to a shift in consumption patterns, even where income may not have altered much. The book documents both types of developments, with a wide range of examples.

The book is well-supported with data, both systematically reported and anecdotal. The data reveal very interesting patterns. The top 20 countries, by rural population, include the US at the 9^th position with about 60 million people, as well as India at the top with about 900 million and Mexico at the bottom with 26 million. The global rural population of about 3 billion is expected to remain approximately robust over the next 3 decades despite urbanization, due to population growth. 

The examples of successful marketing and consumption growth that are documented most often come from global FMCG companies like Unilever, Coca Cola, P&G, and so on. These MNCs are leading the way in accessing new consumer bases. Advertising and brand communications are key to the success of companies who wish to make significant and successful inroads into this domain. Each of the MNC examples cited shows the power of large advertising budgets and the freedom given to the local business to develop and run communications that connect with their customers. The same global brands are visible across the rural world, be it Coca Cola or Pert or Dove or even L’Oreal.

This is not to say that there are no local players. Examples are given of Airtel reaching out to small farmers, Marico promoting Parachute coconut oil in the un-differentiated coconut oil market, and examples from other countries.

The author communicates palpable excitement in discussing the size and vibrancy of the rural world and the diversity of approaches towards garnering a share of the spending power. However, many of these practices are well-known and some of them are already eliciting other kinds of responses. The Lifebuoy hand-washing campaign for example, has a strong advertorial flavour. Similarly, creating salespersons for FMCG products in rural areas is a very effective low-cost model for last mile delivery, with inevitable spin-offs in terms of income gains for the salespersons. The conflation of necessary business growth activities with CSR is not a settled issue among CSR theorists or practitioners. These issues are not discussed.

The overwhelming focus on non-essential goods in the most successful rural marketing campaigns is also a matter that may attract comment. The growing focus on sustainable living is already altering consumer preferences in urban areas. Should this not also reflect in rural business strategies?  The most moving stories in the book come from the smaller local-scale programmes like the Taobao village-based enterprises in China, the “Infolady” IT-by-cycle initiative in Bangladesh, and the World Health Partners model for rural healthcare. Many of these are supported by philanthropic rather than marketing budgets. These issues remain unexplored.

Nevertheless, marketing professionals the world over would be interested in reading this book because of the wealth of stories it documents, and the great blend of data and description.

CEO Interview: Dr Vinod Nowal, Dy MD, JSW Steel, Oct 2016

 

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Dr Vinod Nowal, Deputy Managing Director of JSW Steel, runs India’s leading primary integrated steel company, spread across 6 locations, employing over 30,000 people and producing 18 million tonnes of steel per annum. While growing up in a village in Rajasthan, he would often watch with fascination as kites swooped down on the field mice after a harvest, in a single smooth trajectory, with precision, never missing their prey, never miscalculating speed or direction, never sustaining injury or having to look for their prey after reaching the ground.  Today, the flight of the kite is his mental motif for effective business management: precisely planned, precisely executed, with clarity of purpose and applying tactics in real time. Dr Nowal shares vignettes from his personal style as well as his business operations with The Directorial.

Dr Nowal, congratulations on your successful bid in the auction of iron ore mines by Karnataka government. The steel industry has had a difficult year, marked by significantly reduced sales overall. JSW has also posted a significant dip in profitability in FY 2015-16. Will this trend now turn for JSW?

Despite the overall sluggish market, JSW is the only steel company that has done well in this period. Our competitors have captive mines, which means, their cost of iron ore has been 1/3 of our cost. With this acquisition, this imbalance has been corrected.

We are in a cyclic business, but our growth has been unrelenting.  In Vijayanagar, we have grown from 1.6 Million Tonnes (MT) in 2002 to 12 MT in 2014. This is an unprecedented rate of growth, and has been achieved despite the choppy business environment.

We are today India’s leading integrated steel manufacturer, and in Vijayanagar we have the country’s largest integrated steel plant at a single location. We are continuously investing in technology as well as capacity expansion. Given the high cost of capital in India, we have been selective in our investments. In FY 2015-16, we have invested in a coastal area slurry pipeline which will get us raw material @Rs.200/tonne vs Rs.1000/ tonne, which is our current cost.

From Nov 2015 to Mar 2016, we mopped up Rs.407 crore in savings, from our existing operations. We are on track with additional savings this year. We are constantly on the lookout for areas for improvement. For example, we have 4 ports, of which Goa is the cheapest. We have therefore moved upto 9 MT of our production through Goa. Railways raised freight charges by 30%, so we are now moving finished goods by road. We are cost-conscious and this has helped us stay ahead.

How did you deal with the Supreme Court's revocation of iron ore allocations in 2013? Did your risk management anticipate this move or did it take you by surprise?

In 2010-11, it came to light that 50-60 million tonnes of iron ore were being illegally mined. Illegal activity took place because the export prices were high. Ore mined at Rs.300 per tonne was fetching Rs.4000-5000 in the export market. Supreme Court therefore ordered a ban on iron ore mining in Ballari.

Ours is a land-locked plant, and at the time, we were fully dependent upon Ballari mines. Our daily requirement was 5400 tonnes. We were faced with the huge challenge of logistics of local procurement versus the high cost of import. The Supreme Court permitted us to use of the poor grade ore that was dumped in the forest areas. We developed in-house technology to beneficiate this 45-55 grade iron ore and make it fit for use. We survived for 2-3 years with this type of adaptability, operating at 80-90% of capacity. Remember, we had 500-600 kg slag per tonne of ore, due to the low grade ore. That meant, 40-50% steel per tonne of ore, versus our competition who had 70% steel. That was our worst period. Nevertheless, we performed better than the others.

We have now diversified our supply sources. We import from overseas, we have developed suppliers from the Eastern region, and we are able to use local Ballari ore. Thus, overall, the crisis strengthened us in many ways.

This is indeed an insightful story of survival under difficult circumstances. Indian companies are increasingly showing the world the way to thrive in a resource-constrained world. Is that the bedrock of sustainability? How do you define sustainability?

Sustainability at JSW is a synonym for more advanced and sophisticated industrial practices. Natural resources are bread and butter for the entire steel industry, and these are limited. JSW believes in a stringent no-waste policy. We utilize resources to their fullest potential. I can give many examples. We pelletize and use iron ore sludge and iron fines, instead of wasting them. Process gas from the Corex process is used for power generation, saving precious coal and water. Slag, which emerges as the waste product of steel manufacturing is used to manufacture cement. Slag is processed and made a substitute for sand. These strategies reduce waste generation, save money, and reduce illegal sand mining around river-beds, thus saving the larger environment.

The Board of JSW Ltd has a particular focus on sustainability. In addition to wastage reduction, we are engaged in proactive measures to improve the environment.  The group has planted more than 16 lakh trees in its premises, or one for every tonne of steel produced. As a result, there is more rainfall in and around the plant premises than the adjoining areas of Ballari. We also engage in climate policy advocacy, via our Climate Project and Earth Care Awards

What are the top areas occupying the agenda of the executive leadership of JSW at the present time?

With the improving industrial scenario, we believe the demand for steel will see an upward. Responding to these market forces is the foremost concern. Automobile sales are also picking up and their demand for steel has to be met in a timely fashion. Being a highly dynamic industry, automobile companies seek different grades of steel quite frequently. Customization is highly important, so we have to be abreast with all the contemporary changes.

We have a capacity expansion plan for 40 MTPA by 2025. As part of this expansion, Vijayanagar will be expanded from the current 12 to 16 mtpa, Dolvi doubled from 5 to 10, and Salem from 1 to 2 mtpa. We have plans for a massive greenfield plant of 12 mtpa in Jharkhand. In addition, there will be acquisitions. In Odisha, we propose to have a 10-12 mtpa presence. If the government policies are positive, we will grow to 60mtpa.

Right now, we are working on a Pipe Conveyor project. These overhead pipe conveyors will supply iron ore slurry direct from the mines to the plant. This is a cost saving measure, but it will eliminate the need for trucks and greatly improve our environmental performance as well.

What competitive strengths are you leveraging as you pursue these goals?

Scale is something ingrained in our DNA. As mentioned earlier, speed is also something which we are good at. Earlier this year, our Blast Furnace-1 was revamped and its capacity was more than doubled, from the earlier .9 MTPA to 1.9 MTPA, in just 150 days. Can you imagine any other organization in the industry achieving this feat in such a record time? Another area of strength, I believe, is how we treat our customers. JSW truly values its customers, and we customize, tweak and alter our own comfort levels, fixing our eye on the customer’s needs.

You have spoken of your capacity for scale and speed. But are these not replicable? What makes you singularly positioned? Are there other factors, such as access to capital, leadership vision, risk taking, global connections, tech savvy, linkages to other institutions, etc.  that are important?

Everybody is deploying technology – technology is purchased in the global market. So, we really compete via superior management. Sajjan Jindal has a reputation for turning around a business. He has proved it again and again in Salem, Dolvi and Vijayanagar, steering the company through crises, be it trade-union related, the 2008 global market crisis, the ore supply crisis.

Competing steel-makers use 64-66 grade iron ore, which is the best grade. This means there is low consumption of coke and low slag at about 280-300 kg slag per tonne steel. Ballari ore is 58-61 grade, which is high in alumina, silica, and manganese. The slag is 400-500 kg/ tonne of ore. But JSW is one of the best in the world in the conversion cost of raw material to steel. Korea is leading in the benchmarks, but uses high quality raw material, whereas we have to use beneficiated raw material. We have to make up for the efficiency so lost.

We have ambitious growth plans, which all of us believe in and are working towards. We want to be a 60 MTPA steel-maker, which will make us a true global player.

We have grown our business from the ground up and through difficult times. The entire team has learnt and grown with our experiences.  Decision making at JSW is a learning process for the managers. Small teams are constituted to work on specific ideas. We have a very stable team and there is no question of any of my ‘stars’ leaving. We remunerate competitively and more importantly, we nurture leaders and give them the space to grow.

Yes, we are widely present across the globe. We have value-adding and long-standing international partnerships, for example with JFE. We export to 100 countries and export is 10-40% of our production. India is our focus, but we sell wherever we get the best realization.

Vijayanagar is a 12MT plant, but we think of only 33,000 tonnes at a time. Otherwise, we would be lost in the scale. Each team has to work on its own remit. Vijayanagar plant has 6 furnaces and 3 steel melting shops, and I want my team to think about each of those units, and not about how big we are.

Your plant has been awarded the Best Integrated Steel Plant by the PMO. What are the qualities of such a plant, in summary? What should investors, employees, customers, public officials, academics, etc. understand from this appellation?

Vijayanagar plant is the best managed steel unit on 23 parameters. We are a zero discharge plant. We recycle waste to 90%. We require 890 MW of power for a 12 MT steel plant. Of this, 677 MW is produced from the flue gases and waste heat recovery. That is about 76% of heat recovery. Nippon in Japan has achieved 93%, which means there is still scope for improvement.

JSW has been benchmarking itself with JFE (Japanese steel organization) and we have achieved JFE standards. We are now using Posco as our benchmark. My approach to target-setting is different from that of others. Others look at where they are and where they can go in the next year. I look at where we want to be. And then I look at how to close the gap, on each of the parameters.  How do we achieve this closure? We deploy systems, processes, technology, whatsoever it takes.

 

We run 600 6-sigma processes. We invest in both long-term and short-term R&D. Overall, we are more efficient than our competitors.

In what respects has the quality of steel changed in our day to day usage? Is it reflecting in the quality, durability or aesthetics of the products we use? Or is it primarily in the quantity of steel that is being used that the change is most evident? Is it in the production values - i.e. the ability to use lower grades, etc or is it in the customer experience of steel that the change is most manifested?

Steel is made by reducing ore with coke in the furnace and then additives are added for various grades and end-uses. The fundamental production values of the blast furnace itself have not changed. However, both upstream and downstream of the furnace, several new technologies are being deployed, and in that sense, yes, the production values have changed. For example, the ability to use lower grades and achieve conversion efficiency has altered. Upstream technologies include beneficiation of iron ores using microwave, circular pelletizing etc. which we have adopted in Vijayanagar. In terms of energy efficiency and meeting environmental norms, Maximised Emission Reduction in Sintering (MEROS) process, Emission Optimised Sintering (EOS) Process, Rotary Hearth Furnace for waste recycling etc. are relevant.

Another production technology that JSW has pioneered in India is Corex. Corex is a smelting-reduction process for cost-efficient and environmentally friendly production of hot metal from iron ore and low grade coal. The process differs from the conventional blast furnace route in that low grade coal can be directly used for ore reduction and melting work.

Downstream of the furnace, we have the end-use values of earthquake resistance, thinner with same strength, durability, galvanizing, finish for attractive looks, etc. have come to the fore. These are determined by the additives used. JSW has a 15% equity partnership with JFE for additive technology. Steel from Vijayanagar is of the best quality and is used for the outer panel of cars of all brands, which was previously imported. Construction industry requires TMT and structural steel for roofing. Thus, from a customer experience standpoint, we now have different grades of steel that meet different requirements. Steel is thus being de-commoditised.

Quantity is also a big deal. The thumb rule for steel consumption is 1.2 times GDP growth rate, i.e., for unit increase in GDP, steel demand increases by 1.2 units. The national steel vision is to achieve 300 MTPA capacity by 2025 or 2030. Currently we are at 117 mtpa.

India’s per capita steel consumption is 60 kg, which is very low. Developed countries have 250+ kg per capita steel. USA, Japan, China have 400kg+ per capita steel consumption. Of course, this is also mediated by factors such as earthquake proneness and high cost of manpower, as a house made with steel is easier to build than a house made of cement. Therefore, Indian per capita steel consumption may be lower, but still, it will go to 250. Only 10% of infrastructure is currently in place. We need to build highways, railways, bridges, etc. Moreover, rusted metal has to be replaced.

So how does the future of the steel industry look, in India? Do you see India becoming a major steel producer and exporter?

Despite temporary challenges, India’s long-term outlook for the steel sector continues to be bright. Government of India is aiming to scale up the country’s steel production to 300 million tonnes by 2025.  The government's resolve to infuse $ 300 billion in infrastructure would further invigorate the demand for steel in the country. The infrastructure sector has a cascading effect upon the whole industry.

The primary problem in the domestic steel sector is of scale and speed. Scale-wise we are far short of China, consequently the Chinese have the ability to affect our prices, and this makes us vulnerable.  Therefore we must augment our production facilities. As I earlier mentioned, we are already working on these lines. I believe the industry will follow.

Steel is a pure strategic alloy in every aspect. It is directly related to nation’s progress. All the core industries of the nation, be it real estate, automobile, all are dependent on what happens in our shop floors. We consider this as a privilege, a direct service to the country. Our largest buyers undoubtedly would be automobile and real estate. We are supplying our products to metro rail projects currently, and towards the development of highways, and we are proud to do this.

Do you also serve the small retail consumer? How important is that segment to your business model?

We have a very effective mechanism to reach out to our retail customers.  We have set up JSW Shoppes across the length and breadth of the country. JSW Shoppes are our “all-product encompassing shops”. All our retail products ranging from Steel sheets, to Steel bars to colour coated steel products are available at JSW Shoppes. This is a very important segment in our business. It doesn’t add much to our coffers but has established our direct rapport with the end user. I personally have seen people asking each other, the location of JSW Shoppes in their cities. This is a very big achievement for us, I must say.

Where is technology innovation happening in this sector? Are you able to drive innovation on the shop-floor and in management? Are you able to leverage academic partnerships? How well is the industry adapting to modernisation?

Over time, the Indian steel industry has moved up in technology front from “technology adoption only” strategy to “technology development” strategy. Looking into the global competition, no company can survive without adoption of emerging technologies. Presently, various technologies are emerging in steel industry, particularly to comply with the environmental norms. These are mainly process related technologies.

Our Vijayanagar plant has become one of the most efficient in terms of conversion cost globally by leveraging state-of-the-art technologies. Our R&D department works closely with the shop floor teams. We adopted several eco-friendly processes in our day-to-day production. We are best in class in terms of investment in research and development as well as our R&D management. 

We were the first to utilize Corex technology, to deal with the problem of low-grade coal. Through our technological interventions, we have ensured zero effluent discharge from our facilities. Even in our product development, we utilize the best technology, something which comes out of our own R&D. We customize products for our customers, with our R&D teams working in close partnership with each customer.

JSW has collaboration with IIT Mumbai, where our employees upgrade to M.Tech. degree.  JSW has also set up a school of public policy at IIM Ahmedabad, with an initial corpus of over Rs 50 crore.

The steel industry has cycles of growth and glut. How does your risk management process deal with this? What are the largest risks and how do you deal with those?

JSW Steel follows the Committee of Sponsoring Organisation(COSO) framework of risk management that ensures timely anticipation, impact assessment, prioritisation and response to risks affecting organisational objectives. The Company follows a combination of top-down and bottom-up approach, ensuring foresight and insight with regards to risks before they arise or spread.

The effectiveness of our risk management can be gauged from the fact that in FY2015-16 when there were steep competitive pressures and a sharp drop in steel pricing, we managed to register encouraging growth. We believe in growing incessantly, come whatever may. Our resolve is to become a low-cost and high-quality steel manufacturer. Even during the 2008 economic crisis, when the steel companies were contracting globally, we alone were augmenting our capacities. These bold and calculated moves have today established us at the pinnacle of steel manufacturing in the country.

In the current scenario, due to global underperformance, we have shifted our focus to the domestic market, as India continues to be the engine of global growth. We have increased our market share through increasing our distribution network both in retail and wholesale network.

There have been instances where we struggled to get our raw materials from the domestic market, consequently we had to import them. Although it was debilitating in many ways, this increased our supply base, and we got a first-hand experience of exploring global markets. We continue to import coal from international markets.

The bottom line of the risk management strategy at JSW is: to never shy away from challenging the status quo.  

How are the initiatives of government panning out in the steel sector? What are the major policy changes you are seeking?

The government's indigenization drive is a game-changer. The evasiveness people had in investing in India is now reversing. Last month, I was at a meeting chaired by the Minister of Railways. This meeting was a part of their outreach programme towards their major revenue contributors. This was an unprecedented gesture.

Indigenization is possible only if we utilize our own resources, else we will be squandering our forex reserves. In this regard, mining is a sector where we expect government to do a bit more. Transparent auctioning of coal mines will reduce our dependence on imported coal. Ore mine auction also needs to be taken up with the same vigour. The auctioning of mines by the Government of Karnataka was entirely in the same spirit and we are encouraged by the results.

The government's plan of extending the Minimum Import Pricing is also a right step in the right direction. Most certainly we are facing stiff competition from cheap Chinese imports. Their closed units are opening up now, the days ahead are challenging. Hence, a lot is on the plate for the government, but I count on their wisdom, commitment, and intentions.  Anti-dumping duty is a great move and we should learn from the US in this area. China was instrumental in shutting down European manufacturing units. While this may not be the case here, we do face this threat. 

The Ministry of Steel has notified 30 steel products, which are critical in building the country's infrastructure under the mandatory certification scheme of BIS. The Ministry has set up an Investment Facilitation Cell to support investors with information. Steel Research and Technology Mission of India (SRTMI) has been established to spearhead R&D activities in collaboration with steel industry, with an initial corpus of Rs.200 crores. The concept of Special Purpose Vehicle (SPV) has been mooted, with State Governments of Chhattisgarh, Odisha, Jharkhand and Karnataka, in order to promote the creation of production facilties to meet the national target of 300 MT by 2025.

We welcome such policy moves aimed at raising quality standards and expanding production in the country. I may mention that JSW played an active role in forming the Indian Steel Association (ISA) to articulate the needs and aspirations of the steel sector of the country.

As a successful, internationally savvy businessman, you have no doubt had plenty of opportunities to compare Indian industry with others. What is unique about the Indian style of operating a global business? For example, what do we do which is different from say, the Chinese, or the American or European way of business management? How reliant, for example, are we on written policies? How effective are we in raising capital, taking risk, or anticipating and managing unexpected situations?

India is a focus area of global business. It is the responsibility of all enterprising individuals and companies to rise to the opportunity and make a success out of it.

The Indian style is to use both heart and brain. We are emotional in our decision-making. We are not very system-oriented. We work on intuition and gut feel. We should support this method with systems and data-based decision making. In my own case, I can say that JSW is world-class already, but having systematic processes will raise standards and automation will eliminate errors.

Before I went to Harvard, I used to say that a manager should be 10-20% of the time a clerk themselves, designing their own action plan, writing a note themselves, and so on. This will make him or her, a better person and a better manager. Now, I have altered my language. I say, we should implement a Deming Process and Enterprise Decision Management. Previously, I used ordinary language, developed through experience. Now I say it in management lingo. We have always been doing things like Review – Conclude – Assign. Thus, at one level, we are just calling what we do by a new name. Nevertheless, putting the whole method on a sound process-oriented footing will raise our game.

That is interesting. What then, in your experience, is a good balance of real grounding and book degrees?

Let me start with myself. I am a B.Com, MBA. People ask me, how I manage a vast steel company without an engineering degree. But I have spent 32 years in steel business. Dr Bharat Jhunjhunwala interviewed me on a railway station at 11 pm one day, when I was 25 years old. He was looking for a person who was fresh, energetic and result oriented. He chose me to turn around his paper mill. I then moved into the sugar industry. At age 28, I was picked by OP Jindal for the Tarapur steel plant. OP Jindal held me up before his family and said “This boy will deliver”. I am illustrating what makes a manager click.

Technically, we have very good people on the shop floor – but if they have not gone for a complete general management experience, they are not ready for large responsibilities.  I have experimented with many people who, when put on the ground, are able to analyse and discuss perfectly, but do not have the nerve to act.  They are very impressive when you listen to them, they give a perfect impression about the company, they can narrate everything, but the key thing you need to know is -- where to stop discussing and when to act, what result you have to get. The majority of managers can explain very well. They are good to receive guests and offer courtesy. But, I ask, what about the result?

I ensure that my managers have a good blend of technical, commercial and decision-making experience. I assign the right job to the right person and monitor if he needs support. I ensure that he succeeds. Job rotation is a part of the set-up. I have an intuitive understanding of how much boundary should be given. If something goes outside of the boundary of my arms and eyes, I know that I need to step in.

When I meet with stakeholders, I try to understand their mind on my issue. I go fully prepared, and analyse the merits of my case, as well as what to expect. Sometimes, the counterparty is indecisive or simply waiting for a transfer.  Three scenarios are possible – there is no traction and this route is closed to me. Or, the person understands my position, and in that case I strengthen their views. Or, they don’t fully understand and it is helpful to explain my position. In all cases, I take a decision and act upon it. Judgment within a short time is what is required for agile business.

What is the role your Board plays and as CEO what is the most valuable guidance and support you seek or receive from the Board? How does a Board play an enabling role from the CEO's standpoint?

The Board of JSW is run by a Non-Executive Director. Very reputed individuals are Independent Directors on the Board. We have expertise like CA, legal, etc. represented in it. Board agenda is mainly on four points, the first of which is governance, or how we do business. The Board also keeps an eye on the company’s reputation and credibility. Secondly, the Board offers guidance on sustainability, which is about how to sustain our growth through the cycles of business. Risk management is also a part of this topic.  We also review and frame our policy advocacy, for example in favour of anti-dumping measures. The Board, of course, examines the company’s financials. Finally, the Board spends time on issues concerning Health and Safety, which is an important issue in this industry.

The Board carried out an annual performance evaluation of its own performance, of the Independent Directors individually, as well as the evaluation of the Committees of the Board. The Nomination and Remuneration Committee leads the performance evaluation of all Directors. The Independent Directors carry out the performance evaluation of the Chairman and the Executive Directors. This is a very effective process. We receive solid high-level guidance, without interference in day-to-day work.

Dr Nowal, you are the executive head of a 18 MTPA steel business across 6 locations. What does it take to lead a major, fast growing company with huge assets, large environmental and social footprint and political vulnerability? What are the qualities that have brought you so far? Has your Harvard education been a key factor or did you have to un-learn and re-learn in the ‘harder school of business’?

Let me put it this way. My father participated in the freedom struggle. The values of my family come from there.  My mother is a great people person, loved by all her extended 4-generation family. It is a very close-knit family. I learnt from her how to manage and keep a large family around me. She is everything to me. My grandfather, father, brother and mother have uniquely taught me how to help others. Even 50 years ago, when there was no cooking gas in homes, no traveller who stopped at our house at night would go without hot, freshly cooked food. In those days there were no hotels. People from our village would come with a reference from relatives. My mother would give them a bucket of water for a bath and serve hot food. Even when we did not have surplus money, my mother would insist on giving.  I learnt from them how they live for the sake of others. This sort of grooming is the source of courage. I had a struggle with Datta Samant’s union, when I was just 28 years old, which I won. Datta Samant created fear, but I did not give in to that fear. I was doing my job.

I completed by Ph.D. in 1997. Harvard came only last year, when I attended the Advanced Management Programme.  Everybody in the class was surprised to hear that I run a large steel business. They wanted to hear my experiences. The case studies at the programme were very interesting. Even more amazing was what I observed in the other students. Every student had to read 80-90 pages of case studies every night and come prepared the next morning. Everyone was in his or her seat before the Professor arrived. We have something to learn from that.

My Harvard experience also taught me about innovation. It is not good enough to say you did something well in the past. You have to keep on improving.

I have directed the Vijayanagar steel plant for over 12 years and brought it to where it is. I keep myself open to listen, learn and understand. I conclude and take a decision. If you take the view of all, that means, all are with you.  As regards MBAs, if they don’t ‘click’ in time, they will miss it here at JSW. The decisive attribute in my mind is the ability to conclude.

I know my concern points. My management style is very simple. I have to guide my subordinates, but they must have the space to operate. We have the freedom to enjoy work and enjoy life. I do not wish to micro-manage, but experience tells me that I need to watch. I keep a close ear to the ground. Even the watch-man or driver may have something important to say. Keeping close to my work is my only mantra.