"Collaborations are a very important part of scaling up and going global"

V Keshavdev, executive editor, Outlook Business: It's a pleasure to be here for the Outlook Business Smart Enterprise Cluster Meet. It has been close to 10 years that Outlook Business has been covering SMEs across 52 prominent clusters. We have seen lot of them gain in scale and size and become success stories. But you all know that the journey to scaling up is not easy — it is fraught with challenges.

In today’s panel, we have four astute entrepreneurs from Aurangabad who have gone through their journey and achieved remarkable success :

Starting off with Milind Kelkar, how did you begin your journey? You have a very fancy name for your company — the Grind Master. So can you take us through the grind before you finally became a master in machine tools?

Milind Kelkar, chairman, Grind Master Machines: The journey of Grind Master during the last 35 years has been full of challenges. We have always enjoyed, cherished and looked forward to having more of these challenges. That has been, in a nutshell, the story of Grind Master. The whole philosophy has been that stick out your neck — say that you can do something when you have not done it earlier. Say it with confidence; say it in a way that the customer is always sure that he is never going to be at a loss. For example, when we started in 1984 and started delivering products which were hitherto not being made or used in India, we used to tell the customer, we are giving you a bank guarantee. If the product is successful, you enjoy the success; if it is not successful, the loss is all mine.

Since today we are going to speak about scaling up and going global, I cannot under-emphasise the importance of collaborations — not only with foreigners but also within the country: getting into partnerships, developing together. So at Grind Master, today, we are working with as many as five collaborators. All the collaborations are going very well because it is fundamentally based on a win-win principle. We don't get into any arrangements. I typically call myself a 49:51 person. I am happy in any deal if I am making 49% and someone working with me makes a profit of 51%. I will fight tooth and nail if it is not happening. I will not enter into any collaboration where this does not take place. So look for innovative products; learn all the time from everyone that you deal with — your employees. As an entrepreneur you have lots of things to learn from your employees and suppliers. Another important thing is that we frame constructive policies. What are your policies towards your own people, all your suppliers and the supply chain? Most importantly, what is your mindset with your customer?

How was it in your case Raithatha?

Sunil Raithatha, CEO, Vinodrai Engineers: I come from a small town in Maharashtra, Jalna. I am a mechanical engineer by profession. I was making small machines for my clients in India. We met one of our clients from Fiji, an Indian origin sardaar ji, in one of the exhibitions. I never thought that I would be able to sell my machines abroad. When this gentleman from Fiji showed interest in our machines and asked me to quote the price in dollars, I was not able to tell him the price because selling the machines abroad had never struck me. To put it simply, I just divided and converted the Indian money into dollars and quoted the price to him. His next question was, is it a FOB or CIF? So candidly I told him if he wanted it as a FOB, I would give it that way; if he wanted it as CIF, I would give it that way!

He could instantly make out that I had no idea about import-export, but he did like our machine. We eventually managed to get that first export order of $35,000 from Fiji. I would like to mention here that our journey, that started with a very small country, proved that Indian machines were the best solution for him. So I tell everybody that we Indians should start a company’s exports from Zambia, from “Z”, and then slowly move up towards America, “A”. The simple logic behind this is that if you are making something which is acceptable as is somewhere in the world, you should immediately go there and sell it. Right after our first order, we started focusing on exports. Today, we export to more than 55 countries across all continents and we are exporting directly to the customers. I would say that there are 200 countries which are members of the United Nations, out of which about 30 countries are where our products cannot be sold without improvements.

But that is not the world. There are 170 countries where my product gives value to my customer because he has another option of buying a Chinese machine. All over the world, people have a perception that Indian machines are better than Chinese machines. That is because people have faith in Indian machines. I realised we have to build an organisation where people have faith on us. That is how we started growing in countries like Zambia, Zimbabwe and most of the small countries where you find an Indian population. In Africa, when I export, there are so many Indian entrepreneurs. So I don't feel that I am exporting. Now, we also export to the United States.

Anil Save, you come from a bit of a different background. How was your transition from serving the Navy for two decades and then becoming an entrepreneur in pharma?

Anil Save, MD, Atra Pharmaceuticals: I am an engineer by profession. I am not a pharmacist, nor did I have knowledge of what Paracetamol was — which is one of the most common drugs. I had to choose some particular field to start with when I was leaving the Navy. I chose pharma because at that time when I left the Navy 51% of the patents were filed from the healthcare industry. I thought that is the base where we should go. Being an engineer, the progress for me in the pharma field was difficult. The best thing we did was that we piggybacked on Sandoz and started manufacturing Calcium Sandoz. Things went on very well but you should always be prepared for adversities. We did have some hiccups right in the beginning but because they merged with a company called CIBA, to form Novartis, suddenly we were on the roads not doing anything. I had zero experience of a civilian life but I had my team with me and they were everything for me.

One day thereafter, we decided we should go for ISO 9000 and that was the time we looked at the quality. The moment we stressed on quality, we could differentiate ourselves from other manufacturers; we could tell what value addition we could give. That is when we started getting more MNCs on board. That is how things started moving for us. When this was happening, we also took some risks. We set up a plant in Nalagarh, sold it, made some profit, picked up a sick unit over here, converted it into a new plant, sold it, made some money and set up another plant. These are all different ways of looking at it. Pharma, unlike engineering, is a very different market — a very challenging and regulated market. It can be very difficult at times.

Shriram, you have an MNC and it's been a decade now that you are operating here. How has it been? How did you go about creating a supply chain network?

Shriram Narayanan, president, Endress & Hauser: First of all, we are not a multinational company. We are a family company. It's a global company with local leadership, which means that we operate like entrepreneurs. Many people think of us as a multinational company, you get money from abroad and we can do whatever we want. But that's not the way we operate. I was recruited first and the equity, which was invested in a company was just 10%. About 90% equity was borrowed from a local bank — Bank of Maharashtra. We had to grow in order to pay the EMI. That's a model that was set up and this is similar across the globe.

This is because when people see us as a multinational company, they feel that there is lot of money that we put in but that is not the way we play. We run like an entrepreneur and basically this comes from the owner’s genes. My promoter comes here regularly and says that it is Shriram’s enterprise or my colleague’s enterprise. The main principle why we're successful, as a group, is because in the last few years we have not made any loss. We are always growing, except in 2009 when the global prices went down. The reason behind it is that we look for four things: first is excellence. We don't look for quick results. Excellence means we look for partners slowly and steadily. Next is quality. For us, quality starts from the basics, like the way our loos and canteen are maintained. We insist a lot on quality. So excellence in whatever we do comes first. We are willing to work with our partners.

Second is friendliness. Whenever we visit a company, whether it's outside or inside a company, you should get a feeling that these people are very transparent and open, they are not hiding anything from you. This is what we look for in partners. The third thing, which is very important, is that whomsoever we're working with — is it a sustainable company; is it a fly by night operator? We look whether the partnership will sustain. So excellence, friendliness and sustainability are the three things we look for in partners. Looking at what we source there is a huge opportunity. If you look at our group, our buying globally will roughly be €1 billion. What we do from Aurangabad, I think for example, in India, we are close to Rs.1,000 crore and we buy close to Rs.200 crore from the Indian market; what we buy from Aurangabad is maybe close to 10%. There is a lot of scope for scaling it up and we can, provided we find these three qualities — excellence, friendliness and sustainability.

Is that an issue with SMEs? How many supplies do we have right now? Is it non-critical components that you source?

Narayanan: No, it's all critical components that we source because we believe that in India, we have lot of scope. Generally, whenever we source, we don't have multi-sourcing. We will have a back-up supplier in Europe and probably one in India or in China. What we see as a challenge is that whenever we choose a partner, we would like him to be very transparent. This is what we look for when we do the audit. We are very comfortable with companies that share the culture, their openness to accept mistakes and their attitude to keep on improving, because we are willing to accept mistakes. It's not that we don't commit mistakes in our own company. We also have problems here.

Do you see an issue in terms of transparency?