The acquisition went off smoothly, but soon a lot started going wrong. As a recession hit the global economy in 2008, the lighting and fixtures business too got some nasty shocks. Sylvania's revenues and profits plunged. Its turnover fell from m490 million in 2007 to m410 million in 2009, with almost zero earnings that year.
Vanishing profits made it difficult for Havells to service the debt it had taken on to fund the buyout. "It was a do or die situation. It was not about saving financials, the reputation and the future of the company was at stake," recalls Anil Gupta, Joint Managing Director of Havells India and son of the founder chairman, Qimat Rai Gupta. Anil along with his cousin Ameet, then prepared a comprehensive restructuring plan for Sylvania that aimed at reducing manpower, increasing outsourcing to low-cost countries like China and India, saving on material costs and optimising processes. The plan worked. In 2010, Sylvania was back on its feet, recording m28 million operating profits on revenues of m430 million.
Promoter: Qimat Rai Gupta, 74
Son: Anil, JointManaging Director
Why I did it: "My father was a man of modest means. Earning respect and making my family financially stable has been my key motive throughout my life."
Total turnover: Rs 5,300 crore in 2009/10
Keen business acumen saw him strike a deal to buy up the Havells brand for around Rs 7 lakh in 1971. Havells was a purely Indian enterprise that had fallen on bad days - named thus by its original promoter Haveli Ram Gupta to give the impression that it was a foreign company.
Over the next two decades, Qimat Rai not only turned Havells around, but also expanded rapidly. He set up new manufacturing units, acquired smaller - and sometimes sick - companies, started joint ventures, entering into new product categories such as high capacity fuses, miniature circuit breakers and energy meters.
In 1995, the company set itself an ambitious target - to grow its revenues from Rs 100 crore to Rs 500 crore in 10 years. "In those days, most small companies which had crossed Rs 100 crore in annual turnover found it extremely difficult to grow beyond. The key reason was the promoters' lack of trust in their employees, which made them unwilling to delegate powers to the professionals they hired," says Qimat Rai. "When we set this target, we were clear we could not achieve it on our own."
He brought on board a number of professionals to oversee day-to-day operations, while confining himself to a strategic role, searching for new growth areas.
By this time, Qimat Rai's son Anil had also joined the family business. To counter rising competition from foreign brands and Chinese manufacturers, Anil spearheaded the company's foreign collaborations, bringing in technology and scaling up the distribution network in India and overseas.
"We subsequently invested heavily in research and development to end our dependence on foreign partners for technology," says Anil. For the past seven years, the company has been spending nearly 1.5 per cent of its annual revenues on R&D. All the 11 manufacturing units Havells has are equipped with the latest technologies.
Havells, with revenues of Rs 5,300 crore in 2009/10, has a wide distribution network spanning 50 countries in Asia, Latin America, Africa and Europe, and a diverse product portfolio catering to household, commercial and industrial electrical needs. Many of its products are market leaders.
"The key challenge is to maintain the growth momentum. We want to double the turnover in the next three years, which is achievable given that almost 70 per cent of our revenues are coming from high-growth emerging markets," says Qimat Rai.
Having established a strong brand name, Anil is now planning to expand into rural areas. "With the rise in construction activity, there is a lot of latent demand for our products in small towns," he says. He is bursting with plans, but adds that he is not a patch on his father, lacking the older man's uncanny ability to take calculated risks. "I think of myself as a trained entrepreneur. I have a methodical approach towards issues.
I can't take a m300 million acquisition decision in less than five minutes like my father did in the case of Sylvania," he says.