Inspiring Tales Part 6: My Interviews of First Generation Indian Entrepreneurs Who Made It Big

Inspiring Tales Part 6: My Interviews of First Generation Indian Entrepreneurs Who Made It Big

November 2013

The Transformer Man of India

On 3^rd April 2013, Anil Aggarwal, Chairman & Managing Director, PME Power Solutions (India) Ltd, received the Ministry of Micro, Small & Medium Enterprises’s First Prize in the Medium Enterprises (Manufacturing) category. This is not the first time that he got a national award. Some of the prestigious awards under his belt include the “Niryat Shree Gold Trophy” for the year 2009-2010 by FIEO (”Federation of Indian Export Organization”) that was given to him by the President of India and India Exporters Excellence Award from ECGC-D&B in 2012.

Awards mean a lot to this 57 year old entrepreneur, who has carved a niche for made in India transformers, globally.

In an exclusive interview to Deepak Parvatiyar and Ajit Kumar at his manufacturing unit in Greater Noida, he speaks at length about his business, disappointments and the giant leap from a small manufacturer to a large global player. Excerpts:

Q) What prompted you to start this venture in 1988. What type of dreams were you carrying with you?

A) I started my professional career in 1975. This business was originally being done by my father, who was a self made person, at Faizabad and Bhatinda. In 1987 a decision was taken that I am going to establish a separate company in Noida or Greater Noida. This is how this company was conceived and since its beginning I have been managing it myself. Of course the dream was that it should be among the front runners when it comes to transformers. And the dream was not only to supply in India but was also to cater to the requirements in the overseas market and we did it quite fast. Once we started operations I started looking for overseas market and that started way back in 1992. We became the first transformer company in India to go for ISO 9001 certification. The ISO certificate in 1994 was presented to us by the then Industries minister. So this is how we started our journey. And then of course we kept on building. In order to prove our credentials we manufactured whole range of transformers and took them to Ceci (Centro Elettrotecnico Sperimentale Italiano), Italy and got them tested in conformance to the International standards to give confidence to the overseas buyers that yes, we can offer you product as per your specifications, duly tested so that you do not carry any doubt on the quality of the product.

Q) You said you started as a professional. What does it mean?

A) I did my graduation in commerce and then I did my MBA. Of course when it comes to the technology part, I was trained inhouse under the shadow of my father who was a technocrat.

Q) Does that mean that your family supported you in your business venture?

A) Though a decision was taken that I will make my own living independently, we cannot say that there was any family support. My father worked for British, Americans, Japanese. His thought process was very different. He used to say I have trained you people and now you have to decide what you want to do. It was decided that let those in the family  who had learnt the business should chart their own path and start living independently. There was no guidance that was given in terms of selecting the vocation for myself. The only support that was available was the initial 12 years of training that I could have from him during my stay with him. It was an all round training. I used to go to the shop floor to learn the construction part of transformers that eventually gave me the confidence to give presentations before my clients. I had to learn the tricks of the trade.

Q) How challenging was it to set up a business in Greater Noida in those days?

A) It was very challenging. The biggest problem that I had in this area was the law and order situation and infra structure. When we took the land in 1987 we were looking for overseas market and therefore proximity to Delhi was important to us. But we never realized the difficulties. We had no telephone connections for long and there was a big challenge of getting Delhi connected. We always used to hear stories about kidnapping and dacoity. Then in 2002, there was a dacoity and we lost goods worth Rs. 36 Lakh.

Then of course, getting orders from Indian power utilities have always been challenging because they go for tendering system and tendering system in India is loaded by L1 jinx. You get the order if you have quoted L1 or you give you a counter offer to accept L1 prices which is a very Hippocratic system which is not leading us to establish ourselves as quality manufacturers.

Q) What type of financial support that you had when you started?

A) I had  the  finances only what I saved during my working period with my father. There was no additional support that was available. Of course I borrowed some money from my father that I repaid him. Honestly I started with only Rs 3 lakh.

Q) Any bitter memories of your struggle phase?

A) Of course a lot of bitterness. See banking had always been a challenge. Nobody in India wants to finance a small scale industry. They are not respected by the bankers, lenders or financial institutions. You have to wait for hours before they allow you to even peep into their chambers.I had to virtually fight sometimes with my bankers. I can cite you an example that when my this unit was being constructed I had current account with one of the banks. When my construction was completed and I got trial order from the UP state electricity board, I went to the bank and asked for the form so that I can apply for some working capital. Even that form was denied. I was upset to the extent that I straightaway went to the CMD of that bank. I knew that the bank is not going to give me money so I thought that let me take out my steam by at least shouting at the CMD. So I went to him, met his PA. He said are you a client? I said your bank is not supporting me to become your client. He said the CMD cannot meet me without an appointment. I said I will wait here till he comes out of his chamber. Then probably he realized that this man is not going to leave and went to the CMD and he called me. I asked him to put up a notice that no lending will be permissible to new and budding entrepreneurs.

Q) What is your mantra for success?

A) I read a slogan long back. It said Industry thy name is problem. If you have that kind to heart and will made out of steel, then only you should go otherwise please don’t go.

Q) Is this slogan relevant today in a liberalized economy too?

A) The problem is that when you talk of liberalized economy, it is good for large scale, it is good for the corporate club that has been made in Mumbai. But is it good for micro or small industries? No small scale sector ever dares to ask for interest because the moment he asks for it, he will be told that gentleman, if you don’t take the debit note back, we are not going to give you orders from tomorrow. So what sort of liberalization are you talking? When you talk of the mandatory provision of 20 per cent orders being given to small scale sector by public sector undertakings, now it has been done at L1 price. You have to match L1 price. How is it possible?

Q) How did you counter competition?

A) In order to counter the competition, we were the earlier birds to middle east, gulf and Africa. That is how we countered the competitors. This area had suppliers from Japan, Europe and USA. But it came to us by chance. I give you an example. I had submitted a tender in Dubai and they called us. They told me that we were slightly better placed than Siemens, Germany. We know Siemens but we don’t you. How do you convince us about your quality, deliveries etc.? I said I will get my transformers tested from Europe. They inserted a clause in the order this is subject to the test within a specified date. They sent one of their representatives to witness the test. If you are not confident about your product, you cannot handle competition.

Q) From a small start, you are already a large industry. In the last few years you have made a quantum jump. Your annual production increased from Rs 6560.4 lakh to Rs 43022.72 lakh and profits increased from Rs. 1072.22 lakh to Rs 7518.33 lakh and exports Rs 2795.54 to Rs 32245.40 lakh just in two years 2008-09 to 2010-11. Who do you attribute this success to?

A. We increased our investments in plant and machinery from Rs 325.79 to Rs 674.65 lakh during this period. We have about 650 people with us and I will dedicate the success to my staff and workers. I am fortunate that I have a very good set of people who have always stood by me in good times and bad times. The average stay of people in our company is 18 years and I don’t believe in hire and fire system. We understand that anyone who works might commit mistakes. We counsel them when they do so. So people are happy. Our success is the outcome of hard work that we as a team has done during the initial 20 years that laid a strong base for us. Whatever the company is earning, there is some portion for them also and many people get incentives equal to six month or year’s salary.

Q) What are your future plans?

A) In the next 8 years time, my endeavour would be that I should be able to translate this company into an institution. See we already now are a large company. We are planning to go for IPO and then to go for 400 KV transformer production.