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Date:23rd November 2008 |
Compiled by Mr. M. Sathya Kumar | |||||||||
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Neeraj Kanwar - A Success Story of Apollo Tyres Founded by his grandfather Raunaq Singh, further established by his father OS Kanwar, Neeraj RS Kanwar is now holding the reigns of this US$ 1 billion company. He discusses about his journey as a third-generation entrepreneur and shares insights about the industry.
Can you begin by telling us bout your journey at Apollo? Back in 1995, when I joined Apollo, my grandfather Raunaq Singh was the Chairman and my father OS Kanwar was the Vice-Chairman and Managing Director. Since I am an engineer by qualification, I had to undergo a lot of training at the shop and plant floor. Subsequently, I went for training on how tyres were being sold in the market. I did not have any of the head office responsibilities for quite some time. In fact, I started with handling one of our smaller district offices in Piragarhi (Delhi). I was constantly on the roads; meeting the consumers, understanding their needs, taking their feedback, understanding how we were with our after-sales services, etc. It was really a hardcore understanding of the business. I remember an experience when we were launching a two-wheeler scooter tyre and I was out there on the road putting stepnee (spare tyre) covers on the scooters. In 1997, I entered the head office and immediately started integrating marketing with manufacturing and technology. There was a huge gap between these departments, so I built a bridge of communication and transparency between them. I started a department called Strategic Planning and Coordination, the primary objective of which was to bridge the gap of understanding what the customers required and what we could give them. In this way, we saw a lot of improvement in what we produced for the customers. Slowly I moved up the ladder and went into manufacturing. I started looking after the three plants (two in Kerala and one in Baroda) we had in 1998. I had to bring in a sense of globalization, global benchmarking, and global scale production at these plants. Our Baroda plant then was at 70-80 tons per day capacity, and the Kerala plants were sitting at 110 tons per day capacity. Today the economy of scales is up to 200 tons per day in any given plant in the world. Our Baroda plant is running at 420-450 tons per day and Cochin is at 310 tons per day. So these plants saw a manifold increase in output, which gives me a sense of achievement. Around 2000, we brought in passenger radials. We were pretty late in tapping this segment, as our competition had already entered it long back. At that point, 50% of the Indian cars were on radials. I brought in a new expansion by starting the state of the art passenger radial plant in Baroda. We came up with a new scheme called B2K (Battle 2000) which shook up the tyre industry by bringing in radials at the price of cross-ply tyres, which was really affordable for the customers. The customer understood the value we were giving—better fuel efficiency and mileage. Then we saw a change in the OEMs buying tyres. When Maruti went radial, the entire country went radial. Today, 99% of the country’s cars are on radials. We were at number five in the marketplace then; today we are clearly at number two. We have seen growth at the rate of 25-30% since 2000. Now, I aim at taking us to number one in the passenger radials market by 2009. The move from being a very commercial tyre (trucks, tractors, etc) oriented company in the ‘90s to catering to the new and upcoming customer segment (passenger cars); and thus making Apollo a more ‘all aspects of tyres’ company is one of the key changes I brought in. Apart from this, a sea-change was brought about in after-sales servicing. I remember in the late ‘90s, a service claim took about 4-8 days. Today, we have brought that down to 1.5 days, and there are times when we have done it in couple of hours. I believe when you want to create a new wave, you have to start it from the ground level—you have to change yourself, and get the whole organization to think the way you are thinking. The customers benefited by the changes, and we also benefited as we got repeat customers coming in. I would say hats-off to the organization and to its people who are very open to change. Change in small or big ways comes in every six months at Apollo. For example, we have just launched XT-100K, which is a truck tyre that will run for 100,000 kilometers, as compared to the average 60,000 kilometers. With this tyre, we are offering a tyre as good as a radial in the cross-ply segment. The catalyst for all this has always been my father and our Chairman. We have noticed that many non-first generation entrepreneurs work as management trainees at different organizations before joining their own company formally. What is your reason for the same? The idea was to get an experience outside of what I have grown up with. It was for getting a different flavor of how the professional world runs—an eye-opener and confidence-gaining exercise before joining the company. Besides this, before I joined Apollo in 1995, I started a company called Apollo Global Capital, which I ran for two years. This non-banking finance company (NBFC) was pushed to me by my father. In those days (1993) NBFCs was really considered a big business. I understood aspects of money and dealing with people. It had nothing to do with our tyre business. I lost good money in that business, which made me understand the value of money and people. Tyres are not generally seen as a glamorous industry. Did you really want to do tyres all your life or did you want to do something else? The tyre industry becomes glamorous when you are on the highway, and you are cruising at 110 kilometers per hour. What one does not realize is what goes into giving you complete control at those speeds, which in my opinion makes this business glamorous. A normal customer just looks at it as black, round, and un-sexy; but a tyre is a highly engineered product. The number one tyre company in the world, Michelin spends close to one billion euros in just the research and development of this product. After all, it is about the safety of the customer. When you look at highways abroad, the vehicles are running at speeds above 100 miles per hour. We test our tyres in a test track owned by DaimlerChrysler in Papenburg (Germany). Here our tyres are tested at various conditions. We are talking about testing this product to the extreme speeds, weather, and road conditions. We are the first Indian company to launch winter-tyres (for Europe), and these tyres have been tested in snow, ice, etc. It really gives a kick in itself. Having said that, I do not feel it is an unglamorous industry. I always wanted to join this industry, and I think it is very sexy. Besides this, I make sure that my calendars are extremely sexy too (grins). It is said that Apollo aims to hit US $2 billion turnover by 2010; how are you ensuring that this aim will be achieved? In April 2008, we were at $1.2 billion. Our vision is clear: $2 billion by 2010. This is going to be met with organic and inorganic growth. In terms of organic growth, we are on an expansion mode throughout the company. We are expanding in Baroda, both in passenger radial (by 50% more than our current capacity) and a new product line—for the road tyres for, say, mining vehicles, etc. Then we are getting into a green-field project in Chennai, where we are setting up our largest passenger radials outfit with truck radials also. Out there we are looking at 20,000 tyres capacity for passenger radials, and 1,500-2,000 truck radials. Our South African plants are expanding by 30-40%. Besides this, we are always in the market looking at opportunities for inorganic growth. We are looking at opportunities in the tyre space around the globe, mergers and acquisitions, etc. Your father, Mr Onkar Kanwar, places the board of directors and management at a very high level as a factor of the company’s success. In your opinion, what makes that magical board and how do you rope in the right people for this job? The mantra at Apollo has always been transparency and empowerment. My father plays a very important role in the organization. He gives a good macro overview of where he wants the company to be. As I mentioned in the beginning, he is the main catalyst for bringing about changes. We are the people who have to implement those changes, and we also sometimes question those changes. I have a good set of people around me. They are my strategic thinkers. How we manage ourselves in this environment of dynamic change is by having open dialogue and transparent communication with each member of the management. My core team is empowered to take decisions on its own. This is not only at the senior level, but even down the line. We have a cross-functional team culture, there is a culture of go-and-get-it-done, rather than endless meetings. I believe that the DNA of Apollo is transparency and empowerment. Today Apollo is organized in three profit centers—India, South Africa, and International. Then we have corporate functions, like HR, accounts, finance, purchasing, etc. But within India and South Africa they have their own functions, and they are supposed to run it, and supposed to bring in profitability and growth in the business. That is how we really manage the entire organization. Apollo has equity participation by a state government; and you have government nominees on the board. What are the challenges and benefits of such a situation? Apollo had given share holding to Kerala since its inception (in 1976), but it was a very small portion, less than 2%. Because of the history with them, they have about two nominees on the board. We respect them, take corrective guidance from them, and I think they play a very important role in our growth. The automobile industry is very cyclical. As an input provider to the automobile industry, how do you manage this cyclical nature? About 20% of our production is dependant upon the Indian automotive sector. Of course, nearly 60% of our turnover comes from the Indian market. Besides this, we tend to have various territories apart from this. For instance, today we export to the Middle East, Asia Pacific, Africa and South America. These are the different channels of distribution by which we de-risk our marketing strategy. When the domestic market cycle is weak, our export arm picks up the goods. Your biggest revenue earner must be sales to automobile manufacturers. How do you manage these relationships? How do you nurture them? How closely do you work with them? How are you personally involved? In the commercial segment, we have been supplying to Tata, Ashok Leyland, Eicher, etc for a long time now. We have a really good relationship going with them. Other than normal supplies going to them, we also have had strategic joint R&D programs running with them for their new vehicles. In the passenger segment, we supply to almost all the Indian OEMs and some of the biggest global OEMs like General Motors, Skoda, Ford, etc. We launched a Vehicle Dynamics Workshop in Pune last year, which was a great success and well-appreciated. For this, we had brought in engineers from some universities in Germany. We showcased how a tyre and vehicle operate together on the road. Besides this, we are in touch with our OEMs to stay abreast with the new innovations that we can bring about in the product, in terms of safety, cost, and customer satisfaction. As for maintaining these relationships, it is really system-driven. Yes, on an annual basis I do have a look at the OEMs, participate in various forums with the OEMs, and more. Recently, we have been invited by Volkswagen in Germany for their IZB conference, where we are showcasing Apollo for the first time. What will be the impact of the current financial turmoil on Apollo and the automotive ecosystem? As far as Apollo is concerned, I must say we are well-poised as a company. We had seen a downturn coming in the industry in the beginning of the year. So, corrective measures were taken back then. To cite an example, to bring down manufacturing cost is an ongoing process, but in the beginning of the year we came out with some major breakthrough projects in manufacturing. We are pushing the people in the plants with these projects, whereby we want to see an increase in productivity from the same equipment and manpower in upwards of 30-40% increases. When my productivity goes up, obviously my manufacturing costs come down. We had launched Six Sigma two years ago, which is an ongoing process again, and which has given benefits of about 20-25 crore in the last year. When oils and natural rubbers go up (which has happened in the past six months), it directly hits the tyre prices. Hence, we had to come up with various solutions for handling the issue of raw material by reengineering our products, which our technology team has done very well in. We have reduced the weight of our tyres, raw material costs, etc. If you were to see Apollo in Q1, we have actually grown. That has really come due to our strong presence in the after market. We deal with 4,500 dealers in the country today, whom we nurture as much as we nurture our customers. We have 140 offices in the marketplace, with over 500 employees on the fields. Our message to them is that for us customer is God, so you have to be there for him. The market has shrunk but Apollo is not willing to shrink. We have smaller growth coming in, but it is there. As for the ecosystem, I think there is a downturn in the automotive sector. We have seen the production of commercial and passenger vehicles coming down. And that hits not only Apollo, but the entire tyre industry. It is a challenging time for everyone. But I think Apollo as a company has lived up to the challenge rather than succumbing to it. Does the CSR initiative of Apollo benefit the bottom-line in anyway? As a citizen of India, it really means a lot for us to be able to give back something to our country. About five years ago, we started the journey of HIV awareness. Our customer is our God. He brings a lot to our revenue and profitability. A segment of our customer (commercial truck drivers) is also part of the main set of HIV carriers, illiterate and less educated population. This customer needs to be aware of the dangers, preventive measures, and such. Therefore, we set up an education program, besides six clinics in various regions. Apollo is educating them as well as bringing about sponsors in these communities, who then educate people further. Also, we have tied up with ILO to bring in AIDS awareness internally. By this move we are educating our 10,000 plus employees about these diseases. Other than HIV-AIDS awareness, we are also doing a lot for the environment. Today as we all know, global warming and going green is a big thing. We in our own way have been doing a lot in the plants for looking at substitute fuels, tying up with various organizations (such as World Bank), and more, to become an environment-friendly company. Besides these two initiatives, we are working with the War Wounded Foundation, which is supporting the soldiers handicapped in various wars in the past. We have close to 50 dealerships with them across the country. We feel glad to be able to help these soldiers who at the age of 18-21 got handicapped in wars and ended up at home doing nothing, by providing a source of livelihood. What are the noticeable
trends in the tyre industry? A noticeable trend would be the Internet. In Europe, there are a couple of big companies who started selling tyres through the Internet—a more B2C platform. Even in India, the customer today does not have time to go to a tyre market. It is a fact that the tyre market is not a ‘glamorous’ place to be at, and is usually found in the outskirts of the city. It is a day’s work gone when a customer is looking for a tyre and getting it changed. A B2C model is going to come up soon in India. We ourselves are looking to be in this space, and I am giving a big cue to the readers ,that the aspiring entrepreneurs, that it is an opportunity that will do really big in the country in the future. How much personal time do you get and what do you do in it? The culture of Apollo has been that you need to find valuable time with your family. It is a very critical component for us, wherein work and family life has to be in balance. From the time of my father, it has always been encouraged to go for small vacations. We want our employees to go out with their families and come back with a fresh mind and greater productivity. I also tend to take breaks. But I think it is in my blood to be involved with work even when I am out there. As a kid, you have seen your father always on the phone (laughs). I remember when I was in Thailand to celebrate the New Year with my family in 2002, and I had come back here on the 30th of December, due to some emergency. So, yes, even when I am out there, I am on my Blackberry and Internet. But there are times when I switch it off to maintain the balance. What was the legacy that was passed on to you by your predecessor? What is the legacy you want to pass on to the next generation? All that I have spoken about in this interview is the legacy passed on by my father. What I am today is due to the learning I have had from him, which is really—the value of time, money, and people. Till date, he keeps telling us is that change is constant, time is money, and if we do not change with time, there are sharks out there that are waiting to take us over. We blink, and competition will get to us. So there is no time to blink. That is really the legacy passed on to me, and which I will pass on to the next generation. What is your success mantra? Passion and fun at work has been my success mantra in the organization. I believe that there is this relationship with my colleagues and employees that yes, work is work, but at the end of the day there is also this friendly environment that has to be there. The human touch is very important in the Indian context. To cite an example, here in our organization you will see that I like to see a smile on people’s faces. If I do not see smiles, there is something wrong in the organization. I remember when we took over operations in South Africa (Dunlop), the big thing that was missing there was the human touch and bonding of employees, which I think in the past couple of years we have been able to inculcate. I launched the program Apollo One Family four years ago, which is a family bonding program to spend time with each other, go on vacations together, and more. We have had an integration program in which 50 employees from South Africa were brought down to India and were looked after, had dinners at homes of Indian employees, etc. I think that fun has to be there to be successful. Source : DARE - A Magazine for Daring Entrepreneurs
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