Will Malhotra’s water business be as Luminous?

He made his first billions by giving us reliable power back up.  Will Rakesh Malhotra, the man who built Luminous Power Technologies, make his next billions by giving us clean drinking water?

Malhotra, founder and chairman of Luminous – a brand synonymous with inverters, UPS and batteries – is now betting on his three-year-old Livpure brand to give market leaders in the water purifier business Aquaguard and Kent a run for their money. Livpure is available in 22 States and scaling up fast.

In 2011, after 23 years of running Luminous, Malhotra and his co-founders Navneet Kapoor and Sunil Bhalla sold 74 per cent of their share in the company to French energy major Schneider Electric for ₹1,400 crore. “That gave us more than a little money to play around with – as we are typically middle class people and our needs are not much,” says Malhotra, the son of an IAS officer and an unlikely entrepreneur. 

And yet Luminous’ journey has been an inspiration to many.  In 2011, when they sold the majority stake in the company, it was clocking around 1,₹100 crore in revenues. Today, it is more than double that, with nearly 10 per cent revenues coming from solar solutions. “We knew Luminous was a great company and hence held on to the balance stake. It is a great brand so can scale in many directions,” says Malhotra.  Indeed, with Schneider leading the charge, Luminous has diversified into home electricals – switches and lighting.  

Even as the Luminous growth story continued, Malhotra and Navneet Kapoor joined hands to set up SAR Group. To start with they launched a private investment firm – nCubate Capital Partners – to invest in micro, small and medium enterprises. nCubate has invested in 11 ventures and Malhotra says the fund size is flexible. “As a per cent of our asset book size, it is small so it is open-ended,” he says.

However, the bug to build their own company bit soon. “We had too much steam left in us to be passive investors,” says Malhotra, who was just 49 when he sold Luminous. “Especially my partner Navneet – who is nine years younger than me.”

Between 2012 and 2014, the duo put all their energies into launching three new businesses. The first launched in 2012 was Livpure, which started off with water purifiers but has diversified into air purifiers too.  Malhotra and his partner pumped in ₹25 crore to get the company going, later raising two rounds of funding from CLSA Capital partners  (₹55 crore and ₹100 crore) . “We have invested upfront quite a lot – on brand, on product development, on manufacturing and service,” says Malhotra. The facility at Manesar, he says, is the most integrated plant you will find at one location with everything from injection mould to plastic membranes produced here. Since everything is insourced, there is much better control over quality, he says. With a capacity of 300,000 RO units and 500,000 gravity-fed units, Malhotra says it will be easy to double production without further capex, if they work two and a half shifts.   

There is huge headroom for growth in the water purifier business, he says, pointing out that penetration is barely 6 per cent. “I will stick my neck out and say there will be 25 per cent penetration in 10 years,” he says. As for air purifiers, they are the next RO, he believes.

Many big brands ranging from Philips to Panasonic to Tatas and Hindustan Unilever have entered the category without making much headway. So what gives Malhotra the confidence? The differentiator, he believes, is in the smart products they have created from day one. The latest launch is an IOT enabled product.

 ”The journey to get into the water category is very hard,” he agrees. “But the prize is very interesting,” he adds.

The second firm set up in 2013 is a battery company. “That is an R&D company. That’s still stealth,” says Malhotra, choosing to be tightlipped about it.

The third company was born out of acquiring Luminous’ automotive battery business, which was generating ₹30 crore in revenues. From word go, the business was up and running as there was a manufacturing line, and an existing distributor network.  “Last year our revenue was around ₹300 crore. This year our revenue run rate is ₹55 crore per month,” he says.

Between 2012 and 2014, SAR Group started three new companies. But in 2015, they decided enough had been started and it was time to build them up.

For a man who has a finger in nearly 15 companies, the soft-spoken entrepreneur who has recently relocated to Singapore, looks calm and collected. Perhaps that’s the secret behind his unflagging energy. Or is it tinkering with batteries that keeps him so charged up?

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