Companies

‘We want to be ready for technological disruption’

Nandana James/Thomas K Thomas Mumbai | Updated on March 11, 2019 Published on March 08, 2019

Suneel Advani, Chairman, Blue Star   -  PAUL NORONHA

Blue Star’s 75-year-long journey is punctuated by various disruptive events — the Partition, liberalisation and demonetisation, to name a few. Suneel M Advani, who is stepping down from the post of Chairman on April 1, has steered the company through some of these changes. In a candid interview with BusinessLine, he reflected on some past failures, how certain “reckless” moves paid off and how the company is readying itself for the future. Excerpts:

For the first time, you have chosen a non-family person to be the chairman. How difficult was this decision?

It would have been nice to say that it was entirely a matter of choice, but you know that sometimes choices are also dictated by what the laws are. My son (Vir Advani) has impressed the board members with his maturity, knowledge and experience. The new law (which requires Chairman and MD posts to be separated) does not come into effect until the next year, so we had the option to have him as the CMD till then. The entire board was in support of that. But then, he himself opted out, as it doesn’t serve any real purpose as far as the company is concerned, and it sends out a much better signal to our employees, shareholders and investors if we are a professionally-managed company. And then the obvious choice was Shailesh Haribhakti. He has been with us now for almost 15 years.

What are the kind of potential headwinds you see?

The threat of technology, for one. Will a different technology for cooling be invented? It is going to happen one day. We want to be ready to be part of that, because the same old technology has been in use for many years. Technological disruption is waiting to happen.

Are there any new sectors Blue Star would like to diversify into?

Diversification is not a good word at Blue Star. But, if you add the adjective “related” to it, then I am willing to talk about it. Related diversifications, which I prefer to call “expanding the core” or “adjacencies”.

In fact, I have set the company a goal, that by the time we are 80 years’ old, which is five years from now, we should move from ₹5,000 crore today to ₹8,000 crore.

So, we need some more avenues to get to ₹8,000 crore, because the existing product lines and markets may not grow at that rate to take us there in five years’ time.

How do you plan to grow the business?

When we look at Larsen &Toubro, there’s a thought that comes to mind. Does L&T provide us with a model of growth, something bigger than MEP (Mechanical Electric Plumbing ) ? It’s a question we are asking ourselves and we are yet to get down to it. It came up in the board meeting recently. Maybe that is a way for us to grow the business... to expand beyond MEP into more engineering services.

The other area is cold storage for preservation of food and transportation. Food is such a high proportion of disposable income and yet, we don’t even have enough cold storages, leave alone refrigerated transport. The whole cold chain is waiting to be built. It’s a huge opportunity in our existing field.

The third area of growth will be the traditional air conditioning business. The penetration of air conditioning in this country is less than 5 per cent. The world is getting hotter by the year. There are huge opportunities just in our existing businesses, but the growth rates have to pick up, and then the unit cost will come down, based on scale. These things are going to happen now.

Many large traditional family businesses have gone through a painful periods of separation. What keeps the Advani family together?

I think the starting point is the value system. My father who founded this company was the third brother, out of four in his family. But, all his brothers worked for him. And they created a culture in the family, which we try and emulate. The interests of the company supersede the interests of any individual, including the founder.

What about the period from 2009-2011 onwards when you did some acquisitions that weighed on your balance sheet? Would you consider it a bad call?

The call was bad in terms of timing, because we bought those two entities at the same time the Lehman Brothers happened and the bottom fell out of the construction market in India, which is only now beginning to recover after 10 years.

The other thing was- which we knew and we were willing to take that risk- was that, we acquired those companies because one was an electrical company- electrical contracting- and the other was plumbing. Now, if you want to become a full service- full engineering services player in the projects business-you got to have Mechanical Electrical Plumbing (MEP). We were only in air conditioning.

India was going the MEP route. The Middle East was all MEP. So that's why we acquired those two companies. If we had not acquired them, we would not be MEP.

So yes, we are over the worst, we took some losses on that front. But now, we are the leading MEP player in the country. The Indian market is distinctly moving toward MEP.

You have been the longest serving individual at Blue Star. What would you say would be some of the key turning points in terms of success?

When my father started this company just before partition, in 1943, he provided jobs to our relatives coming in from Pakistan as refugees.

When my brother and I took over in 1984, by then, there were so many relatives and frankly, relatives don't always function in a company as we would like.

So my brother and I; we didn't hire any more relatives starting mid-1980s. That process of professionalisation began then. I think, that was a major turning point in the mid 1980s when my brother and I decided to go that route.

Then, after a few years came liberalisation when many Indian companies either shut down or sold out. We decided to stick it out and we said we will do it on our own.

I did many joint ventures in the 1980s, before liberalisation, in other, related fields. But, the learning from that is that we didn't get very much out of that. So, we decided to go on our own and do everything on our own. All our product design is our own. We didn't tie up with anyone -with any large air conditioning company. So, that was another major turning point- the decision to do it all on our own.

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Published on March 08, 2019
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