It was around November of 2002 when S Rangarajan got a call that Sivathanu Pillai, then chief of India’s BrahMos missile programme and Chief Controller, R&D, in DRDO — the Defence Research and Development Organisation - would be visiting their office on a Sunday. He had heard about Data Patterns’ (DP) technical expertise from the Indian Space Research Organisation (ISRO), to which it was supplying to. He wanted to see for himself if DP, an electronics systems supplier then to the aerospace industry had the product capability to compete in a tender which the likes of Tatas, L&T and BEL were pitching for.
Pillai’s legendary reputation and fastidiousness about neatness preceded him, so when a DRDO staffer told Rangarajan that the DP office may be too shabby, it sent him and his wife Rekha Murthy, a Director in the company, into a tizzy.
At that time, the DP office was located on the congested Arya Gowda Road in Chennai’s West Mambalam in an unprepossessing building, the ground floor of which was a vegetable shop. Unfazed, Murthy and Rangarajan swung into action and roped in over 20 workers and had the building white washed overnight. A deal was struck with the vegetable vendor to close shop for the day, underwriting his day’s sale (we couldn’t have our guest stepping over cabbage to enter our building, says Murthy) and red carpets placed for Pillai’s visit.
While Pillai was impressed by DP’s technical expertise, he had a word of advice for Rangarajan. He told Rangarajan that he needed a bigger vision and if in future if he got orders for big systems, for example, fitting assemblies for missiles mounted on trucks, he would need a very large space. Rangarajan told Pillai that all he wanted was an order to prove the company’s technical expertise and a large facility could always be secured. DP was cleared to bid on technical grounds and then had to compete with the other companies to be an L1 supplier.
In six to seven months, DP qualified as an L1 supplier. The first product for the BrahMos missile programme that DP supplied was the Fire Control System (FCS) which launches the missiles. The contract was for ₹7.4 crore. Later, DP would go on to develop the missile calibration system, single and three missile simulators, launch hydraulics simulator, FCS with launch control system, missile test systems (called missile checkout equipment) and the FCS for Sukhoi 30 to launch the Brahmos missile from air. For many of the components, DP has been the sole supplier for the missile programme for the past many years. “We have now developed the RF seeker which is part of the Brahmos missile. This has to undergo flight tests,” adds Rangarajan.
For Rangarajan, a chemical engineer with a Master’s in Science from IIT Madras, who played table tennis for TN state in both the boys and men’s category from 1974 to 1978, the entrepreneurial journey has been one long, bumpy road from 1985. He can regale one with many stories of the years of grit, grind and serendipity: dealing with long development times for the defence products; delayed payments; proving to naysayers that he had the technical expertise, raising capital — ‘I even had to insist with a bank manager that I would not get my father to sign his house as collateral for my loan,’ he says — to eventual success. DP’s IPO in December 2021 to raise ₹588 crore was oversubscribed 119.6 times and listed at a 48 per cent premium to its IPO price of ₹585.
And, Rangarajan kept his word to Pillai: in 2004, DP bought 5.75 acres of land in a TN government’s industrial complex, and built a one lakh sq ft office space shifting there in 2008. This office is staffed by over 800 people today, 450 of them engineers, a far cry from its Arya Gowda road office with just 90 staffers. “The facility cost was more than our revenues then,” recalls Vijay Ananth, chief operating officer, who has been with DP over 25 years. Now, DP is building another one lakh sq ft of space to fit vehicle-based launch systems for BrahMos as well as electronic warfare vehicles for frontline areas.
Making a space in space
Rangarajan started DP in 1985 using personal computers in non-data processing applications. Along the way he supplied products to many industries till DP decided to pitch to ISRO for a navigation system. The ISRO official said he needed to ensure that the DP product would work continuously for seven days. “The navigation test is the most complex test which they do as they need to calibrate the drift properly in different temperatures and over time for a 20-minute flight of ASLV,” he explains.
Rangarajan and his team sent the product to ISRO in a truck and it was sealed in a room for a week. It worked well and DP’s first product/test system was for testing the launch vehicle’s inertial navigation system at Sriharikota. “Many years later (in 2002-2003) we delivered the second launch pad test system. Now both the launch pads are working with our equipment,” says Rangarajan. This order also opened the gateway for DP to supply a whole gamut of products to the aerospace industry.
Vijay Ananth takes us for a quick tour of the facility to show the bewildering array of products DP makes now: from nano satellites to ground receiving systems, avionics for Tejas light combat aircraft; launch control systems for Sukhoi 30 aircraft; actuator pins for torpedoes; rugged display systems for helicopters; electronic warfare systems; electronic intelligence and communication intelligence receivers (ELINT and COMINT); landing support radars. And, of course, critical parts for the BrahMos missile programme. “We upgraded 12 radars for ISRO and now have a contract with Ministry of Defence to upgrade nine radars,” says Ananth.
DP today has an order book of Rs 600 crore in its kitty. “The order book consists of contracts for radars and radar subsystems (> 50 per cent), electronic warfare products like RWR, ELINT and COMINT, cockpit displays and avionics, FCS for Brahmos, and so on,” explains Rangarajan. The FM’s announcement in the recent Budget that 68 per cent of the defence capital procurement budget would be allocated towards procurement from domestic industry augurs well for a company such as DP. Its net revenues in FY 20-21 were ₹224 crore and it had a PAT of ₹55 crore. Rangarajan expects growth for FY22 to be over 30 per cent.
Shyam Sekhar, Founder, ithought Financial Consulting, says though it’s a relatively small company, Data Patterns has a very strong acceptance in the stock market, principally because of the technology it uses and the kind of industries and institutions which it touches. It’s a highly profitable, high margins industry, but still a relatively small business, he says. “And, it’s also a business where working capital cycles are long; in the last two years, it’s almost one year cycle times. If the company has to grow, it needs capital so it may not be seen as a growth stock, as it requires many external factors to grow. The kind of valuation it’s seeing has a lot of novelty premium written into it,” says Sekhar, adding that while it’s a long runway business, the opportunity is huge and the market has already priced in two-three years of good performance by the company.
Ask Rangarajan if he needed an IPO at all or if in a new post-IPO regime, the company’s entrepreneurial zeal will be dimmed, and he’s ruminative. “The opportunity is very large; we have an order book. There are risks ahead and it’s not a short-term goal; we have to look 10 years ahead and build products; the development time is long. But when we want to build big systems or compete in a Rs 1,000 crore tender I need access to a lot of cash. So, I needed to do this (the IPO).”
He says now is the time to rapidly scale as DP has the contracts. “I am quite excited, it’s tough and not an easy business, but we have done it before. We will scale our engineering competency model. And, yes, we should not lose our entrepreneurial culture,” says Rangarajan. It’s a pattern he’s quite familiar with.