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Friday, January 02, 2009

He made the movie 'The Elephant Can Dance' & believed it

He's an entrepreneur with three decades of experience in the heavy metal industry. An innovator who is seeking excellence in the manufacturing and forging of steel. That is Baba N Kalyani for you, who is worldwide known as Baba Sahib.

Baba Sahib joined the family business in 1972 and became the chairman of the group's flagship company, Bharat Forge in 1998. This was a time, when the companies core business of auto components was badly hit in the economic recession. Kalyani came in to the rescue and bailed out the ailing business and turned Bharat Forge into the world's second largest forging company.

His son, Amit Kalyani joined the group in 1997. Deputed to a sister company in the US to oversee the technology transfer to the Group's new ventures. He returned to Bharat Forge in 1998. The father-son duo since then has transformed Bharat Forge into an undisputed market leader and made it the first name in India's steel forging industry.

This transformation didn't happen overnight but took 15 years after Kalyani found that the company had become inward looking company. Baba Kalyani told CNBC-TV18, "It was a situation, where we saw our domestic market going downhill. We didn't see a recovery of the business in a short period of time. We didn't really read it as a recession the way normally people would read it. We read it as a fairly structural change in the market. We had come down to working only 2.5 days, it was really a bad situation."

He adds, "Bharat Forge is almost a 40 year-old company. Every time we have been through difficult situations, we have converted them into opportunities - to do something new and something different and come out winning."

His son, Amit came into the company, when revamping operations were essentially over. But he plugged into the company's vision right away - of taking the company to the number one or two slot in every segment. He picked up fast and he credits his father for it. Amit Kalyani says, "Working with my dad everyday is a learning experience. It has been tremendous. You're learn how to react to different situations. Working with him has made me more proactive and made me think about what is going to happen two steps down the road."

It's fact that Baba Kalyani has faith in the Indian manufacturing sector and knew that this sector could get competitive but he was way ahead of his time and in 1996-1997, no one believed him. He says, "I didn't have one believer in me in corporate India, whether it was CII or anybody else. I made a film when I was President of CII Western region - 'The Elephant Can Dance'. That was all about how the manufacturing industry in India can become competitive."

He explains, "In India, the business model in the manufacturing sector has always been of the lowest capital investment - use low cost labour force, lower-to-medium cost technology and use that as a competitive advantage. We had this phobia, where we thought that the labour force is your competitive advantage, but this is wrong. We were doing this till early 1990's and we were never competitive. When I say competitive, I am talking about being competitive globally but not domestically. It just struck me one day that we have to change this business model and use high technology and skilled people."

This hunger for moving forward into uncharted terrain gave rise to acquisitions being made in USA, Scotland and Germany. It was about getting more marketshare and more customers and therefore more business from abroad. In 2003, they started looking at either partnering with or going and acquiring global companies because that reduces the risk for the customer and it gave them access to technology, as well as new manufacturing locations.

The result has been, as Baba Kalyani says, "Bharat Forge is exporting products now almost in every continent. We were exporting to North America, China, Europe, Asia." He targeted Germany for acquisitions because that is where the new development, new cars and new technology was happening. So there was a need to be in that market. There were reverse culture shocks - where the whites saw a brown guy coming to the rescue of their bankrupt companies.

So, Kalyani had to convince the management, the employees and the customers. The customers were the first to be convinced and they communicated their support to the company. There was another reason why they fell in line - a lot of the companies were in the process of bankruptcy. So, when the customers liked the deal, the employees also picked it up very quickly and soon the management also fell in line.

He doesn't see any big differences in managing foreign employees as he says, "People have the same sensitivities, the same emotive needs and I think it's the job of the leadership and management to nurture that and bring out the best in them."

But Kalyani has been at the helm for 37 years now and he's begun to step back from running the company in 1993, when he started to put together a team, who would carry on the show. But he's also given this team a goal: to become the world's largest forging company by 2008!

This need not be through acquisitions only. But there is plenty of opportunity out there. Kalyani explains, "If you look around the world, especially in Europe and North America the automotive supply sector is in a fair amount of stress. Therefore, it is going to get restructured and therefore acquisition opportunities, strategic alliance opportunities are plentiful. But the younger Kalyani cautions and says, "It has to be a strategic feat - it has to either add customers, new technologies, new products or new processes."

That, is after all, the bottomline.

Written for moneycontrol.com

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