Engineered in India
MMA-KAS organised a discussion on the book “Engineered In India” authored by Dr BVR Mohan Reddy, Founder Chairman & Board Member, CYIENT. Mr M M Murugappan, Chairman, Carborundum Universal Limited, led the conversation with the author.
Murugappan: Tell us about the defining moments in your life and how they impacted you.
Mohan Reddy: Mothers have a very important role in our lives. So was my mother. I was in class seven. I was good in extracurricular activities. When I got the mark sheet, I was so scared to show it to my mother and hid it for a while. She was smart enough to find where I could hide things. She saw my marks and was furious. She said, “Look, this is not acceptable. If you don’t perform well at the end of the year, I will send you off to our village, where you can go and join your grandfather.” My paternal grandfather was a farmer. I used to go and spend summer holidays with him. I knew how difficult it was to live in a village. Just about that time, around 1961 or 62, they got power supply in the village.
She also asked me, “When your sister can do so well in the school, why can’t you?” My sister, elder to me by a year, is now a medical doctor. I couldn’t sleep that night. I was really scared of going to the village. I started studying my sister. She was very studious and hard working. I started competing with myself to do better and better. That became a very positive habit and led to a virtuous cycle that goes on and on. I was in pursuit of excellence in everything I did. This attitude thereafter translated itself into my business too. I started my career as a professional. I spent about nine years in Voltas, a Tata Group company. Then I jumped into a full-fledged entrepreneurial journey.
The second moment came after working for 18 years when I realised the environment was changing. I turned 40 and the energy levels seemed to go down. The family was very supportive and therefore, with a big leap of faith in myself, I took a jump and became an entrepreneur, ready to take the risks in my life. The third, is meeting you and you made a lot of difference to my life, as my mentor, though younger to me. So please do not think your mentors need to be elder to you.
Murugappan: You chose to pursue an entrepreneurial dream at 40. Did you assess your risks at that time?
Mohan Reddy: Yes, I did. I come from a middle-class family. My father was an honest police officer. My mother was a homemaker. There was not so much of money at home. But I had the ambition and dream to become an entrepreneur. As soon as I graduated, I wanted to be the master of myself and do something to contribute to the world. I understood that I had to wait for a while to create some amount of wealth for myself. Also, in the 1970s and the 80s, it was still a tremendous amount of license raj and it was not technology. My wife Suchi (Sucharita) and I assessed the risks. I also had growing up children at that time. I built a little economic, social net to make sure that she would become economically safe. I came and bought a property in Chennai and rented it out to TCS. I promised my wife that I would not touch the rental income.
Murugappan: So, there was an element of a very typical South Indian conservatism, coupled with a high aspiration, courage and conviction. Is that why you chose to go public at an early stage of your business?
Mohan Reddy: Maybe hindsight tells me that it was one of the wrong decisions. We started with a very small capital. 20 lakhs was my personal money. Two NRI friends gave me $10,000 each. (1 USD was Rs 25 then). I borrowed 97 lakhs from IDBI. The project cost was just 1.22 crores in all. Fairly quickly, by 1997 or 98, we thought it was important to raise capital. Somehow, I got the impression that the lowest risk capital was the public issue. As it was just after the Harshad Mehta scam, my financial advisor said that it could be the last chance for us to go public, in the next couple of years. In hindsight, I think I diluted myself a little early. But that was a key driver model. We wanted to expand the business by raising money. Engineering was still not there. So that was the trigger.
Murugappan: I’ve seen the company grow over time. First, it started off with digitalization services. Soon it transformed itself towards value added services and more towards engineering services. Did you engineer these transformations? Or did it happen at the right time, at the right place?
Mohan Reddy: It was a very conscious move for us to transform ourselves on a continuous basis. My lifelong dream is to build engineering products. I’m a mechanical engineer by training. We also moved up the value chain to provide product engineering services, providing solutions to customers and design-led manufacturing to ensure that we get a competitive advantage.
Murugappan: You chose to invite some key customers into the shareholding. Wasn’t that a conflict of interest?
Mohan Reddy: The key to it is that if you have a customer who has got a stake in the business, he becomes your anchor customer. United Technology Corporation or Pratt and Whitney had the maximum shareholding in the company at 15%. We had our own doubts if they would interfere with our work, look at the pricing structure and put pressure on the margins and pricing. The second challenge was if this would block any of their competitors to come to us. We discussed ways and means by which we could address that. But we were sure that once they became an investor in the company, they will certainly have a greater commitment to us. Hindsight tells us that it was an amazing decision. They continue to be a top customer. We have an engagement with 1000 people and generate $100 million revenue year after year. Literally, this is like an annuity that comes to us. We wrote the contracts in such a way that they cannot question our pricing and they agreed to it. We also ensured that their competitors come and work with us. After the deal, I spoke to Mr Louis, then Chairman of United Technology Corporation and profusely thanked him. He said that he had made money twice over. “First, by getting you as an offshoring partner, I’ve saved two thirds of my money. Second, by investing in your company.” I was delighted by what he said.
Murugappan: I saw, as a board member, you created value in terms of capability of the company. There was also an underlying value system of trust. That is why, all the customers came to us without batting an eyelid.
Mohan Reddy: Absolutely. My simple definition of trust is ‘under promise and over deliver.’ That is when you earn the trust of the people. We won the contract with Pratt and Whitney, precisely because of the trust part. It was an accidental meeting I had with a team of 16 Pratt and Whitney. After 90 minutes of conversation, their Executive Vice President asked me, “Mohan. Can I come to your office tomorrow?” It was not on his calendar. At the end of the meeting, he invited me to come to Hartford. Much later, I went back and asked him, “Louis. What made you decide so quickly that I was the right partner for you?” He said, “Trust. When I came to your office, I saw all that happened. It was no different from what you told me—your emphasis in process, your ability to deliver quality and on time and the way in which you control your costs. All that mirrored every document I saw in your office.”
Murugappan: You chose to give people from across the world responsibilities, which spanned India as well. What caused you to do this?
Mohan Reddy: I believe that locals know the culture, the value system and the ethos in that part and they are much better in conversing and convincing and giving the comfort to a customer, compared to a foreign individual who goes from here. For example, Indians would not understand how the American football game is played. Right from the very early days, we decided to have locals work with us in making sure that we can scale our business much more comfortably.
Murugappan: Building capability was a big part of Cyient. You also felt that Cyient was at a stage where you needed to slowly step back and do things that you enjoy in society. We already had the Cyient Foundation. You look at something much larger.
Mohan Reddy: The underlying phenomenon is fairly simple. We build institutions to last forever. Human beings don’t last forever, founders will not. But they like to see businesses flourish even after their time. Therefore, there is a very clear succession plan that comes in. When I turned 60, I decided to put a succession plan in place to make sure the company will flourish forever. If the company gets into trouble, it is not just the wealth of the founders that is lost, but 16,000 jobs are at risk. I’m putting families at risk. They trusted me, believed in me, came and joined me and they built this company.
When I was 32 years old, fully in control of my previous company called OMC computers, a Tata Sons director asked me if I ever thought what would happen if a bus came and stopped over me. I had two young children and I was only worried about them. But when the same question was asked ten years later, I started this company and it started growing. Now I was thinking about all my people in Cyient.
Murugappan: In the new phase of your life, you spend more time in public service, educational institutions, mentoring startups and so on. Is the joy that you get now greater than what you got when you started the business?
Mohan Reddy: Both of them give me joy. I can’t put one to be superior and the other as inferior. It’s an amazing feeling that you get at the end of it. Business gave a joy to us in making sure that we created wealth, not just for ourselves but for several other associates in the company and investors. We also participate in nation building. In 1991, when I started this company, India was precisely in the same situation that Sri Lanka is in today, unable to pay the foreign debt. Today, India has about $550 billion of foreign exchange. Software companies contributed in big way. We also contributed in a small way. The joy that comes from doing work outside the business is also enormous.
There is a poem by Linda Ellis. It’s called ‘Dash.’ Once we disappear in this world, every one of us will rest in a six by four space. The tombstone has a name, date of birth, dash and date of death. If you look at the constituents of that board, nothing is under your control, except the ‘Dash’. Dash is the one that you contribute to this world. So we must think about what we can leave behind as our legacy.
Murugappan: What do you think the future holds for India?
Mohan Reddy: The future looks very promising. I’m an optimist like many other entrepreneurs. The environment today is so conducive for the growth of this nation. The ease of doing business has improved. The innovation index has improved. I believe that technology, AI especially, will drive this decade. ChatGPT will become as popular as what it is. It’s very concerning to many. But we will see ChatGPT will get integrated in every industrial applications- agriculture, logistics, transportation and healthcare. The opportunities are aplenty for the young people through technology and a conducive environment. In addition to that, we have the demographic dividend.