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“Our Single-minded Focus Is To Increase In Country Value Add” Aravind Melligeri, Chairman and CEO, AEQUS
“We have the next 10-year roadmap laid out for us very clearly”
Photo Credit :
In an interaction with Urvi Shrivastav, Editorial Lead, BW BFSI, BW Businessworld; Aravind Melligeri, Chairman and CEO, AEQUS speaks about the formation of the company, their diverse portfolio, ESG initiatives, and objective pf the company.
What was AEQUS’ journey?
We started our facility in 2006 with aerospace manufacturing in Bangalore. It kicked off because of the 30 percent offset offered by the then government for aerospace. Then another programme came which offered us 50 percent offset. We were already doing design for Airbus and asked them if they would be interested in getting the manufacturing done from us as well. While they agreed, we relaised it will not solve the Billion Dollar plus requirement these companies have. Also, for them to give us work, we had to remain globally competitive. In addition, we had to sustain over decades, because that is how aerospace programmes work. The Special Economic Zone (SEZ) Policy came up at that time and we thought this is the right opportunity.
There were no aerospace cutting machines available at that time. Every machine was imported and output exported. SEZ was a perfect policy for a facility like this. We faced a lot of push back because we were going from a services business to manufacturing. That is also when QUESS manufacturing got involved as well. Our single-minded focus is to increase in country value add. When we started aerospace, we had only 20 percent in country value add, everything else was imported from outside. We wanted to solve this issue, not just for us but whole industry. That is why we went via joint venture route, to scale up fast. Our next joint venture was forging and assembly, which scaled us up another 30 and 20 percent in terms of in-country value. Today, we stand at 90 percent in-country value, which will soon become 100 percent. This also has a positive impact on the carbon footprint.
How did you expand to toys, a vertical completely different from aerospace?
In 2015-16, Hasbro toys came to India. Via our interaction with them, we realised toys as an industry is very similar. It needs its own manufacturing base, it is a child safety issue, requires specific kind of paint, which does not include Lead. The specifications are similar to aerospace. India has increased 60 percent duty in toys which nas made their availability difficult. We took up our first project from Hasbro and were able to price it competitively. We expanded eventually to another 20,000 sq feet facility. That is how the toy cluster at Koppal, Karnataka came up.
During this time, we had an interaction with a company called Wonderchef, who were buying from China. Since they were a brand with no experience in manufacturing, we agreed to partner with them as a contract manufacturer. We established a factory for them in Koppal and they bought the capacity for the whole plant. In total we have invested $500 Million in the business, including infrastructure, and plan to launch the IPO by 2025. Our debt is also small at $20 Million. All in all, our aerospace business has been profitable, toys are yet to reach there, and this is our first year with consumer durables.
How has ease of doing business changed since you started? Did you have difficulty is getting customers to trust your brand in the initial years?
We had credibility in the aerospace business because of our association with Quest. From there the customer was comfortable with respect to our ability to deliver. We also had a small facility in Bangalore to demonstrate that we can deliver. When we set up in Belagavi the focus was on scalability. Airbus was steadfast behind us when we launched this ecosystem. Getting customers was initially a challenge but we had a base to build them from. Given that we work in an SEZ (Special Economic Zone), not much interference is there from the government. We have the next 10-year roadmap laid out for us very clearly. There is opportunity in this field now, and now is the time to establish. If you are not exporting goods worth over a Billion Dollar, then you are not moving the needle. During Covid aerospace market went down by 65 percent, but we had other verticals where we could deploy people.
What are your ESG initiatives?
For every person working in our facility, we are impacting their family. They are not migrant labour, but come from within 50 km of the work place. While that is our number one focus, we also are strong believers in STEM education. We have engaged extensively with the local schools in this regard. We have also partnered with Agastya Foundation, for teacher training and laboratory facility. Additionally, healthcare facilities like eye check-up etc. is done at the school level itself. Our campus is very lush, which exceeds the government mandate, for instance, there are three rows of trees around the boundary. The total would be close to 18,000 in number. If you look at our mission statement, employees come first before customers because we have to create value to these people. It is a part of our DNA here at AQEUS, which incidentally means equal in Latin.