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Drawing Up A Success Plan
For Cyient’s B.V.R. Mohan Reddy people and client relationships are two important hallmarks of success
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In the 1990s, entrepreneurship was not the obvious choice for many. Bodanapu Venkat Ram Mohan Reddy or B.V.R Mohan Reddy, then 40 years old, had spent considerable years working for other firms. A mechanical engineer from College of Engineering, Kakinada and a postgraduate in Industrial Engineering IIT Kanpur, along with a postgraduate degree in Industrial Management from University of Michigan, Reddy launched Infotech Enterprises in 1991 with an aim to explore global opportunities in engineering research and design services. The company changed its name to Cyient in 2014. “I saw a big opportunity globally for ER&D services and became a full-fledged entrepreneur by incorporating Infotech Enterprises,” says 67-year-old Reddy.
Back then, when Reddy started his business from home with a capital of Rs 25 lakh, it was an unpretentious affair of four engineers. At the time, Indian laws protecting intellectual property were not comforting enough to the western world. So, the work available in engineering services was low-end digitisation of paper drawings. Work packages remained small and the return on investment was difficult to justify. Reddy and the small team continued to scan the market and soon found an interesting yet underserved area. “We discovered the opportunity to digitise maps for geographic system applications.” However, high quality technical skill was required and that was in short supply in India at the time.
Today Cyient’s revenue stands at $538 million as of FY ending March 2017. This mid-scale firm is a home run for most investors. In October 2017, PE investor ChrysCapital had fully exited its stake in Cyient for about $19.4 million. In 2015, a partial stake sale had given the same investor a 3x return. In September 2017, a subsidiary of United Technologies, by selling its Cyient stake, scored Rs 651 crore ($100 million).
On the day ChrysCapital exited entirely, Reliance Mutual Fund bought 2.33 million Cyient shares at Rs 520 a pop. In the second quarter of FY 2018, Cyient netted Rs 111.40 crore profit compared to Rs 97.3 crore in the corresponding quarter for last financial year, a growth of 14.6 per cent. Cyient’s leadership clearly knows what it wants and is on the way to getting it.
Entrepreneurship was not hot in the 1990s. Reddy admits it was challenging to leave behind the security of the salaried jobs. Before Infotech, Reddy had already worked with four firms — DCM Group in 1974, and later with MICO Bosch, HCL and OMC Computers; he was the managing director with OMC Computers when the entrepreneurial bug bit him. “I did not become an entrepreneur right after leaving University of Michigan. I came from a generation that emphasised the need to first gain solid business experience. It took me another 15 years to feel confident enough to start my own business,” says Reddy who graduated from University of Michigan in 1977.
People. Technology. Relationships
For Reddy finding the right people to work for him was a priority when he started Infotech. He realised early on that people are clearly the pillars of success. “First we recruited the right people, then we trained them, rewarded them, and finally, retained them,” says Reddy. “We invested heavily in training, spending 11 per cent of our revenues.”
Another pillar of success was technology. “We simultaneously invested in building robust production processes. We deployed the right technology. We developed a robust tool for double-entry digitisation. That was unique and gave us over 99 per cent accuracy.” Cyient’s engineering services largely cater to verticals such as aerospace, communication, utilities and geospatial, and transportation and works with global companies including Boeing, Pratt & Whitney, and Philips. That brings us to the next pillar of success: client relationships that can weather M&As, restructuring, board rejigs — the works.
Reddy elaborates, “Our relationship began in 1993 with a company called Etak, forerunners in creating digital databases of road networks. By 2000, Etak was acquired by News Corp, Sony and then, by Tele Atlas, a European pioneer in navigation databases. In 2005, we strengthened our relationship quite significantly with Tele Atlas by acquiring their India-based captive.”
In 2008, Tele Atlas was acquired by TomTom (one of Cyient’s first 10 customers), to create the world’s largest provider of in-car and personal navigation solutions. “Despite three ownership changes and several management turnovers, we have sustained the relationship by continuously reinventing our value for this customer. It is now a $25 million account and our association has crossed 20 years,” Reddy.
Reddy now serves as Executive Chairman of Cyient. His son Krishna Bodanapu took over as MD and CEO in April 2014. Reddy now mentors 16 startups funded through his family office. “Startups are solving Indian problems and leading digital disruption with a frugal mindset,” says Reddy, who also serves as Chairman of the Board of Governors at IIT Hyderabad, a position he leverages to lobby for formal curriculum on entrepreneurship.
On Cyient’s growth, Reddy says, “I strongly think our company is at an inflection point of accelerated growth. We have the most conducive environment in India for a design led mid-scale manufacturing company to grow into a technology giant.”
Earlier in 2017, Reddy was honoured with the title of Padma Shri for his contributions to the industry. “To me, awards and recognitions are a motivator to do better and do more in the eyes of future generations who look up to us as role models.”