At GE, I could walk into a room and the moment I told anyone that I was a 23 year old veteran in the company, they would be all ears. Here I have to unlearn and learn; I need to first understand what the culture is and how the organization DNA works.
How different is your new role here in Rolls Royce compared to what it was at GE?
My role in GE was primarily into energy where I headed a vertical and everything under it, while at Roll Royce I have a group to take care of. Rolls Royce operates in 6 different sectors and my work cuts across each one of them. My role therefore has grown from an operating day to day, single domain work style to a group level. The current role is wider and more strategic where I emphasize on business, governance and control.
You spent quite a long time at GE so moving on to Rolls Royce what were your three biggest challenges?
Networking is my biggest challenge at Rolls Royce. At GE, I knew everybody, so it was very easy for me to conduct business. I just had to pick up the phone. A lot of credibility was already built so the acceptance level was high.
Also at GE, I could walk into a room and the moment I told anyone that I was a 23 year old veteran in the company, they would be all ears. Here I have to unlearn and learn; I need to first understand what the culture is and how the organization DNA works.
The third challenge comes from the business. When we talk about a business, we look at margins, prices, costs, the competition and capabilities. Most of these fundamental aspects don’t differ across business but what differs is how people function and operate in a certain business environment. I am learning that part here.
So how big is Rolls Royce in India?
Globally we are around 12 billion pounds in revenues. All our operations are measured at a global level. We are expected to look at market shares in different geographies, drive our production to the markets and then build out a base so that we can do the right thing to grow the business. Internally, we do go about measuring ourselves in terms of numbers and growth, but as a company policy, we do not publish these numbers.
In India we are going all out. We are present in civil aerospace, defense aerospace, marine, energy, engines and nuclear power.
If we talk about our market share, we will have to look into specific sectors. In Civil aerospace division we had a joint venture with Pratt and Whitney called International Aero Engines which we sold off to P&W later. We invested that money into another company in Germany. This happened around 2 years back. We are still waiting for the wide bodied aircrafts to come in. In the current lot of Air India 787s and also the jet airways fleet, we had missed the bus long back. We are currently waiting for the next wave of change and we are ready with the right products for the right bodies and we also have the right relationships in place.
Today, if there is a bid in any of the sectors we are a major contender and everyone looks up to our participation.
How different is the business of aerospace from what you used to do? Is the road to the market any different?
Sectors differ on the basis of how you look at them. The purchase modus operandi for an aircraft or an engine buyer is very different. There is a leasing structure in aerospace which does not exist in energy. In energy sales are straight forward, but we have to partner with banks to help them understand the products, the technology play, the product lifecycle and long term servicing agreements etc. There are both similarities and differences. When someone switches sectors, there are people who say that you don’t know the sector so you’ll have to learn a little bit more. The product is not very different. What really matters is how you structure your payments and how people interact differently. The way a banker would speak to you is different from the way an operations guy would talk to you and similar is the case with all industries. In Energy, there is more of technology, so there are technical people who take up the roles of Senior leadership in Energy companies. In aviation, you need not be a technical person, there may be operations people taking up these senior roles. The senior people can also come from aircraft leasing companies, or even aircraft maintenance. Like Naresh Goyal, for example is a know it all kind of a professional because he built the airline from scratch. Now the new person who comes in his place might come from leasing and therefore will talk differently. Someone like a Vijay Mallaya is from the breweries business who jumped into airlines and therefore his way of thinking and talking would be very different from the others.
The civil aerospace thinks about commercial aspects and how can we make money. The defense sector thinks about how do I protect the country’s interest regardless of whether it’s L1, L2, L3.
Here its still a learning curve for me. There are different ways of building relationships in the aerospace and defense and aviation industries.
What about the service based business per se?
If we talk about defense and aerospace, we have tied up with HAL and they do most of the servicing for us while we provide technical support. All the Jaguars and HawkTrainers that fly in this country run on Rolls Royce engines, but they are made by HAL with our technology and we ensure that all technology upgrades and new technologies are given to them.
In the energy generation business, we have engines and compete with companies like Wartsila and we have turbines where we compete with companies like GE, but this market has currently not evolved enough. We talk about power cuts in this country, but it is not an issue of capacity because if all power companies switched on their generators, there is enough power in the country. It is a question of load management and the second issue is that of peak hours management. We currently have a peak load deficit of 13% and we have to optimize this load and we do that we realize that when you have gas availability you have to have more efficient turbines and that is where we come in. But it is at least a 2 year effort before this happens because currently our base load units are sitting idle because we don’t have enough gas. So first we need to get these up and running and then we need to optimize them and that is where I am focusing.
In the nuclear space, we are not very big players because we are neither reactors nor turbines. We are control systems and transmitters.
In the marine sector, we are in the off shore platform, where our engines are being used by the coast guards and fast engine vehicles and we work very closely with shipyards and players like L&T, ONGC, the Indian Navy and Coast Guards.
You have a manufacturing base at Bangalore. Tell us about it.
It’s a 50:50 JV with HAL where we make machined parts for direct assembly into our global fleet. We ship them to Derby or Singapore and we assemble them, which is the first of its kind setup by anyone in the gas turbine business in aviation in India.
Not many companies set up manufacturing bases in India? Do you think that unless an Indian conglomerate like a Tata or a Reliance sets up a manufacturing base for Aviation/aerospace, things will move slowly for MNCs?
For us to get into manufacturing, we have to force offsets to move in the right direction. But the question is why should any company come to India, set up a manufacturing base and ship our products abroad? This is a question that every company asks. We do have some clear cut positives here like good labor, good optimized cost facilities, but it takes a lot of effort to maintain delivery execution quality and ensuring that people are really committed to being the best. The controls have to be very strong in the aviation space because every part is super critical. This is excluding the regular issues that every company faces with respect to number of forms we have to fill, the number of approvals we need to take, complications in tax, in land and labor. All these things coupled together make it a very different proposition and there is a clear cut requirement of a long term vision at the leadership of this country. There is a lot of room for policy reforms and speed in terms of setting up setup capabilities.
There is also a lot of opportunity and young talent available in this country which is just waiting to be tapped, but how and when this is tapped, needs to be seen.
The road is not easy for the Indian players also. They have to have the technology to do things right and in-house technology development takes a lot of time and effort. Its like reinventing the wheel and therefore it becomes important to get some foreign company in. However, it is a lot easier for an Indian company to acquire a global company and serve the global markets rather than an Indian company partnering with a global MNC to serve the Indian market.
This is precisely the reason why a lot of Indians buy companies globally while the M&A activity in India is limited. The valuations in India are too high and the returns are spread out over a period of too many years
Looking at the turbulence in the markets and the Civil Aviation space in India, what are your growth prospects in the near future?
In all the sectors we are present in, we have long term strategies in place. If you take civil aerospace for example, we are an active participant and our products are liked and appreciated. We are positioned well in the sector and when the sector itself takes off, we shall take off with it. Talking about areas like defense, there have to be long term strategies and in energy and engines we are still waiting for some clarity in this sector. Unless some clarity comes, it shall be very difficult to grow. Nuclear again is a policy issue. When things move forward, we are there with the right products and relationships and we shall get our fair share.
Marine right now is offshore for us and naval being tied to defense and offshore to oil and gas, the sectors in general are slow. For us, the mandate is clear. We need to be patient and persevere and passionate about our businesses and the country and if we stay focused, the opportunities will come.
Is quality talent a constraint? Where do you think we need to improve to have a talent pool more suited for this sector?
Finding and retaining quality talent is always a constraint. We worry about it all the time that we need to have the right people in the right job. Some of our operations, because of the nature of the business will have people from overseas, but other businesses like engines and marine business are totally local. Except for our Civil aerospace and defense businesses; which require a lot of big deals and high end technology, all are business have a lot of local talent and I feel that in India, it is always a challenge to find the right people.
We have lots of engineers coming out every year, but are these quality engineers? We need people who are application experts and not theoretical experts. Now with more and more factories coming in, there is definitely going to be an issue with the talent availability.
Finally on an informal note, how does your average day look like?
I usually leave my house by 8:30 and reach the office by 9, post which I am usually signing on the important paperwork and then my meetings start. I try to divide my meetings to 30% with external connections, 30% with internal and the rest of the time I divide between my thinking time and in calls that make to people when I discuss about my strategies for this business. Typically I leave for home by 6:30 and am usually on calls till 7:30 pm, post which I spend time with my family.