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Interview

with Javed A, Managing Director & CEO, Hawa, Hawa Valves (India) Pvt Ltd

29.09.2011 / Energyboardroom

Mr Hawa, Hawa Valves has been active for five decades, but the turning point has been in 2001, when you took over the operations. What have been the main strategies you adopted to reposition the company in the Indian valves market?

Hawa Valves is a family business, started five decades ago, and we are now at the third generation. To take the company to the next level, it was important to focus on one sector only, as we believe that you have to be a master of one rather than a jack of all trades and master of none. In this way it is possible to bring value both to the customers you are serving and to create value within the company.

When I joined the company in 2001 and formally set up Hawa Valves, we decide that we would focus entirely on the oil and gas market. Within the hydrocarbon sector we looked at seven segments within the valve industry that we would like to operate in, and since then it we have adopted a very focused approach.

Since we knew which directions we wanted to take, we were looking for areas where we could provide value. If you can do something different – maybe more efficiently or with innovations or with better products – even in some small way, then you are able to provide value.
Looking at where the hydrocarbon market was heading towards and what it would require, we realized that, within the valve space, potential customers were looking for value-added high end products. There were indeed huge concerns for health, safety and environment – HSE – as safety is a very important issue. The industry had a crying need for a product which was safe and took care of the environment, of the employees and of the safety.

Hence health, safety and environment – HSE – was the primary concern that we looked at. We considered how that could translate into what we could provide to the industry, and we figured out that we would be successful if we moved into engineering with a good product: a long term, safe product where the cost of ownership would be not just for two years, five years or whatever was the terms of the guarantee, but it would be for the entire life-cycle of the product.
You might have to all-engineer your production or bring in some innovations which will make the product last much longer. However, if you could do that and you are able to prove it to the customer, then he would be convinced very easily to adopt a slightly more expensive product because in the long term it would be a much more competitive product.

India is a very price sensitive market, especially if we look at the PSUs, where the L1 or lower bidding is in place. Did you find it difficult to convince the customer to accept a high-end, more expensive product?

Initially, there were times when we met customers, and they said we were too expensive. It is understandable, every customer has that complaint because they are always looking at reducing the cost of their projects and one of the ways to do it is by reducing equipment costs.
How we went about convincing them was very interesting.
L1 is the biggest problem of the market in India at the moment. The concept of L1 is hurting the industry. There is an evaluation, done by engineers. However, those engineers are not valve engineers. They will look at any company and their products against some parameters that have been set by their management but they do not have the in-depth knowledge to understand what differentiates one valve company from the next. In fact they are carrying out an evaluation, which is prior to the bid opening, but that evaluation is skewed from the beginning. The process is flawed.
We saw from the beginning that we were always priced off, we were never L1. We participated in many bids and we started thinking that we should find a different approach. A company has to survive on the basis of the business it is getting. Even if you have a good product, there is no point in doing business if no-one is using it.

In 2009 there was a huge fire in an Indian Oil (IOCL) terminal in Jaipur and the PSUs started thinking differently. IOCL suffered millions of dollars of damage and there were huge environmental concerns because of the pollution that was created, and that changed a little bit the perception, but not enough.

Hence we decided early on that we would try to find customers who would understand this value. That is one of the prime reasons that we went global rather than local – we realized that the values that we were bringing to the investor in terms of HSE were better recognized by the global end users in the hydrocarbon sector, rather than the PSUs.
We were very focused also in terms of countries to serve, and we started looking at markets close to India. The first one has been the Middle East, which is a national market, because we have been a traditional trading partner with the Middle East for hundreds of years. But also we looked at the Far East, where we saw a lot of new projects coming up and a lot of expansion with potential gas finds.
We looked at these markets also for geographical reasons: in case we needed to go across and speak to the people and also provide after-sales services it was easier as they were closer. It is not just about selling a product and walking away. In this industry you have to provide before-sales service.

You have to create a presence and you have to be there after the sale of the product. Then if you have any potential issues you can tackle them pretty easily and that is what they expect.
We found both of these markets very receptive, and led us to go deeper and deeper into the internationalization. When we entered into a conversation with the international oil users we noticed a very different approach compared to what is happening in the oil PSUs and the oil giants within India. Indeed, each different oil company or hydrocarbon user had designated a department especially for valves. They had valve engineers who are considered the final authority and the ultimate say as far as anything to do with the prequalification of valve vendors or the tenders or any buying requirements.

We appreciated that different approach because there was somebody we could speak to in that oil company who could understand what we were talking about as far as giving a better product. Hence we found that L1 is not the only criteria abroad, while it is in India. And in many cases we got orders even when we were priced much higher than everyone else. We were still successful because we could prove them that we were providing a better product for the long term and the cost of ownership was going to be much lower.

Over the years you have posted an impressive growth. Did it come mostly from the global markets or from the local one?

Most of the growth came from the global markets. It is mainly because of the focus on giving a good product to a market which was in the need for it and on looking for a product which would be safer and more environmentally secure. The growth was determined by the fact that we were able to give a product of that nature to a market that actually needed it.
We were pretty successful early on where we had impressive growth figures. However in 2008 there was the recession and we took some hits because some of the projects we were working on were delayed or put on hold. Hence we have been flat for the last couple of years but we believe we will get back on the growth path very soon. Given the amount of projects that are in the pipeline, starting with this year we expect to grow around 30 percent over last year.

Do you have the capabilities to sustain this growth from a manufacturing point of view?

We are operating at close to 80 percent of our capacity. However we believe that if you have created capacity you should be operating at 100 percent of it, and that is what we aim for.
The other aspect is that we have been slightly above the curve as far as growth is concerned. We have been investing a lot in expanding our plants.
We have a plant in Hubli and we have expanded it to nearly three times its size. At the end of 2009, we shifted location and moved into a bigger place. Hence we have a lot of space within our premises to further expand.

Within Mumbai we are setting up a new facility which is about the same size of the existing plant that should be operational towards the end of 2011. We have indeed planned ahead and we have looked at expanding our capabilities and our capacities.
But importantly what we have also done is to expand the supply chain. If you expand the manufacturing side but you do not have a good supply chain you are going to face problems. Hence the focus of the last two years has been to strengthen the supply chain.
When the recession hit us in 2008 we took that as a positive thing and thought it would be the time where we could sit back and look at where we could shore up core competencies, what we needed to change, and what we needed to do better in order to get to the next level and be more competitive.

Bringing the company to the next level involves the expansion of capabilities, capacities, and manpower. This is why we have just advertised to hire thirty to forty new people. We are also looking at supply chain management and strengthening that. All of these actions are going to result in us coming out much stronger and bigger. We really need to handle the growth in a manner that will not compromise the quality. As far as this industry is concerned, if you have a problem with quality you will be out of the market very soon.

Looking at the Indian oil and gas industry, where do you see the most opportunities for Hawa Valves?

Most of the opportunities for our company are in the upstream sector. While there are a lot of activities happening downstream and in distribution and in utilities, we do want to focus more on the upstream sector. That is because India is a relatively unexplored region geographically but with big potential, and what happened in the KG-D6 basin for Reliance opened up a lot of peoples’ eyes.
Something similar happened in Brazil, ten years ago. All of a sudden they realized there was so much potential. This is especially important for a country like India, an emerging economy where there are many concerns about energy security. The sheer growth of energy consumption is tremendous and unless there are some alternate energy sources identified and looked at which might happen in the future, such as solar and wind, we do not really see any alternative to the hydrocarbon sector as an energy source.

Therefore for us within India, there is a lot of potential in the upstream sector and we hope to be involved in some of these new projects, contributing to them by providing a better product.

Given the potential of the Indian market that you have just mentioned, do you think there is going to be a shift in your focus from global to local?

It is more global than India. I do not really see a shift in this. A company always has to think global, and then local. You have to think about the value that you can provide to a global customer and the quality norms that are prevalent globally.

When you think globally it is a commitment. You cannot start thinking globally and then at some point change your focus to thinking local. It might work for some companies but not for us because the company has grown with the interactions we have had with end users globally. These relationships are strong and they have been built up very painstakingly over the years with a very long term aim, which is that we will be working with them for many years to come.
The hydrocarbon industry globally is a very small community where you have a lot of people going back and forth between different companies. The global giants have their own teams and they take care of them. But if you look at the second rung of engineers, it is very fluid and maybe that is because the industry is very project-based.
Hence the relationships that we essentially built up within these companies and the opportunities that those companies continue to provide to us are too important and hard to ignore. They are very important because they are commitments.

So we will always be global but at the same time, because of the experiences that we had working globally, we are in a very unique position to provide a high value to local Indian companies as well. Of course we let them know that while our company’s focus has always been global we are here and we can provide the same value locally without the hindrances such as the L1 culture which we have in India.

What would be your mission for the company in the next three to five years?

What I would like to achieve is the creation of a brand that represents value. This is our focus for the future. I would like this company to be known as a value player and a reliable company because our commitment to the customer comes right from the top. This goes right through the organization. The customer is always the most important element and if the customer is happy we are happy. That is Hawa Valves philosophy.

Therefore we want to strengthen this aspect and make people realize that this is a company that can be relied on for a quality product, for a commitment to service and to deliveries, and that makes sure the projects are executed on time. Then growth will come automatically.
I feel that growth is the cart and the philosophy and culture of the company is the horse. So you have to get the horse right and the cart will follow.

Growth will continue to happen providing we can continue to provide value to the people that we are serving and we continue to be important to those people.
I would like to see the company being a strong name in the global hydrocarbon industry.

Being a family business, what kind of legacy would you like to leave to the next generation?

I am doing this because I like to do it. I do not know if the next generation will want to continue this business or not. Hence I am not creating value to leave for someone else.
We have created rungs of leadership within the company, a strong organization, where we have competent people working at different levels and in particular at the senior top management. We are creating an organization that has a life of its own, rather than just a family business which you create and leave behind for somebody else. That is a different way of looking at it, but a sensible way.

In a way it involves self-satisfaction and what you like to do. My family happens to be in this business by luck or by chance but if in the future the next generation sees an opportunity elsewhere then they will continue to think like entrepreneurs. Or as opportunities evolve in their generation maybe they will choose to take this company to another level by doing something different from what I have been doing.
However, my job right now is to strengthen the organization and create an organization that will then represent all those good things that we would like to do for our customers.

Do you have a final message for our readers?

Expect to see us as a bigger player in the future. Also, give us the opportunity to engage with you.

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