When the US-educated 37- year-old took over as the Vice Chairman and Managing Director of Amara Raja Batteries in 2003, few would have imagined that one day he will eclipse many of his peers to emerge as the best-performing CEO. Today, Jayadev Galla, or Jay Galla, has come a long way to prove his mettle. "My first few years as MD were not attractive at all. Our revenues were less than Rs 200 crore. I took a calculated risk to enter automotive batteries (the company's earlier focus was on industrial batteries), much against what many felt was not a wise decision. To top it all, we were losing money in the initial days and even crossing the Rs 200 crore mark in revenues seemed to be a challenge," he says.
Since his return from the US in 1992, Galla had taken it on him to steer Amara Raja's industrial batteries business to new heights, but at the back of his mind he always knew that automotive batteries would be the future. Cut to 2014/15, the visionary in him comes to the fore. Amara Raja posted a massive Rs 4,211 crore in net sales last fiscal, catapulting Galla as one of India's most successful corporate leaders. The jury for the 2015 Business Today Best CEO Awards also recognised his efforts and unanimously selected Galla to top the chart for the auto ancillary category.
Standalone data, net of extraordinary income and expenses
The last two years, however, have been very aggressive for Amara Raja. The company increased its capacity across all five broad categories. In the industrial batteries space, capacity for UPS batteries was doubled, while telecom applications saw an increase of 25 per cent. In the automotive segment, annual capacity for four-wheeler batteries increased by 33 per cent from six million to 8.25 million, and for two- wheelers was up by 30 per cent. For inverter batteries a new plant is coming up and expected to be ready by January 2016. In fact, the shift in focus from trading to manufacturing has helped the company immensely. Says SV Raghavendra, Chief Financial Officer, Amara Raja: "Total investments in capacity increases has been around Rs 1,500 crore." Incidentally, Raghavendra, who joined the company about 18 months ago, admires the hands-off approach of Galla, describing it as "the kind of freedom we get in terms of visualisation and looking at what is good for the organisation".
But, other than capacity expansions, what has Galla done differently in recent times to take the company forward? Initially, he says "we used to limit our exposure to OEMs to 25 to 30 per cent of our total automotive battery manufacturing capacity, but in the last three years it has gone up to 35 per cent".
However, the OEM segment was never a profitable business because margins were lower compared to the battery replacement market, which is 8 per cent higher than OEM segment, say company officials. "We opted for it because we found that one out of every three customers was just replacing the battery brand. They would just pop the hood, look at what was there and replace it with the same brand." Galla, however, was quick to add that, now, one out of two customers would replace the same battery brand. He attributes this shift in attitude to Amara Raja's aggressive advertising campaign. Now that the company has grown its capacities and volumes, it is in a position to take higher exposure to the OEM segment. Further, an increased market share has helped spread the fixed cost over a larger number of units.
The second major initiative by Galla and his team has been the launch of sealed 12V-7Ah AGM batteries (sealed and maintenance-free batteries used in two-wheelers with push button start) for motorcycles that helped capture the underserved market in two-wheelers. Galla is clear on the road ahead for the company which is to "become the market leader in the Indian automotive batteries space in the next two to three years". According to Raghavendra, Exide has a market share of 55-60 per cent in the OEM four wheelers segment, while Amara Raja commands 35 per cent. It sees itself running neck and neck with Exide in the replacement market for four-wheelers and two wheelers, with 30 per cent market share in four-wheelers and 28 per cent for two wheelers. In the two-wheeler OE segment, though Exide is the market leader, Amara Raja has captured 12 per cent market share in the two years since it entered the segment. In the industrial batteries space, which accounts for around Rs 2,000 crore of total revenues, more than 50 per cent is from the telecom sector, where it is the leader with 60 per cent market share followed by Exide and HBL. About 25 per cent of its industrial battery turnover comes from the UPS segment, which is a fragmented market with around half a dozen Indian players, apart from Chinese and Vietnamese imports. The balance 25 per cent of its industrial battery turnover is divided between exports, Indian Railways and solar power.
Analysts, who keep a close watch on the company, however, feel that there are many challenges along the way. One, the automobile sector has seen muted growth in the last two to three years. Two, improving power situation is expected to negatively hurt industrial batteries manufacturers. Three, though Amara Raja has been more aggressive in capacity expansion, Exide will still be at the leader, given its investments in technology upgradation.
2000: Amara Raja forays into automotive batteries. Launches the Amaron brand of batteries
2002: Forays into exports Launches the Quanta brand of industrial batteries
2004: Inks an original equipment agreement with Maruti
2005: Enters into an OE agreement with Hyundai
2007: Forays into rural markets with the launch of Powerzone brand of automotive batteries
2014: Major expansion in UPS batteries after new MVRLA plant goes commercial
2015: Second manufacturing plant for four-wheeler batteries goes onstream. Raises total capacity from six million to 8.25 million per annum
With enough management bandwidth to handle daily operations, he set up the Amara Raja Corporate Council in 2014 to devote time to strategic discussions and to plan for the future. The members include his father and Amara Raja Chairman Ramachandra N Galla and the CEOs of the six Group companies, apart from Group heads of human resources, supply chain, finance and quality. Jayadev Galla's two nephews - Vikram Gourineni and Harsha Gourineni, who joined the company as senior management executives, were inducted in the ARCC recently.
If Galla, the corporate leader, is a success story, so is Galla the politician. In the 2014 elections, he won the Guntur parliamentary constituency on a Telugu Desam Party ticket. Using a mix of technology and travel, Galls has been able to divide his time between his two passions. But, how does he cope with the demands as a politician, especially if it proves to be detrimental to his business interests? "What is good for the country is good for us," pat comes the reply. And, he has reasons to sound so confident. Sample this: Amara Raja sold 1.5 lakh inverter batteries every year in the Seemandhra region. But when TDP lived up to its promise of 24x7 power supply, the company suffered a major blow. "We lost that business as there are no power cuts in Andhra. It was our largest market until a year ago, adding up to 30 per cent of our total home inverter battery sales. Now, the sales are down to about 30,000 to 40,000 in this region. But I have no regrets. We have shifted focus to other regions, especially North and here we will now be shifting our focus to solar power storage batteries for home applications."
For Galla, his father remains the role model, but his admiration for Ratan Tata, Anand Mahindra and Sunil Bharti Mittal, has inspired him for long. "They have all made some aggressive moves and have become global players. Each has something that is unique. Ratan Tata's move to acquire Jaguar and the Corus deal were amazing. Anand Mahindra has expanded into so many different businesses while ensuring the core is very strong and doing it all ethically. On the other hand, the whole world is looking at Sunil Bharti Mittal's business model based on innovation as the way forward in telecom."
Visit Galla's constituency in Guntur and you would find his supporters overawed by him. They consider him glamorous, yet accessible. His links to the Telugu film industry only adds to his charm - he is the son-in-law of veteran actor Krishna, and the brother-in-law of super star Mahesh Babu. But, what does Galla bring to the table as a politician? "The country needs citizen legislators - people who have worked in society, have excelled at something, added value and then taken to serving the people. If they don't know anything other than politics what are they bringing to their job?" he signs off.
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