Albert Einstein wasn’t an entrepreneur. But his most celebrated mathematical formulation E=MC2 defines start-up organisations remarkably well. Entrepreneurship = Money x Courage, with courage compounded to the power of 2. In Jai Prakash Malhotra’s case the formula can be modified to read E=MC3. For this Faridabad-based first generation industrialist, the odds against pulling off a successful business were very high. But he overcame them to come out a winner.
Over 18 years of working as an employee did not dull Malhotra's spirit of setting out on his own. In fact, he turned his two decades of experience into an accumulated asset to build his business on. At the age of 40, the fear of putting at stake the future of his two children did not deter him from venturing out of the comfortable shell of the monthly salary. If anything, it goaded him to make his business plan as fail-safe as possible. So, when his business partner suddenly walked out of the project after six months, Malhotra did not stop in his steps. Not even a single valve had rolled out of the factory but Malhotra had enough confidence to go solo.
It’s for these reasons, and more, that the Faridabadbased Rs 3-crore Bhartiya Valves is an instructive case study in starting a new business. Sure, Malhotra is no N.R. Narayana Murthy or Sergey Brin or Larry Page, who built global scale companies in less than a decade.
His old-economy small-scale valve manufacturing unit in Faridabad near Delhi has the sight and sounds of a classical factory. “I love the feel of grease on my hands,” says Malhotra, 57, who reaches his factory before his team of 28 troops in. His hands-on approach—Malhotra can single-handedly turn the raw material into the final product—-is something the workers admire him for.
Yet, Malhotra’s foray into business had more to do with providence than a plan. He was a production engineer with Atlas Cycles when Superflame, a company manufacturing household appliances, sought him out for setting up a factory to manufacture valves for gas cylinders in 1980.
Not only was the company a newbie in the segment, even Malhotra was wet behind his ears when it came to valves. “I was not familiar with the technical aspects of the product. So I took a twomonth leave and learnt all about valve-making at a factory in Pune,” says Malhotra.
Armed with that knowledge, he joined Superflame’s new venture. Till then, all Superflame had was land for the project in Faridabad. Malhotra had to do everything—from liaising with banks for loans to obtaining government clearances. The opportunity to start a new venture was excellent training in business management for the engineering graduate. The turning point came in 1989. The Superflame plant was running on full steam, manufacturing 65,000 valves a year. Malhotra had risen to become the general manager.
However, differences cropped up with the new management and soon Malhotra was considering other options. The idea of entrepreneurship came from a customer-turnedfriend. Malhotra’s monthly salary at that time was Rs 20,000. And the only asset he had built during the nine years at Superflame was a 350 sq yard house in Faridabad. With a homemaker wife, two school-going children and rent from a small flat in Delhi the only other source of income, the move away from salaried security seemed foolhardy, if not downright suicidal. But Malhotra was confident of his knowledge of the industry. The icing on his experience was the goodwill he enjoyed with potential customers, suppliers and financiers.
With his wife backing him fully, Malhotra decided to take the plunge. He and his partner put in Rs 3 lakh each. Another Rs 8.75 lakh was borrowed from New Bank of India. In May 1989, Bharat Valves was set up to manufacture valves for industrial gases. Within six months, the plant and machinery were in place. However, two major reversals almost took the wind out of Malhotra’s sails. The approval of Chief Controller of Explosives (CCE), necessary for anything that relates to industrial gases, took six long months to come through.
Malhotra started assembling valves, which did not require CCE approval, himself to bring home Rs 20,000 a month. Just when it seemed that they would tide over the crisis, there was another jolt. The partner, tired of waiting for returns from the stalled venture, decided to pull out. To buy out his share, Malhotra needed Rs 6 lakh. He sold his ancestral property in Delhi and bought out the partner. Bharat Valves was now fully owned by Malhotra.
One big plus for Malhotra was that his workers believed in him. It was the support of the 16 workers that set the machines rolling. “There were times when I couldn't pay their salaries but they soldiered on,” recalls Malhotra. The first order was for 200 valves. In 1990-91, the company did business of Rs 21.36 lakh. Within four years, this figure had jumped five times to touch Rs 1.16 crore in 1994-95. In 2005-6, the sales turnover of Bhartiya Valves touched Rs 3 crore. With Malhotra’s son Gautam joining him after a stint at Infosys Technologies, Bhartiya Valves is on an expansion spree. Malhotra has also stood guarantor for a few startups. An angel investor in the making perhaps.