5. Turnaround - ???????????? ???????? ???? ???????? ???????? ?????? (because Beyond Fear, Lies Victory)

As you may recall from my previous post, I had an important decision to make.

The options to continue in the US, either at another job or for an MBA, were enticing and safe.??

The option to be the CEO of a company that was making significant cash losses, with a revenue drop of 90% in the last 2 years, and fighting multiple legal issues, was full of unknowns and challenges.

Until that time, I had been taking more unconventional and unexpected decisions. I had moved from the highly ranked University of California at Berkeley (with perfect weather!) to a relatively smaller and colder Rensselaer Polytechnic Institute in upstate New York. I moved back to India immediately after finishing my PhD while everyone else I knew had taken jobs in the US. I then left a global MNC, Siemens, within a few weeks of joining and joined a relatively smaller and unknown company called Sterlite. For each of these roads, I took the one less traveled, and I do not regret any of those decisions.

While the CEO opportunity was challenging, it also promised great potential. I was 35 at the time, had spent eight years in the company, and didn’t have much to lose.

I decided to take on the opportunity and dive into it with full vigour. We were still living in the US, and our second daughter was just born. I traveled to India after accepting the role to assess the full situation.

The company had four manufacturing units :

- Copper cables plant in Silvassa: this was shut down as there were no copper orders due to India shifting to wireless mobile phones.

- Optical fiber cables in Silvassa and Atlanta: both these plants were operating at extremely low utilisation due to lack of orders.

- Optical fiber in Aurangabad: this was in the midst of an expansion with a completely new manufacturing process. The capital was committed for the expansion, while the orders were disappearing fast. The price of optical fibers sold in 2001 at $100/km had come down rapidly to about $10/km in 2003. Also, the cost to produce fiber was still higher than $30/km.

Each of the plants was losing money and the morale was extremely low. There were widespread rumours about the company closing down as there was no apparent promise or demand in any of the business lines.

The company had revenues of Rs. 122 crores,losses of Rs. 86 crores.? It had a market cap of Rs. 30 crores, and a debt of about Rs. 300 crores. The employees, creditors, banks, as well as investors were looking for answers.

There was no clear direction and I didn't know where to start. I decided it was best to communicate and be brutally transparent, first, with the employees of the company.?

I visited both locations, Aurangabad and Silvassa, and had an all-hands-meeting with everyone. I communicated the prevailing situation of the business. Till that time, there had been a high focus on cutting costs - I mentioned that while some of that would continue, we would put a high focus on increasing sales, and called the initiative ‘Cut and Grow’.??(As an amateur gardener, I apply the same cut & grow approach to nurture and grow my plants).

By analysing the P&L information, it was clear that just cutting expenses would not be enough and that revenue growth was critical for the business’ survival. I sought everyone’s full participation and had growth conversations with whomever I met within the company. I also wanted everyone’s 100% commitment and we all went into mission mode towards a few focused projects. This focus on growth and short-term goals gradually started increasing momentum and motivation with the employees - this was the most important part.

I have since always believed in sharing the full picture with all employees, rather than holding back due to ‘strategic reasons’. We hire the best globally, everyone is an adult, so they deserve to know the full picture. It pays back in multiple ways: every employee starts thinking as an owner, there is great alignment on the direction (even if not perfect agreement), and every employee becomes a great brand ambassador.

I continue to practice asking open-ended questions, like ‘what’s new’ to most employees that I meet even today. With each unexpected and open discussion, we are able to engage at a whole new level compared to the traditional cookie-cutter exchanges that end up being predictable.

To increase the revenue as planned, we started focusing on areas where we could see green shoots or ones we had ignored during the dot-com bull run. We decided to focus extensively on the Indian market, which we understood best, but had left sight since the shift to the US. Rahul Sharma took on the initiative to get new business from public government customers across the product range. Manish Agarwal, who had moved to Atlanta along with me, initially worked on selling the US facility, and then shifted to getting business from the new and upcoming private telcos in India. In 2003, China was starting to grow and was a net importer for optical products, and we decided to send Ashwin Laddha, who had just joined the company, to explore the marketplace (more on China and the global growth in a later post). We consolidated all sales efforts to India and China.

All our initiatives started showing results and our sales reflected month-on-month improvement. This was extremely important as we could then increase our focus on the ‘grow’ rather? than ‘cut’ part. Rahul, Manish, and Ashwin continue on their growth journey - Rahul is currently the CEO of Vedanta Aluminum, Manish is the CEO of Sterlite Power’s India Business, and Ashwin is continuing his large scale global sales journey in Grasim Industries. All three of them had an immense contribution in increasing revenue, which was pivotal to the turnaround.??

We had major shifts in operations as well. We pivoted the copper business from telecom cables to ethernet LAN cables - this opened up a new enterprise segment that had just started to grow. For the optical cables, we focused on turning this into a strong bespoke engineering organisation which could turn a conceptual design into a finished product with extreme agility and flexibility. The optical fiber business required major initiatives to stabilise the new manufacturing process while increasing the capacity - this helped in reducing the cost of manufacturing fiber (I can write a few chapters on this alone).

While focusing on growth, it was important to seek the partnership of some of our vendors too, who had dues from the company. I applied the same methodology of transparency with them. We shared that we had full intentions of coming out of this situation and needed their support. We sought longer repayment terms for past amounts due and for future business, while sharing our larger turnaround plans with them. I am really grateful that most partners agreed to extend their payments to a future date, which provided us more breathing room, as a large part of the organisation was struggling with overdue creditors.?

The other critical element was towards arranging financing, as our credit ratings had taken a nosedive and banks were withdrawing all facilities. The same banks who were offering us all kinds of credit facilities when we did not need them were withdrawing them when we needed credit the most! We did the rounds to most banks, along with our CFO, showcasing our turnaround plan and strategy - the hit ratio was extremely low here. I recall making a presentation to Dr. P.J. Nayak who was the CMD of UTI Bank (now Axis Bank) for a term loan of Rs. 50 cr. This was the first time I was making a presentation to a bank Chairman and was extremely nervous, as they were amongst our last options. He asked very tough questions, but eventually, we got the credit lines. Similarly, Loknath Mishra, who had just joined ICICI Bank at the time, believed in our plan and extended new lines for us (Lok currently is the CEO of ICICI Bank in the UK and we continue to do global business with him). This was extremely helpful and we have always tried to favour these banks over others at later times, as they believed in us when no one else did.

This period was extremely challenging for all of us both professionally and personally. My wife had to manage a newborn and a 5 year old, all alone in the US, while I was spending an extensive amount of time in India in a new role. We decided to move back to India in early 2004 and we decided to come to Pune. I was the first employee of Sterlite Tech in Pune and we shared offices with a group company. Eventually, we made Pune the headquarters, as it continues to be even now.? I met Mr. Pravin Agarwal around this time, and he continues to be a great mentor and the Vice Chairman of Sterlite Tech. Along with the new role in 2003, I also hired my executive assistant, Supriya Joshi, who used to work with the previous CEO. Supriya has been a tremendous asset throughout the last eighteen years of my Sterlite CEO journey and has helped me tremendously, while multitasking with added responsibilities.

All the efforts of the entire team started reflecting in the results, and within a period of two years, we were able to turnaround the business. The sales grew from Rs. 122 cr (FY’03) to Rs. 332 cr (FY’05).? We turned net losses of Rs. 86 cr (FY’03) to net profits of Rs. 10 cr (FY’05). This entire period had its full set of learnings: the importance of planning, quick decision making, rigorous execution, bonding with employees, and transparency with all stakeholders. I have found that these principles work across all sectors and situations.

The turnaround experience removed any fear of the unknown from all of us. We were exporting a technology product to China, we had stabilised a completely new technology process for optical fibers, and we had created a new product line for ethernet cables from a traditional product. We had done all of this with a tremendous amount of ownership, mutual trust, and had become closer to each other than ever

As I became CEO, I regret losing the warmth of ‘tu’ (informal/friendly ‘you’) to the respect of ‘aap’ (respectful ‘you’). Up until that time, all my colleagues and superiors used to refer to me as ‘tu’, but that changed dramatically to ‘aap’ and suddenly the loneliness of the position started becoming clear.?

It is a similar feeling when people add ‘Dr.’ to my name – I know they are doing it out of respect, but still feels a bit distant. I keep telling them to call me by my first name (if not ‘tu’), but I got tired after some time, as this progressed so deep in the company. My first manager, Mukesh, had initially insisted that I add Dr. to my name while sending fax/emails to potential customers to lend credibility to me and the company!

I got married within a year of getting my PhD, and my parents were so proud of the fact that I had a doctorate that my wedding card mentioned my name as Dr. Anand! By the time I saw it, it was too late. My wife still makes fun of this!