ENTERPRISE

How Rakesh Malhotra's Luminous Power Technologies exploited market's need of low-cost inverter

An engineering degree automatically qualifies one for the odd handyman's job at home. At least it did in my household. My father was an IAS officer and the south Delhi locality we lived in was prone to frequent power cuts. Our overused inverter would crash time and again, and my mother expected me to rectify the problem. Thankfully, machines fascinated me and I loved to tinker with them. It did not take me long to realise that this enjoyable pastime had the potential of becoming a successful business idea.

Inverters were very expensive in the early 1980s and cost around Rs 50,000 a unit. So, in between my corporate jobs, I conducted research on power inverters and tried to develop a cheaper version. After graduating from Jadavpur University in 1983, I had job hopped from Allen Bradley in Kolkata to Nelco and, finally, to Siemens Energy. In 1985, when I felt sure that I was on to a good thing, I decided to quit my job and set up my own venture, which would manufacture UPS (uninterrupted power supply) or battery-powered back-up systems. However, it wasn't till 1988 that I finally launched my company.

Since the concept of UPS was new, my father was apprehensive about my decision, but my mother supported me. Despite his doubts, my father helped me raise a seed capital of Rs 40,000 from his savings, which helped me lease a 600 sq ft space in south Delhi and employ four people. That's how Luminous Power Technologies was born.

Within 15 months, my inverter, priced at only Rs 15,000 a unit, was ready for marketing. I managed to offer the low rate because all the parts were procured locally. My first client was Modi Xerox, which placed an order for 28 units. The size of the deal was Rs 4.2 lakh, so we were off to a good start. I left nothing to chance, going myself to pitch for the deal instead of sending an employee. Before long, other deals started materialising, and by the end of the first year of operations, Luminous posted a turnover of around Rs 8 lakh and increased its headcount to eight employees. It helped that very few companies were in the UPS business at the time, but it was the strength of the product that ultimately helped me crack the market.

I am proud of the fact that my company was a pioneer in making inverters visually appealing. Since the other products in the market were very ungainly, people would keep them tucked out of sight. We, however, made innovative covers and designer trolleys that looked aesthetic, and as a result, our customers were able to install their units even in their drawing rooms. It was in keeping with our objective of selling a unique product that was also easy on the eye.

That's not to say it was smooth sailing all the way. I faced a big challenge within a few months of starting out because I had not conducted proper research before launching the product in the market. The inverter developed a defect and it resulted in a lot of complaints from clients.

However, I took care of these by visiting every client personally, bringing in the faulty products, fixing the problem and delivering them back. This not only helped meet the customers' expectations but also gathered a lot of goodwill.

Today, we supply products to 34 countries, including China, where we have also leased a factory outlet. In fact, Luminous has deliberately tried to stay asset-light by relying exclusively on the leased model for all its offices. In 1994, we started diversifying and took interest in other businesses, such as telecommunication infrastructure, knowledge process outsourcing and renewable energy, and there has been no looking back.

In June last year, the company hived off 74% of its equity holding to French energy major Schneider Electric for Rs 1,400 crore, and since then I have been trying to take a backseat in its operations. Though I am still the chairman, I have delegated the responsibility of its day-to-day running to the newly appointed managing director. I'm now devoting time to my new baby, Ncubate Capital Partners, which was founded in November 2011 and is looking at providing venture capital to micro, small and medium enterprises (MSMEs).

In India, the number of companies funding small enterprises is minuscule. Moreover, they do not provide strategic or operational talent. Most venture capital or private equity firms have industry and sectoral knowledge and the experience of funding, but they do not necessarily have the operating depth. So Ncubate was set up with the aim of exploiting this gap and providing capital, along with expertise, to the early-stage profit-generating companies. We have invested around Rs 250 crore so far and have 40 employees to handle the new venture. In the next three years, we plan to fund around 13-14 new companies.

(As told to Amit Shanbaug)