HYDERABAD: In one’s life, a man is presented with many choices to make — some are easy shortcuts, while the others involve difficult paths. Many people choose the easiest way, for being upright is the most difficult task, especially when they have umpteen opportunities to make money. One of such disciplinarians is Cyient founder B.V.R. Mohan Reddy. He is the founder of Rs 9,184-crore engineering giant.
“I respect the wealth I have built so painstakingly since I learned early on that money does not grow on trees. One has to earn it, in the right way, without cutting corners and by staying on the right side of law,” Mohan Reddy wrote in his memoirs ‘Engineered in India — From Dreams to Billion-Dollar Cyient’.
This clarity of thought permeates the character of Mohan Reddy. He worked for what he believed in and always resisted the temptation to join the herd to make quick money. He set up his company Infotech in 1991 — nearly a decade ahead of the dotcom boom. But Mohan Reddy remained glued to his first love — engineering — in spite of many other entrepreneurs making millions by offering software outsourcing services.
Recalling his fascination for engineering, Mohan Reddy recalls his first tryst with machines. “It all began when I was seven and spotted a steam engine chugging along the railway line… I was floored… My father’s heroics suddenly faced serious competition from the world of machines, as I watched the engine effortlessly lug an endless chain of bogies. One, two, three, four…”
As he grew up, internal combustion engines (ICE) replaced steam engines as his area of interest. Contrary to many people who look at their interest and career as two different areas of pursuit, Mohan Reddy sought to marry them.
He took his interest to the next level by taking engineering as his field of study. He did masters in industrial engineering from the premier Indian Institute of Technology, Kanpur. After graduation, he decided to be an entrepreneur going against the established practice in his family — his paternal grandfather was a farmer, maternal grandfather a revenue inspector and his father a police officer.
As he was from a middle class family, Mohan Reddy to pursue his new dream entrepreneur by himself. He neither had the capital for it nor the experience. So he drew up a plan and went on to execute it systematically — though it was painstakingly long from the current startup standards. He took up a job in Shriram Refrigeration, a DCM Group company, as a senior management trainee, which involved running operations of the diesel engine assembly on the shop floor at Balanagar in Hyderabad.
While understanding the nitty-gritties of an assembly floor in India, Mohan Reddy got an opportunity to study in the United States. He yearned to see the West and witness technological progress in the western world by being a part of an American university.
“I also understood that in addition to education, I needed to develop lateral thinking, understand different cultures and nurture diversity of thought. I did not want to remain the proverbial frog in the well.”
Mohan Reddy secured a seat for MS in Industrial and Operations Management at the University of Michigan in 1976. In spite of strong opposition from his father, he left for the US leaving behind his day-old baby son and his wife in India. At the university, he learnt about the problems of small businesses and studied the ways to manage every aspect of a small business — marketing and sales, people, operations and money. This ticked off another check-box for his future
After witnessing the changing technological landscape in the United States, Mohan Reddy joined Motor Industries Company Ltd (now Robert Bosch) to pivot his career around computers. He later joined HCL to learn one of the most important functions of an entrepreneur: selling his product.
He toyed with entrepreneurship in the late 1970s when he got a government licence to manufacture computers in India. But on advice from a senior government officer and a family friend, he decided to join a joint venture of US computer scientist Dr Raj Reddy and Tata Group company Voltas, which was funded by the Andhra Pradesh Electronics Development Corporation Limited. The joint venture, OMC Computers, was to manufacture computers and Mohan Reddy was part of the leadership team as the chief executive officer, reporting to the company’s non-executive chairman A.H. Tobaccowala.
“OMC became a rising star and one of the top ten computer manufacturing companies within five years of its inception. Its turnover, which stood at Rs 3.10 crore in 1984, shot up to Rs 15 crore by June 1988,” Mohan Reddy wrote, adding that OMC had 50 per cent share in the Indian market for CAD/CAM/CAE.
As the startup emerged as the market leader in design automation by the late 1980s, the OMC founders decided to sell the company. “I had been at OMC for nine years and was getting restive once again. I wanted to break out on my own. I needed to challenge myself.”
Mohan Reddy decided to resign from OMC. He got Rs 20 lakh through his exit from the company as he had three per cent stake in it. “When I look back, my journey at OMC fills me with the satisfaction of not just selling a product but also an idea — of introducing a concept, a dream, and an industry to this country. It was a fitting forerunner to my eventual journey as an entrepreneur.”
During the year-long cooling off period at OMC, Mohan Reddy travelled extensively in the United States, Singapore and Taiwan. “These trips opened my eyes to the tremendous potential to sell software services in the American market.”
“I toyed with several business ideas and finally concluded that while I had the requisite experience in both hardware and software, in the prevailing climate, the larger business opportunity lay in software services.”
“Wasting no time, I corporated Infotech Enterprises in August 1991 to
provide software services exports,” Mohan Reddy explained.
After he was relieved from OMC, he launched the operations of Infotech Enterprises from his modest home, with two associates. The dining area at his home was converted into office space and started working on CAD-CAM workstations Infotech’s first customers were General Motors and Gabriel Shock Absorbers.
In the early years, Mohan Reddy juggled his tasks functioning as the frontline salesman, HR manager, operations manager, admin manager. His backend support was his wife, who dished out tea, breakfast, lunch and dinner for all associates from the home kitchen during the first six months.
As business volume increased, Mohan Reddy shifted his office operations to Maitrivanam and STPI-Hyderabad. By March 1995, Infotech had over 100 people working in two shifts.
“Within a short period of time, ‘digitization at scale’ became our core competence. Infotech had a diversified portfolio of CAD and geospatial services — 5 to 10 per cent of the volume was CAD and the rest geospatial business. This service offering gave us enormous business traction and our volumes swelled.”
As Infotech grew, Mohan Reddy decided to focus on partners to increase the scale of its operations. “I scouted for partners willing to identify business prospects, bid on contracts, close projects, define the process to us, interface with clients and promise customer satisfaction.”
“By mid-1996, Infotech was profitable quarter-on-quarter and not hamstrung for cash… Nonetheless, we needed growth capital to foray into engineering consultancy and double software and product development capacity… The only viable option that remained open to us was public markets and the IPO,” Mohan Reddy wrote recalling the circumstances that led to the IPO.
Infotech’s IPO opened on March 17 and was oversubscribed 1.56 times. The valuation at the time of listing was about Rs 11 crore.
Infotech grew reasonably well in the first five years, but was not on par with other IT industry peers. “We had to make smart choices… We could not afford to fail. I studied the evolving business environment and decided to test waters in software development services with an eye on the Y2K remediation opportunity… I explored the market for a potential acquisition… We found Systems Research Group Ltd (SRG), a Hyderabad-based commercial software development company, as a desirable target for acquisition.”
The acquisition of SRG enabled Infotech a quick entry to the commercial software market.
Mohan Reddy, however, observed that “digitization and software services businesses are like chalk and cheese, despite the perceived similarities in their business and operating models.”
While Mohan Reddy always desired to build a global engineering services company, he faced roadblocks in his path as multinationals did not have confidence in Indian companies. “They zealously guarded their products as though they were crown jewels and were extremely sceptical about outsourcing their core competence.”
Infotech, however, managed to build trust among some companies. Its first customer in this segment was Ford Motor Company, which outsourced element modelling and analysis of an engine block.
The next major transition in the corporate journey of Infotech was its association with aerospace major Pratt & Whitney. In 2000, Infotech entered into a deal with P&W after a chance meeting with the latter’s vice-president (engineering division) Ed Crow and CFO Jyothi Purshottaman and several rounds of talks.
“We finalised a five-year strategic partnership with Pratt &Whitney. The engagement involved delivering a range of software services and engineering services for product development and maintenance… We offered a 15 per cent equity stake in the company with an option to further enhance it to 18.4 per cent by 2003.”
For the first six months after the deal, Mohan Reddy said P&W outsourced low-end work such as product definition and class-2 engineering changes, which allowed Infotech to understand the engineering change management (ECM) process.
In 2013, Infotech got rebranded as Cyient as the name ‘Infotech’ was too generic.
Though Mohan Reddy for long resisted his son Krishna’s push for rebranding, two instances changed his mind.
After dismissing the idea of rebranding, “I went to a party. A senior IAS officer with a lively interest in the IT industry got into conversation with me. He made general inquiries about the business health of the firm and concluded our discussion with an optimistic observation that was discomfiting in the extreme — ‘As long as you are associated with Infosys, Mohan, the company will do well’.”
It was a slip of tongue, but it convinced Mohan Reddy that there was little distinction between Infosys and Infotech. “They were such close homophones that people often used the names interchangeably.”
The second instance that finally convinced Mohan Reddy was the arrest of a director of another company which has infotech in its name. The result was rebranding Infotech as Cyient.
The company later decided to offer designing services for the manufacturing sector.
To accelerate the company’s entry into manufacturing, Cyient decided to acquire Rangsons Electronics, a Mysore-based electronics manufacturing services and system integration company, and its high-precision machining subsidiary Techno Tools in January in 2015.
“This acquisition enabled us to position Cyient strongly and expand into high-technology and high-value, design-led systems and solutions in line with the company’s S3 (services, systems and solutions) strategy,” he wrote.
As the framework was set, Mohan Reddy took a backstep by taking the role of a mentor or final arbitrator, giving more space to the ideas of the young generation led by his son Krishna.
At the age of 60, Mohan Reddy allowed his son Krishna to take a key role in decision making and shifted his focus on promoting entrepreneurship through mentoring and investment. He is actively involved in government programmes to improve the quality of education in the state....