In YPO member Raghav Kanoria’s family, they start them young. “We’re encouraged to look at business early, so from the age of 16, I was part of meetings at various family companies within the Kanoria Foundation,” he says. “Right after university I worked in our financial company for a few years, which manages almost USD7 billion dollars of funds in India. That brought me insight into a lot of different industries and gave me a good perspective on risk.”
Having a good perspective on risk is vital for anyone working in the power generation industry in India. It’s a lesson Kanoria learned when he joined India Power, a major electricity generation and distribution company, four years ago. Having recently been made CEO, the 27-year-old has gained a fascinating insight into a sector in which the potential rewards are tremendous — but so are the challenges.
“There are a lot of opportunities in the power sector,” says Kanoria. “It’s a USD100 billion business, it’s growing fast and we want to be a really substantial part of it.”
The sheer potential is jaw-dropping. “According to government data, 250 million people still don’t have electricity,” says Kanoria. “Even among people who have electricity, only a very small proportion have high quality, 24/7 transmission. Outside the cities, many towns and rural areas are completely deprived of power. The expansion opportunities are huge.”
As a newly promoted CEO, Kanoria is going to take time to get the lay of the land before diving in to new investments. “At the moment the focus is on efficiency improvements and stabilizing all our existing investments,” he says. “But within the next six to eight months we will look at more growth.”
In a country with affordable land and lots of sunshine, renewables seem like an obvious area for acquisitions. “We entered the renewables sector very early,” says Kanoria. “We set up our first wind turbines in 2005, which were among the first in the country. We have a decent size of investments in renewables, around USD150 million, and we did purchase a solar asset not long ago. But we are taking a cautious approach because competition in renewables is extremely tough and won’t give us the desired results for our shareholders at the moment.”
He’s not kidding. New supply from renewables has driven consumer electricity prices down to a quarter of what they were two years ago in many places. “The aggression which is there in the sector is just unimaginable,” says Kanoria. “We are not very comfortable taking that sort of risk.”
Distribution opportunities
The real opportunity right now, Kanoria reckons, is in power distribution, rather than generation. “We have a very good base in the distribution sector,” he says. “We operate two areas in the east of India, where we supply electricity to 250,000 people. Our first focus is to look at growth in distribution, gaining a foothold in more areas of the country. Meanwhile, for our current distribution business, we’re focusing on improving efficiency.”
Once again, the numbers are huge. In some places where India Power has taken over distribution, says Kanoria, technical and commercial losses of electricity were amounting to 80 percent. The national average is 25 percent. In one area, India Power’s engineers have managed to bring it down to just 3 percent. This epic improvement, says Kanoria, is thanks to India Power’s technology. “We’ve been rolling out smart grid tech,” he says. “It makes all the assets in the entire distribution chain communicate so we know how power is flowing through our system and what each customer is consuming, both commercial and residential.”
Alongside the technical challenges are some fairly massive customer services issues. “In India, customers don’t generally tend to pay for electricity,” says Kanoria. “In most areas, that’s still a big challenge. And that’s primarily because the distribution companies don’t have a very good quality of supply and their customer service is very poor. Until that’s resolved, the customers don’t want to pay. So first, we have to improve the quality of supply. Then we focus on customer service, making sure all grievances are monitored and addressed. Finally, we put in the technology to identify where losses are happening and how we can reduce them.”
Kanoria clearly has his work cut out. He says he’s driven in his everyday challenges by the philosophy of his family’s Kanoria Foundation, a trust with more than a hundred years of business behind it. “Our approach is simple: to work with devotion,” he says. “We are not in this just to make money. We have to be completely involved in our business to make sure that all the stakeholders involved are benefiting. What are we doing to benefit our customers? What are we doing to benefit our shareholders? If any of your stakeholders are not happy or their expectations are not being met, it means your business model probably needs to be looked at again.”
What is Kanoria’s advice for any YPOer interested in doing business in India? “One key thing if you’re looking at any big investment in India is that you should closely evaluate government policy in your sector,” he warns. “Government policy is still in a phase of consolidation and you don’t want to be caught out. You should also be sure to take a long-term view and get some trusted local partners — this is a very complicated country with a lot of different states containing a lot of different regions which are home to radically different societies.” His main recommendation, though, would be to go for it. “On the positive side, if you can get all this right, the opportunities are just immense in almost every sector in India,” he says. “The rewards are there for brave entrepreneurs.”
