Heman
t Kanoria had the classical upbringing of a boy born into a Marwari business family in Kolkata. Amid the life of a large extended family, he sat through meals where his grandfather, father, uncles and cousins used to talk about the family business. This is often done deliberately by Marwari parents so that the child absorbs, perhaps only semi-consciously, concepts and values and grasps why some things worked and some did not, and why some things lasted and some did not.
Two things in particular have stayed with him from his childhood. One is the value of the joint family in teaching essential values. “In a joint family spanning generations, you learn to adjust and adapt, to give and to take with grace. You learn to work with various members who have different attributes and skills. You learn to work like a team. Later, when you grow up and join an organisation, you have to do the same thing, that is, work with people who have different personalities and different strengths,” he says.
The second was that, as a wealth creator, you have to have humility. “You are taught early on that the wealth you
create is for the wider society and that you are custodians of this wealth. It is not yours alone,” he says.
The family has stayed together. Kanoria’s parents and younger brother live with him in Kolkata. The third brother lives in London and the fourth in New Delhi. At every opportunity, they get together, with their sister, at their respective homes.
When he was 17, Kanoria was given responsibility for two flour mills in the family business. One was a sick unit; the other had been closed. “Every Marwari father does this, gives responsibility because the best way to learn is when you have weight on your shoulders – baptism by fire,” he says.
Although the mills had to eventually be closed down owing to government regulations, this early experience was important. The young man who had focused a lot on sports – swimming, rugby, ice-skating and horse-riding – was thrown into managing time, people and priorities in a challenging environment. His father wanted to let him make mistakes and learn from them.
His days were packed. Getting up at 5 a.m., going to college, reaching the office by 10 a.m., working all day and then studying in the evenings for his professional courses. In running the flour mills, Kanoria had to interact with politicians, bureaucrats, bankers, workers, unions, and professionals from different backgrounds.
“Running a mill is both an art and a science. I understood the psyche of the workers, I learnt to connect with them, and that is very important. However, both the babies I nurtured had to be abandoned in 1988,” he says. This “failure” taught him a valuable lesson: that there will be plenty of successes and failures, and not everything that you want to happen will happen, but the point is never to give up, that one can always find a way of achieving success.
It was then that he thought of starting a new business and his first thought was infrastructure because of its sheer scope and potential. His younger brother Sunil and he set up SREI. They began by financing infrastructure equipment for contractors and construction companies. To their good fortune, the sector was opened up for private participation in 1991. They began expanding their portfolio. Today, SREI has 32 branches across India and has expanded to Germany, Russia, the UK and parts of Africa.
In 2010, Kanoria Foundation company India Power Corporation took over DPSC Limited in a government restructuring exercise. The company has a diversified portfolio with renewable and conventional modes of power generation, distribution and power trading. It owns and operates a distribution licence spread across 620 square km in the coal-rich Asansol-Raniganj belt. Its distribution business is one of the best performing, with transmission and distribution losses of around 2.5 per cent.
India Power has also won the rights to distribute electricity in Gaya, Bodhgaya and Manpur for 15 years as a distribution franchisee. In the generation segment, the company has an already operational portfolio of 100 MW of assets. It has now set up a 450 MW thermal power plant (TPP) in Haldia, which is expected to be commissioned within this financial year. It has recently also acquired a 1,000 MW TPP in Andhra Pradesh.
India Power has, moreover, entered into an agreement to purchase 49 per cent in a 36 MW solar plant that is under implementation in Uttarakhand and is looking at further opportunities in the renewables space. Going forward, it is looking to expand in the distribution and generation segments, and aims to be a leading integrated power company in the country.
Kanoria strongly believes that the power sector has become unnecessarily complex and that people have lost sight of the basics. He would like policymakers to slash through the complexity and cut down the forest of laws and guidelines to reveal the essential simplicity of it all: consumers want good quality 24×7 power at a reasonable rate and are prepared to pay for it. How this objective is to be achieved should be simple. After all, India has natural resources in abundance – coal, hydro, wind and solar.
Take coal. Kanoria says, a simple solution is for the government to hold auctions, from time to time. The power sector needs inferior quality coal, which can be auctioned every few months to bring prices down. “The cost of mining is much lower than the price at which coal is being sold. Because of the huge margins coal owners (including the government) have, this can be addressed in a simple manner,” he says.
Or take financing. Kanoria says that public financial institutions charge 14 per cent interest, a rate so high that 25-40 per cent of the project cost goes towards interest. “The project becomes unviable and the banks get into a vicious cycle. The government should reduce the interest rate and, just as it provides concessional interest rates for exports, it should provide an interest subsidy of 4-5 per cent, which could go directly to the financial institution. This would lower the project cost and the cost of power, making it easier for the consumer to pay. Instead of a vicious cycle, it becomes a virtuous cycle,” he says.
Why don’t policymakers do this? The reason, he says, is that people in the sector overthink matters. They seem to think that because power and infrastructure are complex issues, they cannot be treated simply. But, after 30 years in the industry, Kanoria is categorical that all the problems that bedevil the power sector can only be solved if people think of them simply and work, step by step, towards simple solutions.
Kanoria’s experience is valued by many. He has held the position of chairman of the FICCI National Committee on Infrastructure and is currently council member of the Indo-German Chamber of Commerce. He has been on the board of governors of the Indian Institute of Management, Kolkata; member of the government’s Regional Direct Taxes Advisory Committee; and president of the Calcutta Chamber of Commerce.
Kanoria is proud of the fact that SREI was the first private Indian infrastructure company to be listed on the London Stock Exchange (in 2005), thanks to his ability to convince international investors – the German and Dutch governments and lenders – to come and give the company long-term lines of credit.
“This was a turning point in our and SREI’s lives, to have got endorsement from reputed international organisations owned by governments,” he says. It was also an event he will never forget for another reason. The day his brother and he were to address investors at a press conference – the day of the Rs 20 million initial public offering in 1992 – a bus crashed into their car in Kolkata. Both of them were hospitalised with serious injuries, including a broken jaw for Kanoria.
While he was recuperating, he did a lot of thinking about how death can come at any moment. This, in turn, led him to the realisation that while humans are mortal, institutions are immortal. “I realised that whatever I want to do, I must create institutions with systems and processes so that they can outlive me. This fit perfectly into the idea of my Marwari upbringing that you have to leave your wealth for future generations,” he says.
India Power’s culture is to inculcate and propagate professional entrepreneurship. “We take on professionals but we teach them to think as entrepreneurs, as if they own the company,” he says. As an old family concern, they do not hire and fire, preferring to nurture and train people, and do what it takes to make them perform well. That’s why some employees are the fourth generation in their family to work for the company. Of course, it’s not that unproductive employees are allowed to linger on – they are weeded out if they have a negative attitude – but everyone is given a full chance to show their potential.
For relaxation, he likes playing squash, doing yoga, going skiing with his children and brothers, watching movies, and reading. Even though his day starts at 5.30 a.m., he does not feel tired when it ends, at around 11.30 p.m. “I don’t feel tired because I enjoy every second of it. I have so much fun that I can hardly call it work,” he says.