Vectus’ water tanks set cash registers jingling

30.06.14 / Author: T E Narasimhan, Chennai

Seizing opportunities, taking risks and innovating are key to entrepreneurial success, says Ashish Baheti, a first generation entrepreneur and IIT graduate who runs Vectus Industries Limited, a manufacturer of water tanks and other plastic products, along with his cousin Atul Ladha.

A fortnight ago, PE firm Creador invested ₹100 crore in Vectus, saying that the two factors that attracted them was the quality of the management and the company’s sound financials.

After finishing his engineering from IIT Kanpur, Baheti worked briefly as an employee, and then decided to become an entrepreneur. “Though entrepreneurship was not in the family, it was in my genes, considering I am from the Marwari community,” says Baheti, the son of a banker.

In 1990, the market for water tanks was moving from iron and concrete products to plastic ones, so Baheti decided to set up a factory at Ghaziabad to manufacture plastic water tanks. The investment was around ₹5 lakh and raising the money was not a big constraint, considering his father is a banker, he says.

“From day one, the business has been profitable, thanks to the demand,” says Baheti, who roped in Ladha to help expand the business. Baheti’s company focused on Delhi, Uttar Pradesh, Bihar and Punjab under the brand “Ganga”, while Ladha expanded in Madhya Pradesh and other parts of central India under the brand ‘Water Well’.

In 2004, the two companies merged to form Vectus Industries, and also diversified into pipe manufacturing, which yielded high returns, which have been invested in manufacturing facilities and new products. Fifty per cent of revenues now come from the pipes business.

Innovation and risk-taking are the other most important things, says Baheti. Vectus was the first to make triple-layered tanks with antibacterial properties to keep the water clean and an insulated foam layer to keep water cold in summer.

In 2010, the entrepreneurs invested in a machine that cost 10 times the traditional one. The new machine was based on blow moulding technology, and the company offers a guarantee of 20 years on water tanks made with this technology. “If we had failed, it would have meant a loss of ₹5 crore, which is big money for us. But we decided to take the risk,” says Baheti.

Vectus has now installed 18 machines based on new technology across its 11 facilities in Uttarakhand, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, Rajasthan, Karnataka and Jammu.

With Creador’s ₹100 crore, Vectus is planning to set up five more plants – in Bihar, Gujarat, Tamil Nadu, Pune and West Bengal – costing around ₹15 crore each. These plants will manufacture both water tanks and pipes. The company has also ventured into Africa by setting up Vectus Kenya Limited, a joint venture with local partners, to manufacture and sell blow-moulded and rotational moulded water tanks and piping systems.

“This is the first step towards our aim of becoming a truly global company,” said Atul, who added that West Asia will be the next target. Vectus has a target of ₹1,500 crore for annual revenues in three years.

Anand Narayan, senior managing director, Creador Advisors India Private Limited, who will be on the Vectus Industries board, said that the two factors which attracted Creador is Vectus’s financial performance and the quality of the management.

Vectus reported revenues of around ₹420 crore and profits after tax of ₹24 crore in 2013-14, with a return on equity of 27 percent. Revenues and profits have seen a compound annual growth rate of 34 per cent and 45 per cent respectively over the past three years.