With a string of business acquisitions, Hero Electronix has entered the technology and innovation space. In an interaction with Baishakhi Dutta of Electronics Bazaar, Nikhil Rajpal, CEO of Hero Electronix, shares why the organisation forayed into the Indian electronics sector and, going forward, how it plans to establish a strong foothold in the Indian technology space.
EB: Tell us briefly about your acquisitions and business model.
Hero Electronix is the Hero Group’s venture into the technology space. The plan is to create large tech businesses out of India from this one company. Some great global companies have already been acquired for this, in hardware technologies like semiconductors, IoT, etc. At present we have four tech businesses with different partners, and all target different markets.
The first organisation is MYBOX, which is India’s largest set-top box manufacturer. It was initially manufacturing high definition set-top boxes and has worked with all large DTH (direct to home) and cable providers. It has now changed its focus to OTT (over the top) services, and will soon be launching an OTT box. From being a pure hardware company, it is evolving into a hardware-cum-software technology company.
The next partner, Tessolve, is one of the largest semiconductor engineering services companies out there. It serves the biggest semiconductor companies in the world and works with them on all aspects of R&D and engineering. Tessolve is working on chip design, and has been building embedded systems to make products smarter across all verticals. The company has around 1500 engineers now.
The third partner is Zenatix, which is an enterprise IoT company. We want to be involved with both the consumer and the enterprise side when it comes to IoT. At the enterprise level, we are working with Zenatix in the fields of retail and banking, and are going deeper into these verticals. On the consumer side, we are building our fourth business right from scratch and hope to launch it very soon.
Apart from our partner companies in their diverse verticals, we are interested in two other domains. One is automotive technology and the other is defence technology. We have not done anything yet in these areas but we do aim to venture out there soon; after all, it’s only the third year for us in this technology domain. We plan to build a corpus fund of ` 10 billion in the IoT vertical alone by 2022.
EB: To expand into IoT, why did you select Zenatix out of so many companies?
Many companies had good products but none of them were focusing on any specific vertical. It’s one thing to get a product to work at the prototype stage or in the lab. But implementing it in the real world, particularly for industrial purposes, is something big. It demonstrates how scalable and robust the solution is. Zenatix was the first company that had some real scale and a unique solution. That is how it caught our attention.
EB: What business benefits are you looking for through the acquisition of Tessolve?
India has the ability to make. We believe Tessolve is already on its way and will soon be the best in the world in the engineering space. Starting from a concept to full delivery, Tessolve is reaching that level. The acquisition is not about marketing tech chips, but about the ability to build end-to-end design solutions.
EB: What was the reason behind going ahead with a mix of solution providers across different services?
If you look closely, they are not very different from each other. We are going through a fundamental transition in our lives where every product that was less smart, is about to become smarter. The use of electronic components is suddenly increasing exponentially. Lots of intelligence and analytics are going into the development of smart products. IoT is a nice word but, fundamentally, it’s the chip that is transforming the entire game.
EB: Can you give us some innovative use cases for which you aim to introduce smart technologies in India?
As an example, when a room freshener gets over, we generally forget to order the refill. In the US, a new room freshener pack now comes with a small volume-measuring chip. When the liquid in this pack reaches a particular level, the chip automatically triggers a request for a refill to Amazon. The user just has to approve the request and the refill is placed in the shopping cart. I would love to replicate this with mosquito repellents in India.
EB: What is your target customer group?
We are building a business around connected intelligent devices. So all our investments have a common thread. The set-top box has gone from being a simple viewing device to a smart device with the help of which customers will soon shop, stream from the Web and do all kinds of jobs. Everything is IoT enabled, and that is the area we want to cater to.
EB: Is there any particular business engagement plan that you follow?
Every company that we have acquired has different sales and marketing plans. All the businesses that we have acquired have been set up by teams of entrepreneurs, and they are still running their companies even after the acquisition. We participate very actively in the directorial decisions of managing the company. We help the companies in developing connections, leads, strategies, etc. Of course, cross-sourcing is happening between the companies. But apart from that, the management structure remains the same even after the acquisition.
EB: What challenges do you face in the business ecosystem of the Indian electronics industry?
Getting the correct hardware without having to import Chinese products is the real challenge at present. As a group, we are trying to make more smart devices. The fight is not just about more volumes. Enhancing the whole solution is our core aim. Whenever you enhance a product with the latest software, localisation plays a pivotal role. The local ecosystem needs to be extremely strong and well developed to meet this target.
We are trying to migrate towards high-end products and that is another challenge. Making more value-added intelligent products without compromising on quality is the biggest challenge for us since there is already strong competition in the electronics industry, be it nationally or globally.
EB: What is your marketing goal for the next five years and how do you aim to achieve it?
We do not have any target, as such. Overall, we want to strengthen Hero as a group and I believe five to seven years is a good time to achieve that dream. Eventually, the rest will follow. The real aim is to create great world class companies in India. We plan to address business challenges in retail, hospitality and logistics, through the deployment of IoT and emerging technologies in the coming days.
EB: Any more acquisitions or business collaborations coming up?
Right now we have four businesses and we want to stick to these for a while. Any acquisitions that we do will be to enhance the existing businesses. A year or two later, we aim to do something big in the automotive and defence sectors. However, right now we are not big enough to take on such targets. Currently, we want to improve skills in the existing businesses, because each of them is a great opportunity for Hero Electronix.