Garware casts its net wide

IT IS A COOL JANUARY MORNING and the vista is pleasing. Large industrial sheds dot a mountainous terrain in Wai, in the foothills of Mahabaleshwar, a scenic hill station in Maharashtra. Apart from the one-toned clanking of machines from a few sheds, what prevails is the industrious quiet of women squatting inside the sheds, knotting giant nets (some are over a kilometre in length).

No, this isn’t a small cooperative in action. It is big business—worth ₹1,103 crore as of March 2019, in fact—for Pune-based Garware Technical Fibres, an increasingly sought-after maker of fishing cages for salmon farming, No. 291 on Fortune India’s Next 500 list. Its net has spread globally—literally—replacing those of competitors in exacting markets such as Norway and Canada; it is also setting up a new office in Chile. The company even got a patent for its nets in India in 2018 (it has filed for one in Chile, Norway, and Canada, among others, as well).

These are uncharted waters for Garware Technical Fibres which, till six years ago, sold 70% of its nets and ropes (primarily made from man-made fibres like nylon, till that point) in a commoditised manner. “We added value only to the rest. Today, that equation has turned around,” says Vayu Garware, 46, the Wharton-educated chairman and managing director of Garware Technical Fibres who decided to invest in creating a “unique product” (it took them four years to develop, but more on that later). “Now our products sell at a premium over even European competitors in all the markets,” he says.

As a result, sales went up 40% from ₹786 crore in March 2015 to ₹1,101 crore in March 2019, while profits jumped 300% in the same period (from ₹60 crore to ₹182 crore). Not surprisingly, its stock soared. On the BSE, it rocketed 437%—from ₹280 in February 2016 to a high of ₹1,695 on February 27, 2020. (The markets downturn has seen a slide down to ₹1,072.55 as of April 2.)

The gains, according to a research study titled How Competitive Advantage Drives Churn in the Stock Market by Saurabh Mukherjea, founder and chief investment officer of Marcellus Investment Managers, are also because Garware is at that early ‘inception’ stage in a company’s life cycle, where it creates a new niche in the market, leading to a unique positioning and profitability. That makes news and enhances value, he wrote.

Which is why Vayu believes this is just the beginning for Garware, particularly since aquaculture comprises only a little over 25% of the business by revenue, though it is the focus of the company’s efforts. The scope for growth is, therefore, vast given that salmon fishing accounts for 45% of the total value (and 30% by business) of the global aquaculture industry. With the geographical advantage of their shorelines—salmon need deep, cool, and calm waters to proliferate and grow—Norway and Chile are the top two salmon-fishing countries (where

Garware has 20% share of cages) followed by Scotland and Canada, where the company accounts for 90% of the cages.

VAYU HAS BROUGHT CHANGE to the almost half-century-old company set up by his grandfather Bhalchandra Digamber Garware (popularly known as Abasaheb), founder chairman of the Garware Group of Industries. Before he founded his eponymous empire, Abasaheb started out as a second-hand car dealer in the British Raj. During World War II, he saw a business opportunity in making plastic buttons for the navy, and that got him started on thinking about downstream petrochemical products, especially man-made fibres and plastics.

The rest is Indian business history, although from a slew of successful companies started by Abasaheb, only a couple of them, including Garware Polyester (run by Shashikant Garware, Vayu’s uncle), are still considered heavyweights. Garware Technical Fibres is a standout, where the third generation—Vayu—is adding unprecedented value to the vision of the founder, who was also the recipient of the government’s third-highest civilian award, Padma Bhushan, in 1971.

It was a chance meeting with the owner of U.S.-based Wall Rope Works on a flight that led to the setting up of Garware-Wall Ropes by Abasaheb in 1976 to manufacture corded ropes. Vayu’s father Ramesh inherited the company (renamed Garware Technical Fibres in 2018 as part of a rebranding exercise) after Abasaheb passed away in 1990. Ramesh, who had moved to Australia after his own venture Garware Shipping did not take off, came back to India while Vayu joined the business in 1997 after an MBA in finance from Wharton Business School.

Vayu, who was asked to start at the shop floor and learn about the operation of the machines, says, “I wanted to start in the finance function but my strict father would have nothing of it. Looking back, that was the best thing to happen as I got used to the sound of the machines and the feel of the ropes early on.”

Ramesh, after all, understood the importance of a robust shop floor, having envisioned and set up the factory in Wai. It had been tough to find financing options at the time, that too in a new location, making it a long-drawn process for the company. But with the help of internal accruals and a small bank loan, he saw the plan through in 1994. And now, “70% of the bottom line comes from this factory and we have enough room for expansion,” Vayu points out.

The scope to expand is a necessity because of the size of opportunity. The man-made textiles industry is estimated at over $200 billion in revenue; medical textiles account for nearly 50% of this, while Garware is swimming in the other half, the industrial segment, which includes packing technology, geotechnology, and agrotechnology. This is a competitive playing field and, with an annual turnover of ₹1,013 crore and a valuation of less than $500 million, Garware is just one of thousands of manufacturers. What sets it apart: The specific niche it has created for itself on the back of product innovation in recent times.

ABOUT NINE YEARS AGO, when Vayu took over at the helm of the company, he took the call to move from being a commodity supplier to selling products and solutions based on R&D. “Since a lot had not changed for a long time in the industry, we knew there was room for disruption,” he says. “But we also knew that it would come with some pain as we were developing our own unique product for the first time.”

After getting customer feedback, expert advice, and doing other groundwork, Vayu set up an R&D centre in Pune. This would be managed by a fledgeling team led by the erstwhile head of manufacturing, S.V. Raut, who was best placed to lead this effort, says P.S. Kamat, head of manufacturing at the Wai plant. “Manufacturing is the key in this business as ultimately that will decide whether a product can be made or not,” he says.

Vayu zeroed in on salmon farming as the focus for the R&D team. For one, it was a big business opportunity. Salmon fishing cages can be up to 200 metres in diameter, 50-60 metres deep, and are dropped into the ocean where fish are grown for over 13 months. Each fish weighs an average 5 kg and the cages could have between 100,000 and 200,000 fishes in them, taking the total catch weight to 500-1,000 tonnes. The value per cage? Around a million dollars. For the other, it was an area that had not seen many product innovations. More importantly, there was a specific problem that Vayu felt Garware could address.

Algae and barnacle deposits on fishing nets (which are open-ended as compared to the closed cages used for salmon) tended to inhibit a smooth flow of water, leading to disease among the fish. Regular cleaning with robots was a major cost and pain point for companies. Adding copper to a coat of paint on the ropes was the prevalent solution to reduce deposits. Garware, too, followed the same practice but conversations with customers indicated there were takers for a more permanent solution that would reduce cleaning costs and enhance the life of ropes.

“It took us four years to develop, test, and work with customers to come up with the solution,” says Vayu. This was to introduce copper into the ropes as opposed to the paint coating. The copper was woven into the nylon fibre which released the free ions that inhibit algae formation. Branded V2, this product was priced three times over that of competition, but the payback—with lower cleaning and maintenance costs—could be availed in two seasons. Also, Garware claims the longevity of V2 cages would be 2x that of the earlier cages (which last five-six years). “We have thought ahead. Our cages will leave very little microplastic sediment that will affect the ocean fauna,” says Vayu.

V2 started selling in late 2017 but breaking into new markets is still a rigorous process, points out a senior executive, who did not wish to be named. A Chilean company tested its cages for 13 months before being convinced and placing an order, he says.

A CATALOGUE OF OVER 20,000 SKUs (stock keeping units)—across aquaculture (27%), fisheries (26%), sports (10%), geo-synthetics (10%), and other uses like bird nets—that can be produced according to customer demand has given Garware the breadth for growth. With V2, the company gets further depth in the aquaculture and fisheries business.

Beyond the waters though, Garware wants to push sports as a bigger contributor to its bottom line. Already, tennis nets made by Garware are used in the US Open but are sold unbranded to large catalogue companies. (It has, however, begun investing in building its sporting equipment brand Sportiva.) It also makes ballistic ropes, that cost $60 a kilo, for baseball coaching, as against the standard $1 per kilo variety. These ropes are lighter, stronger, and thinner than their cheaper counterparts, and have caught the fancy of cash-rich baseball teams since they offer more visibility during coaching players.

Innovation is the common theme in its other businesses as well, with products such as machine inflated tents for the army. As Vayu puts it, “It’s been a long journey and we are still at it. After launching our patented V2 cages for salmon farming, our mindset has slowly changed to selling services from merely offering a product.”

This story was originally published in the May 2020 issue of the magazine.