U.S.-headquartered Fortune 100 multinational Honeywell is one of the few firms to have continued to invest in India even in the years before the NDA came to power and when other global investors had turned less than positive on the business environment. This year, it has invested $200 million to develop its largest engineering centre in the world at Bengaluru, where 6,000 of its 8,000 engineers in the country operate from.
With a billion dollars in domestic sales and exports from its India operations, the company is set to accelerate its investment plans in India where its businesses are clocking growth in the region of three times the GDP growth rate. Vikas Dhoot spoke to Shane Tedjarati, Honeywell’s President for Global High Growth Regions to understand the company’s strategy.
Edited Excerpts:
Indian corporations are yet to start investing, despite this government’s efforts to revive the business environment. What’s your assessment?
Sometimes, if you are too close to the centre of gravity, you may not feel it.
But for me, I have to say in ten years of working in India and more than forty years of visiting (I came here first in 1972 as a child), there have been times when there was a lot of hype, lot of excitement, and we have gone through those cycles. But in the past ten years, this is the time we are seeing a lot of renewed excitement, both with the local Indian businesses as well as the global MNC community. I see a renewed vigour. On the business side, India is growing exceedingly well for us.
Obviously, we are not impervious to the fact that India being India, things still take some time to unravel and to get going.
There’s a lot of engineering and talent here – India is one of the biggest exporters of talent for Honeywell. Some of our biggest leaders now come from India. The head of one of our biggest strategic business units is Rajeev Gautam and his next two lieutenants running multi-billion dollar businesses are also Indians, one of them home-grown from the Indian business.
What else does a business need? We need a government that encourages business, creates sensible regulation, moves with reasonable speed and most importantly, is consistent.
Could you elaborate on what you mean by consistent?
Good or bad, the way the capital system was designed a couple of hundred years ago, it’s not my saying and I don’t like it – but capital is a coward. Over time, it finds the best and most efficient way to get a return for investors. Part of that cowardice of capital is looking for consistencies, reducing risks and getting returns.
My shareholders are not just Americans, they are everywhere. And If I tell them, I think I may give you good returns this year, but maybe I won’t, they are gonna flee. I have to be predictably able to say I have built a business for you and based on experience and consistency, I can deliver a good return for you. By the same token, it’s the same with countries as with companies. Today is certainly India’s time – it has been working for twenty plus years to build a foundation, but there’s still a lot to do. We can’t stop at getting 300 million Indians in an ‘okay’ position and let the rest be.
What’s next for Honeywell in India?
The last two years have been great for companies like ours that continued to invest even in the four years prior to that when not everyone was being very positive about investments in India. Even in the global financial crisis of 2007 to 2009 we did things differently than many of our peers. That gave us a great tailwind when 2009-10 came. We are seeing the same gain in India, we are investing in our biggest engineering campus in Bengaluru, continuing our capability building within India for global businesses as well as ‘East for East’ opportunities.
As a company, we want to have India as ground zero of innovation and production of the emerging new middle class products and services, to serve the Indian market and the emerging middle class coming up behind India in the rest of the world.
For us, India is becoming the world’s centre of gravity for that. We can do it today because we already have five major engineering centres with 8,000 engineers and seven manufacturing sites here. We have a supply chain here, sales and marketing. So we don’t have to lay the foundation. We are going to start full force.
Which other businesses are seeing growth? Can you share some details on your new investments here?
All our Indian businesses are growing healthily at double-digit rates. We are investing on our own, but also partnering with firms wherever possible. Over the last 12 months, we have ramped up to make India global centre for finance.
As we are growing, the emerging middle class product development, we need to continue to expand our manufacturing in the chemicals, oil and gas and automation and control business. Less than 15 per cent of our portfolio is directly related to oil and gas. Whether it’s Reliance Industries or other companies in the sector, they may not be investing billions in new infrastructure, but they want to run existing infrastructure more efficiently. I still believe we can grow 2x plus GDP growth. We are growing nearly 3x GDP in India. If there’s a slowdown we don’t pull out. Now it’s India’s time to accelerate growth.
How does the new campus at Bangalore fit into this?
We have about 6,000 engineers in Bangalore alone. I am not a big fan of thinking of engineers as outsourcing bodies cause it diminishes the value that an engineer can create, working with sales and marketing and differentiate a solution that makes life better, faster, more efficient and more comfortable. You have got to give them design authority and latitude and think about the global mega trends and problems and that’s what we have been doing. That’s why we have much higher retention of talent as they feel they are not just low-cost labour.
Do you believe that the BRICS is no longer relevant as a concept for global investors?
I never believed in BRICS. I thought that it was a good thing to say and was present at the meeting where the Goldman Sachs fellow said it, but you have got to be realistic. There were pillars of growth in those emerging markets, but there’s a greater global trend that started 30 years ago with China. If you want an acronym, its not BRICS, its CREST -- China and the Rest. If you go back 300 years of development, since the industrial revolution, it’s basically been the white man’s world plus Japan. The rest of the world became less prosperous, whether it was through colonisation or wars. I would say, as a westerner, the report card of the Western civilisation in the past few hundred years – good for them, F for humanity. You made 700 million people prosperous with 7 billion not really participating in the fortunes. China said ‘No, I don’t want that western development model. I failed by not waking up at the dawn of the industrial revolution, but we are not going to do it the western capitalist way, or with the political or socio-cultural infra that you had defined as the only way to prosperity. I will do it my way. And the world watched and said you are going to fail, but they didn’t. It emboldened the rest of humanity to say India can do it and so can Africa and they can do it in their own ways. Neither is South Africa the same as India, nor is China the same as Russia, the reality is we are going from 700 million people defining how mankind will live to 7 billion people participating in the prosperity. It’s gonna take much longer and will be much slower, but it took 300 years to make 700 million really prosperous at the cost of others. There are studies that show 70% of Europe’s prosperity is directly attributable to the exploitation of Africa. China and India have now challenged that, so yes, we will have some hiccups in Brazil or India might have a slowdown like it did for a few years, capital flows may slow down. Three years ago, I used to say biggest challenger to India was Brazil as your capital was going there. Look at it now. China, India, Africa, Middle East, Africa and Latin America will show the future.
China and India are big bets on the forefront, the big wager for global MNCs like us. That’s nearly 2.7 billion people, a third of humanity and it’s moving. The Middle East, Africa and then Latin America will come up at different stages. That trend is what i believe in and bet on. Short of a cataclysmic event, this is going to continue. People ask me if I worry about war, conflict, I actually think the more economic development we have and the more interdependence between nations, the better off we are. If your prosperity and livelihood depends on a stable China, you will oppose anti-China policies. So businesses can act as stabilising factors in dynamic geo-politics.
