Watering the future

Written by Sushila Ravindranath | Sushila Ravindranath | Updated: Mar 11 2014, 08:58am hrs
Water treatment is the next sunrise industry, says Rajiv Mittal, the managing director & chief executive officer of VA Tech Wabag Ltd. It is the largest water solutions company in India which is based in Chennai and has a turnover of R2,000 crore. There are so many companies in the water business, I remark. Dont confuse us with infrastructure and construction companies which build water pipelines. We are a technology company. We are the only company in total management of water services. Wabag is a multinational, operating from Chennai, implementing projects in 19 countries. Half of our order-book is from outside the country, says Mittal, as we walk down the green laden pathway to the Raintree, the spacious and well-lit Chettinad restaurant in Taj Vivanta, for lunch.

Mittal came to Chennai in 1996. A chemical engineer from the Bombay University, he started his career with Hindustan Dorr-Oliver Ltd. He was working in the UK, and joined Wabag in 1995. The company sent him to India to set up a strategic business unit in water. We made a major breakthrough that year when we got an order from Reliance for their Jamnagar refinery project. We executed the largest effluent treatment plant in Asia in 1997. When I came back from the UK, the water business was unheard of in India. I had to do a lot of aggressive selling. What we offer is life-cycle solutions for water: sewage treatment, effluent treatment, sludge treatment desalination, and reuse for industrial and municipal corporations. It is not a sexy business, he laughs.

As we wonder whether to order some starters or not, we find ourselves unable to resist the tiny idlis tossed in curry leaf powder that the restaurant attendant has just brought to our table. I ask Mittal how he ended up acquiring the business in what is described as one of the most interesting management buyouts in the country. We order our main course: appams, idiyappams and some usual Chettinad faremushroom & dry beans, sundakkai cooked in a tangy gravy, chow chow kootu (cooked with lentils and coconut) and the flavoured watery buttermilk. We are both vegetarians and the cuisine doesnt disappoint.

The water treatment division, Wabag, was one among the four units of Deutsche Babcock. In 2000, the Austrian conglomerate, VA Tech, acquired 100% stake in Wabag, forming a new company known as VA Tech Wabag. Wabag India became a wholly-owned subsidiary of this company. I had to boost the morale of the employees, reassure the existing and prospective customers, and also vendors and bankers. Other Deutsche Babcock divisions in the country were winding up operations and the employees were feeling very insecure, Mittal says.

It was a difficult time for the company. Mittal managed to carry out ongoing operations seamlessly and put the company on the growth path. In 2003, VA Wabags turnover was R100 crore, the only company in water business to achieve this figure. The following year, we made R200 crore.

Just when things were settling down for Mittal and the company, another change took place. VA Tech decided to sell its Indian subsidiary due to business compulsions. Siemens took over the entire VA Tech group in 2005. Soon after, Siemens decided to put on the block all the overseas companies of the Wabag group. The German and French subsidiaries were making losses. The Indian company was doing well. So, Siemens was very keen on selling our unit to make up for the losses in Europe. We started getting a stream of prospective investors, some of whom filled us with dismay. I decided to try and acquire Wabag India and put an end to so much uncertainty. With the support of ICICI Ventures, I put in a bid, competed with eight multinationals, and emerged the winner, Mittal recalls. It was an audacious reverse acquisition and Wabag India became a true-blue Indian multinationalthe wholly-owned subsidiary was now the principal. We got 70 million euros as bank guarantee from ICICI Ventures. Today, we are a debt-free company, the man who made it all happen says.

Wabag put up a desalination plant in Nemmeli, in the southern outskirts of Chennai, last year to augment water supply to the Tamil Nadu capital by 100 million litres per day (mld). Tamil Nadu, with its perennial water shortage, was the first state to go in for desalination to meet drinking water needs. Chennai requires 1,500 mld. The industry also needs a considerable amount of water, which takes the citys total water requirement to 2,000 mld. However, the Chennai Metro Water Supply and Sewerage Board, also known as Metro Water, manages to supply only an average of 1,000 mld, and that too in good times.

The desalination plant is situated 35 km from Chennai, which is augmenting the citys water supply by 10%. This is the largest desalination plant for drinking water in the country. The Nemmeli plants project cost is R1,033 crore. A seven-year operate-and-maintain clause is a part of the project agreement. Mittal tells me that water from this plant is very affordable and is available at 2.5 paise per litre. Desalination of sea water for drinking has become more viable in the last 6-7 years, explains Mittal. With our large coast lineand agriculture taking up 80% of our water resourcesdesalination may be the way forward, Mittal contends. Wabag has put up many smaller desalination plants for industrial use.

In the nine months ending December 2013, the consolidated revenue went up 44%. The companys order intake exceeded R3,000 crore. Our international business managed and operated out of India has started paying off. We are putting up a challenging desalination plant twice the size of the one in Chennai in Oman, Mittal says. He is confident that the company will end the year very well in these difficult times. We have been winning international bids funded by multilateral agencies and have entered Turkey and the Philippines, he notes.

Our friendly attendant appears again, tempting us this time with rose-flavoured, white chocolate flan. People have to change their mindset about recycled water. Singapore uses recycled water for bathing, cooking, everything, Mittal states. He goes on to explain how precious water is going to become in the coming years. He fills my head with scary figures. There is going to be a demand-supply gap of over 50% in our country, he claims. Demand for water is expected to rise from 1,500 billion cubic metres (bcm) against a projected supply of 740 bcm. Municipal and domestic water demand will double and demand from industry will quadruple by 2030. No wonder Mittal calls water a sunrise industry.