NO HOT AIR

An Indian businessman built the world’s largest air-cooler company, giving shareholders 91,000% returns in a decade

Quartz india
Quartz india

Achal Bakeri could have taken an easier way out if he wanted.

After all, he is the heir to one of India’s oldest real estate companies, the Rs109-crore ($16 million) Bakeri Group. But as a young MBA graduate returning from the US in 1986, the then 26-year-old Bakeri had other plans.

“I felt I wasn’t adding much value to the real estate business,” Bakeri, now 56, said. “There was already a well-established structure and hierarchy in place in the real estate business while I wanted to challenge myself.”

So, he set forth on his own journey.

Borrowing Rs700,000 from his father in 1988, Bakeri went on to build a business that had few takers back then: air coolers. These machines are cheap and less power-consuming substitutes for air conditioners (AC) and can be particularly effective during hot and dry Indian summers.

“When I started out, ACs were very expensive and air coolers were huge and ugly. I sensed an opportunity to build something that appealed to buyers,” Bakeri said.

Within a year of its founding, Bakeri’s company, now called Symphony Limited, had hit its stride and began generating profits. Nearly 30 years on, it is the world’s largest air-cooler maker with a market capitalisation of $1.2 billion. Bakeri’s own wealth has swelled to $1.26 billion (as of 2016), making him India’s 74th richest man.

Symphony shareholders, too, have had a great run. The stock has risen by a mind-boggling 91,000% in the past 10 years, from Rs1.30 in 2006 to Rs1,180 as of Dec. 20.

It’s been a roller coaster ride, but a great one nevertheless.

Dad’s idea

Bakeri credits his father, Anil Bakeri, for the business idea.

In 1987, his family moved into a new house in Ahmedabad. “Till then we had never used an air cooler. Our consultant asked us to use them in some areas (of the house) where ACs couldn’t be installed,” Bakeri said.

But the machine was noisy and took up a lot of space, besides being an “eyesore.” One Sunday morning, as the household sat in the garden for tea, his father asked Bakeri—who has a degree in architecture from Ahmedabad’s Center for Environmental Planning and Technology (CEPT) University and an MBA from the University of Southern California—if he could build a better-looking and quieter air cooler.

“That triggered something in my mind,” he recalls now. “To me, it was an alien concept.”

So, in February 1988, Bakeri launched Sanskrut Comfort Systems, which would make air coolers. It initially operated out of a small room in the family’s real estate office and developed a prototype within a month.

“The existing air coolers were noisy, ugly, would rust very soon, and one could even be electrocuted,” he said. “So we wanted to build something that was aesthetically appealing and not out of metal. We used plastic and the final product looked like a 1.5-tonne AC.” By March 1988, they had six prototypes.

Back then, the air cooler market was also unorganised, as it mostly still is. Bakeri launched his product under the Symphony brand at Rs4,300 a unit, putting out a full-page advertisement in India’s largest-selling English-language newspapers, The Times of India.

This was a time when ACs were selling at Rs35,000 a unit and local air coolers at Rs2,000.

Steady success

By the summer of 1988, demand had steadily grown and the company had sold 1,000 units, raking in Rs40 lakh in sales.

Yet, it never manufactured coolers. “Manufacturing is a capital and management intensive process, and we thought it better to outsource it to specialised vendors,” Bakeri said. Sanskrut would only assemble the various components into an air cooler under the Symphony brand.

By 1989, the company hired a few graduates from the National Institute of Design (NID) in Ahmedabad to design new air coolers. Until then, Bakeri and his small team were designing the products in-house.

“We sold some 3,000 coolers by 1989 and by 1990, we scaled up our distribution and started advertising aggressively on national television,” Bakeri said. “We sold 21,700 by 1990 because our campaign had picked up.” By 1991, he set up a factory in Ahmedabad and began assembling there.

In 1994, the company went public, raising over Rs10 crore through an initial public offering (IPO). It also changed its name to Symphony Comfort Systems that year.

The big fall

Stock market success brought with it the pressure to diversify and expand quickly. As air coolers weren’t sold round the year, Symphony chose to develop new products.

Soon it was manufacturing everything from geysers to water purifiers to washing machines. But these couldn’t match the air coolers’ success. “The moment we began to diversify, we began to stagnate and lose money,” Bakeri said. “Diversification was a mistake.” The company was also spending heavily on manufacturing and marketing.

By 2002, Symphony’s net worth had eroded. That year, it had total revenue of Rs28 crore and a net loss of Rs31 crore. “Moving out of its core DNA into the highly competitive industry proved to be a tall task for the management,” credit rating agency Crisil said in a 2010 report (pdf). “Although the company did well in coolers, it failed to successfully establish itself in other products, resulting in huge losses and wiping off the net worth.”

In 2003, Symphony decided to approach the Indian government’s Board for Industrial and Financial Reconstruction (BIFR) that helps sick companies restructure their businesses. The company began to revamp its business model and engage with more distributors. It began to outsource even the assembling of products and went back to being just an air cooler maker.

“It took four years for us to exit all our diversified businesses and, by 2006, we were back to being a single product company,” said Bakeri.

The recovery

By 2008, Symphony also began to focus more on its distributor and dealer base. From about 100 distributors in 2007, it has 800 today, while the dealer number grew to over 20,000 in 2016, from 3,000 in 2007. Now, Symphony controls nearly 50% of India’s air-cooler market.

“I had built this company from scratch and I couldn’t watch it sink,” said Bakeri.

In 2008, Symphony acquired the Mexican assets of the International Metal Products Company (IMPCO), founded by Adam Goettl, the inventor of air coolers, for $650,000. That gave it access to the North American market in addition to a wider product range. IMPCO had built up a reputation as a maker of large metal coolers for commercial projects in North America and sold its products through stores such as Walmart, Sears and Home Depot, among others.

Bakeri also realized that IMPCO’s product line, especially the large commercial coolers, could soon be deployed in India. “Every building in India that did not have air conditioning, like schools and hospitals, could be an opportunity,” Bakeri said

The Indian air cooler market is still unorganised with up to 80% dominated (pdf) by local manufacturers. However, it is estimated to grow at a compounded annual rate of 19% between 2015 and 2025 , fueled by growing demand in India’s tier II and III cities. According to brokerage firm Motilal Oswal, nearly 143 million Indian households live in hot and dry climatic conditions. “Only about 8% own air coolers, thereby providing a huge opportunity for growth,” Motilal Oswal said in a report in May (pdf).

India aside, Symphony also wants to tap into some of the world’s biggest countries. In 2006, it began selling in the international market in countries such as Saudi Arabia and Iraq. Last year, it acquired China-based Munters Keruilai Air Treatment Equipment Guangdong for Rs1.5crore ($234,000) in order to increase exports of its coolers to south Asian markets and to tap into the Chinese market. Today, Symphony has a presence in over 60 countries.

So what’s next for Symphony?

“We don’t want to try anything new,” said Bakeri. “We want to focus on our core area and step up our presence in every part of the world.”

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