Built to last: IITians’ enduring growth story
Until 1994, Technocraft Industries operated as a single-product company, specialising in drum closures for a specific market. Its single-product focus, while giving it a leadership position, also imposed growth constraints. The Saraf brothers have always been determined to expand their company into a larger corporate entity, and they achieved it, thanks to their extraordinary capabilities. Their first diversification into steel tubes, following the acquisition of a struggling company – Maharashtra Steel Tubes- and subsequent shift into scaffolding, proved successful. As the company continued to diversify its business portfolio, its top and bottom lines grew consistently. Today, Technocraft Industries (India) is recognised as one of the best companies in enhancing shareholder value and is one of the few mid-sized corporate entities that have experienced steady growth, even during the pandemic. “Every adversity has been an opportunity for us as we transformed all adversities into opportunities,” Dr Sharad Kumar Saraf, Chairman of the company, says.
Why are you leaving the country? Why not try your luck here and see what the future has in store? Dr Sharad Kumar Saraf heard the voice in a dream one day after graduating from the Indian Institute of Technology (IIT), Bombay (IIT-B) in April 1969. More than two-thirds of his classmates left for the US for higher studies in those days, and Dr Sharad also received admission to two universities with a handsome scholarship. Parents, who were reluctant to send their son abroad for higher studies, were overjoyed when he told them the voice he heard in his dream that advised him not to go abroad. No doubt, India’s IIT alumni have always been in high demand and those who are bold become entrepreneurs. Those who stayed back in India did better, becoming well-to-do entrepreneurs rather than being well-to-do executives, Dr Sharad later found.
Of course, there were enough torments in the ’70s and ’80s for Indian entrepreneurs due to the parochial licence permit raj clouded the Indian business for a long time. It was a do-or-die option for new entrants. Over-production, which naturally led to the deployment of more workers and contributed more taxes to the exchequer, boosting the GDP, was virtually forbidden. That was an astonishing reality until the early 1990s. While reminiscing about the days of the licence permit raj, Dr Sharad smiles at the irrationality of an economic policy that carries the stain of the British legacy, and the same rules that the Indian business followed until the liberalisation process set in 1991. For two decades, he worked under a closed economic regime and learned many lessons that drove his business through the most gruelling period. Now, Dr Sharad praises India’s liberalisation process and the consequent changes in the Indian economy over the last three and a half decades, though, as he rightly says, there is still scope for improvement in ease of doing business.
Obstacles are no longer obstacles for those determined to do what they have in mind. Being a technocrat with a sound knowledge of his business, immense resilience and dedication to what he was engaged in, Dr Sharad could find ways to draw the best from the government policies and the otherwise unwelcome licence permit raj. “We converted adversity into opportunity. That was one of the secrets of our success in the days when doing business in India was not so easy, especially for the first-generation entrepreneurs like us,” he points out. He acquired a sound knowledge of India’s export-import policy and the changes the government incorporated into it over time. He knew his work well and never compromised with what was unethical. There were many provisions in India’s export-import policies in the 1970s and ‘80s, like procuring an import licence without any reciprocal obligation to export, which cunning traders could wantonly misuse. The saleable import licence fetched substantial money for those who could misuse it. “Nevertheless, I never thought of doing anything foul to make money unethically,” Dr Sharad recalls. Of course, he used the provisions of the foreign trade policy discreetly for the business gain of the company, which began exporting in 1977. Even today, he is an expert in trade policy.
After graduating in Electrical Engineering, he joined REMI, a company run by his cousin-brother Vishvambhar, and he worked there until 1972, the year his younger brother Sudarshan Saraf graduated from IIT-B in Mechanical Engineering. REMI was making electric motors. In those days, the Sunday family meeting of the Sarafs, as per the Will of his paternal grandfather, continued. Dr Sharad just returned from a European trip. In one of the Sunday meetings in early 1972, after his return from Europe, his uncle Ramnivasji Saraf suggested: “Sharad and Sudarshan, maybe you can produce flanges used as a closing device for steel drums.” Ramnivasji was running a die-casting facility at that time. He also produced zinc die-cast plugs but could not sell them without flanges, a sheet metal bottom of the plugs. Sharad was 27 years old, and his brother was 24 then. That became a business launch pad for the Saraf brothers, who were contemplating some business by deploying their engineering skills.
Having graduated from India’s best institution, the brothers had no dearth of jobs. However, they were keen to start a business with no specific idea in mind until they got the suggestion from their uncle. Plugs and flanges together would sell in the market, the brothers realised the fact soon. The plugs and flanges together formed drum closures – consisting of a bottom part called flanges that was press fitted on the drum top and a plug screwed in the flange after liquid filled in the drum. Drum makers couldn’t make closures at a reasonable cost. The first challenge was to make it economical and time-saving. The Saraf brothers combined their skills in the production process and engineering technology to enhance operational efficiency and the knowledge of the prevailing ecosystem that would help them find a space in the international market. Getting into the quality-conscious international market was not easy, but the young Saraf brothers had enviable capabilities.
That led to the formation of Technocraft Industries in partnership with Dr Sharad’s wife, Shakuntala and brother Sudarshan. Technocraft stands for technology and creativity, and the meaning remained undiluted for over 53 years to this date, with timely diversification into other segments, which can sustainably enhance the company’s revenue. Father Madhoprasadji worked 18 years with the Aditya Birla Group and saved ₹1.72 lakh as a terminal benefit. Father offered the sons his entire savings, which constituted a virtual seed capital for Technocraft Industries. That was not enough. The brothers took a loan of ₹5.50 lakh from Maharashtra State Finance Corporation (MSFC) and bought land of 1000 square meters in Andheri, Mumbai, the premises where Technocraft House, the edifice of its pride, and a landmark in the dense industrial locations of Mumbai suburb. They constructed a building and bought machinery. They were prepared to face the challenges ahead and explore newer opportunities.
By nature, the Saraf brothers are workaholics with a passion for innovation. They have a talent for innovation that saves time and money. With the product model in hand, the company would rival American Flange and Manufacturing Company (AFMC), founded by the son of the inventor of the drum closure. It was not easy to break the monopoly of an influential American company with a footprint all over the world. AFMC tried hard in every possible way to stop the new – one and the only rival, a more efficient Indian drum closure company promoted by technocrats. The American company even accused the Saraf brothers of stealing their drawings, though the Sarafs had never seen even a picture of the AFMC premises. But the American company, in its despicable attempt to stop Technocraft, got the police to raid the new company’s premises and the owner’s residence in 1974. The American company misbelieved that threatening young Indian engineers would scare them. “We had no intention to copy from anyone, nor did we need it. We had our own ways and capabilities,” he recalls. The police officer, whom the American company sent to raid the premises of Technocraft, understood the story and realised the talent of the two IIT-B graduates. The police team couldn’t find anything on the premises as the American company accused the Technocraft team of stealing. The AMFC allegation proved a damp squib.
At the same time, customers of the American company, which kept its product prices high and maintained strict supply terms, were pleased to see another company enter the until-then supplier-dictated market. The high prices charged by the American company during its monopoly were a blessing in disguise for Technocraft. The company consistently improved its manufacturing process by utilising advanced technology, which enhanced its cost efficiency and offered a good margin even at a selling price lower than the competitor’s price. Additionally, Technocraft focused on customer care, leading to better acceptance of its products among consumers. However, the early days of the business were not very encouraging due to tight government regulations on private enterprises. “That was another challenge in those days,” he recalls.
Drum closure had huge overseas market potential, and buyers were willing to change suppliers when they had options. The domestic market for the product was not highly encouraging. The company was prepared to enter the foreign market, and its product quality, pricing, and production capacity fuelled optimism. The Saraf brothers worked hard to find a position in the export market. While Dr Sharad focused on positioning the company by finding the right ecosystem, Sudarshan concentrated on production and technical development. Father, Madhoprasadji Saraf, with many years of experience working in the Aditya Birla Group, managed accounts. Madhoprasadji was a person with a high level of integrity and was always determined to uphold the values and ethics of his profession. Perhaps that was why an income tax raid on the company in February 1981 found no evidence of wrongdoing. The Assistant Director of Investigation, A.D. Gupta, who led the IT raid, informed Dr Sharad after the search: “Normally, businessmen hide cash under the mattress, but your father kept all of it in the books.” The raid did not unearth anything but an extraordinary accounting discipline that the company maintained. The company suffered plenty of baby sickness mainly owing to the hostile business environment and the culture of corruption that prevailed at that time. But the Saraf brothers weathered all the sickness and carefully navigated through rough weather with their perseverance, honesty and ethical approach.
In 1977, Technocraft had its first major break in its export business when it received orders from Iran and Iraq. Two years before that export order, he took his first business trip to Thailand, Myanmar, the Philippines and Hong Kong. He couldn’t get any orders from the places. However, the order from the National Iranian Oil Company, which followed another order from an Iraqi oil refinery, brought significant fortune to the company. The product was well-accepted in the international market. Within two years, the company became a government-recognised International Export House, indicating that it had become globally competent in the drum closure business. The company continues to maintain this distinction to this date. Dr Sharad continued to travel extensively and even adventurously. Some were family-cum-business-cum learning trips. All these experiences benefited the company in many ways.
Demands for the product increased, necessitating expansion of production capacity in 1980. In the following years, the company took measures to meet the challenges of timely response and delivery. It opened offices in foreign countries with the first one in the United Kingdom in 1993 in the form of a subsidiary. A step ahead, Technocraft could beat the pioneer and the long-time monopoly player to make itself into the leadership position. Now we are the largest in the drum closure business with a footprint all over the world,” says Dr Sharad. The company also has a manufacturing facility in China.
The acquisition of Maharashtra Steel Tubes from an auction floated by SICOM in 1994 marked the company’s entry into a diversified business. The factory of Maharashtra Steel Tubes was close to the Technocraft factory. Moreover, the management of the company was exploring new business areas as they realised that there was a limit to the market of drum closure products. The market was saturating. “We bought the company with the expectation that steel tubes would sell well in the market. However, soon we realised that the product had huge competition, which forced us to think of diversifying into the scaffolding business,” Dr Sharad reminisces. The company continued to diversify, eventually making it a conglomerate with diverse business verticals. Three years later, the company opened a 100 per cent export-oriented (EOU) yarn unit. Again in 2000, the company opened a division in the name of Technosoft Information Technologies to provide engineering software and design services. The same year, the Union Ministry of Commerce and Industry awarded the company the National Award for Export Excellence. The following year, the Engineering Export Promotion Council – Maharashtra awarded the company the Export Excellence Award for all steel products. After entry into yarn and engineering services, the company entered the garments segment. “But branding was always a tough proposition. We gradually moved out of selling our branded garments but continued to make for others,” says Dr Sharad. The company’s textile division has state-of-the-art facilities for the production of yarn, fabric and readymade garments.
Over a period, the product profile of the company expanded to textiles, engineering design and IoT services, scaffolding and formwork, etc, besides drum closure, where it had its maiden entry and more than half the business currently comes from. Engineering design and IoT services business functions under the Technosoft engineering division. This division provides engineering services like design, embedded and IoT services to various engineering and manufacturing companies. The company has built a strong customer base in North America and Europe as it offers multi-disciplinary engineering services in its five business lines: engineering, consulting, innovation, resources and content.
Its entry into the scaffolding and formwork was another major milestone in the company’s history. Currently, the company manufactures various scaffolding systems such as cuplock and ringlock. These products have huge markets in the US, Canada, UAE, Australia, and New Zealand, as well as in many European and African nations. In 2011, the company expanded its product offering to include the design and manufacturing of custom formwork for infrastructure projects and transmission and telecom towers. Now the formwork division caters to the infrastructure sector, as it offers solutions for commercial, residential and infrastructure projects.
The company started with a turnover of a few thousand rupees in 1972 and crossed a turnover of Rs 2200 crore. Technocraft has around 4000 employees, including a large number of engineers and technicians. “We have only been growing since the day we began our business. The growth continued even during the COVID-19 period. Now also all our business divisions are doing well,” Dr Sharad points out. The management believes in following a prudent business strategy. Shutting some of its overseas joint ventures, which were unnecessary and rarely productive, and closing down the small power coal-fired generation division, etc, were part of the prudent business strategy adopted by the company management.
Though it has shelved its garments brand, the division continues to generate substantial business from its textile division, which has fully integrated textile facilities in Amravati in Maharashtra. Thirty-five years after founding the company, in 2007, it listed its equities on the BSE (Bombay Stock Exchange) and National Stock Exchange (NSE) after offering 8.32 million shares to the public for Rs 105 each. The offer was oversubscribed 11 times. Today, in a deeply subdued market, its price is over Rs 2200. In July 2024, it crossed Rs 3900. Its shareholders have never been unhappy. The company bought back shares from the investors four times since 2016, which led to the dilution of equities and consequent improvement in return on equity. Correspondingly, consistent improvement in bottom lines also enhanced the shareholders’ value. The company offered Rs 4600 per share, substantially higher than the market value, in the last buy-back in 2024. “That was one of the ways to reward our shareholders,” says Dr Sharad.
Five years after the company began its business operation, it entered the export market, and two years later, the government of India recognised it as an export house. The company has won many awards for export excellence, including Best Export Performance, awarded by the Prime Minister of India.
Sharad Kumar Saraf always demonstrates remarkable composure and responds with logic and common sense rather than engaging in arguments and disagreements. Whether it is a police raid, an income tax investigation, or any false allegations, which are common challenges rapidly growing companies face, Sharad used to give discreet and well-reasoned answers, thanks to his sound knowledge of what he deals with and engages in.
“I thought of businesses where demands never recede. Our entry into the yarn, fabric and garments was on the merit of cloth as an essential item like food and shelter. That business is scalable with space for expansion. Diversification became a part of our business growth strategy. Single product business is susceptible to downturns with limitations to scale up.”
“In the last five years, I have seen a change in the spending patterns of people. Earlier people used to buy good shirts and good quality household items. Now people spend money to buy costly smartphones and electronic gadgets and go on holidays. The proportion of discretionary spending is going up. Even middle-level executives also go on holiday to foreign locations.”
Dr Sharad Kumar Saraf
Chairman, Technocraft Industries (India)
“It is clear that corruption is all pervasive and is probably the oldest profession unlike the one popularly believed. To be successful in business one has to draw a line of how far one should go in compromising one’s own ideals.”
An extract from Engineering Karma (a book authored by Dr Sharad Saraf, published in 2022)
