Nahata Makes His Next Move

Away from the public eye, Himachal Futuristic has been planning big

Mahendra Nahata, part-owner and director of Himachal Futuristic Communications Limited (HFCL), is back. Two years ago, he earned notoriety and ridicule for taking on the largest tender in Indian telecommunication history, worth Rs 120,000 crore, for nine telecom circles. His turnover at that time was around Rs 97 crore. It was predicted that his company would go bankrupt. It was said that once Sukh Ram, the then minister for telecommunications and the man regarded as the force behind the companys meteoric rise, went out of power, HFCL would go bust. Two years down the line, Nahata says nothing of that sort has happened. All that is behind us, he says.

 

In HFCLs plush office in Delhi, Nahata speaks excitedly about the huge plans he has for his company. He has been on the move for the last few weeks, packing in 16-18 hour days. By next year the company plans to increase turnover to around Rs 280 crore, a 40 per cent increase from the current level of around Rs 200 crore. By the turn of the century, HFCL hopes to have a turnover of around Rs 500 crore, and it could be one of the leading Indian telecom equipment providers. We are already the largest Indian telecom turnkey projects provider, says N K Goyal, president operations.

HFCLs order entitlement position from the Department of Telecommunications (DoT) is at an all-time high. Far in excess are the orders pouring in from the private sector. There are plans to diversify into broadcast equipment and in the room adjacent to his there is a team from abroad waiting to talk to him about a tie-up. In the long term, Nahata plans to examine civil aviation and naval navigational equipment manufacturing. And, the icing on the cake: HFCL may have got out of its contractual obligations to set up basic telecommunication services in four circles which would have involved paying out thousands of crores to the Department of Telecommunications. About two months ago, the Delhi High Court passed an order let HFCL off the hook.

No one in the company today wants to talk about Sukh Ram or the controversies of 1995. It was a bad time for us, says Nahata. People said all sorts of things, but our clients and friends stood by us.

The bad time that Nahata refers to happened about two years ago, when the government threw open bidding for basic telecommunications services. HFCL, incorporated in 1987, emerged the leading contender in as many as nine circles. In other words, this Rs 100-crore turnover company had accepted in principle to pay Rs 85,925 crore as licence fees alone to DoT over the next 15 years! In some circles the fees alone that it proposed to pay (for example in Andhra and Punjab) exceeded the gross operating profits made by the DoT in 1993-1994!

Needless to say, the department was forced to put a halt to the basic services programme. Soon after, Sukh Ram himself had to face corruption charges and was forced to resign. In the ensuing controversy, the DoT reacted by stopping purchase of equipment. Pilloried by the press and industry for its connections with the minister, and hit by a sharp fall in demand for its core products, HFCLs impending demise was regarded as a foregone conclusion.

Today the figures seem to tell a different story. I see us as improving on our earlier rates of growth, says Nahata. We plan to build on our advantages of solid R&D, low costs, and technical strengths. Examine these facts if you dont believe Nahata. At the moment, HFCL has definite contracts worth around Rs 172 crore from the DoT. Out of the total Rs 463.59 crore worth of orders the department has placed in 18 categories of transmission equipment in the past one-and-a-half years or so, HFCLs share is a whopping 27 per cent. And that in a time when Sukh Ram was not the minister for telecommunications. Orders from government overall have slowed in the past few years. However, this is around double the number of orders we have had from the DoT at any time in our history, says Nahata.

Out of these, HFCL made the lowest bid in as many as eight contracts. Our ability to supply equipment at the lowest possible rates is a key strength, says Goyal. Theres a story that is legendary in our company. A few years ago, for a particular order the lowest rates that were being offered to the DoT were around Rs 26 lakh. We won that order by putting a bid, for the same equipment, for Rs 5 lakh.

Neither Nahata nor Goyal are willing to go on record, but there is a perceptible feeling of having proved a major point. Two years ago, says a general manager in the company, They said we couldnt win a single contract without Sukh Ram. They said, once the minister goes out of power, HFCL will collapse. We have proven them wrong.

HFCL seems to have made successful forays into the private sector as well. Look at it this way earlier our competence was under scrutiny, says Goyal, adding, but if we really were incompetent, why should the private sector place so many orders with us? Contracts worth Rs 475 crore have been signed with private sector telecommunication companies. That list includes companies such as Essar Telecom, Sterling Cellular and Srinivas Cellcom. HFCL has also tied up a Rs 250-crore, nationwide contract with a mega-Indian company, but Nahata is unwilling to go on record with its name. We will speak about it at an appropriate moment, he says.

Orders worth around Rs 30 crore have come in from the institutional segment, which includes clients such as the Gas Authority of India Limited (GAIL) and Oil and Natural Gas Commission (ONGC). The company has also set up a turnkey telecom transmission equipment division with around 200 people. We are already the largest Indian company in this segment, says Nahata. Last month alone the company recruited around 8-10 general manager level officers.

The Rs 500-crore turnover that HFCL plans to hit by 2000 does not include contribution from the planned diversifications. The last two years were bad for all telecom equipment manufacturers, he says. Although now the DoT has started to give new orders and MTNL is expected to follow suit. In the next stage basic service providers are expected to expand. So the future looks good, but not everyone will survive.

In the next year or so Nahata plans to firm up the plans for entering the broadcast sector. We are looking at the three segments of cable, terrestrial and satellite services. There is tremendous potential. I am looking at the naval and civil aviation telecom equipment market but it is at the moment only in the conceptualisation stage... For the long term, my role model is Dhirubhai Ambani. He has shown the world how to succeed even if everyone is against you.

So is HFCL really, really back? We never went away, says Goyal.