Second Wind for Gamesa
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Image: Raju Patil for Forbes India
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LOFTY DREAMS Ramesh Kymal has turned Gamesa's fortune around in India
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n early 2009, Ramesh Kymal got a phone call that changed his life. Kymal was then the managing director of the Indian subsidiary of Vestas, the biggest wind turbine maker in the world. For the past five years, Kymal had tried and failed to convince his bosses in Denmark that he needed new investments in India. Eventually, he gave up and decided to move on. Yet, after six long months of negotiations, just when he was on the verge of joining Siemens, he received a call from Richard Chocarro.
What the chief operating officer of the $4 billion Gamesa Corporation told him was music to Kymal’s ears. Chocarro wanted him to build the Indian business from scratch and set up a local manufacturing and supply chain operation. And the deal clincher: He would report directly to the executive committee in Spain — without having to deal with the bureaucracy of an Asia Pacific chain of command based in Singapore, like at Vestas.
Kymal couldn’t contain his excitement. “This was the answer to most of my big disagreements with my previous employer. I gave my consent almost instantaneously. Within two weeks, I went to Spain, we signed up and it was done,” says Kymal, who has now spent 24 months at the helm as the managing director of Gamesa India.
In that time, he’s turned Gamesa into the player to watch in India’s burgeoning wind energy market. The firm has emerged as the third biggest player with a 10 percent share in a market, dominated by local maker Suzlon and a host of multinationals like Vestas, Enercon, Siemens and GE sitting on the fringes (see graphic on Page 55).
By next year, if Kymal’s plans pan out the way that he hopes, he could overtake his former employer Vestas as well. Already, Gamesa’s existing manufacturing capacity in Chennai is sold out for the year, he claims. And Gamesa is likely to close this fiscal with installations of 550 MW, a 100 percent growth over last year. By next year, Kymal aims to almost double the share of India’s contribution to Gamesa’s global top-line from the current 17 percent to 30 percent.
Behind this surge lies an untold story of how the Spanish multinational shifted its centre of gravity from the developed markets of Europe and the US and hunkered down in the emerging markets of China, India and Brazil. In many ways, Jorge Calvet, its chairman and CEO, did what a lot of Gamesa’s rivals were unable to push through: He began shutting down manufacturing and R&D (research and development) resources in Spain and shifted them to low-cost destinations like India. He devolved greater powers to local managers like Kymal and backed them with innovation resources and investments.
Now, it wasn’t as if Calvet had much of a choice either.
A New Reality
Calvet, 54, who graduated with an MBA in finance from the Stern School of Business, had spent much of his investment banking career with Morgan Stanley, UBS and Fortis. In 2009, Gamesa invited him to take over as its chairman. “I was an independent board member of Gamesa since 2005 and the board asked me to take up this challenge and I thought it would be a very interesting challenge to run an industrial company,” he says. But the timing couldn’t have been worse.
The financial meltdown of 2008 turned the wind energy business on its head. Between 2006 and 2008, the wind energy market was driven by huge demand in Europe and the US. Pumped up by the talk around climate change, clean energy and government subsidies, power utilities were looking for wind turbines to fulfill their large programmes of investment. If you were a wind turbine manufacturer you could even pre-sell every turbine you manufactured. But when the downturn hit in 2008, orders were cancelled or postponed.
Gamesa Corporation found itself in a tight spot. Till about 2008, Spain, its home market and Europe constituted about 50 percent of its sales. And now just like that, all of it dried up. Compared to its competitors, Gamesa felt the pinch even more since it didn’t have any products in the off-shore segment, the only segment which was growing marginally. “Only at the end of 2009, 35 percent of our sales were in Spain. Today, as we speak, our sales in Spain are exactly zero. We do not sell anything there,” says Calvet.
In 2009, Gamesa Corporation’s sales fell by 16 percent and the company reported a net profit of €115 million, compared to €177 million in 2008. Looking back, Calvet says the crisis taught him a big lesson. “You have to diversify your risks from a geographical and customer point of view. This is because the world never goes in sync, not all the economies are synchronised. Some fall behind, others move ahead,” he says. So, while demand in Asia and Latin America have surged, Western Europe and the US have fallen behind.
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