Chetan Maini Spells out the Rationale behind Selling Reva
Image: Gireesh GV for Forbes India
Can you tell us about the relationship between the three companies owned by your family?
They are completely separate companies, [that are] part of Maini Group. Each one has a separate shareholding pattern, independent boards and management teams. There are synergies in the group in procurement, policy, HR, best practices, etc., but decision making is independent.
In the boards, there are more people who are non-family and independent directors. The group companies have helped Reva tremendously in the early stages. For example, this factory is on land given by Maini Materials. There are various components (plastic systems, charging systems) that are supplied by the group companies. Since 1986 we have been making electric vehicles (golf carts), so there is a lot of synergy in the supply chain. In the early years Reva received a lot of support and was given a high priority within the group. When there were investments to be made in areas of component developments, the group companies took over some of that. The group has helped in giving management bandwidth and financial perspective. In the group, there is strong emotion to Reva. There was a high level of commitment, sometimes to the disadvantage to other group companies. I am not on the boards of other group companies so we run independently. I have shareholding in these companies.
Over the last few years, have these companies have become reluctant to put in more money in Reva?
That’s very true. We started the business in the initial years with a lot of our own money and AEV invested money. We got support from ICICI Technology financing and other debt financing and that helped the programme grow. The opportunity that we saw in 2005-2006 was much bigger for all group companies. Each of these companies needed capital and if they were only going to support Reva then we would have constrained their growth significantly. We believed that it was time for Reva to get more investment; the product had matured by then. We were already selling cars in India and Europe. DFJ (Draper Fisher Jurvetson) and GEF (Global Environment Fund) came into this sector, which helped Reva.
Was it true that Maini Precision had an external investor at that time and they wanted that the company should re-invest surplus in that business and not invest in Reva?
I don’t remember the exact year, but the auto components business was growing tremendously, the company was looking at going into aerospace business and they had global opportunities. They were positioned well and they needed more capital to grow. It wasn’t one versus the other. We just felt it was the right time for the group to grow. We couldn’t self fund ourselves; Reva wasn’t profitable at that time. Other businesses were very profitable. But a lot of their investment came into Reva to support it.
So this was done amicably?
It was done very amicably; there were no differences between the investors or the family members. When we started in 1999, before we moved back from US, my father had a discussion with the three of us, that if we do this, we should commit zero or 200 percent. That was an understanding that we had as a family and they were very supportive of me and the idea. They are still very supportive and have been the back bone of why we can do this today.
From 2006 onwards, did their priorities change?
No, each had their own business to run. But when it comes to financial and overall capital, we get together. We decide what to do; this is a financial decision not an operational decision. Once we saw that each company needed capital to grow, we took a call whether we should bring in external capital or do it ourselves. We believed that raising external capital was the right decision for all companies.
They did not feel that supporting Reva was becoming a drain on their resources?
I don’t think so. At some point we had to put our shareholder cap on. It is not a drain, but it was a question of opportunity. The options were, should we — as a group — grow slower and own larger portions, or grow faster and own smaller portions. As a family we chose the second route and said that this was the right time for capital infusion. In December 2006 we got in external funding.
What was the premise on which DFJ and GEF invest in the company and why did they exit?
DFJ was very interested in this space, they had invested in Tesla and they wanted to invest early in a space they believed was hot. This became a part of their cleantech investment. GEF also wanted to invest in EV for a while.
So why did they exit?
For me it was more of how we saw the next step coming. We were seeing that capital requirement was going to be significant going forward. But not at one shot. The business is so dynamic, so should you focus as a company continuously raising capital? Or should you focus on creating value? It is very time consuming to continuously raise funds. The money we had raised was not very large and the growth we are envisioning will be higher. We wanted a strategic investor now. We needed more than money, we needed growth capital. These companies invest more in early stages rather that in the latter stages. We were going to the next stage.
Did they get impatient because the company wasn’t making profits?
No. I wouldn’t say that. We were not profitable but we had showcased two new models. We had developed complete next generation of technology, and we had a tie up with GM. We were on a path. The investments they made went into creating this value; we started our new manufacturing plant. I don’t know what their internal constraints were.