Lessons From QRG – The Man Behind The Rise Of Havells

‘Business is done with conviction and not with a Calculator’ - QRG

QRG started as a electrical goods trader in Delhi’s Bhagirath market in 1958. In 1971, he acquired the Havells brand from Mr Haveli Ram. Havells initially manufactured switches and meters. Over a period, the company expanded its product portfolio to include wires & cables, MCBs, lighting and small household appliances like fans, water heater, etc. The company has grown through multiple acquisitions including Standard Electricals and Surya cables. With an intention to become a global brand, they had acquired Syvania lighting in 2007 but later sold it in 2015 due to fundamental changes in Europe’s lighting market. In 2017, Havells entered the consumer durable segment with the acquisition of ‘Lloyd’ brand. In 2019, the Sales/PAT/ROIC was US$1.43bn/US$165mn/~35% and the current market cap is US$6bn.

Havells is admired by all the FMEG (fast moving electrical goods) companies. While they have built their business model over the past two decades, the durability of their business came to light only around 2010-2012. There are two market segments –large projects segment and the other is trade channel (web of dealers, retailer &electrician). Large projects could be cyclical in revenues and profitability. However, the trade channel has steady margins but takes a long time to build reach. While other companies were busy chasing large projects, Havells just focused on building sales through the trade channel. As the projects market segment started shrinking around 2011-12, companies started exploring the Havells model. One dealer I had visited in 2011 told me, ‘Everyone now wants to know how Havells did it?’ After meeting the ecosystem of dealers, competitors, retailers, etc., I figured the prime reason behind Havells’ success was their unconventional promoter Mr.Qimat Rai Gupta (fondly known as QRG). Let me highlight three traits of QRG that I believe were very important for the success of Havells.

Building long term Relationships with partners can become a strong competitive advantage

In buying a switch or switchgear, the consumer lacks the understanding of technical aspects and hence relies on electricians for advice. The role of the intermediary (electricians and dealers) is critical and companies incentivise them. Hence, Havells’ entire business strategy focused on distribution. A member of Havells team once told me – ‘Please think of Havells as a distribution company. Product and brand strategy revolves around distribution.’ Since distribution was their moat, the distribution partners – dealers & distributors – were very important to the company. QRG kept personal relationships with each dealers. One Havells’ competitor, Mr.Bala (name changed) put it beautifully, ‘We can offer dealers more margins but how can we replace QRG’s personal touch? This makes it is tough to imitate the Havells’ model’

To explain his point, he narrated a story. Mr.Bala had approached a large dealer of Havells to start selling their products. Due to higher margins on offer, the dealer initially agreed to switch. He informed Havells that he would not be selling their products startingnext month. The next day, QRG called the dealer and invited him and his wife for lunch at his residence. Out of respect for QRG, the dealer could not turn down the invitation. When the dealer reached QRG’s residence, he and his wife were greeted by QRG’s entire family and the lunch was served by QRG’s wife personally. They spoke on various personal topics, but QRG did not discuss any work related topics. When the dealer got up to leave, QRG handed his wife a parting gift envelop as is customary in India. The envelop contained tickets to tour Europe for dealer’s entire family. QRG had made him feel like he was a part of his extended family. With such feelings, the dealer could not move out of selling Havells and politely refused Mr.Bala.

Discussion with another competitor brought to light one more incident. In 2008, the copper prices crashed and all the dealers faced inventory write-offs. At month’s end, QRG asked all his sales team to compile the inventory of all the large dealers and send to him the next day. Every dealer’s inventory loss was calculated and QRG decided to bear the loss. A cheque was couriered to the dealers with a personal letter from QRG the very next day. No other company could do this.

Always challenge conventional ways of doing things

In 2004, Havellslaunched a premium range of fans. Most dealers and even Havells’ management team objected to this approach. They wanted an economy range of fans too. Most dealers predicted that Havells will fail in fans. However, QRG was adamant and focused only on the premium market. A large fans dealer in LoharChawl fondly remembers his discussion with QRG during 2004-05. The dealer used to complain to QRG about not having the entire range. QRG used to calmly say, ‘You keep the fan inventory and I will ensure customers come to your door to buy it’. The dealer used to laugh as Havells was relatively unknown brand in Mumbai and such things don’t happen in a short span of time. However, he was surprised when one day a client landed on his doors asking specifically for a Havells fan. Looking back, the dealer thinks that Havells spent heavily in advertisement and this created a pull effect for the products. In those days, branding through advertisement was unheard of in the electrical market. Finally, QRG’s strategy worked and now Havells is the leader in the premium fans segment (Priced above Rs1500).

Never be afraid to reverse decisions or change course

Most promoters do not back out of businesses or reverse their decisions. However QRG was different. Havells had a JV with DMZ of Germany to make electric meters. The business grew from annual turnover of US$8mn in 1998 to US$42mn in 2002 . However, the business landscape changed once the World Bank gave loans to the electricity boards to convert from electro-mechanical meters to electric meters. Many unorganised players entered the market, prices crashed and corruption increased. In 2002, QRG decided to exit the market at a time when revenues from meters were about 50% of total company revenues.

The family had also entered two businesses – Havells financial services and Zeus advertising. However, they shut them down within a year after realising that it required more attention and bandwidth than they had. The company had also started a faucet business which they exited after realising that it had no synergy with their existing business.

QRG’s trait had rubbed off on Havells’ management team led by his son Mr. Anil Rai Gupta. In 2015, Havells sold Sylvania (European light business). Given the deteriorating lighting market in Europe, Havells decided to focus on Indian market.

Who else is doing it?

When I met Havells in 2013, they explained their business model and future plans. They impressed upon me that their distribution focused strategy required a unique mindset which the competitors lacked. When I asked which other company they believe have a similar mindset, they mentioned about V-guard. Interestingly, very few investors had heard about V-guard during that time. Over the years, it emerged as a strong compounding business under the leadership of yet another intelligent fanatic Mr. Mithun Chittilappilly.

Disclaimer: The intent of the article is to know promoter traits that led to the success of company. This is not a recommendation on the stock. I and my family do not own Havells at present but our decision may change in future. Although, most inference that I have made is based on my interaction with the ecosystem, I have also taken a few facts from the book written by Mr Anil Gupta (Son of QRG).

If you enjoyed this article, you should become an Intelligent Fanatics member. As a member, you get our current and future Intelligent Fanatics books, case studies, online courses, and transcripts for free, as well as the ability to participate here on our community. Join Us.


Thanks for sharing this @Jay_Kakkad… One observation that intrigued me was that almost all great household material companies have this obsession to keeping their distributors happy. I did not think much about it till I read this excerpt from the awesome book ‘Capital returns’.

Charlie Munger asked the MBA students of University of California this question - "You have studied supply and demand curves. You have learned that when you raise the price, ordinarily the volume you can sell goes down, and when you reduce the price, the volume you can sell goes up. Is that right? That’s what you’ve learned?” The business school students all nod in agreement. Munger then goes on: “Now tell me several instances when, if you want the physical volume to go up, the correct answer is to increase the price?”
Some students come up with the luxury good paradox, whereby higher prices indicate superior quality which, in turn, leads to greater sales.

Very few students identify Munger’s answer, namely that when the customer is not involved directly in the purchasing decision, then higher prices can be used to bribe the purchaser’s agent and can result in both higher profit margins and sales volumes. From an economist’s perspective, the customer experiences an agency problem. Agency creates the potential for supernormal profits for both agents and producers. Investors who understand the process can profit, too.

The book goes on to explain how Geberit benefits from this ‘unholy alliance’ between the manufacturer and the decision maker.As mentioned in the book - Normal relations between provider, intermediary and consumer are distorted when the consumer lacks understanding and relies on a supposedly independent intermediary. In many cases the relationship between the intermediary and the product provider has developed to the point where these parties form a tacit alliance to exploit consumer ignorance.

Now think about what happens when there is price increase? The intermediaries who take the decision on behalf of the customer welcome it - higher product prices implies higher commission for them.

There are other industries where this phenomenon plays out - for example in the healthcare industry like dental implant or hearing aid or any other personal space in your body. You just don’t want to take the cheaper option in case of things related to health.

But all good ideas taken to the extreme can backfire. The above model, where end customer’s interest is not kept primary, is prone to disruption by a company looking to exploit inefficiencies.

This is perhaps what is meant by Charlie Munger that sometimes the mental models conflict with each other, and one needs to synthesize them. The above model has created and is continuing to create exceptional wealth, but there are industries where the above model is being targeted by new age nimble competitors to disrupt. So it is both a great and an awful idea.

Which again brings us back to our belief - duality is everywhere.


I really enjoyed reading @Jay_Kakkad’s article on risk. Would suggest the readers to check it out -