Podcast | Digging deeper - Business of Family: The Munjals

Om Prakash Munjal was one of the forces that created the world’s largest integrated bicycle manufacturing company by volume and Hero Motors, an Indian two-wheeler giant. The company further diversified into areas like bicycle components, automotives, automotive components, IT, hospitality, educational and medical philanthropy in a very productive journey that shows no signs of slowing down.

The beginning

Born in a tehsil called Kamalia in Lalpur district of undivided Punjab, Om Prakash and his brothers always had more spunk than their circumstances allowed and the simple business of vegetable trading was never going to be enough for them and they soon went on to trade in bicycle components.

In 1943, the clouds of Partition had begun to loom and the family shifted from Lahore to Amritsar. Even though the family set up the business from a scratch there, the aftereffects of Partition crippled the profits and the growth.

Subsequently, the brothers moved their operations to Ludhiana which was beginning to buzz with young businesses.  In Ludhiana, a community called Ramgarhias, known for their craftsmanship helped the Munjals to restart their manufacturing wing. In 1956, the Munjals transitioned from component manufacturing to full-fledged bicycle manufacturing. The brand name Hero was also coined then and it befitted the first bicycle manufacturing unit in India. In the first year of its inception, the company produced over 639 bicycles.

A classic Indian success story

This story is interesting in the context of where India stood post independence. The country was in the throes of famines and droughts and the aftershocks of World War II. There were no global allies to speak of and there was a dire need for self-reliance. The Nehruvian call to entrepreneurs to build Indian businesses fuelled the ambitions of the Munjals even though the scenario was less than conducive for entrepreneurial growth.

Before the automobile boom, the bicycle was the carrier of the humble Indian and there were many players taking advantage of the huge demand for this simple and inexpensive mode of transport. The Munjals were not about to be left behind despite difficulties they faced while procuring a manufacturing licence.

But things were turning their way. Manubhai Shah, the industry and commerce minister between 1950 and 1954 created the National Small Industries Corporation or NSIC with the guidance of the Ford Foundation and it was Brijmohan Lal, Om's brother who decided to make use of the shift in the business climate in the country and to start making cycles. Omprakash was assigned the responsibility to establish a dealer network. The Birlas were making Hind Cycles, TI was making inroads into the south, Raleigh and Atlas Cycles were also thriving and Hero Cycles aspired to be the leader of the pack.

To achieve this goal, Brijmohan Lal even travelled to Germany and Japan to source components and this foresight is what set Hero cycles apart in a league of their own. He bought a complete chain-making plant for Rs 3 lakh.  The death of the eldest brother Dayanand Munjal just when the business was beginning to thrive, hit the brothers hard but their rise was unstoppable.

According to a 2007 article in Rediff.com, "by 1971, the Munjals had set up a rim-making division for Hero Cycles and launched another company called Highway Cycles that would make freewheels -- it was then that Brijmohan Lal restructured and streamlined Hero's rapidly expanding business. Within a span of 6-7 years, production at the Hero Cycles plant doubled."

In the seventies, the company ventured into the two-wheeler territory with Majestic Auto that by 1983, had captured almost 35% of the domestic moped market.

In 1979, the company hit the milestone of 1 million bicycles and they were just warming up for what was to come. In 1986, Hero Cycles was crowned the largest bicycle manufacturer in the world by Guinness Book of World Records. Hero Cycles went on to manufacture a minimum of 20000 bicycles a day.

A company that works together, grows together

Not all empires are born equal and this one was started against all odds with a bank loan of Rs.50,000 in 1956 when the family, as we have mentioned before, transitioned into cycle manufacturing and its growth created opportunities for talents in multiple streams like engineering, technology and more. From four brothers in the fifties, by the turn of the 21st century, says Rediff, there were 21 active Munjal members in the business.

All four brothers had an equal stake in all the Munjal companies and any member keen to get a slice of the pie had to do his bit to enlarge and run an independent business which contributed to the company's organic expansion without members eating into each other's space.

Even the political turmoil post Operation Bluestar did not dampen the Munjals’ indomitable spirit.

The turning point

The biggest shift in the company’s fortune was of course its collaboration with the Japanese automobile conglomerate Honda. Hero Honda was a never before and never again moment in India's two-wheeler industry. Hero Honda initiated its first assembly line in Dharuhera, Haryana and says Rediff, the first 100 cc Hero Honda motorcycle came off the assembly line in April 1985 and with it Hero Honda kick started its journey to unimaginable success.

From their dependence on Bajaj scooters, Indian consumers went on to revel in the aspirational delight that motorcycles offered and by the nineties, Hero Honda was at the top of the heap. Another family tragedy followed, Raman Kant Munjal, Brijmohan's elder son, who had been instrumental in the success of Hero Honda passed away in 1991. But the wheels kept on turning and the company diversified into Hero Honda Finlease to finance potential customers and launched Hero Exports, which eventually became India's largest exporter of two-wheelers.

There were ups and downs along the way, says Rediff, with occasional disagreements with Honda and yes, there was Bajaj bringing out a four-stoke engine and poking fun at its closest rival with a nudge nudge wink and wink ad campaign with the sneaky punchline-- 'Kyon Hero?"

But one thing never let the company down. Its foresight. The next generation of the Munjals ventured into IT and IT-enabled services and also tied up with National Bicycle Industries, a part of the Matsushita Group to manufacture high-end bicycles. In the late 1990s, the company dived into the concept of electric bicycles in India.

By 2007, the Hero Group had a staggering network of 5,000 dealers across the country, and an annual turnover of Rs 10,000 crore.

In 2010, Om began to head Hero Cycles, Hero Motors, Munjal Kiriu Industries, ZF Hero and Munjal Hospitality and also was widely known to nurture and encourage the expansion of Urdu language through events and publications. He won the Sahir Award in 1994 for his contribution to Urdu literature.

Apart from various honours, he accrued in his lifetime, Om also received the Udyog Rattan Award from the Punjab government and the Indira Gandhi National Unity award for his work towards the promotion of integrated social values.  Om was also known to look after his work force personally.

New horizons

A 2017 report in The Economic Times reported how the Hero Group company Hero Motors is foraying into the electric vehicle segment after tying up with UK-based design company Hewland Transmissions for design synergies.

Hero is India’s largest brake disc, brake drum, steering knuckle maker, says the report and with a head-start, Hero Motors can meet the electric gear box requirements of OEMs in India as well as globally.

The timing as always is right because the demand for EV components will zoom as the country transitions to all electric vehicles by 2030.

The ET report also says that Hero Motors has several new projects up its sleeve across both automotive and its flagship bicycle vertical for which it is beefing up to invest Rs 800 crore over the next 1.5 years.

We quote, "These will encompass brownfield expansions, new plants and electric drivetrains for which funding will be primarily through internal accruals.”

Hence, says the report, Hero is now pushing to electrify its flagship business of bicycles as an alternative solution, where it will have the option of both manual and electric drives that will lead to a cost advantage and consolidate its supply chain.

The report further states that Hero’s automotive business currently contributes a turnover of Rs 1,100 crore out of the total group turnover of Rs 3,000 crore. The Chairman, Managing Director & CEO of Hero Motocorp Pavan Munjal says that with all the new businesses in their kitty, the company hopes to double their revenues to Rs 6,000 crore by 2022.

In 2017 again, a TOI report informed that Hero Cycles Ltd would merge all businesses and companies under a new group identity called "Hero Motors Company" (HMC) as the company felt that Hero was not just about cycles and automobiles and would be diversifying into different business interests in the time to come. The HMC family today is made up of organizations such as Hero Cycles Ltd., Avocet Sports, Hero Motors, Munjal Hospitality among others.

At present, Hero cycles alone exports to over 70 countries including Germany, Poland, Africa, Finland, UK and Europe etc.

It has a vast suppliers network and over 7610 employees. Hero Cycles has also entered into Mid Premium, Premium & Super Premium segment under the brand names Hero Sprint, Hero Sprint Pro & UT (formerly called —Urbantrail). As part of its strategy to further cement its position in the fast-growing premium cycling segment in India, Hero Cycles acquired Firefox Bikes, India’s largest premium bicycle brand.

Hero Cycles Ltd, also has acquired majority stake in Avocet Sports Limited, to mark its entry into the high-value cycle market in Europe. Avocet is one of the top three distributors of bicycles, e-bikes, bicycle parts and accessories in the UK.

The company has also acquired a majority stake in Sri Lanka’s leading bicycle manufacturer BSH Ventures, further strengthening its manufacturing capacity.

In 2017, the company also showed interest in setting up a Rs 400 crore cycle project near Sahnewal in Punjab.

Apart from promising its most humble consumers India's cheapest cycle in the form of Sarthi, the company has also, according to an August 2018 report,  revived the 110 year-old Viking Cycles brand with the help of the Manchester design centre. Viking was part of Avocet Cycles portfolio.

Viking stopped trading in 1967, went through ownership shifts and faded into near oblivion till Avocet bought the trademark in 2002.

When Hero Cycles bought Avocet, it decided to renergise the brand appeal and nostalgia associated with the Viking brand and invested more than £2 million to restore it to its former glory.

The bigger picture

While Pavan Munjal is busy with breaking new entrepreneurial ground, his sibling Sunil is keeping up with the family tradition of giving back to society in multiple ways. As a social entrepreneur, an angel investor, the Chairman of Hero Enterprise which has interests in insurance distribution, steel-making, real estate and corporate training, he has not just invested in e-commerce enterprises but also supported start-ups that focus on digital learning, community transportation, healthcare, women empowerment and children’s education.

He has co-founded BML Munjal University and is also the President of the Dayanand Medical College and Hospital, Ludhiana, which has been ranked the Number One private teaching hospital in North India by the Week magazine.

He is keenly interested in arts and has set up the Serendipity Arts Trust, a unique social project that offers patronage to the arts.

He attributes a lot of his social work to the Arya Samaj way of life that eschews fundamentalism and promotes humanism and social equality and is proud that the philanthropy done by the family is never publicised even though it dates back to over sixty odd years.

Philanthropy he believes is not about writing cheques but contributing energy, ideas and tangible support to those who need it most.

That is why where ever the company set up a factory, there followed a school, facilities like access to clean, drinking water and more.

Success he believes even in philanthropy follows when you apply to it the mindfulness and efficiency of strategies mastered by an entrepreneurial mind.

With more taxation benefits, he believes, more business houses will give back to society.In any case, money must be used to create something larger than self-aggrandisement and you cannot just fill it, shut it and forget it in the coffers. He believes that it must be shared and utilised to create a better, more equitable society where even the so called common man can become a Hero.

And that is the true legacy of the Hero brand. The fact that it is the saarthi of every Indian and the brand that travels as far as the great Indian dream can go.