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‘We brought our long-term loans to practically zero during COVID’

Amiruddin Thanawalla, Managing Director, Prime Focus Group, speaks on the virtue of adhering to a conservative business approach, which he says has ensured financial stability for the company. Excerpts from an interview he gave to Surendar Balakrishnan of Climate Control Middle East…

| | Jul 11, 2021 | 5:45 am
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As Prime Focus Group, what specific strategies and scenario-planning measures have you adopted to ensure financial stability during the pandemic? Are they helping you in terms of positive cash flow and business continuity?

It is not something we have done differently in the pandemic. We have always had a conservative policy, including placing a limitation on debt. Typically, people would add vertical capacity when the economy is picking up, which would mean more machinery and more debt.

The years, 2016, 2017 and 2018 were good ones. We were still conservative in those years, and because of that, our net reserve position was good. When COVID-19 came, we deployed our internal accruals to settle all our debts. We have a good standing with banks, because over 20 years, we have built a strong reputation of not taking undue risk.

Amiruddin Thanawalla

Our cashflow helped us finish off our debts. We brought our long-term loans to practically zero. The banks asked us why we had closed out our loans. We told them we would come back to them as and when things would start looking upwards. We have a strong outreach programme with banks. I feel there are two entities that are important in business. One is the banker, who supports your expansion, and the second is the human resources set up.

As a group, we have always maintained a good relationship with our bank and taken care of our employees. The COVID-19 tagline doing the rounds here is, ‘We are all responsible’. And that line came to fruition, when our staff supported us well. They were more productive than in the past and, when it became available, took the vaccine. We have a well-diversified HR base. Everyone of the employees felt and took the responsibility to ensure the wellbeing of the company.

To what extent are you affected by delinquent contractors and bad debts, which you probably would agree are long-standing issues that have affected manufacturers and suppliers of capital HVAC equipment?

There are two types of contractors – one that is totally focused on cost and the other that is totally focused on big business but not on working in the right way. I am aware of big contracting companies that have got into difficulties, which in turn, has affected many, many suppliers. I have been in the GCC region market since the 1990s. It has changed for the better, but sometimes, it has taken two steps backwards.

Our approach as a company has been to decide whether to bend or say, ‘fine’. If it is a question of ethics, we have decided not to take the business. We deal in products related to fire safety, among others. Wherever human safety is concerned, we would not bend back at all, because it is not just about business, it is also about moral values. It is not just about making money. Whoever wants to compromise on human lives, we don’t want to be part of it. It is a tough decision, because everyone wants to make money, but we prefer to make informed choices, in line with moral values.

Are you an advocate of the need for specialised HVAC consultants and contractors, who typically are able to precisely estimate cost of projects and present realistic figures to developers and investors?

Initially, in the 1990s, the contractors were specialised. We had specific HVAC, plumbing and fire-fighting contractors. Over time, we got to see several instances where all three combined into one. Whether they have the capacity to offer all services or not, and whether the building industry wants this arrangement or not is a subject matter of debate.

In the 21st century, we are seeing a lot of large contractors. And so, do we need to go back to the 1990s? Is this amalgamation of three services into one serving us well? Well, I have a mixed reaction. I believe some good aspects have been lost owing to lack of specialisation. We still see the specialisation in some small projects, but in the case of large projects, we see an MEP division. One good aspect of amalgamation of services is the coordination that happens.

I used to work as a contractor at Voltas, and I know the challenges on site, when you have ducting routes, fire-fighting, plumbing and chilled water piping. When all these aspects come under one contractor with three service heads, the contractor invariably is able to sort out issues that are likely to arise, and there is no need of arbitration. That’s why I said it is a mixed bag. I don’t think we can reverse the situation and go back in time. So, we live with it. We need to strengthen the model, work out all the gaps and make sure it reflects best practices.

You describe Prime AC Industries as focusing on specialised engineered products. What percentage of your annual revenue do you allocate to R&D? And what is the scope of R&D? Could you cite examples of transformational technologies you have produced?

I am an engineer, and I head Prime Focus Group. My own past experience with contracting was particularly important, because it is not unrelated to what I am doing now. Many a times, manufacturers cannot relate to the contracting industry, because they do not know the application side. They are not able to fully understand the happenings on site. Coming as I do from the contracting industry I have an understanding of what is needed on site.

So, that way, you already have R&D inputs into manufacturing. I studied mechanical engineering and specialised in production engineering. As part of my work experience, besides working in a contracting company, I worked in the tool room at Larsen & Toubro. All these combined gave me a kind of aptitude and approach to my role as a manufacturer.

At Prime Focus Group, I have personally led the R&D activity. As a company, the first decision we took was about concentrating on the air side of the industry. Ducting came first, then we got into producing flanges and then into controlling of air volume.

After that, we added fire safety aspects of ducting systems, and so we went into making fire dampers, and then BMS came in. After that we went into motorised fire dampers. The next question we asked ourselves was, ‘What about distribution to zones?’ And so, we went into VAVs. And finally, air has to come in, and so we did flexible ducting.

Then came thermal insulation, and so we evolved into manufacturing tapes. Along the way, we started manufacturing grilles, diffusers and filters, including HEPA filters. We also went into the production of vibration- and isolation-related equipment, sound attenuators, flexible ducting connectors and vapour barrier for insulation.

Today, Prime Focus Group is the Wal-Mart or Carrefour of the air side of the HVAC industry. We are into anything or everything of the air side. All this has been possible only because of a robust R&D approach. We also have foreign collaboration and adaptation of foreign technologies. The adaptation has also been an outcome of R&D.

The entire diversification at Prime Focus Group has required robust R&D. In 2003, flexible duct connectors used to be entirely imported from the United States and Canada, with a small portion from Belgium. Today, the flexible ducting connectors used in the UAE are almost 100% manufactured in the UAE. Likewise, flexible ducts used to be imported from the United States; today, 100% is manufactured here. Once you manufacture locally, foreign currency is preserved in the country. And then, it is export potential, and it earns foreign currency and supports the economy of the UAE. That is one thing that has happened very well. I have been in the air conditioning industry in the UAE since April 1993. It has been nearly 30 years, and I have seen the evolution of the industry in terms of contracting and manufacturing. Locally made products have got the right kind of place in the industry; of course, more needs to be done.

A major concern in buildings is the loss of valuable thermal energy from leaking ducting systems? What innovations have you introduced at Gulf Duct to curb energy losses and reduce total cost of ownership?

Leakage from ducts is just one aspect; we also have to talk about flanges. Flanges used to be imported from Germany, the United Kingdom and the United States. In 2003, we started manufacturing them in the UAE. We did not limit to imitating a product; indeed, we are pioneers in the UAE. Given that there are two standards – SMACNA and DW144 (UK spec) – we went to the United Kingdom to test our flanges, where they allow up to five per cent leakage for less than 500 pascals.

The test results proved that we were well within the permissible limits. You cannot prevent leakages from occurring – they cannot be zero, but it is possible to bring leakages down to a minimum limit. One aspect that needs emphasising is that a flange is not a mere component but is a system. So, you have the flange, pleat, gasket, etc. We would prefer if contractors would adopt a method of single-sourcing a flange system, but of course people buy from different manufacturers, keeping price in mind.

Speaking of contractors, to what extent are the losses owing to poor design and installation, where variations occur and ducting gets rerouted as a value engineering exercise? How frustrating is it for you as a manufacturer?

The frustration comes from knowing that people are not being trained properly, which means they are not able to do a proper installation – and sometimes, they do not put the components together properly. We do receive complaints that the products are not right, and that’s how we learn that they have not been assembled in the right manner. So, contractors need to take care and train their staff. When it comes to fire safety and human safety, when we supply fire-rated ducting, we go to the site and certify the installation – the whole nine yards, as they say.

So, it is not just production and transportation but also the right installation. We make sure the components within the ventilation system have been installed properly. We don’t supply and forget, because it is about human safety. Fire-rated ducting can help in the human evacuation process, so that people can escape on their own. So, we do take a lot of care and insist that we visit the site to take a close look at the installation. We provide the contractors with adequate engineering drawings much before they start the installation process, but sometimes, things do happen, and so we are there at the site as a last line of defence.

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