When industry veteran Ravi Girimaji came to Tianhe Chemicals in 2010, he and company Chairman Wei Qi shared one vision for Chinas largest homegrown supplier of lubricant additives and fluorochemicals: Make Tianhe a billion dollar multinational.
This June, a key milestone towards the goal was achieved through an initial public offering in Hong Kong. The IPO infused $654 million into the company, which now claims to be the worlds fifth largest full-line additives supplier. With revenues from lubricant additives last year of nearly Yuan 2.1 billion ($335 million), the company boasted to prospective investors of having a 41 percent share of Chinas lube additives market, comfortably ahead of domestic rivals that include Lanzhou Lubrizol and Sinopecs Wuxi South (17 percent each), Shanghai Hairun (7 percent), Xinjiang Land (5 percent), Jinzhou Kangtai (4 percent) and numerous others.
The IPO outlined plans to spend about $24 million to expand its existing additives production base in Bawang Village, located in Yi County near Jinzhou, the small northeastern city in Liaoning province where the company is headquartered.
Bawang Village produces a number of ashless dispersants, detergents and a dozen additive packages. The expansion, which is already under way, will increase the annual capacity of ashless dispersants to 30,000 tons from the current 25,000 tons, as well as double the capacity for making its proprietary long-chain linear alkyl benzene calcium sulfonate, an key intermediate for detergent additives, to 60,000 tons per year. Production of zinc and extreme-pressure additives will also be doubled to 40,000 tons per year.
Tianhe also aims to spend almost $100 million building a new plant in Qinzhou, Guangxi province in southwest China. It already has a plant there producing additive components, and the new facility will be capable of expansion in the future.
Another $29 million will go towards strengthening the companys research capabilities, including building new labs and buying advanced equipment. Aside from our current R&D center in our headquarters, we are expecting a huge lab in India in the following 12 months, if not earlier, Girimaji told LubesnGreases. He said the location has not yet been decided, but it could be Bangalore, where Tianhes India operation is located, and where Girimaji, CEO of the additives segment since February, is based.
Tianhe has never been one to skimp on improving its R&D capacity, he stressed, and its research center in Jinzhou bears this out. Occupying three stories and equipped with advanced, imported devices – such as a Ducom four-ball tester, emissions spectrometer from Thermo, and hot-tube tester from Komatsu – the labs are designed to test key performance attributes of additive components and packages, including viscosity, extreme pressure, friction and wear characteristics.
Strict tests have led to quality improvements which garnered qualifications from a few multinational lube marketers, he pointed out.
Girimaji knows exactly how much time and effort it took to bring Tianhe to its current level, from a once-typical Chinese supplier which complied with Chinese standards only and did business in a Chinese way.
When I took over the additives business, I thought, all these had to change, Girimaji recalled. A seasoned technology and management consultant who had extensive experience working with high-profile players including Lubrizol and Bharat Petroleum, Girimaji quickly started an internal revolution, hiring an international leadership team to conduct staff training as well as adopting a number of international standards, including DIN standards from Germany, Japans JIS and the globally accepted ASTM standards.
I told our Chinese staff, Chinese standards are OK while you are serving Chinese clients, but they are not accepted in the global market, Girimaji recalled, referring to Chinas GB specifications for additives. Now all of Tianhes additives are tested at independent third-party laboratories, such as Southwest Research Institute in San Antonio, Texas.
The most challenging part, however, was to change the mentality, he conceded. Its not something you can get through training. I kept telling our Chinese staff that they needed to think like a world citizen before actually serving the world. We cannot think locally and act globally, he said, while we can think globally but act locally.
It took him two years and a number of meetings to make it happen. It was indeed very difficult, but we share the same vision, which made the impossible possible.
Girimaji wins enough trust from Chairman Wei Qi to be granted autonomous management, which is rare in private Chinese companies.
He gives me the free hand to let me do my job and never interfered, Girimaji said of Wei, an amateur fossil collector and active investor said to be eyeing steps into healthcare and agriculture.
Being Asias largest additives supplier makes Girimaji glad, but far from satisfied. In the next five years we want to build Tianhe into one of the highest quality suppliers in the world. We will be a company with quality, consistency and delivery to complete customer satisfaction, and we will do this through bringing a compelling proposition to the table, he said.
Of course, the company faces great challenges from the well-established additives Big Four: Lubrizol, Infineum, Chevron Oronite and Afton Chemical. According to the research firm IHS, this foursome accounts for over 85 percent of additives demand on a worldwide basis. And other global additive suppliers – such as BASF, Chemtura, Dow, Elco, IPAC, Rhein Chemie and more – are stiff competitors as well.
Nonetheless, Girimaji is confident in his plan, where the keyword is expansion – geographically and in product lines. While China remains a vital market for the company, we are to expand in Asia-Pacific and South America. We also have plans to grow our business in the U.S., he said.
This year, Tianhe appointed Houston-based Soltex Inc. to be its exclusive U.S. distributor, to boost sales and service customers. It also hired a vice president last year to lead the U.S. effort, which now has six experienced people who are involved in daily strategic planning, including marketing, sales and technical services.
In Asia, the additives division recently opened a sales office in Kuala Lumpur, Malaysia, naming Alan Savidge to head the operation as vice president, Asia-Pacific. Another sales office opened in Dubai early this year. And in India, by having a new lab here we [will be] able to serve clients around the world thanks to our advantage of English-speaking ability, Girimaji said. Building a production base outside China is also on the agenda, but the location has not been decided.
At the current stage the additives business has yet to set foot in Europe, but he is considering adding an office in the region for future development. We are doing business with European companies in other regions as they are eager to expand in Asia-Pacific, EMEA and South America. But the EU itself is not the market for us right now.
With a history dating to 1992, Tianhe has built a rich portfolio of components, including scores of detergents, ashless dispersants, corrosion inhibitors and pour point depressants. However, acknowledging clients growing demand for additive packages, Girimaji said its current focus is on those. Its IPO listed more than 20 engine oil, gear oil and industrial lubricant additive packages now, and promised more to come.
Luckily we have an advantage: our proven strength in component development. Therefore we have the technology, as well the professionals who know how to make high performance packages, he said. We are relatively new to packages so right now we probably are in the mid-level, but we aim at high performance and we are going to get into the high level as soon as we can.
The global strategy also relies on acquisitions and forming joint ventures. While Girimaji declined to give more details, he said the company is constantly scouting companies worldwide that are in its strategic interest.
According to Girimaji, becoming a global supplier will also help in Tianhes home market, China, where it has long been a major supplier to Sinopec and CNPC, the state-owned oil giants. As our products meet international specifications, we are confident of getting a fair share in the Chinese market. Moreover, our multinational clients are also expanding their product portfolio in China and are looking at us as a preferred supplier, he said.
Tianhe has logistics centers in three coastal cities – Jinzhou, Dalian and Tianjin – and may add product warehouses near depot locations to extend its reach.
To keep up the fast pace, the company is recruiting for almost all positions, including production, marketing, R&D and logistics, most based in China. Hiring experienced talent is a tricky task, Girimaji admitted, as most of his senior-level officials have served time at rivals, including the Big Four. Therefore, he has to be extremely careful with respect to intellectual property infringement, especially when it comes to R&D.
Most of our clients are multinationals, so if we use any technology similar to the Big Four it will bring us bad reputation. So one of our principles and ethics that we practice is all of our technologies are developed by our own, and all of the people who joined us are given the task of producing new technologies and new products.
Legal and technology experts help ensure Tianhe is not involved in IP infringement. We are a China-based company, so we have to be extra careful, Girimaji added.
Managing a company with employees from different countries can be challenging at times. Girimaji is himself a native of India, with Chinese, Americans, British and Colombians on his global team. While he admits cultural differences could sometimes pose challenges in communications, he deals with it by creating a performance driven environment.
We may have very different backgrounds, but we all share the same goal, that is, creating a history. After all, there had never been a major additives company from Asia before us, he said.