Is India on her mind?

What's common to the Leh-Manali Highway, the newlook octagonal columns of the Delhi Airport and frissia, the protein drink? If you want hints, we have a few: it's also common to the Tata Motors' Nano, high-quality hybrid cotton seeds and the Asian Paints Royale ad, which features a paranoid Saif Ali Khan worrying about scratches on the wall.

The answer: The $26-billion, Delaware, US-based E. I. du Pont de Nemours and Company, or DuPont as it is better known, and the innovative products from its labs. A section of the Manali-Leh highway uses DuPont's Elvaloy resin to ensure smoothness and crack resistance. The material was used on India's first toll road in the Ahmedabad-Vadodra section and is now being used more regularly in the National Highways Development Project. Another DuPont customer, Asian Paints, uses a product of the Teflon family for its new Royale paint with surface protection.

If Saif Ali Khan is in the picture, you can't keep another tinsel town regular, Shahid Kapoor, out of it. Remember the VIP ad where Kapoor flees with his bride on his wedding day, with a suitcase (with the wedding dress inside) in tow? That piece of luggage has Teflon coating too—with water protection. At the new terminal of the Delhi airport, DuPont's Corian has been used for the 134 columns of unusual shape—and for the first time it has been used for vertical cladding.

And frissia, of course, is convenience protein—just dissolve in water for your daily needs. Want some more examples? Tamper-proof Rakhi envelopes made of Tyvek (a paperlike material that you can't tear and can wipe clean even if you spill coffee on it) or Kevlar, used for bullet-resistant jackets by the Indian army. And then there are the biggest customers of DuPont in India—farmers who buy its insecticides, Avaunt and Rynaxypyr.

Passage (Back) to India DUPONT'S CHIEF SCIENCE & TECH OFFICER'S JOURNEY. When Uma Chowdhry says "the talent pool here (in India) is tremendous," it's difficult to miss out on the irony. Chowdhry, 62, Senior Vice President and Chief Science & Technology Officer at DuPont, was born in 1947 in Mumbai—then much better known as Bombay—where she went on to obtain a bachelors degree in science from the Indian Institute of Science of the Mumbai University. She didn't see much of the city after that. After a master's degree from the California Institute of Technology, Chowdhry worked for a couple of years with Ford Motors and then went to the Massachusetts Institute of Technology for her PhD. In 1977, she joined DuPont and today heads the innovation department of the innovation company of the world. Last fortnight, Chowdhry, along with DuPont CEO Ellen Kullman, met up with BT in Mumbai (they also visited Delhi and Hyderabad, home to DuPont's knowledge centre), dressed in a Kota saree. "I try to come to India once a year," says Chowdhry who now lives in Wilmington, Delaware, with husband Vinay. At a time when most industries have been ravaged by a recession, Chowdhry has plenty of silver linings to show for her efforts. "In a recession year 39 per cent of our revenues came from our new products that had been introduced in the last five years," she beams. The company's decision not to cut back on research & development expenditure also resulted in 2009 being a record year in terms of patents issued. "We have become a lot more productive and if you look at the revenue per person in the last few years, it has grown tremendously. It is allowing us to do research at a much lower cost. In India, the cost of research is almost one-fourth of what we can do in a developed country," says Chowdhry who has been heading DuPont's scientific research function since 2006. So is her CEO satisfied with that? "I am never satisfied but innovation is a hard thing to schedule," quips Kullman. "And what is important is to really get to understand the Indian market." Chowdhry will clearly be making many more trips to Hyderabad in the years ahead.

Numbers Make a Case
To paraphrase a cliche, there's a little bit of DuPont in every part of India—in fact so many little bits that they caught even Mark Vergnano, the Wilmington, Delaware-based Executive Vice President of DuPont, by surprise. "The openness to innovation (in India), which is really our lifeblood, is surprising and very exciting."

As India goes about chasing double-digit growth, it is more than happy to adopt DuPont technology. That is visible in the nearly $500 million of revenue that DuPont clocks in India (along with the seeds business, which is housed in a separate company, Pioneer Hi-Bred) from a variety of businesses—agriculture and nutrition, construction, automotive, consumer goods—all growing in robust double-digits. Balvinder Singh Kalsi, President, DuPont South Asia, reckons the Indian operations, E. I. duPont India Pvt Ltd, will double revenues to a billion dollars by 2012.

That fits in well with DuPont's global strategy of juicing out more from emerging markets—which in 2009 have contributed 30 per cent to the top line, with emerging Asia accounting for 11 per cent. So it wasn't an unpredictable move when Kalsi made a strong pitch for investing in manufacturing when DuPont Chairman & CEO Ellen Kullman flew into the country last fortnight. Currently, DuPont India has six units in three manufacturing locations in India at Hyderabad, Savli near Baroda and Madurai in Tamil Nadu. These units make crop protection chemicals, engineered polymers, automotive paint refinishes, seeds, Teflon coatings and Nymex. This apart, in 2008, the company set up a Knowledge Centre and a Service Centre in Hyderabad, which is easily the jewel in DuPont India's crown.

Kalsi feels it's time for the next big move. "Three years ago my position was: Let's focus on what India can bring to the table. That led to the setting up of the knowledge centre. I feel this is the right time to focus on (scaling up) manufacturing." Adds Uma Chowdhry, Senior Vice President and Chief Science and Technology Officer of the parent firm, who made the trip to India along with Kullman (see Passage Back To India): "In emerging markets such as these, we do not have time to waste." For DuPont, however, which has just about got its house in order after a difficult 2009, a scale-up in India may have to wait. "We have local manufacturing here in three centres in India. The knowledge centre will help us understand the local needs and determine what's next for us here," says Kullman.

Indeed, it would appear that after sinking Rs 200-odd crore into the DuPont Knowledge Centre (DKC) in Hyderabad, DuPont will wait to see the results of those efforts before it takes a plunge into large-scale manufacturing. The global R&D centre in Hyderabad—DuPont's third in emerging markets—is doubtless a significant outpost as it is the only centre outside the US that does both agricultural and industrial biotech under the same roof. The DKC is also important because it houses a bioinformatics lab, an engineering design facility—things that have till date been done only in the US. It has 260 scientists currently, and is built to accommodate nearly 600. The centre has filed for three patents since starting operations 16 months ago.

Cost or Value Proposition?
India allows DuPont to develop products at a lower cost with acceptable performance. Over-engineering is often central to value in developed markets as against cost in developing markets. Kalsi cites paint refinishes. "We have products which last a lifetime. Question is, do you need products with a life span of 20 years? So, we are developing paint refinishes which last five years." But the applications for these products will be global. For example, the centre is working on ballistic resistant materials. "Our original designs were largely for the US military. Here we are producing them for a different market. We are using different kinds of techniques, blends and fibres. I guarantee that the product will have applications across the world," says Vergnano. Rice is another big opportunity being worked on at DuPont.

India's hybridisation level is less than 3 per cent, relative to 50 per cent in China. And the company is focussing on developing traits relevant to India— improved yield, drought-tolerant and disease and pesticide-resistant. Yet, if India is a key market for DuPont, a ramp-up of existing manufacturing capacities is inevitable. Amongst emerging markets India lags behind the likes of Brazil and China. In Brazil, for instance, where DuPont has been around for 73 years, the company posted $1.6 billion in sales, has 2,600 employees and 11 plants (although it opened a global R&D centre a year after it did in India—in 2009!).

The China story is more compelling: After 21 years in the country, it clocked $1.7 billion in sales in 2009, has 30 manufacturing sites, 6,500 employees and opened its global R&D centre in 2006. In India, where DuPont's investments in fixed assets are still just a paltry $100 million—as against $700-800 million in China—the 15-year-old subsidiary lags way behind on all parameters.

The question one is tempted to ask is: Is India just a cost proposition for DuPont—which may explain why the R&D centre takes precedence over manufacturing—or does Delaware see big value emerging out of the country in the medium to long run? Kullman is quick to dismiss any such speculation. "If it's about saving a few dollars, then it's a short-term thing. If manufacturing is a way to create more value, that will be great. We have to put together the business plan. The knowledge centre is going to create a tremendous amount of opportunity, which may result in us thinking very differently two years from now."

Adds Vergnano: "Today, India is #10 in the list of countries by revenues. Our aim is to quickly accelerate it to the top five. China was not in the top 10 a decade ago, yet it is #2 today." It's difficult to see that happening without a step-up in manufacturing operations. As Kalsi shrugs: "With the growth mission we have, we will have to look at manufacturing again in a different angle. We cannot continue to grow at 20-25 per cent on year-on-year basis without putting more investment in local manufacturing." Over to Kullman.

INTERVIEW WITH ELLEN KULLMAN "There is more connectedness now between the laboratories and businesses and the countries we operate in" In October 2008, Ellen Kullman took over as President and CEO-designate of E.I. DuPont de Nemours & Co, the $26-billion, 207-year- old "market-driven science company," after growing through the ranks for 19 years. Kullman's elevation from President to CEO on January 1, 2009 happened at a time when the global economy was in the throes of a vicious recession. Kullman took some tough decisions like closing down a few units and cutting staff by 7 per cent to keep the company's profits on track. But we didn't cut back on R&D, says Kullman, who made a whistle-stop visit to India (Delhi, Hyderabad and Mumbai in three days) last fortnight. Excerpts: Coming out of a recession, what does the scenario look like? We see the economy improving slowly, sequentially. But it is different in different countries and in different industries. Agriculture never had a financial crisis—it continued to grow right through 2008-09. There are tremendous opportunities in seeds and crop protection chemicals. India has done very well through the financial crisis. Our business here is growing and is strong. We see things like automotive coming back. There is more opportunity in automotive in India, in China, and Latin America than in Western Europe, which has already seen a lot of stimulus. In 2009, US and Canada contributed about 40 per cent to your revenues. Do you see that rebalancing itself in the years ahead, with emerging markets like Asia, Latin America contributing more? Emerging markets have been on a continual growth path. They have been growing at almost 15 per cent compounded annual growth for the past five or six years and we see that continuing. Emerging markets brought in 30 per cent of our revenues in 2009 and we see that growing at a faster pace. Our developed markets' revenues will increase at a smaller rate. The growth will come from India, China, eastern Europe, Latin America. Latin America and Asia both have opportunities to grow very strongly. I think we will see GDP-equivalent growth in the US. However, agriculture is going to see higher growth in the US as there are heavy investments being made in technology to get a higher output. Our application development capability in the US is very well-developed. We are developing that capability here now. We are going to see 20 per cent type of growth rates here by investing in the technology centre and in research. Can environmental sustainability be a business proposition? You can bring sustainability to many businesses. If you look at energy and you think about efficiency, that is great sustainability. Having more output with less energy. We took that on as a challenge in 1990. We were looking at how we could keep our energy consumption flat while our production increased and not only were we able to keep it flat but we reduced our energy usage by 14 per cent while our output went up by about 40 per cent in that decade. That not only created sustainability for our products but it also created more competitive products because of the lower costs. What about reducing dependence on fossil fuels? Solar photovoltaic is a large area for us. We are working on materials for photovoltaic cells for many years. We are really at the cutting edge in bio-fuels. Making ethanol from non-food sources is one area. The second one is a molecule called butanol (butyl alcohol—a molecule with four carbon atoms as against two in ethalnol) that can be used similarly as ethanol, but which does not have the energy degradation and can be transported in gasoline pipelines. In the past you have faced flak for being polluters— how is it now? You manufacture Teflon in India, the process of which was considered polluting in the US because of a chemical called C8... When you are 207 years old you have a lot of history to deal with. The standards around water, air, land environment have increased substantially over the past 100 years. We have always worked with governments, locally and nationally, to make sure we are meeting every regulation. We take that very seriously. And we operate with global standards—so we bring the best technologies to India when we manufacture here and our standards here are the same as in the US. Are you satisfied with DuPont's rate of innovation globally? What I am proud of is that we have more connectedness now between the laboratories and businesses and the countries where we operate than I have ever seen in my 21 years with DuPont. In 2008, we had to cut staff and capital expenditure. We had long discussions on what to do with research and development. Do we stop programmes or do we not? We wanted to make sure that given the global financial crisis these programmes were still relevant to our customers and markets. We decided to maintain our funding in research and development and in 2009 we had a record number of US patents issued. Customers also had a little time—they were not running as hard—so we could get their time and introduce new products. That was a real positive of what came out of the global crisis.