Statutory Warning: This is not an attempt to try and tom tom our investment into A.Avartan – This is not an attempt to display our deep technical knowledge (we dont have it to show it!) – This is not an attempt to show us as deep thinkers with a fool proof investment fail safe strategy (there is no deep thinking when it comes to VC investing its a lot of judgements and expectations also there is no fail safe strategy in equity investments)
“ We need a more efficient motor to run our power tools” – Jim Loree Stanley Black and Decker . “ We need more efficiency in E-motors for EV Cars to out perform ICE Cars” – All auto enthusiasts. “ When will our fans become less noisy?” – All Indians at night. “ What a motor mouth you are” – Brian Mcmillan to Steve Waugh. So motors are the sentinels that have found their way into our lives without us noticing since the industrial revolution , we just hope they dont lead to the “Raise and Rule of machines with able support from AI”. Remember “Motors are now Mainstream”
Now that it has been established that motors are as regular in our life as social media, lets look at how they have evolved over the years
So the motor revolution has been going on for some time now. For a layman we have heard Induction / conduction motors / ac motors / dc motors now its on to Brushless Motors (BLDC) / Permanent Magnet Synchronous motors (PMSM) / Switched Reluctance motors (SRM) / Flux Motors etc. Now each of these have a characteristic that is unique to them and has varying efficiency levels as depicted below
Source: https://www.pelonistechnologies.com/blog/comparing-the-efficiency-of-different-electric-motor-types
Largely the above four rule the roost. With BLDC currently being the motor of choice across vehicles , machinery , aircons , equipment and the rest. The rest of the motors are catching on to the bandwagon with strategic inputs and offerings.
Looking at the above Why were we attracted to Avartan?
Lets look at Avartan from the above established lens,
Good Promoters with strong ethics
The promoter family comes with years of experience in the Auto and Industrial space along with relevant work experience in the segment. Ethics are core to their business philosophy and it’s a key consideration in decision making.
Potential innovation / Disruption
The Switched Reluctance motors (SRM)that the company has developed is a deep disruptor in the motor space, thought the technology has been around for years now, the relevant use for the same is being realised now.
The SRM play is to be understood from its bones, meaning it should be seen right from the Raw materials (RM) that go into making it. Normal motors (BLDC, PMSM etc.,) come with magnets (neodymium) built into them . The problem currently and for the foreseeable future is the availability and cost of the same. China currently controls 95% of the supply lines for the neodymium market. Recently they have issued an embargo on export of neodymium from China to anywhere in the world. ( https://www.reuters.com/markets/commodities/china-proposes-new-rules-tighten-control-over-rare-earth-sector-2025-02-19/)
With the rising demand for EV and other motor applications, the china factor is a big dent on the availability of magnetic materials globally. But the challenge is that the magnet story cannot be abruptly stalled or stopped. Enter SRM motors,.
Construction: The SRM consists of a stator with wound copper coils and a rotor made of soft material, typically laminated steel, without any magnets or windings.
Magnetic Reluctance: When power is applied to a stator winding, it creates a magnetic field. The rotor moves to align its poles with the stator’s magnetic field to minimize magnetic reluctance,
Rotation: To maintain rotation, the electronic control system switches on the windings of successive stator poles in sequence. This ensures that the magnetic field of the stator always “leads” the rotor pole, pulling it forward
The entire play is not only about lessening dependence on China, its also about the efficiency of these motors. Not only are these motors noiseless but are also capable of operating in almost total silence and at different speeds and torque. Are about 1.6 times more efficient than a regular BLDC (study conducted by the co.).
Problems solved or Value added
Taking the earlier lines into consideration its a no brainer that the SRM play potentially disrupts the magnet play in motors. Now let’s look at the Value added side of these motors, the Indian government has established India Energy Efficiency Standards which mandate use of high efficiency motors and controllers in utilising electricity , this is on par with the WTO requirements as well. Avartan is well poised to take advantage of this play (which it already is) by supplying SRMs to the Fans and FMEG segment.
The current cost of importing magnets from China makes BLDC and other variants more expensive than the SRMs , further if we throw efficiency into the mix SRMs become the manufacturer delight.
Ability of the management team to execute
Inspite of products/solutions being exceptional execution always remains a key risk in most companies across the early stage / venture stage eco system . It gets more challenging during the early stages especially. Avartan’s core team comes with over 20-25 years experience in the auto and industrials space. The company has applied and has been awarded multiple patents int his technology as well. The hold co Aditya Auto has been a marquee window regulator and other parts supplier to multiple OEMs across the auto value chain. The tech team in Avartan comes with years of research and execution capability as well.
The lesser known fact is that there are only 2-3 companies globally who have successfully commercialised SRMs the leader being Turntide Technologies ( https://turntide.com/products/motors/ ) – invested by BMW Ventures and other marquee investors and the other company being Tesla (uses IPM SRM), Avartan being part of this elite but minimal list is an hat tip to the execution ability of the team.
Market Potential / Traction – Revenue Possibility – Profitability
Without disclosing much, Avartan has established SRMs as an effective alternative to other magnet based motors , starting with the industrial side. It is only a matter of time before the transition happens into the auto side of things (their existing relationships and performance through their hold co is a good stepping stone for Avartan to carry its SRMs into larger auto OEMs). The first beachhead conquered by them is in the Ceiling fan space (noiseless efficient motors) further they are headed into the HVAC space along with Power tools as the 3rd coupe. The lifeline orders are in excess of USD 50M and counting. The product profitability is amongst the highest in the motors segment. Any further proof for traction and potential?
Competitive Advantage
At the outset there is no competition currently for Avartan’s SRMs , Turntide is currently not a competitor as there are no common markets where the companies compete. They could be potential collaborators in the future. There were a couple of well funded startups looking to compete with Avartan, they have neither commercialised nor competed. With a significant early mover advantage the company is quite comfortably placed and awaiting a potential competitor. In terms of the product the efficiency and no magnet requirement gives a significant advantage over BLDC and PMSM. We as investors are waiting to see SRM successful in the auto space where BLDC and PMSM rule the roost.
Potential Exit Opportunities
A good product and investment thesis 9 out of 10 times leads to a reasonable exit. We are like a child scared to commit marks to our parents after a math exam. We know we have done well put in the effort and executed, but there is still a 1% fear factor of goofing up. This nervous energy is good as it keeps the foot planted firmly on the floor and our eyes firmly on the progress the company is making.
In light of the above , We at a99 are honoured thrilled and hopeful of a decent outcome from our investment into A.Avartan. For long we have felt that India needs a product play irrespective of segments that enables it to compete or lead the world. We feel the SRM developed by Avartan is one such product. It’s a matter of going into the right markets and on the point execution. Easier said than done, but we have 100% confidence in the management and the entire team at Avartan to come out with flying colours.
PS: I have tried to keep the context and explanations as simple and candid as possible , the idea as stated in the opening monologue is not to tom tom our investment but to give a shout out to the incredible work that the A.Avartan team is currently doing. Also there is deeper research to back what we have put out here, people interested in understanding further do reach out to us at a99 or just me.
Avartan – “Jagatam Adhipatyam Karishyami”
