Vol 2 / Issue 07 / Apr 09
/Rs 30
Why Big Retail is in a Mess The Truth about Microfinance Doing Business in Denmark
entrepreneur of the month/
Sandip Somany, Hindustan Sanitaryware
How BPOs are Managing the Slowdown
investor of the month/
Fresh Water Fish Farming
Subrata Mitra, Accel Venetia Kontogouris, Trident Capital
Managing Celebrity Security Sun Rider, the Solar Boat Essentials for the Spa Industry
innovation/
A Microscope made from Bamboo e-charkha Mentored by Mother Nature Case: Printo Document Services Starting a company in an economic drought 100 pages including cover
Vol 2 / Issue 07 / APR 09
BOARD OF ADVISORS C K Prahalad
University of Michigan
N R Narayanamurthy
Chief Mentor, Infosys
Kanwal Rekhi
Chairman, TiE
Romesh Wadhwani Chairman & President, Wadhwani Foundation Gururaj ‘Desh’ Deshpande
Chairman, Sycamore Networks
Saurabh Srivastava Chairman, Indian Venture Capital Association Kiran Mazumdar Shaw R Gopalakrishnan
Chairman & MD, Biocon Executive Director, Tata Sons
Philip Anderson
Professor of Entrepreneurship, INSEAD
Shyam Malhotra Editor-in-Chief Krishna Kumar Group Editor
ANALYSTS Ambrish Jha Aswathi Muralidharan Binesh Kutty Vimarsh Bajpai
sector/retail
36
Why Big Retail is in a Mess
OPERATIONS Ajay Dhoundiyal Product Manager VIjay Rana Design Anil John Photography
SALES & MA Jaideep Mario Gabriel Imran Ali Dayanath Levaj Jagadeesh Kingshuk Sircar
MARKETING Associate VP West West South South South-East Asia
PRINT & CIRCULATION SERVICES NC George Associate VP T Srirengan GM, Print Services Sudhir Arora Circulation Services Manager Pooja Bharadwaj Assistant Manager, Subscriptions Sarita Shridhar Assistant Manager, Reader Service
Overambitious expansion, squeezed profit margins, and unsustainable operational costs have adversely affected India’s organized retail sector
Printed and published by Pradeep Gupta. Owner, CyberMedia (India) Ltd. Printed at International Print-O-Pack Limited, B-204-206, Okhla Industrial Area, Phase 1, New Delhi-20 Published from D-74, Panchsheel Enclave, New Delhi-17. Editor: Krishna Kumar. Distributors in India: Living Media India Limited, Mumbai. All rights reserved. No part of this publication may be reproduced by any means without prior written permission. BANGALORE 205, 2nd Floor, # 73, Shree Complex, St.Johns Road, Tel: 41238238 CHENNAI 5B, 6th Floor, Gemini Parsn Apts, 599 Mount Road, Tel: 28221712 KOLKATA 23/54, Gariahat Road, Ground Floor, Near South City College, Tel: 65250117
Essentials
For the Spa Industry
88
MUMBAI Road No 16, D 7/1 MIDC, Andheri (East) Tel: 28387241 DELHI D-74 Panchsheel Enclave Tel: 41751234 PUNE D/4 Sukhwani Park North Main Road, Koregaon Tel: 64004065 SECUNDERABAD #5,6 1st Floor, Srinath Commercial Complex, SD Road. Tel: 27841970 SINGAPORE 1, North Bridge Road, # 14-03 High Street Center Tel: +65-63369142 CORPORATE OFFICE Cyber House, B-35, Sec 32, Gurgaon, NCR Delhi-122001. Tel: 0124-4031234, Fax: 2380694.
100 pages including cover
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APRIL 2009
An overview of certain equipment and elements used in the business of spas
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/contents
40
entrepreneur of the month
Sandip Somany
opportunities/ Textile Chemicals as a Business .............. 18 Managing Celebrity Security..................... 32 Fresh Water Fish Farming......................... 55 Opportunity in Female Condoms .............. 74 innovation/ Sun Rider, the Solar Boat ......................... 30 e-charkha................................................. 66
Hindustan Sanitaryware & Industries
Somany talks to DARE about his experience, his challenges, tells us about the innovations of his company, shares some offshoot business ideas, and much more
blogs/columns Philip Anderson ........ 16 Paranjoy Guha Thakurta ... 51
global opportunities/
Doing Business in Denmark As a leader in wind power, Denmark offers lucrative opportunities in renewable energy, besides information technology and pharmaceutical space
strategy/ How BPOs are managing the slowdown .... 20 finance/ The Truth about Microfinance ................... 48 event/ BarCamp Delhi ........................................ 35 CEO Summit ............................................ 64 Startup Saturday ..................................... 76
Rupin Jayal ............. 58
investor of the month/
Anurag Batra ........... 82
Subrata Mitra, Accel
and Venetia Kontogouris
52 based
brand
capital
come
business companies
company
cost country crore customers delhi don’t entrepreneur entrepreneurs experience growth help high idea india indian industry investment
like
look
make
management market marketing money need number people products second services start team technology think time used value venture want waste work world years
60
68
Trident Capital
96
INSEAD/
innovation/ A Microscope made from Bamboo
A low-cost microscope makes learning of elementary science a fun activity for children
Printo Document Services .......................... 24 Mentored by Mother Nature ........................ 44
NEN / TATA NEN Hottest Startups Awards Winners .. 84
others / Exchange ..................................................8 Feedback ............................................... 14 APRIL 2009 5
www.dare.co.in
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blogs/edit
Surviving in a world gone crazy In such a situation, the only priority that should matter is to survive. Survive the next two quarters somehow and you can live long to tell the tale to those who follow
A
s I sit down to write this piece, the news out there is mixed. The Sensex is attempting a last minute leap of faith to somehow close the financial year
above the 10,000 point mark. The “Indian” Premier League will be played in far away South Africa and our political leaders are trying out all sorts of permutations and combinations in their quest for post poll maneuvering space, if not the hot seat itself. All around us, there are fires of various kinds burning and across the seven seas, a company that is “too large to be allowed to fail” is on government life support, but is paying out millions of dollars as bonuses. In short, the world seems to have gone completely crazy. Now add to that the prospect of indifferent, if not bad, annual results, a split election verdict and more unrest around the world, and one can reasonably expect the next quarter or two to be equally bad if not worse. In such a situation, the only priority that should matter is to survive. Survive the next two quarters somehow and you can live long to tell the tale to those who follow. All the very best for the new financial year. May it have better news for all of us!
/Krishna Kumar
APRIL 2009 7
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• partners • mentoring • funding • guidance • advice • ideas...
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enjoy reading DARE as no other magazine. It
Published: March 2009
is really a gift for entrepreneurs and would-be
1. Gaurav Yadav had developed a product, edufruit. com, for educational institutions and was looking
entrepreneurs like myself. I am looking to start a software startup that will develop and market
for angel funding of Rs 20-25 lakh 2. Dhiraj was planning to start a rose polly house
a innovative user authentication technology,
project and was looking for a funding of 50 lakh
EasySecured. If successful, it could change the
3. Akshay Shah had developed an multi-vertical and
way we access our online accounts and make them
horizontal enterprise resource planning (ERP)
safer and hacker-proof. The technology is detailed
product called, iWeb Enterprise Suite, and was looking for marketing cum implementation partners
on the website www.easysecured.com and a demo application that uses this technology is showcased
4. Paramvir Singh had an business idea in the entertainment space and was looking for a funding
on www.unmeconnect.com. I have applied for a
of 2+ crore
trademark and a provisional patent for this technology Response: March 2009
to protect the intellectual rights.
Purnima Gupta of CPG Business Synergies
I am looking for funds to take this to a commercial level and also further protect the intellectual
had written into DARE saying she wants to contact them.
property. The clients for this technology are all the websites that offer paid services. So, if anyone is ready to help me take off this technology I would welcome it. Gurudatt Shenoy
W
e are interested in seed funding IT startups with strong fundamentals. The company/
startup
should
have
core
expertise
on
web
development (php, mysql)/internet marketing (seo, smo, ppc, ad agency). Young and dynamic founders
I
am planning to setup a plant for recycling/
with a strong team and expertise are invited. Gaurav Bansal Eduvision India Services
disposal of e-waste. I would be thankful if you
could provide me more details that can help me in establishing a small-size plant in north India. Ajay
I
am planning to develop a website that will be a single point for all the deals announced daily.
This is a new concept and will sure gain momentum
I
am really thankful to all the team members
magazines/newspapers to list (rather advertise) all
of DARE, who provide a platform for budding
deals that are available. I have a lot of interesting and
entrepreneurs. I am looking for a mentor who can
useful features in mind that will benefit the customers
guide me to establish my medical transcription
to find the exact information they want. The scope of
center and further extend to it to a complete nonvoice BPO.
APRIL 2009
the project is expandable to all cities in India so that more revenue generation is possible. I am looking for funding and support to develop this website.
Amet Tripathi
8
and become the most visited place next to TV and
Baskar S
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• partners • mentoring • funding • guidance • advice • ideas...
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ublished: November 2008 Arjun Rajkumar wanted help for forming a base
O
ur company, based in Manipur, operates in the media sector. Our main target is to
capitalize the north- east Indian market at a time
team for his Internet-education venture.
when the whole nation is shying away in establishing their industries and business units here. So far we
Responses: March 2009 I want to contact Arjun Rajkumar who mentioned about building a team for his next
have made our mark, however due to the recession we are facing a fund shortage. Most of our funding is from our own family expenses. We have our business
Internet venture.
marketing strategies worked out. Can anybody please Suresh GT
let me know how should I go about getting angel or VC funding? Which bank will be the most suitable
This is regarding the Internet venture of Arjun
for me? As ours is a small scale company, we would
Rajkumar. I would like to know what is the business
be needing only minimum funding. Ernest
exactly and would like to contact him. Sumit Sanghvi
F
I
am an engineering final year student. I want to start my own mutual fund and am currently
irstly, I congratulate and thank the DARE team
in the process of forming a group for that. Those
for bringing out such a unique magazine on
people who have some experience in mutual fund
entrepreneurship, business insights, ideas etc. I am
industries and have the thirst to win are welcome
an entrepreneur and am basically looking for ideas
to join our group. G Kannadasan, Tamil Nadu
in the information and communications technology (ICT) sector. I am based in Ahmedabad, but am looking to form a team who share the same drive to create a unique product/service/solution and have the willingness to
I
want to enter the waste paper trading business. I will be highly obliged if someone guides me for
the same. sustain in the business for long—people who really
Sambhav Jain
wish to work hard so as to enjoy the fruits later. I am open to networking, ideas, funding, etc. Sumit Sanghvi
P
ublished: February 2009 Shilpa Dubey was planning to setup a kids
furnishing and furniture store in Noida.
I
want to start a lifestyle magazine and would like to meet entrepreneurs who can help me with
more insights.
APRIL 2009
I want to get in touch with Shilpa Dubey to discuss the supply of kids furniture.
Priyanka Jha
10
Response: March 2009
Vishnu B
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ublished: March 2009 Sagar Padnekar was keen on starting a mango
I
run a very small web solutions company, with a twist. Very few people or companies in India do
what I am doing, and my products and services are
business in his hometown.
selling very well. But for this to grow, it needs proper Responses: March 2009
mentoring and an infusion of funds.
I want to get in touch with Sagar Pednekar.
I buy websites and domains that are not perform-
Vishnu B
ing well at very cheap prices, turn them around in a matter of weeks, and sell the websites for a profit or
I want to contect Sagar Pednekar. I would like to know
we retain them and sell advertisements, traffic and
how and what exactly does he have in mind with regards
co-brandings on them. I started this two months ago
to taking the business of Devgad mangoes forward.
and my monthly turnover is already Rs 2.8 lakh, with
Sumit Sanghvi
just 40 websites. Currently my wife does the selling and marketing and I look after the acquiring of sites
I
own an engineering goods manufacturing SSI unit having four branches in India. I have a herbal
formulation for lowering blood cholesterol and want to
and negotiations. We get three new clients a day on an average, and a phenomenal 87% of my customers place repeat orders.
market it in India through telemarketing / our branch
I am looking for an investor and a mentor to invest
offices. I am looking for an experienced consultant/
roughly Rs 1 crore to increase the monthly turnover
marketing strategist who could guide me ‘A to Z’,
to Rs 40 lakh. I am looking to expand the operations
including all aspects of patenting / distributing /
into a full-fledged one, with hundreds of websites and
packaging etc.
a team of professionals to handle them and provide
S Gupta
other related services to my existing list of clients. Arpan Deb
P
ublished: March 2009 Nandhakumar was interested in starting an
institute dedicated to fashion and retail business and was looking for a mentor.
W
e are medium size investors and are looking for an opportunity in the solar power and
LED lighting space. Please advice us how to go
Response: March 2009 I am from IIT Madras and have started an
ahead as we do not have any technical or industry
educational consultancy service company
background in this field. Akash Mathur
recently. I want to contact Nandhakumar. Rajesh Kumar DARE has been a magazine which we do not miss reading! Thanks! We work closely with entrepreneurs
I
can help provide a solution to generate, store, pack, transport and sell biogas like any other
and small businesses. We would like to get in touch
CNG/LPG gases. We are looking for people from the
with Nandhakumar BS of NIFT Chennai to see if we
biogas industry to start selling biogas like any other
can help him.
gas. Biogas distribution entrepreneurs are welcome. Raj Shankar ichiban Consultants
Sandeep Patel
APRIL 2009 11
Feedback DARE.CO.IN
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Shipbuilding—India aspires to emerge as a leading player ARTICLE Thank you very much for fulfilling my request for an article on the shipping industry–it has explored well about shipbuilding and leading players. It has made me curious to know more about it so I am eagerly awaiting for an article on services like charter, broking, legal, and others if any, in commercial shipping industry. I extend my thanks and gratitude to the editorial board of DARE again for their contribution in the evolution of a new Bharat–self dependent and prosperous! Gaurav How to set up your NGO ARTICLE This is a truly informative article posting all know-how on setting up an NGO. Thanks for posting such useful information! Indian NGO The fading charm of AIM BLOG Good post. Investors all over the world are low on confidence and the “highquality” investors at AIM are no exception. Any company in its growth stage would find it difficult to raise any sort of money in the current scenario, especially if one is in the real-estate sector in India. However, as we all know, its a cycle—what goes up must come down and vice versa. Yameer Adhar How is DARE doing? How is the magazine managing the slowdown? BLOG The letter was awesome! Most people fail to read the writing on the wall. They wait for the wall to crumble and then react. Many have even forgotten what it is like to act in advance, while you still have time to make alterations in your plans. Great going. I like DARE and I’m more than confident that DARE will outlive this slowdown and be there for the future generations to have exciting learning in entreneurship. N Chandrashekar 14
APRIL 2009
Hotels and tourism in India: Dealing with the global meltdown BLOG It is undeniably true that the tourism and hospitality industry of India have also faced the brunt of global recession along with the other industries. However, I guess that in this situation, medical tourism in India may actually grow further. Ramnath Memorial Trust
trepreneur Commons (www.entrepreneurcommons.org). While you mention that banks may be an option, most of the time they require some track record, and therefore are not really an option when you are just starting. There is a huge gap, and Entrepreneur Commons intends to address it. Great post I look forward to reading more. Sydney
Rupee will trade at 54 against dollar by year end BLOG The appreciation of the dollar has been due to the fact that the dollar was made an international currency for international trade. But the way, the American economy is going, we may see it losing its status as an international currency to other currencies like Pound, Euro and may be some Asian currencies as well. This will not be a sudden phenomenon and hence this gradual process could involve dollar depreciation rather than appreciation. This would also reduce the demand for the dollar within India and raise demand for other currencies. Hence, this will lead to a fall in the dollar price rather than an increase. The logic becomes easy to explain if I ask you, today would anyone like to receive international remittances or make international payments in Bangladeshi Takka? Though not the same, the fate of USD in the years to come could be similar. Shubhrakant Shadangi
Medical and wellness tourism in India ARTICLE It never ceases to amaze me how many people are flocking overseas to take an advantage of high-quality medical coverage for very reasonable and affordable rates. I personally beleive medical insurance should be provided to everyone without any discrimination. EMR
How to save paper at work? BLOG Firms should set the printers to print on both-sides of paper by default. Also, don’t keep excess paper-bundles near the printer, this will avoid any wastage. If there is a monthly/quarterly/yearly internal publication, circulate a softcopy among employees. Let interested people ask for hardcopies if they need it. Not everyone reads such magazines. Puneet Shukla Complete guide to debt financing ARTICLE Excellent. I agree with this article. This is right and exactly why I started En-
Cane furniture: A plush future ARTICLE The article about cane furniture and its future makes sense as it sure has a good future for a few strong reasons: a) Actually, the general perception of cane furniture even today is of cheap outdoor furniture. At the same time, even 10 years back there were few stores in India selling designer furniture and charging premium rates. I used to run such a store myself. But gradually cane went out of trend giving way to wrought iron furniture. Then came the trend of imported Malaysian and Chinese furniture. But now cane is back in trend as they are cyclical in nature. b) People get sick seeing the same thing again and again so cane is a welcome change. c) Unlike any other medium, cane gives a feel of being closer to nature. Suresh Daniel
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blogs/INSEAD
Starting a company in an economic drought Businesses that typically do well in a downturn solve pressing problems (usually saving their clients money) without requiring much up-front investment or cash
W
/Philip Anderson
16
APRIL 2009
ith so many people around the world focusing on holding onto their jobs, what would you think if a friend told you that he or she is thinking of starting a business now? Around the world, economies are contracting, demand is falling, companies are cutting back their purchases, bank credit is increasingly difficult to obtain, and risky projects are being canceled. Perhaps India—one of the few economies in the world that still registered healthy growth in the past six months—is less hard-hit than others, but still, starting a new business during the economic equivalent of drought season seems like a mad idea. Or is it? Our case in this month’s issue of DARE seems perhaps to tell a cautionary tale. Manish Sharma started his first company right after graduating in 1995. It was a web solutions provider that entered the market at the perfect time. Attempting to build on this success, he started a second venture just as the dotcom bust took hold, and this company was unable to survive that lean season. It took several years before he was ready to start his third venture, Printo, with his wife, and this venture has prospered in part by riding the rising tide of India’s remarkable recent economic growth. So is the lesson here “Wait until the business cycle is rising before you start a new enterprise?” Such a dictum is far too general to be useful. Sharma’s second venture failed because it was the wrong kind of business to start at the time: an innovative product company. In
contrast, rigorous academic studies show that many successful companies are started during down periods in the business cycle, and often they are more robust in the long run than those which were founded during good times. However, the kinds of businesses that survive in challenging times are not the same as those that thrive in more prosperous eras. Businesses that typically do well in a downturn solve pressing problems (usually saving their clients money) without requiring much up-front investment or cash. This is not a great time to start a product company that requires a lot of investment and a long runway before it breaks even. It is also not a great time to start a company whose offering would make your customers’ lives better if they bought it, but which would not be missed if they did not. Companies that thrive in harsh economic environments usually save their clients money right away. Most businesses and consumers are looking for ways to conserve cash, decrease investment outlays, and lower their total cost of ownership. Firms that can help them achieve such goals often perform especially well during a recession. If you have an idea that fits these times, there are still a few pitfalls to avoid. First, ensure you can reach prospective customers at low cost. If you have a product or service that will save people money, but you can’t make them aware of the opportunity until you spend a lot of money on marketing, you may run out of cash before you build up enough revenues to sus-
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blogs/INSEAD tain your enterprise. Startups who grow via word of mouth or inexpensive search engine optimization are much more attractive than those requiring heavy marketing communications investments. Another pitfall is paying insufficient attention to collecting your accounts receivable. Making money isn’t the only thing that matters in tough times—getting cash as early as you can is at least as important. Many an entrepreneur has grown impressively on paper, only to run out of cash because customers made late or partial payments for work that cost money up front. The more your business can be structured in pay-as-yougo fashion for customers, the brighter its prospects. A third pitfall is relying too much on credit, especially for investments in equipment or inventory. Entrepreneurs often fall into a growth trap when expanding their business requires them to borrow in order to sustain a growing stock of working capital. Even if your top line is growing, you may find yourself in a squeeze when you hit a credit limit and find that sources of debt financing have dried up. Work up a spreadsheet showing how your credit needs will grow as your business expands, then ensure your growth does not outpace the amount you need to borrow in order to sustain it. Then, build in a safety buffer and stage your growth accordingly. Businesses with the right configuration—saving their customers money visibly and swiftly with low marketing costs, a short sales-to-cash cycle, and manageable investment outlays—enjoy a number of advantages when they are launched in tough times. Costs are lower and vendors may be more willing to help out an enterprise that has promising growth prospects. Talent is more readily available and key employees will become more loyal if treated well and given opportunities. Niches are less crowded with rivals, and it is harder for competitors to overwhelm you by spending lavishly on marketing, channel coverage, or direct sales.
Challenging times also present another opportunity: rejuvenating sound businesses that have run into trouble because they were configured for growth. In 1965, the US sociologist Arthur Stinchcombe introduced one of the most influential ideas in modern management thought: “organizational imprinting.” Just as a duck is imprinted at birth, attaching itself to the first object it sees and treating it like a mother, so organizations are imprinted by the
“
Businesses with the right configuration—saving their customers money visibly and swiftly with low marketing costs, a short sales-to-cash cycle, and manageable investment outlays—enjoy a number of advantages when they are launched in tough times. Costs are lower and vendors may be more willing to help out an enterprise that has promising growth prospects. Talent is more readily available and key employees will become more loyal if treated well and given opportunities.
”
conditions in which they were founded. For example, Stinchcombe studied college fraternities in the US, and found that in the 1950s, those started in the mid-18th century continued to be much different than those founded decades later. The environment at the time an organization was launched shaped it in ways that were still visible a century later. The Printo case in this month’s issue of DARE is an interesting case in point. Any digital printing business founded by professionals in 2005 would almost certainly be configured around a fast-
growth strategy, as Printo was. The kind of people one hires; the pricing strategy one pursues; the amount of attention that any one location gets before the founders open another, and dozens of other factors reflect the growth pressures that typically drive firms in eras of economic expansion. They are built for growth, and expanding rapidly is in their DNA. Printo is unusual because its founders recognized in 2008 that they had to rethink the fundamental nature of their business. Most entrepreneurs do not—they operate “bicycle” businesses that move forward smartly as long as they have momentum, but that tip over when their forward motion slows to a crawl. If you start a business in 2009, you will have opportunities to take customers away from businesses that were started several years ago and have not yet gone through the painful change management required to shift gears and run lean. You will also have opportunities to partner with such ventures in cases where they have access to customers but are not configured to save them money right away. You will also have opportunities to buy cheap assets from businesses that are fundamentally sound but that have overextended themselves because they were built to succeed in a different era. 2009 is a great time to start a business for entrepreneurs whose ideas, abilities, and connections fit the spirit of the times. If you can get your first couple of customers very quickly, save them money in the short run, and soon generate more cash than you consume, then you will seldom find more fertile ground to till. If, however, your passions take you in a different direction—for example, toward wanting to invest in breakthrough innovations that temporarily raise your customers’ spending—then bide your time. In both good times and bad, it is important to understand what you love to do and do well, then pick the right moment to start the kind of business that feeds off your passions. DAR E The author is INSEAD Alumni Fund Professor of Entrepreneurship, Director, Rudolf and Valeria Maag International Center for Entrepreneurship and Director, 3i Venturelab APRIL 2009 17
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opportunity/xransport
Major Players n Pidilite n BASF India n CIBA Specialty Chemicals n Clariant n ICI India
Textile Chemicals as a Business With opportunities in manufacturing, distribution and exports beckoning entrepreneurs, the textile chemicals business is witnessing buoyant growth. However, some entry barriers could spoil the party for new entrants /Vimarsh Bajpai
A
s a dealer in textile chemicals for several years, Sanjay Ponda was quick to recognize the opportunity that existed in this booming sector. With some customers already in his kitty, he started his own manufacturing unit in Ghatkopar, a suburb of Mumbai, in 2002. He now produces around 200 metric tons of chemicals and sells through his own dealer network. He also exports in small quantities. With several large Indian and multinational players operating in the textile chemicals space, it is no surprise that Ponda finds the mar-
ket ‘competitive’. Many like him have recognized that selling chemicals is a volumes game—the more you sell, the more profit you make. The organized sector holds approximately 65% share in the domestic market, with the remaining 35% controlled by small players dotting the length and breadth of the country. Although Ponda is a small player himself, the sector he operates in is a big one. Textile chemicals form a significant chunk of the Indian chemicals industry that is believed to be the third largest in the Asian region and the 12th
Textile Chemical Demand (US$ million) Item
1997
2002
2007
2012
2017
Textile chemical demand
800
970
1390
1890
2480
Colorants and auxiliaries
420
495
690
910
1160
Coating and sizing chemicals
105
130
190
260
340
Finishing chemicals
115
155
240
350
500
Others
160
190
270
370
480
18
APRIL 2009
largest in the world. The demand for textile chemicals in India is projected to jump 6.3% annually, touching an enviable US$ 1.9 billion in 2012, according to the Freedonia Group, a USbased market research firm. In this story, DARE focuses on the growth drivers for this business and entry barriers for new entrants.
What are textile chemicals? More than 100 chemicals are used in the manufacturing of textiles. Some provide the basic texture to the fabric, while others are meant for printing and dyeing. Broadly, textile chemicals are divided into three categories—colorants and auxiliaries, coating and sizing chemicals and finishing chemicals. Depending upon the fabric, these chemicals are used as leveling agents, solvents, detergents etc. Take, for instance, cotton. It requires use of various forms of dyes, such as reactive dyes, sulfur dyes and direct dyes. Similarly, polyester processing requires disperse dyes. The synthetic
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opportunity/xransport Quick Facts
1. The rise in demand for apparel, furnishings, upholstery and floor coverings is driving the growth of textile chemicals. 2. Global demand for textile chemicals is likely to grow at 2.8% annually to touch a whopping US$ 19 billion in 2012. This translates into a big export market for Indian manufacturers. 3. The demand for textile chemicals in India is projected to jump 6.3% annually to touch US$ 1.9 billion in 2012.
Entry Barriers 1. Large Indian and multinational companies hold around 65% of the market. 2. Low profit margins make selling a volumes game. 3. The sector is raw material intensive; input costs are high. 4. The demand for high-quality fabric increases the challenge of launching innovative products. fiber industry has led to the development of various new chemicals. With the demand for wrinkle-free and dirtfree clothing on the rise, a host of specialty chemicals have now entered the market too.
Growth drivers The country’s textile sector has been witnessing sharp growth over the last decade. Textile manufacturing and trade plays a pivotal role in the economy, and brings in over 25% of the total foreign exchange through exports. According to government estimates, the textiles and clothing sector pitches in about 3% of the country’s gross domestic product (GDP). With the rise in income levels, the demand for high-quality textiles for apparel, furnishings, upholstery and floor coverings has gone up substantially. This, in turn, has led to the increase in demand for textile chemicals.
“India supports one of the world’s largest cotton processing sectors, which generates substantial demand for various dyes, including reactive dyes, sulfur dyes and direct dyes,” says the Freedonia Group. In addition to its traditional strength in cotton, India has been investing heavily in its synthetic fiber industry, particularly polyester. Moreover, this trend has greatly expanded the country’s demand for disperse dyes, which are widely used in polyester processing.
The business A host of business opportunities exists for entrepreneurs in this space. Manufacturing is one big area, given that India’s position as an excellent manufacturing hub is gaining more credence among multinational players. A number of foreign companies have entered the Indian market through mergers and acquisitions. They are using the country as a base to produce textile chemicals at costs much lower than in their parent country. Also, the huge domestic consumption of such chemicals in India is a big lure for these companies. On top of that, they have the wherewithal to invest in the research and development of new products. Something that mars the industry is low utilization as several manufacturing units operate at around 40 to 50%
4. India is fast becoming a big manufacturing base for textile chemicals, thanks to cheap manpower, a rich pool of scientists, and low cost of equipments. 5. However, for small players the lack of access to world-class technology, shoddy infrastructure and a dismal power situation act as dampeners. capacity. The big players, however, manage to raise this to around 70%. As the sector is raw material intensive, profit margins take a hit. Any change in the cost of raw material impacts the cost of the product. Many of the small players sometimes find it difficult to raise costs for fear of being beaten by the bigger ones. The distribution business is another area to look at, as the sector is set to grow at a fast pace in the coming years. The current slowdown is only a blip for this sector. This is because recession in major textile export markets has lowered demand for now. Once these economies bounce back and the demand for Indian textiles gets a boost, the chemicals business will also grow accordingly. Experts believe that in the Asia Pacific region, China and India will continue to be the largest consumers of textile chemicals, and are also forecast to experience the fastest growth. Besides this, export opportunities exist for players in this segment, though this is where China proves to DAR E be a threat. APRIL 2009 19
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sector/IT/ITES
How BPOs are managing the slowdown The US financial crisis and the subsequent global slowdown has hit international BPO companies hard. Many small and medium ones have ceased to exist and others are evolving strategies to sail through the slowdown /Ambrish Jha
B
usiness process outsourcing (BPO) in India was having a good time until recently. In 2007-8, according to NASSCOM, BPO revenues were close to US$ 11 billion, registering a growth of 30 percent over the previous year. The party seems to have run out of steam after the financial crisis hit the shores of the US, the principal market for the Indian BPO companies. Companies working with the US banking and financial sector (BFSI), the major constituent of the Indian BPO business, have been the worst hit. The magnitude of the financial crisis has been so enormous that it engulfed almost all other sectors of
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the US. Consequently, BPO companies working with these other sectors have also started seeing adverse effects. While the big players like Wipro, Infosys and Genpact retain their optimism for the longer term, they are quietly working on strategies to cope with the current slowdown. In contrast, small and medium players have faced the brunt of it. Many of them have already ceased operations and many others are trying to survive by resorting to various means. However, they are still finding the going difficult. This piece is an attempt to look into what BPO players are doing to sail through the current slowdown.
Revenue Streams of BPOs Segment
Share (%)
BFSI (banking/finance)
40.4
Hi-tech/telecom
19.0
Manufacturing
15.0
Retail
8.0
Airlines and transportation
3.4
Construction and utilities
3.5
Health care
2.5
Media, publishing and entertainment
3.3
Others
4.7
SOURCE: NASSCOM
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sector/IT/ITES Effects on the BPO sector “Companies do not have enough business. They do not have enough money on the balance sheet. They are firing people,” says Rajeev, a BPO professional, who has been lucky enough to get a job after being laid off by a small BPO company, Cyber Futuristics. He was one among 30 people to be laid off at the same time. “When we cannot survive, how can you people survive?” This is what the management told them while laying them off. Rajeev’s case is not a one-off. Many small and medium BPO companies have done the same. They are not only seeing their sales going down, but they are facing pressure on their margins as well. They have been forced to cut on their operating costs as their US-based clients are reluctant to pay higher prices like earlier. They cannot complain, being aware that many people in the US are out of jobs and really short of money. For instance, Revons IT Solutions, a 15-employee Chennai-based BPO company working on the publishing works and back-end office operations outsourced from the US, has seen its volumes going down considerably. A director working with Revons confirms that revenues of the company have gone down significantly. He admits that around 10 employees have been laid off so far to cut costs. The depreciation of the rupee against the dollar has come as some relief in these tough times. Sales of companies have gone down, but revenues in rupee terms have not, as Aijaz Khan, who runs a small BPO company in Lucknow, points out. He says, “Earlier we used to get anything between Rs 36 and 40 for one dollar. Right now we are getting around Rs 50. Therefore, we have not seen the revenues going down considerably though sales and margins are down.” Bigger players have also faced the heat, but are better equipped to deal with the situation arising out of the slowdown. A forecast by NASSCOM reveals the possibility of a 3 to 4 percent decline in growth in this sector in 2009-10. Domestic BPOs like Cameo Corporate Services, a Chennai-based
What International BPOs are Doing Laying off staff Redeployment of staff Increasing work hours Deepening existing relationship with clients Consolidation of business through inorganic means Cooperating with clients over delayed payment cycle Focus on marketing to find new clients outside the US Turning towards domestic outsourcing opportunities Pruning themselves to adopt more efficient means of working Trying not to shut down (even when they have no work) and somehow to reap benefits post slowdown company, are in a better position – probably a reflection of the fact that the Indian economy is not as badly hit by slowdown as the countries in the West and Japan are. But they are also not expected to grow at rates any better than previous years, which also demonstrate that Indian companies are treading cautiously, if ambitiously.
Measures to counter the slowdown When financial crisis hit the US, BPO players thought it to be another opportunity to increase their business. This turned out to be a gross underestimation of the problem as the crisis blew entire investment banks off the US landscape. Ajai Bhatnagar of Tholons, an advisory firm for global outsourcing, says, “Investment banking is the key to BFSI segment, which is the bread and butter of both IT and BPO sectors in India. This is in a complete mess in the US.” So what can international BPOs do, and what are they doing to ride the slowdown? Once reality struck BPO companies, as Bhatnagar says, they hurried to find means to cut down on costs. For the BPO sector this was a
new situation. Till the slowdown appeared, it was used to a growth rate of around 30 percent year-on-year basis for the last many years. To begin with, the reaction was knee-jerk and the first method most BPOs have adopted is to lay off employees. The big ones have not resorted to retrenchment, but they have almost frozen new intakes as compared to before the slowdown. Many BPOs, which include some of the big names, have increased their working hours, and frozen pay hikes and other perks. Infosys BPO, one of the largest, has, according to newspaper reports, terminated the services of over 600 contract workers in February. It has also accelerated the process of redeployment of staff in an effort to prune variable costs. BPOs have suddenly become aware of even the most trivial measures to cut costs. They are asking employees to switch off monitors not in use, to keep optimum lighting at the workplace, reduce expenditure on stationery and food items, and cut down on travel costs. BPOs working on international projects have started reducing their margins, which used to be as high as 20 percent. They cannot let their clients leave at this stage, even when they are not ready to pay the higher prices they were paying earlier. With these BPOs now willing to work on reduced margins, they have suddenly started seeing value in the domestic market, where the margin is generally between 8 to 10 percent. International BPOs like TCL, Infosys and HCL have already started increasing their exposure in the domestic market. Traditionally, BPOs have been focusing on the US market alone. With the US in crisis, they have woken up to the reality that there is a world outside it as well. Revons IT, for example, is concentrating on marketing in Europe and Australia to get new clients, though its efforts have not paid much dividends yet. Unfortunately, the timing of these efforts seems quite inappropriate. Bhatnagar says that they are not going to pay dividends as the whole world has slowed down, including Europe, Japan and Australia. Persistent APRIL 2009 21
DARE.CO.IN efforts on this front may only bear results once the slowdown is over. Viswanath R. Rao, Executive VicePresident of Operations, Hinduja Global Solutions, says the company is focusing on consolidation; something even Bhatnagar says will be a trend for some time in the BPO sector. Smaller players, especially those catering specifically to the BFSI in the US, are showing signs of willingness to be acquired as they know that they may perish forever if they stay put. Bigger players like Aegis, Wipro and HCL have already either acquired or are planning to acquire some of the companies under pressure. BPOs are also trying to deepen relationships with existing clients, rather than looking for new ones, which are anyway nowhere on the horizon. Even smaller players like Aijaz Khan’s Lucknowbased BPO have shown a willingness to cooperate with clients over longer payment cycles. Enterprises outsourcing jobs to India are also keen to deepen these relationships. Companies are spreading their footprint in areas like consultative selling. This is, however, easier for bigger companies, than for small and medium-sized BPOs. Bhatnagar of Tholons says that closures in the small and medium-sized BPOs in recent months have been because of their inherent problems rather than the slowdown as such. “People had started these businesses only in lure of the dollar, with no other commercial will or reason. This downturn will certainly separate the wheat from chaff and a lot of consolidation will take place.” Domestic BPOs are expected to remain unscathed. However, they are also not likely to add to their growth rate. Indian companies might not have been as badly hit as their American counterparts, but they are also looking to cut costs. After all, hardly any sector is showing robust growth. In such a scenario BPOs based in smaller towns, semi-urban and rural areas are expected to make gains. The slowdown, for instance, has brought cheers to rural BPO DesiCrew, as Saloni Malhotra, CEO of the company, says. This outfit, which gets works outsourced from the 22
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sector/IT/ITES Even big players like Genpact expect its revenue growth to reduce from 26% in 2007-08 to between 10-15% in 2008-09. EXL Service expects its growth to slacken from 19.5% last year to 5-8% this year. Indian mobile, Internet and insurance companies, has seen slightly more positive impact during the slowdown.
Future The Indian BPO sector has hit a rough patch, and growth rate as expected in 2008-9 will be much below as what was seen in 2007-8. Even big players like Genpact expect its revenue growth to reduce from 26 percent in 2007-8 to between 10 and 15 percent in 20089. EXL Service expects its growth to slacken from 19.5 percent last year to 5 to 8 percent this year. However, a few factors are still loaded in favor of the BPOs. The rupee’s marked depreciation against dollar has offset loss in sales volumes to some extent, something even Aijaz Khan pointed out. Attrition rate has also started showing signs of slowing down considerably. Inorganic expansion is what many big players are looking for at this stage. With many BPOs
What has hit the BPO industry most severely is the fact that nearly one-third of its revenues originate from the BFSI vertical – an area worst affected during the slowdown.
in bad shape, Bhatnagar says inorganic expansion has become cheaper, a good news for the industry. No wonder we have been hearing of BPOs with cash in hand on a buying spree despite the slowdown. Costs of raising capital through banks have fallen. With inflation falling to almost zero, rates are going to be cut further. This will help the BPOs in the post-slowdown phase, when they will look to give a real push to their business to cover for lost time. What has hit the BPO industry most severely is the fact that nearly one-third of its revenues originate from the BFSI vertical – an area worst affected during the slowdown. This segment is still not showing signs of real improvements though governments all over the world are trying to revive it through stimulus packages. The economic situation in the US and other countries are, however, bound to improve sooner or later as effects of so many stimulus packages will ultimately be visible. Smaller and medium-sized BPOs also realize this and are probably counting on it. They are trying to hang on for as long as possible. Perhaps the best bet for them is to merge with bigger players. And for the bigger players these can prove value-additions at fairly cheaper prices. Bhatnagar says that BPO companies should start working with the international clients to benchmark processes and become more efficient, something on the lines of Infosys, which is expected to maintain an impressive 25 percent year-on-year growth despite the slowdown. NASSCOM is quite optimistic about the BPO sector in the long run. According to its recent report – Strategic Review 2009 – the sector will rebound from 2010 onwards. The report highlights that the BPO industry will ultimately benefit from the short-term cutbacks in spending by US companies on technology. Bhatnagar also prophesies that BPOs that survive these tough years and prune themselves to be nimble entities will thrive and grow with a big bang. Perhaps this is what is inspiring many small and medium BPO players to DAR E hang on by a thread.
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case/INSEAD
Printo: What next for an entrepreneurial husband and wife? Their experience illustrates the importance of understanding early what elements of a venture stoke your passions /Philip Anderson
I
n early 2009, Manish Sharma and Lalana Zaveri sat down to dinner together, late in the evening as usual. The two were grateful for opportunities to be together alone even though the business they had cofounded and ran together, Printo Document Services, inevitably came up all too frequently in the conversation. As their talk drifted to thoughts about the coming year, each realized that both felt it was time to think not just about the business, but about their passions in life. Printo had been moderately successful and had a promising future, even in the difficult economic envi-
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ronment that appeared to be looming. How should it and they change going forward, they wondered, so they could build a happy future together as well as a prosperous company?
Paths of two entrepreneurs Manish Sharma was born and grew up in Mumbai, the son of an engineer who became the commercial head of a small ship repair yard. He graduated in 1995 from Bombay University with a degree in computer engineering. For a few months, he worked in India’s first NASDAQ-listed Internet startup, but he quickly realized that he wanted to
start his own company. Seven months after graduation, he and a few close friends bootstrapped a classic “garage” startup, DBS Internet Services. Eventually, this web solutions company grew to a size of 120 people and won several large contracts; it still exists today in a different form, headed by one of the founding partners. Sharma’s first entrepreneurial venture succeeded beyond his initial imaginings, but he says, “I was always bothered that we had to work to customers’ business specifications, so we weren’t doing creative things. I wanted to do a product company. Solu-
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case/INSEAD tions are good, but I wanted to think of a gap and come up with a product to plug it.” In pursuit of this dream, he founded a product company and moved to Cupertino, California in the heart of Silicon Valley. “You have to be close to your market and you have to be in the right ecoystem,” he explains. “Indian software companies have to date been notably unsuccessful creating products.” Sharma helped pioneer the cross-border model that was to become so popular in the next decade, locating his development team in Mumbai while he and a few others focused on business development in the US. Sharma’s second venture was enormously satisfying to him and taught him a great deal, but it was not as successful as his first startup had been. “We were victims of timing, since we started just as the dotcom bust happened,” he relates. “It was the most
passionate time of my life, but I lost my shirt.” After the firm went under, Sharma moved to Chicago, Illionis to work for a small, niche software firm. “I had no particular reason to be in Chicago,” he says, “but they were the one who were willing to hire me.” After a few years, Sharma’s firm relocated him to the UK on special assignment. “Their European headquarters were there, and they used that to set up a development center in India,” he says. “I helped them establish that. I’m a commercial technology person, so my role was getting the team in place to run the center.” As a result of this experience, he decided to stay in the UK. “I began believing I wanted to gravitate toward India, and this seemed like a good move,” he says. Another important reason is that he had found the woman he wanted to marry, the sister of a dear friend, and the UK seemed like a better place to
Sharma’s second venture was enormously satisfying to him and taught him a great deal, but it was not as successful as his first startup had been. “We were victims of timing, since we started just as the dotcom bust happened,” he relates. “It was the most passionate time of my life, but I lost my shirt.”
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DARE.CO.IN launch their lives together. “US immigration laws were getting silly,” he explains. “They didn’t let a spouse have a work permit if you had one, and that wasn’t going to work for us.” Sharma’s new wife, Lalana Zaveri, had also grown up in Mumbai and had known him for a long time, but didn’t imagine he would become her husband. “Manish and my older sister studied together and they dated when they were both 16,” she relates. “I did not like him at all then!” Ten years later when she returned from studying in the UK, the two bumped into each other and went out for a couple of meals. “We met afresh and started a new relationship, and eventually I decided to move to the UK to be with him,” she says. The two married in 2002. Zaveri’s family history suggested that she was perhaps a more natural candidate to start a business than he was. Her father was a fairly well-todo business owner whose company made diamond-tipped tools used for cutting auto parts. “For a long time, I thought I would go into that business and it took me a long time to realize that was not the way I wanted to go,” she comments. After completing a degree from a university in Mumbai with a degree in life sciences, she joined her father’s business and spent time work-
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case/INSEAD ing in different departments, ranging from dealer relations to product development to business development. Interested in taking over the family business and scaling it, Zaveri quit the family firm after two years in order to take a position at Xerox. “I wanted the
Zaveri’s family history suggested that she was perhaps a more natural candidate to start a business than he was. Her father was a fairly well-to-do business owner whose company made diamond-tipped tools used for cutting auto parts. “For a long time, I thought I would go into that business and it took me a long time to realize that was not the way I wanted to go,” she comments
experience of working in a big company, because I thought I could add more value to my family’s company with insight from how an enterprise like Xerox is managed,” she clarifies. At Xerox, Zaveri moved through several different departments as part of her training. “I spent some time in the servicing area, where engineers go out and service photocopies, but I spent most of my time in the sales department,” she says. “I learned about the functionality of the equipment, who the customers were, and realized how profitable printing can be as a business, especially digital printing.” After two years, Zaveri took a break to earn an MBA at the University of Nottingham in the UK. “It was a bit of a whim, not anything well structured,” she recalls. “I wanted to take a break from working, study some more, and live abroad. Because I hadn’t worked in my undergraduate field, I needed to go back to school in a more general area and management seemed logical.” Upon returning she rejoined the family firm, establishing a distributorship to import a British product allied to the tooling industry into India. Eventually, however, Zaveri realized that her ideas for the family business differed from those of her father and uncles. “They didn’t want to grow beyond a certain size, and they didn’t want to professionalize the company,” she explains. At this time, Zaveri’s relationship with Sharma was blossoming into marriage, so instead of returning to her family’s company, she left Xerox and moved to the UK to be with him. “I didn’t have a proper job, so I worked with two different stores,” she recounts. “I learned a lot about how consumers behave and I had a lot of fun.” Zaveri’s MBA served her in good stead as she learned more about retail. “I was a customer service person, not a manager, but I kept putting on my manager’s hat and asked myself what I would do differently in shift timing, stock taking, and so on,” she says. While Sharma was building up his company’s development center in India, Zaveri returned to Xerox. Once his
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case/INSEAD special assignment was over, Sharma decided it was time for him to earn his MBA. He chose Oxford University’s business school because it offered him a scholarship and because he did not want to spend two years in graduate school. “Economics sounded interesting and they offered a focus on entrepreneurship, which sounded good to me,” he elaborates. Zaveri worked for Xerox Developing Markets Organization (DMO) in London while her husband was studying.
An accidentally entrepreneurial marriage When Sharma finished his MBA, he decided to return to India, where growth opportunities for entrepreneurs seemed especially promising. Zaveri took a job with one of Xerox’s Indian customers, a firm that specialized in digital printing. “That gave me an insight into India’s digital printing market and who it is servicing,” she notes. Sharma came back to India determined to start another venture, and
his wife’s experience heavily influenced the path he took. “I wanted to look at opportunities outside software,” he says, “and digital printing quickly emerged as one interesting opportunity.” Three factors persuaded him that this was the most promising of his options. “First,” he says, “I assumed there was some technological leverage in printing, so I could use some of my technical experience.” “Second,” he continues, “the margins seemed big enough. And third, there
IMAGE PERSONALIZED 2009 CALENDARS FROM PRINTO
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Both husband and wife swiftly agreed on who would be the customer and what would be the key point of differentiation for Printo. They targeted small offices and home office (SOHO) operators and small to medium enterprises, and aimed to win loyal clients through superior service, not unique technology. “We never thought of it as a consumer business,” says Sharma was an underserved market. We were not treated well by existing printers, and others I knew had the same experience. There was nowhere you could just walk in and get a business card or standard printing. Everyone knew someone who was a printer, but the search costs were high if you wanted quality, price, consistency, and a single reliable brand. I was confident I could deliver this.” It was not originally Sharma’s intention to co-found his next business with his wife, but he soon gravitated in that direction. “I realized I might need somebody who knows a bit about this business, as I had no clue at all,” he says. “I was trying to hire one of Lalana’s ex-bosses from Xerox, but the day I approached him was the very day he signed up with another new company. This is a very customer-oriented business and I knew very few people who had the same cultural sensitivity to customer service as Lalana.” Adds Zaveri, “Starting the company was Manish’s idea, even though I had the experience. He kind of forced me to join him in starting the business in 2005; it was far from my mind to start a business 28
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case/INSEAD of my own.” Deciding that Mumbai was too expensive, the couple drove down to Bangalore and launched a new enterprise together, Printo Document Services. Fortunately, both husband and wife swiftly agreed on who would be the customer and what would be the key point of differentiation for Printo. They targeted small offices and home office (SOHO) operators and small to medium enterprises, and aimed to win loyal clients through superior service, not unique technology. “We never thought of it as a consumer business,” says Sharma. “The way we deal with customers reflects the consumer orientation Lalena picked up in retail, but Printo is not where a typical consumer would walk in. However, customer service is the differentiator.” To keep costs down and provide better service, the founders decided to keep things simple. “We built our initial choices around a no-nonsense approach to getting things done,” Sharma explains. “The most important decision was not to offer any customization services, because we thought those would not scale then. We needed things that we could print with no frills, bind, and give back to our customers.” A key element of the business plan Sharma wrote was growing rapidly to generate economies of scale. “We conceived of the business as a huband-spoke model and wanted to add branches as fast as we could,” he explains. “Economies of scale lead to advantages in sourcing and in branding.” However, the couple rejected franchising as a growth model. “This business is about building your brand in the beginning,” Sharma elaborates. “It is difficult to reach out to a franchisee if you are spending your time building out new locations.” Achieving the level of customer service the couple envisioned turned out to be surprisingly difficult. “Our service was clearly better than what was available in the market, but we would like to do even better,” Sharma says. Adds Zaveri, “We do get emails from customers who rave about our
service and any success we have seen is thanks to some senior managers’ personal involvement in running certain stores. Either Manish or I would be at each store in its early stages and we hoped colleagues pick up on how we serve customers, which is different from a mom-and-pop shop. But this is a very difficult thing to crack and you can never say that you definitely give the best customer service.” Although service was envisioned as the base of Printo’s competitive advantage, products were considered key to its growth. Says Sharma, “In the business conceptualization stage, we said that products would make us more scalable.” Comments Zaveri, “I think what we got right is our products. We have some ready design templates for certain core business products that new customers need regularly. For example, we have thousands of templates for business cards. You don’t want to spend a lot of time thinking about the design for your card, but you are sure to find something you like with so many designs to choose from. The same is true for certificates and brochures, and now we have consumer templates as well for things such as mugs, t-shirts and calendars.” As Printo grew, it was able to secure several high-powered advisor/ investors. One was Pravin Gandhi, well-known throughout India for his efforts as an entrepreneur and as one
The couple is not only revisiting how to grow Printo, but how to link the business more closely to their personal passions. Says Sharma, "Earlier, we were exploring a nebulous opportunity that seemed sexy; now this is a moment of truth."
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case/INSEAD of India’s few seed-capital venture financiers. Recalls Sharma, “I knew of him for a while, as he is famous within information technology and I was introduced by a friend some time ago when I was thinking about a business to collect data on private companies in India to reduce transaction costs in private equity. He was not totally convinced by that idea, but I reached out to him when I thought of Printo.” Another was Sridar Iyengar, a wellknown independent investor and advisor to Bessemer Venture Partners whose directorships included Rediff. com, CareerLauncher, and ICICI Bank Limited. “I was at a TiE seminar and was told to give him a quick pitch,” Sharma says,” and then I met him again in Delhi before he agreed to join our advisory team.” Within three years, Printo expanded to 18 stores in Mumbai, Pune, Hyderabad and Bangalore. In 2008, as ominous economic news began to appear with regularity, the entrepreneurs congratulated themselves for having raised sufficient cash to get through difficult times “Investors in this kind of business initially focus more on the number of stores and top line revenue, even if you bleed your way to achieve it, Sharma says, “But we work well as a team and people listened to Lalana when she said it was time to cut down on growth and focus on profitability.” Printo closed five locations to focus on the most profitable ones (plus a small corporate sales team), and enjoyed its first cash breakeven month in December 2008 on revenues near $2 million. To Sharma, 2009 looked like it would be a challenging year, but he says, “Structurally, we are very comfortable.” Summarizes Zaveri, “We started off in a boom time, so we were only thinking about how many locations we could get into in how short a time. We started the business off based on that premise and became gigantic by hiring a lot of people. We have whittled back to 13 stores, and now we have to ask what will take us through the next phase, adding value to our customers’ lives. We won’t have anything strong going for us unless we offer some-
GIFTING SOLUTIONS
thing customers can’t get anywhere else. We have found our stores can make money; now we have to decide how to sustain that by deciding who we will sell to and what else we will try to give them.” Adds Sharma, “We owe a big debt to this recession, actually. It has made us slow down and think about how to do things most sensibly, not just move on the way we have done. At this juncture, we are revisiting everything. Sometimes that causes us to find too many negatives about the business, and then we restore some balance by realizing we have come a long way. We’re trying to be realistic, not pessi-
mistic. Printo has survived and grown, but we have got a long way to go.” As spring 2009 emerged, Manish Sharma and Lalana Zaveri found themselves at a fork in the road. Printo had survived where many other businesses had failed and was positioned to weather difficult times while continuing to grow along with India. Clearly, the business had reached “the end of the beginning,” and they felt comfortable reassessing it from the ground up. What factors should they consider as they looked ahead to the next era of their joint enterprise? PRINTO: WHAT NEXT FOR AN ENTREPRENEURIAL HUSBAND AND WIFE?, CONTD. ON PG 72 ç APRIL 2009 29
INNOVATION
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The Sun Rider 6.2 Technical overview of the solar boat Price: Rs 15 lakh approx. Seating capacity: 9+1 (Price of a conventional motorboat [seating capacity of 8 to 10]: Rs 5.5 lakh onwards) Top speed: 6.5 knots or 12 kmph Time taken to charge batteries fully from zero: 4 hours
Sun Rider, the Solar Boat
If zero charged: Will sail at 3-3.5 knots under direct sunlight
With the ability of running on solar power, the Sun Rider may be a much required green solution to the hotel and tourism industry in India
Life of solar panels: 25 years
/Amit Panday
A
t a time when going green and tackling global warming is at a high, less polluting or pollution-free motorboats are one solution that can prove useful to the tourism and hospitality sector. The Sun Rider is just that—it runs on solar power and thus also helps in reducing operating costs as no fuel is required. Furthermore, an innovative design of the hull increases the speed and performance, while consuming less energy.
Genesis of the Sun Rider Team Sustain, a Cochin-based solar energy solutions firm, experimented with the concept of a 25-seater solar boat last year. However, performance in terms of sailing speed was below expectations, the culprit being the boat’s hull design. The hull design of a boat calls for a balance between speed, carrying capacity, and stability. For example, 30
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slender hulls give the advantage of speed and lower energy consumption, but the carrying capacity and stability gets compromised. The shape of the hull from fore and aft should be constructed for equal weight distribution. This ensures that there is no unwanted tilt (trim) in either direction. This is where Navgathi, a Cochinbased marine design and boat manufacturing firm, stepped in with their uniquely designed dimensions of the hull. The hull of the Sun Rider is constructed keeping all these important factors in mind. “The uniqueness of the hull made by us is that the design betters the performance of the boat by consuming lesser energy and increased speed. In fact, the hull design we have made is as effective on any other ten-seater motor boat as it is with the Sun Rider,” says Sandith Thandasherry, CEO, Navgathi Marine Design and Constructions, on be-
Continuous running at 6.5 knots: 3 hours (batteries full to zero) Continuous running at 3-3.5 knots: 9 hours (batteries full to zero) Maintenance of solar panels: Wiping with water daily Life of batteries: 5 years Warranty on electric torqueedo motors: 1 year half of both the companies. Navgathi also came up with the alternate methods of construction for keeping the costs low.
How does the Sun Rider function? The Sun Rider has batteries that are charged through five solar panels on its roof. These panels are fixed on the roof for maximum exposure to sunlight. Each panel produces energy of 180 watts per hour. Hence, in an hour the total energy produced is 900 watts. The solar panels take four hours to charge the batteries, producing 3,600 watts of solar energy. The energy absorbed from these panels is transferred to charge the set of batteries through control switches. The batteries then inject the charge into two electric torqueedo motors that in turn drive the propellers to gain speed. So how much run can you expect after a full charge? The Sun Rider can
INNOVATION run for three hours continuously at its top speed of 6.5 knots (12 kmph) on the water current of rivers. With its hull design, power consumption is reduced by almost one-fourth when the speed of the Sun Rider is halved. In a situation where the battery drains out, the boat can run at a speed of 3 to 3.5 knots while charging the batteries at the same time. This, of course, depends on the availability of direct sunlight. When there is no sunlight available, the batteries can be charged by electricity.
Advantages and Disadvantages Advantages of the Sun Rider n Energy saving n Reduction of costs in the long term n Reduced running costs as no fuel is required n Reduced air and water pollution n Suits the requirements of current green solutions that the Kerala government is looking for to promote tourism in the state n Encourages the fishing community because of zero water pollution Disadvantages of the Sun Rider n Market price expected to be more than a conventional 10-seater motorboat n Immediate orders would be difficult to entertain
DARE.CO.IN Rough break-up of costs involved Torqueedo motors: Rs 2 Lakh (2 such motors deployed) Solar panel: Rs 50,000 (5 such panels deployed) Batteries: Rs 1.5 lakh per set Batteries used per set: Undisclosed Power capacity of each battery: 12 volts Power capacity of a set of batteries: 600 AH Cost involved in building hull: Undisclosed Start of production: After launch, only on orders The research and development facility of Navgathi is the limited basement space of their office of around 1,000 square feet. It is in this space that 10 laborers work on fiber glass, five carpenters work on the mold, three laborers work on stainless steel fabrication, and some more technicians actually construct the Sun Rider.
The market approach The Sun Rider is scheduled to be launched at the backwaters of Cochin, Kerala, some time between March and April 2009. The first unit was constructed with an investment of approximately Rs 15 lakh. The manufacturers plan to roll it out around the
How and where is it manufactured? In case of conventional motorboats the hull cannot be constructed without a mold—a temporary form to shape the boat. Typically, the hull and the mold are made out of fiber glass. The mold is reusable in the construction of other hulls as well. In the case of the Sun Rider, a wooden mold is used to construct the hull. The benefit of this is that it saves on cost almost two times. The disadvantage, however, is that it cannot be reused for constructing other hulls. “The construction of the Sun Rider is done by a variety of skilled laborers,” says Thandasherry, “For instance, the mold is made by experienced carpenters, the hull is constructed by fiber glass workers, and other laborers undertake miscellaneous elements such as welding.”
cost price. The government and some private players from the hospitality and tourism sectors are expected to place the first lot of orders. “Assuming a decent market response, Navgathi plans to manufacture at least five such boats by the end of 2009 and take the figure up to ten next year. The output might also go up, given the interest of investors,” says Thandasherry.
The challenges Both Navgathi and Team Sustain are small companies with limited funds in their pockets. Even though they are continuously putting in efforts to minimize the cost factor, the investment required for manufacturing solar boats is huge for them. Manufacturing space is another challenge. Thandasherry says, “Typically, construction of a motorboat would require an ideal space of half an acre. Half of this area should be a sheltered, controlled environment where the hull is made, while the rest can be used for outfitting and storage.” Navgathi does this within the constrained space of their office basement because at this point they cannot invest in more. The lack of skilled manpower to construct such boats is again another challenge. If finding people isn’t difficult enough, hiring for the construction and technical work is another big issue. To add more difficulties, a dearth of specialized equipment and the finances required for installing them pose problems too.
The future
"The uniqueness of the hull made by us is that the design betters the performance of the boat by consuming lesser energy and increased speed." — Sandith Thandasherry Navgathi Marine Design and Constructions
Southern India, with its beautiful and scenic backwaters, attracts many tourists annually. As of now, motorboats are good in demand. As an example, Thandasherry says, “The backwaters of Kumarakom in Allepy, Kerala, alone have around 500 houseboats sailing on them.” He is sure that once the idea and its benefits are understood, the Sun Rider will be much sought after. Besides Kerala, other destinations like Udaipur in Rajasthan and Goa have such requirements for their DAR E tourism industry. APRIL 2009 31
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opportunity/security
Managing Celebrity Security With celebrities high on the target list of terror outfits, the underworld and stalkers, their security is now a thriving multi-crore business /Vimarsh Bajpai
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he recent attack on the Sri Lankan cricket squad in Pakistan has yet again sent shock waves across the world. It has left security agencies flabbergasted at the vulnerability that stalks celebrities such as film actors, sportspersons, and top corporate and political leaders. With the governmentâ&#x20AC;&#x2122;s security apparatus proving inadequate, a host of private security agencies have come up over the last decade to fill
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the gap. The demand for private security has increased drastically in the last few years, not only in India but across the world. â&#x20AC;&#x153;The global market for private contract security services is forecast to advance 7.5 percent per annum through 2012 to almost $200 billion,â&#x20AC;? reports The Freedonia Group, a US-based market research firm. As Frank Farmer, the protagonist in the 1992 Hollywood romantic
movie The Bodyguard, played by Kevin Costner, takes up the challenge of shielding Rachel Marron, a pop star, played by Whitney Houston, he leaves no stone unturned to protect her from a stalker, even though Rachel resists his moves to beef up security. While the film has a romantic angle with the singer and her bodyguard having an affair, celebrity security in real life is very dull behind the scenes.
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opportunity/security
Walsons Securitas provides private security solutions that also include celebrity security. The firm is present in 180 cities across India and has 12,000 employees on its rolls. The company has partnered with Securitas, the worldâ&#x20AC;&#x2122;s largest security solutions company, which has bought a 49 percent stake in Walsons for approximately US$ 20 million. Securitas has 2,50,000 employees operating in 37 countries. Arjun Walia, 36, started Walsons in 1996 after a brief stint in a multinational organization overseas. of physical security and intelligence gathering. Highly well-defined programs, backup plans, proactive approach, extreme calmness, confidence level, body language, entryâ&#x20AC;&#x201C;exit defined, crowd management, liaisoning with police and government officials, fire facility services, promoters, entertainers and ushers [are needed]. We talk to Arjun Walia, Founder and Chairman, Walsons Securitas, to understand more about this business.
ping cameras and communication equipment, bulletproof vehicles, vapor analyzers, sound masking jamming and scrambling equipment, etc.
How big is the celebrity security business? Private security industry in India is valued at US$ 2 billion. However, the celebrity security business has not been quantified. Terrorism along with growing unemployment increased personal protection and executive protection. Celebrity protections vary from actors, models, concerts/bands and politicians. Executive protection professionals share many characteristics with military and law enforcement agencies, though without authority as vested with them.
What equipment goes into providing security to celebrities? The equipment could range from close protection weapons, escort vehicles, GPS, radio sets, night vision devices, low light surveillance cameras, bug and RF detection gears, doorframe and handheld metal detectors, under vehicle surveillance systems, baggage scanners, stun guns, pepper spray, bulletproof jackets, bomb blankets, alarm systems, super zoom surveillance binoculars, micro video and pinhole video cameras, surveillance and eavesdrop-
What preparations are needed before the arrival of a celebrity at an event? An in-depth analysis of the advance survey and the vulnerabilities, understanding the detailed program with the organizers, route mapping, sanitization of venue and vehicles, etc. is done. The tabletop exercise allows us to decide upon, provide for and properly execute the planning. [In addition, there is] liaisoning with police and government officials, fire facility services, promoters, entertainers and ushers. Choreography of protection, that is, proper positioning/deployment, providing barricades and security rings/concentric rings and theory of protection, in-depth, are followed. Counter-surveillance techniques support the protective effort by watching the watchers.
How do you ensure that no untoward incident (such as panic, stampede, etc.) takes place during celebrity movement in public? Security companies have to ensure it is a foolproof system (check, doublecheck, cross-check, and ensure nothing to chance) with a combination
Do security personnel get special training to protect celebrities? Celebrity security personnel require different skill sets and are specially trained to provide executive protection. A split second can make the difference between life and death, both for the celebrity and the protection specialists. The focus of their training is to anticipate and be proactive rather than reactive. The emphasis is on avoiding trouble or getting caught in traps rather fighting it out. Protection of celebrities is more of a mental exercise. A protection professional has to continuously keep thinking about what can happen next and how they are going to handle it. Through various tabletop exercises, they are trained to handle different situations. In celebrity security there is no time to think and give instructions, or to coordinate the efforts. This requires a very high level of planning, training and motivation. Training is imparted on crowd management, interpersonal skills, martial arts, fire safety and first aid.
What are some of the challenges in providing security to celebrities? Executive protection is provided to global CEOs, government officials, delegations, politicians, models, stars, APRIL 2009 33
DARE.CO.IN dignitaries, diplomats, religious leaders, etc. The security varies in different segments of celebrities. The challenges faced while providing security to a celebrity would be to handle the media, fans and general public. The skills required are vigilance, sixth sense, body language, proactive approach, calmness and presence of mind. Specialized training is required to handle all kinds of threat perceptions and also for intelligence gathering.
What is the per-day cost of providing such security? How does it vary? The cost of providing such security is very varied and will depend upon how vulnerable the person you were hired to protect is. What perils should you be anticipating? It ranges from a few hundreds rupees per bouncer per day to hundreds of US$ per protection professional per day, plus boarding, lodging in the same hotel and travel in similar vehicles. The cost varies for different requirements, such as armed, unarmed, onsite/off-site, vehicles, escorts, ambulances and so on. It also depends on packaged or individual services, event or conventional.
What sort of people provide the security? What are their backgrounds and age groups? Are they male or female? How long do they last in their roles? Security is provided mostly by retired NSG, defense or police personnel. They are generally between 30 to 45 years of age. In addition to these, persons trained in martial arts and close combat are also employed. Protection drivers are people specially trained in defensive and offensive driving. A majority are male; however, when specially required by the celebrity, female security professionals are also provided. Typically, a mix of both young and experienced are required. Experience and qualified people are required to monitor, analyze and initiate responses to ensure that the celebrities avoid getting into a difficult/dangerous situation. Young persons concentrate on celebrity safety to prevents him/her from getting into trouble. 34
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opportunity/security Where do you find them? Trustworthy and professional people are needed for such jobs. Walsons Securitas has an established network, and most recruitments are on referrals by existing staff and employees. Also, professional personal protection personnel are usually from NSG, defense or police backgrounds.
classroom training, PowerPoint presentations, case studies, demonstrations, role plays and tabletop exercises are used to make the training as realistic and as interesting as possible. In celebrity security there is no time to think; one has to coordinate the security effort and take on-the-spot decisions. As such, practical exercises and mock drills are practiced.
How do you train them? There is a need for persons to be trained as per international standards and best practices. Our training team is headed by Col. Mukesh Lakhanpal, CPP. Throughout the world the Certified Protection Professional (CPP) des-
What sort of people ask for such security? Foreign dignitaries visiting India, film stars, industrialists and corporate executives ask for such security. Even top international celebrities who bring in their own security staff require celebrity security because their personal security team cannot operate without the support of local security organizations.
How close is the liaison with government agencies?
Back-end operations typically involve intelligence gathering, route and alternate route selection, intelligence on exit routes, crowd behavior, media response and liaison with government agencies. ignation is acknowledged as the security professionâ&#x20AC;&#x2122;s highest recognition of practitioners. We also have a team of defense officers and junior commissioned officers who have extensive experience in counter-insurgency and terrorism, who impart training. Retired senior police officers, security professionals and experts in martial arts also provide training. Training is imparted at our centers spread throughout India. Curriculum for this training is based on international standards and procedures for executive protection. Physical fitness,
Walsons Securitas has a team of retired police officers who assist in establishing close liaison with government agencies. Security is a state subject. Local law enforcement agencies are always over-stressed, but they extend their full cooperation as this makes their job easier.
What kind of back-end operations are involved? Back-end operations typically involve intelligence gathering, route and alternate route selection, intelligence on exit routes, crowd behavior, media response and liaison with government agencies. Liaison with event organizers, communication, security arrangements en route and at the destination, vulnerability and threat to the celebrity, arrangement for specialist equipment and vehicles, hotel and airport check-ins, debugging of meeting place, counter-surveillance, handling of electronic and technical equipment, periodic updating of security environment, crisis management, etc. are also required.
What sort of licenses or clearances are required? The Private Security Agencies Regulation Act 2005 lays down the license DAR E and other requirements.
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event/barcamp
BarCamp Delhi The event tickles the entrepreneurial bone with its unique information sharing model that is both impromptu and interactive
O
n the last weekend of February a small of group of entrepreneurs, some prospective, huddled into the conference hall at the Management Development Institute (MDI) in Gurgaon for an event that only had a sketchy agenda. The speakers here were not the usual VIPs that throng big events and are invited to add star value; rather, at the BarCamp – as the gathering was called – every participant was a speaker with free mind and spirit. They also doubled up as audience that was not expected to maintain that customary silence during the presentations either. Registration was free and everyone was welcome to speak on topics that would help entrepreneurs across various domains, at the Sixth edition of BarCamp Delhi held on February 28 and March 1. The profile of the attendees ranged from IT professionals – either entrepreneurs or working with a company and wanting to be entrepreneurs –
to students, recruiters and more. There was a board at the entrance where people booked a time slot for their session. Two to three sessions could happen at one go in different classrooms. Every session was allotted half an hour, and the moderator had to ensure that there was enough time to have a discussion after the presentation was over. The atmosphere was informal but not casual; networking was the key reason behind people attending. One of the early sessions on day one was: “How well you know your website?” It focused on various navigation designs that websites use with examples of bad ones. The objective of the session was to understand how navigation differs from industry to industry. The session was attended mostly by web designers. The presentation was short and had thrown a lot of questions to the audience. Horizontal and vertical text placements are the common forms of navi-
gation, yet some websites complicate it. Navigation is an integral part of site design and is directly linked with user experience. So there is no fixed profile of a website visitor. One of the primary reasons for the lack of adequate design is choosing a wrong user interface manager, so the vendor selection is very critical. As a result of this discussion, people from the audience volunteered to help the those who needed help in improving their websites. Another interesting session was on Location-based Services (LBS), where co-founder of RouteGuru, a LBS service provider, Piyush Gupta, gave a presentation showcasing the fact that the true potential of the LBS market is still untapped. He spoke very clearly about how we are dependent on the web for personal navigation and how in the near future this will shift to WAP. Despite its benefits, Gupta had also listed out its negatives, such as high cost and lack of last-mile data. He also mentioned areas like, directions through MMS, real-time traffic information and voice-based navigation remain untouched. Other sessions on content strategy and social media, the startup checklist, the financial crisis and the social web DAR E were also conducted. APRIL 2009 35
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sector/retail
Why Big Retail is in a Mess Overambitious expansion, squeezed profit margins, and unsustainable operational costs have adversely affected India’s organized retail sector /Aswathi Muralidharan
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ill recently, the government and the industry alike were betting big on the country’s organized retail sector, touting it as the growth engine for job creation and economy. However, the faltering of Subhiksha, which had 1,600 stores till December 2008, seems to have shattered the hopes. Before Subhiksha’s debacle came into public glare, it was the shining example of a successful retail venture. Its founder R Subramanian was the blue-eyed boy of the industry. So what went wrong? Does it mean that the business model that supports discounted small-stores format is flawed or is Subhiksha only an exception?
The retail scene The Indian retail sector is largely dominated by nearly 12 million unorganized players, who constitute nearly 90 to 95% of the sector, which is the high36
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Retail Facts • Total Indian retail market is estimated to grow from $353 billion in 2008 to $416 billion by 2010 • Share of organized retail sector is ~7% and is expected to be 12% by 2010 • Size of organized retail sector is estimated to reach $51 billion by 2010 • The Indian retail industry can be broadly classified into food and grocery, pharmaceuticals, consumer durables, apparel • Some major players in food and grocery sector—Reliance Fresh, Spencer’s, Big Bazaar, More etc. SOURCE: ASSOCHAM-KPMG study
est in any country. On the other hand, the organized retail sector accounted for only 5 to 7% in 2008. Of these, nearly 80% of such outlets are small familyowned businesses. In 2008, the size of the retail industry was pegged at US$ 353 billion in an ASSOCHAM-KPMG joint study. It estimated that the sec-
tor would grow to $410 billion by 2010. The organized retail would value approximately $51 billion by 2010. The retail sector can broadly classified into four major categories—food and groceries, consumer durables, apparel, and pharmaceuticals. These together account for almost 60 to 70%
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sector/retail of the total retail market. Of these four categories, food and groceries account for the largest share of 74%, according to India Brand Equity Foundation (IBEF). The food and groceries segment is estimated at $152 billion. However, organized retail in this sector is just about 1% of the total share, which also indicates the lowest penetration level amongst other major categories. This had prompted many big and small players to grab a pie in the organized retail sector. The major players are Subhiksha, Spencer’s, Reliance Fresh, More etc.
Unorganized Retail Vs Organized Retail Unorganized Stores
Discounted Small-stores
Characteristics
Small store, household business generally employing family members
Comparatively large, shelving branded products, approximately 15 employees per 2,000 sq ft
Driving factors
Unplanned purchases, round the corner location, consumers purchase perishable goods like milk and curd, home-delivery, monthly accounts, discounts to regular customers, familiarity with the store for years
Planned purchase, availability of several brands of a particular product, discounts, deals, ambience, visual merchandising
Challenges
Not all brands are available, price comparison always not possible, small
Availability of in-house brands is not always good because consumers may not associate with them, parking, freshness, distantly located compared to mom-and-pop stores
The big question Let us consider two points at this stage. One, a typical Indian household of two spends nearly 10% of its budget on purchasing grocery, vegetables and fruits. Two, products such as rice, wheat and pulses are utility items that are non-elastic. Several consumers whom DARE spoke to said the slowdown had not affected their spending on grocery, fruits and vegetables. A customer, Rekha Sharma said, “The recession has not made a big difference to my household budget on grocery, fruits and vegetables.” According to Piyush Sinha, Professor of Marketing and Chairperson, Centre for Retail at Indian Institute of Management, Ahmedabad, “Even during a recession, basic utility items like grocery and medicines will be bought and most retailers look at this segment. The Subhiksha story is not an exception but just a reflection of things to come.” If such is the case, then what is ailing India’s organized retail and is causing the closure of such outlets?
A flawed model? When the era of organized retail started in India, a lot of players entered this segment. In the food and groceries section itself, players like Subhiksha, Reliance Retail, Big Apple, Sabka Bazaar, Spencer’s, More etc started opening outlets and most of them adopted the discounted small-store format. An industry insider says the model that these companies adopted was flawed because their expenses far out-
stripped profit margins. Thus, more money was seeping out in the form of discounts and operational costs, while less was coming back into the kitty. Their expenses, which included rentals, employee salaries, inventory, cost of monitoring etc, were higher than their margins. These stores were making money but were not profitable, he says. The situation worsened with the expansion spree. Another reason is that they thought customers would be attracted by discounts, for which they eliminated the middlemen and started dealing directly with big fast-moving consumer good (FMCG) players. The FMCG players have their own vested interest and in the long run they would like to be in a commanding position than in a negotiating position, which would have been the case with organized retail players. Sinha substantiates the point and says, “If you give more discounts, your margins will further shrink and therefore you need more customers. A bigger store may not necessarily mean more footfalls. And if you do not have more consumers, your inventories will suffer because you will have the burden of more stocks to clear.”
Unmindful expansion strategy This one seems to be the biggest demon of all. “This is a factor that has impacted all retailers. It is just that some have been impacted more and some less. The fact is that almost everybody has grown far too soon too quickly. The growth is far much more than they could have managed,” says Sinha. Till recently discount store Subhiksha, which is currently neck-deep in debt of more than Rs 750 crore, was reportedly planning to add two million sq ft by the end of the fourth quarter of 2009. On the contrary, the company has closed its 1,600 stores across 110 cities, with R Subramanian reportedly saying that his company owes Rs 45 crore to suppliers, Rs 20 crore to employees and Rs 24 crore as rentals for various stores! Subhiksha’s troubles started when it began expanding at a rate of 800 stores a year on debt capital. The situation is not very different with Reliance Retail, with rumors afloat that a number of stores have been shut and several employees have been sacked. Sinha says, “Everybody is trying to give a good value to customers. However, the cost that is incurred in the process takes time to be re-couped. APRIL 2009 37
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sector/retail organized retail outlet is the nearness of these stores and this supports unplanned and sudden purchases. Also, the rapport that customers develop with mom-and-pop stores also plays an important role in affecting consumer behavior. “The customers take time to migrate from these stores. Retail does not merely mean distribution. A lot of work has to happen before customers start patronizing the stores. And it takes time for customers to understand a lot of things like whether they are getting the right deal or not. You cannot ask customers to shift by giving them the lure of better environment. It is the value that one delivers overtime that drives consumers. That ensures whether the customer will stick to you or not,” says Sinha.
Brands Vs In-house Brands Brands
In-house brands
Advantages
• Brand name • From the point of view • Consumers associate them consumers: ~30-40% cheaper with quality than brands • Advertisements, hence • From the point of view of better visibility retailers: Only production cost • Prestige associated with involved and no advertisement or owing the brand distribution charges involved
Disadvantages
• Expensive • Consumers may not associate • Must live up to expectations with it, especially when placed with a branded item • Less visibility • Available only at the retail store
Some Examples Tea Handwash Jam Noodles
Red Label, Lipton, Taj Mahal Dettol, Lifebuoy Kissan, Tops Maggi, Top Ramen
The market may not grow at that rate. What has happened is in the wake of growth is that players have focused on opening more stores than consolidating the older ones.” The process of expansion has to be supported with adequate funds, inventory, and service, which was clearly lacking in the case of Subhiksha. Does this mean that other retailers are also following the footsteps of Subhiksha in unmindful expansion? 38
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Reliance Value (Reliance Fresh) Caremate (Big Bazaar) Smart Choice (Spencer’s) Reliance Select (Reliance Fresh)
Customers unprepared? Vijaylakshmi Menon, a housewife who prefers to purchase grocery from the kirana store says, “I do go to organized retail outlets, but not that frequently. I am aware that these stores do provide some discounts, but I do not mind spending one or two rupees extra at the nearby kirana store where I have been a regular for almost the last three years.” One of the reasons behind the attractiveness of kirana stores over
No localized approach The business of retail (food and grocery) is very localized. The consumer behavior in a particular area, for example Delhi, may not be the same as those of consumers in another city such as Chennai. Thus, the consumer needs differ widely across the country. Therefore, distinct strategies should have been adopted for different regions. “What one must keep in mind is that if you are opening a store such as a grocery store then you have a catchment area. It is a very localized business that has to be built bottom up. It is not a business that can be pushed from top to down. So, macro strategies may not work all the time. You need customized strategies,” says Sinha.
Freshness: A concern For most of the customers DARE spoke to, freshness of the commodity was a major concern. Unlike the West, Indian consumers lay huge importance to the freshness of food especially milk, vegetables and fruits. Even loyal customers of organized retail stores purchased these items from traditional stores, street hawkers and mandis. Their recent purchase pattern indicated that even though they bought pre-processed food, pulses, spices etc from the organized retail stores, per-
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sector/retail
Large Retail Format • Retailers sell their in-house brands at a price that is significantly less than branded products • They keep on adding and deleting in-house brands so that even if the customer finds a product wanting in quality after purchase, the negativity is limited to the brand, not the outlet A visit to a prominent, large-format retail store, in Delhi was an eye-opener of sorts. The store was located in a mall, which hardly boasted any big brands being newly built, but in contrast, the retail store was very crowded! Here is what DARE found: Customers: Belonged to the middle class or upper middle class, unlike customers visiting small organized retail outlets, it was a family visit or they were accompanied by friends A Pen Picture: • One-stop shopping experience; the store stocked everything from apparels to consumer goods to grocery; had different floors for each category • A lot of variety in terms of products; a lot of deals and discounts were available • Had various brands both in-house and other labels; in-house brands were mixed with other known brands to an extent that it was not identifiable • Had many staff members who were helpful • The store was clean and organized • Had parking space as the store was located in a mall ishable items such as milk, curd, vegetables and fruits were bought from the local stores. Says Vijaylakshmi, “I buy fruits and vegetables from the local market. This is because they are fresh and I can negotiate prices.” Moreover, these items are bought in small quantities and therefore for many consumers, traditional stores, street hawkers
and mandis make more sense because of convenience.
Home deliveries There are some services that are provided exclusively by kirana stores that drive consumers to these stores, such as home-delivery. In India, groceries are purchased in bulk mostly at the
beginning of the month and home delivery facilitates this. Also, selling on credit has long been the forte of the kirana stores. This ensures that customers stick to with them for long.
In-house brands vs private brands For customers like Monica Chawla, who prefers retail chains over the nearby mom-and-pop store, it is the availability of branded goods that matters the most. Unlike the kirana stores, the organized stores stock up a number of brands of a single product. However, these stores also have a generous supply of in-house brands. On an average, in-house brands come at a discount of up to 30 to 40%, which is due to the absence of advertising and distribution costs. However, this also means that these private labels lag behind the branded products in terms of visibility and hence, sale. Moreover, when such products are placed vis-àvis branded items, consumers may opt for a branded product than a private label. The discounts caused a major hit at DAR E profit margins. APRIL 2009 39
DARE.CO.IN ell us about your journey at Hindware. How was the transition and what were the initial difficulties faced?
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I have been involved with the company since 1982. Back then, I was studying as well undergoing occasional training in the company. In 1985, I started working with the company in an official capacity. I had to undergo quite an exhaustive training, which got me starting to work at the shop floor level and involved in every process that is required in the production stages. I remember working with my own hands, trained under supervisors along with all other workers. During this phase I got a comprehensive understanding of the processes and the technicalities involved. Then over the years, I moved into other positions â&#x20AC;&#x201C; one step at a time to reach the level at which I am today. As for the transition, in those days, it was a natural expectation of the parents that their children will join the family business. By large, back in the day, even the children expected that after their studies they will get into managing the family business after their studies. That said, the company had a structured training program to induct the newer generation. Of course, it was pretty elementary, if we compare it to the training standards that we follow today. But the training did hone me into getting to understand the business in greater details and thus I spent a good three years on the plant and its intricacies doing just that. The time spent then helped me in good stead in the years to come. During those days, while the newer generation groomed itself into a family owned business, it was very important to
/bio
SANDIP SOMANY HINDUSTAN SANITARYWARE & INDUSTRIES When it comes to sanitaryware, the products of his company are a household name and available across the length and breadth of the country. Somany talks to DARE about his experience, his challenges, tells us about the innovations of his company, shares some offshoot business ideas, and much more The plant was located 50 kilometers from Hyderabad, which was then a sleepy little town. For me, taking over this company had challenges and offered many learnings. The first thing that I realized was that the people running the company (staff and managers, not the workers) were completely incompetent. If I recall it right, we only retained two people and the rest were asked to go. We hired fresh people to give the responsibility of running the plant. It was challenging to train them, making them understand where we were and
entrepreneur of the month not look like a complete idiot in terms of asking the wrong questions. There are many times when one would want to ask very basic questions but make them sound reasonably intelligent. Because one does not want to be remembered as the person who had no idea about the business when he joined. Being a member of the promotersâ&#x20AC;&#x2122; family, it was assumed by employees at various levels that I had all the answers, as if I were prepackaged with all the knowledge. The fact was that I had to learn like and as much as everybody else. Living up to these expectations was quite challenging. Besides these, to some extent, winning acceptability of the employees was also a key issue. Those days, of course, were different, as people would accept a family member coming in with the ultimate intention of going to the top. Now it is lot tougher. Today there are aplenty professionals working in the company; any family member joining in has to be really competent to be able to command their respect.
You have turned around sick divisions into profitable ones. How did you go about it? The first independent charge that I took, in 1989, was that of a company called Krishna Ceramics in Andhra Pradesh. The plant was struggling to get its products and production right. We acquired and merged this company into our business. 40
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where we wanted to go, etc. Meanwhile, the workers thought some rich person from north India has bought the company, so demanded to double-triple their wages. This led to a strike within the first year of taking over. We took a tough stand and broke the back of the union â&#x20AC;&#x201C; by simply saying, wage increment will be production linked. Since then we have had very good relations with the workers and the union. Hindware at that point of time was principally operating in north and east India. We had small pockets in the south like Bangalore and Cochin, where we had our presence. So, we went about setting up our marketing network in the south. The plant, when we took it over, had a capacity of producing close to 1000 tonnes per year. Today it does 18,000 tonnes in a year. We brought in a completely new chain on the distribution side, wholesalers, retailers, etc which was quite challenging. With many such challenges tackled, within eighteen months of taking over the sick divisions, they turned around and started making money. This was very heartening for me as well as the very young team there. The average age of employees at that plant back then was 25 years. All this gave me the confidence that I can independently go out and look at opportunities. To sum it up, there were some key strategies that made all this possible. First was the focus on the production side,
/bio
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DARE.CO.IN where we cut our costs, utilized the plant capacity, and made sure that we produced what the customers wanted. Secondly, we had some very motivated and dedicated people to run the operations on the plant as well the salesmarketing front. The third thing was a structured manner of penetrating the market by showing a long-term commitment to our customers.
What kind of R&D goes into bringing out new products? It all starts from consumer feedback and from trying to understand what consumers’ expectations from this product category is. As in, the desires that are still unfulfilled. Having done this groundwork, the next is our design board, where we have a whole team of talented designers. These designers conceptualize new products and take them through the development stage till it reaches production level. From here on it is a very detailed and laborious exercise, which requires a lot of adjustments and fine-tuning to get the right efficiency of the product. These products are made at a temperature of 1,220 degrees centigrade. The challenge here is to put in right procedures, not only to speed up the process of modeling but also keep it production friendly and efficient. From the days of doing everything manually, we are now at a stage of computer-aided designing facilities. Besides computers, there are other technological advances too. As you know, our products have a lot to do with water. For instance, flushing is done with water. Water is not as abundant as most people treat it to be. Future wars, as many experts believe, will be to control water, not oil. We have been leading the drive in India to make our products ecologically friendly. From a national water consumption level of 15 liters per flush, we have already brought it down to 6 liters per flush. This could be achieved by design innovations and advancements in hydrodynamics. Hindware products have the capability of flushing with as low as 2 and 4 liters of water. All our new products have a dual-flush system. As in, after urination, you can now use half the quantity of the water to clean the bowl. To put some numbers, a typical water saving products of ours saves 28,000 liters of water per year per toilet. Considering that we make 3 billion pieces a year, out of which toilets would be around 1.7 million pieces, that is a significant amount of water that we help saving every year. Over a period of time, we have come to introduce automatically flushing urinals using infrared sensors, men’s waterless urinals, and more such innovations.
How would you differentiate Hindware products between the cheap small scale sector products and high end imported designer products? Most of the manufacturers making sanitary ware in the small scale sector produce rubbish products. Sanitary ware is supposed to be vitreous; which means it should not absorb more than 0.5% of water. The products coming from these manufacturers are not vitreous, which defeats the very purpose of using sanitary ware. Because once water 42
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/bio gets into the ceramics, it becomes a breeding ground for all kinds of germs and bacteria. Also these products are not durable and tend to crack in a small period of time. These disappointed customers will ultimately turnaround for a better product like ours. As for the international designer brands, the consumers are paying the price only because of the brand name. In some cases, it is also because of a certain style element the products may have. One thing that should be noticed is that many a times these products are not coming in from America or Europe, as the customer would like to believe. They come from China, Thailand, Indonesia, and such. We have invested a lot of money over the years to make our plants world-class, which can make products as good as an American or European company.
The next big things in ceramics and glass segment? In sanitary ware, there are a lot of innovations that we will see in the future. For instance, we have recently launched Intellimate – which is an intelligent toilet that does things such as warming the seat cover in cold weather, it has an air freshener built in to curb bad odor, it has a hot air blower built in, and so on. For making all our products user-friendly, we have the seat covers with soft close – so that when you close the cover, it gradually comes down without creating the racketing sound, which disturbs the sleep of family members in the nights. We will also see a lot of focus on trying to bring the water consumption level further down. You see, since the time Thomas Crapper invented the loo, which dates to more than a century, the functions and material of basic ceramics have not changed. In the glass business, there are a lot of opportunities in terms of customizing bottles for consumers. The big initiatives will be in the lines of light weighting the bottles. In India, we will soon see a surge in single trip bottles – which are bottles that need not be returned to the retailers.
Any ideas of offshoot business opportunities? The glass business is extremely capital intensive. The minimum size of a viable plant is at least 300-350 tonnes and good volumes of orders. A green field plant of that size will not cost less than 200 crore, depending upon the technology in use. Hence, it is kind of out of bounds for aspiring entrepreneurs. As for ceramics, I think there are good opportunities for aspiring entrepreneurs, we take the bathroom as a whole and not just ceramics. These opportunities are in the areas of logistics – both inward and outward. Similarly it can be in the area of improved packaging. And, of course, there is a huge segment available for tapping in terms of product designs, because that is an area in which India is not world class.
How are your dealing with the current financial slowdown and the real estate mess? Well, when the world is falling apart, it will have its effects even in India. In India, the growth rates have gone down,
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/bio even though we are growing positively. We will finish this year at about a growth of 14-16%, which is a healthy rate. But yes, if the slowdown would not have set in, the growth rate would have been much higher. We are a sound company with a good market share, so the slowdown is affecting us lesser than it is with others. There will be some amount of correction in capacity utilization as an industry. There will be problems in the sales, because the large institutional buyers are in trouble, which is leading to a fall in their consumption. Fortunately, we are very strong in our retail presence which is continuing to drive our growth. To offset the demand from the institutional segment, we are now going to smaller town with smaller builders who are not over leveraged. Although they buy small quantities, what counts most is that they at least buy.
Any advise for the aspiring and existing entrepreneurs in India?
and time to market. I am not sure if they will want to run this business or do something else. If my son comes along and says that he wants to do something else, I would encourage him to do whatever excites him in life. The company will go on doing good business, as we have a good set of professionals who can manage it very competently.
How much personal time do you get? What do you do in it? It is difficult to do but one has to balance time to make some personal time. For me, I disconnect from the thoughts and work of the business the moment I leave office, connecting back only when I go back there. Of course, there are exceptions in case of emergencies. I do not work on Sundays. I try to make time for vacations during the summer and winter holidays. I love water. I can kayak, canoe, snorkel, scuba dive, jet-ski, etc. I used to be able to sail, but I am out of practice now. I also race cars. These are my passions.
My advise to aspiring entrepreneurs, who want to start Looking back, any big learning up in these turbulent times, experience? Anything that you will be to check their business wish would have been done plans over and over again. differently? Please do not build plans The answer to this is very dodgy. I which are completely specuentered the business in 1982 and lative in nature. There is very till about 1995-96 we were part of little latitude for failure, as the a joint family. The course of each system is not as tolerant as business and its decisions would they were earlier. It is imporbe discussed by and with everytant to have the right products one. While there are good things SUCCESS MANTRAS/ and services at the right price HAVE FAITH IN YOURSELF AND BE COMMITTED about being in a joint family, the in these times. decision-making becomes exTO THE CAUSE. HAVE CONFIDENCE IN YOUR For entrepreneurs who are tremely slow and bureaucratic. OWN ABILITIES AND HAVE THE DEDICATION already out in the market, I To answer this question in a would say that lower the burn different manner – I wish we were TO STICK TO IT – EVEN IF THE GOING GETS rate of cash as much as posnot part of a joint family system, REALLY TOUGH. THERE IS NO SUBSTITUTE TO sible. Cash is king! If you have as we would have grown much HARD WORK AND THERE ARE NO SHORTCUTS a pot of cash at the moment, faster. I cannot at the same time TO SUCCESS IN LIFE you can put it to very good say that I wish that the separause. Because valuations will tion should have taken place earcome down and you can do a lot more with your money lier. But the fact is that after the separation, I took decithan you could a year ago. sions and calculated risks, which by God’s grace worked out fine for me. If you track our growth from 1985 to 1996 and compare that with 1996 till date, we have at least triWhat is the legacy that was passed on to you by your pled the rate of growth. Without generalizing it, in our predecessors? What legacy do you want to pass on to the case, the joint-family structure held back the growth of next generation? the business. Since a child I have seen my predecessors slog. They worked as hard as any other employee and were very quite hands on. Besides this, they had an excellent value system. The one big success in your time with the company? They never resorted to any unethical practices to earn fast We significantly scaled up the business. The pace of cash. All these impressions have remained with me and I growth, size, and internationalization is much higher than know that there is no substitute for hard work and no shortwhat it used to be before. Hopefully, in the next couple of cut to success. years, the company will be more international than it is As for the next generation, besides the values I got from today. It is this momentum that can be attributed as the DAR E my predecessors, I would like to pass on speed, decisiveness, one success.
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/INSEAD
Mentored by Mother Nature The most effective office-spaces are not only those devoid of walls but a ceiling too! Three hugely successful entrepreneurs realised early on that their â&#x20AC;&#x2DC;mentorâ&#x20AC;&#x2122; was right under their noses-in fact, all around themMother Nature! /Irawati Gowariker and Philip Anderson 44
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/INSEAD right under their noses-in fact, all around them-Mother Nature! Outdoor entrepreneurs Somit Doshi, N. Sreekumar and Girish Deshpande of Strawberry Outbound, Aria Holidays & Resorts and Moving Clouds respectively, took us willingly on their adventure-filled ‘journey’ lined with Nature’s hints, leading up to their booming business model. Moving Clouds is a name that Girish Deshpande came up with, for his designer travel company, while trekking in the Himalayas. “I have always been
“We use the outdoors as a vehicle for experiential learning, where the learning is real, with real successes and failures, and only genuine input will achieve lasting results. The great advantage of the outdoors is that it forces you to use your communicative and reasoning skills to confront problems head-on”, Doshi explains.
M
ost entrepreneurs search high and low for mentor/s that have the right network, industry experience and the time, to help them monetise their ideas. Three hugely successful entrepreneurs realised early on that their ‘mentor’ was
a seriously outdoors person having criss-crossed India’s underbelly, far & out regions, having trekked over 2500 kms in the Indian Himalayas, Trans Himalayas & Nilgiris. Moving Clouds is a concept ahead of its time,” says this “vacation-scientist”, who has devised innovative tours ranging from actionpacked adventure sport tours to spiritual sojourns and everything imaginative in between-high altitude desert safaris, textile tours, heritage stays in refurbished havelis, even swiss tents in the Himalayas! Having conducted nearly a hundred tours across India and Bhutan, the promoter of this designer travel outfit is confident about the growth opportunities for newcomers as long as they can think out-ofthe-box.
While innovation is Nature’s cue to Deshpande, Kerala’s backwaters gave some winning cues to Sreekumar six years back. A hotelier earlier, Sreekumar tried to replicate luxury, past hotels, to houseboats. Sreekumar has also popularised the traditional Kerala country boats which were phased out by modern transport. He explains, “Two of our six houseboats are designed similar to the Kettuvallam, a boat that was made by tying together pieces of wood- and no single nail! Eco-friendly bamboo poles, coconut fibre ropes, bamboo mats, coir carpets, all of which are available locally are used to make our houseboats”. The design has been adapted to meet the luxury requirements of today’s tourist. Despite a short peak season (mid December to mid January) that this industry experiences, most of Sreekumar’s boats have touched their desired occupancy of 200-days per year. Besides the Kettuvallam-styled boats, Aria Holidays is also the proud owner of the largest houseboat in Kerala-Celebrations which accommodates 150 passengers! Somit Doshi, Founder and Director of Strawberry Outbound says, “I was brought up in an environment of outdoor culture and sports lifestyle (14 years in the UAE). My family took me to beaches, national parks and mountains and I was naturally inclined towards the outdoors”, and modestly adds, that “I was miserable at anything else so for me it was make money out of outdoor life or….get ruined”! Since 1997, Doshi has lucratively illustrated to the top brass of India Inc. that the most effective office-spaces are not only those devoid of walls but a ceiling too! Justifiably for Doshi, Strawberry Outbound has been about “having my cake and eating it too”! “We use the outdoors as a vehicle for experiential learning, where the learning is real, with real successes and failures, and only genuine input will achieve lasting results. The great advantage of the outdoors is that it forces you to use your communicative and reasoning skills to confront problems head-on”, Doshi explains. Strawberry APRIL 2009 45
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STRAWBERRY OUTBOUND
Somit Doshi, Founder & Director, Strawberry Outbound Started in 1997 Founder & Director Somit Doshi Located in Mumbai Haryana, Uttarakhand and in Dhaka, Bangladesh Nature of business Team building activities, adventure programmes and out-of-the-box corporate outdoor initiatives Initial Investment INR 35 lacs Team size 16 + freelance trainers Break even After 4 years Regulations *Safety gear to be UIAA approved *Instructors to hold qualifications from govt-approved mountaineering institutes Break up of running costs R&D-60%; Promotion-20%;Administrative-20% Tariffs Customised on demand Business promotion Word-of-mouth; participants are their greatest advocates Conversion ratio 3 out of 5 Challenges Hiring the right people Customer profile Corporates â&#x20AC;&#x153;The best decisions will always be ones with the highest risks. Stay fearless- run your business with loveâ&#x20AC;?. 46
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Natural surroundings help Oberoi Hotel staff unwind
Tata Communications team jubiliant after a team building exercise
Rock climbing experience for the team at Varda Biotech builds trust, concentration and discipline
DARE.CO.IN Outbound is one of the most experienced companies that has trained over 300 corporates through team building activities, adventure programmes and out-of-the-box outdoor initiatives. Using the outdoors as a vital component, it offers a host of programs on leadership, team development, performance improvement, facilitation workshops and young employee apprentice programmes among others. With a young team of 16, including technical people, creative heads, a finance controller and trainers, Doshi is convinced that flexibility is the key to their success. “The team is young and happy to experiment and keen to listen. When you listen, you can adapt quicker”. When asked if competion is stiff, Doshi, who, even today, never misses a chance to be outdoors, replies, “it is not stiffer than my back”! How has the road from conception to profitability been? Bumpy, for Strawberry Outbound, in its first four years. Saddled with an initial investment of nearly INR 35 lakhs, taken as a loan from friends by mortgaging office space, Doshi speaks candidly about Strawberry Outbound’s 1997 days. “Early days were miserable with little or no business, and expenses on the other end. Then, India was not particularly for communities with outdoor lifestyle. It was tough and I often thought of shutting shop and working as a guide or running a tea-stall in the mountains”. Determined to create commerce out of his love for outdoors, Doshi’s venture broke even only after reaching a critical mass. With as much as 60% of Strawberry Outbound’s running costs dedicated to R&D (including safety, search for new ideas, props, equipment), Doshi encounters a expectation-returns conundrum. He explains, “When people talk about operational capability and safety, we are compared to the west. But if I have to do the same with what we charge, we fall back by 200-300%”. He agrees that manpower and office expense is lower in India but cost of operations continues to be high, as safety can never be compromised. Unlike Doshi, one-time hotelier, Sreekumar, ‘sailed’ smoothly into his MENTORED BY MOTHER NATURE, CONTD. ON PG 78 ç APRIL 2009 47
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sector/finance
The Truth about Microfinance Default rate among micro entrepreneurs is almost zero, despite high interest rates of 17-32 percent they pay for getting small loans. In comparison, well off people and industrialists get loans at a fraction of this rate, and they still default /Ambrish Jha
I
n India, people from different strata are treated differently in all matters, even when it comes to accessing funds for development. While big corporates get the required finance at anything between 10-14%, those from the marginalized sections can get microfinance of a few thousand rupees at rates 24-32%. There are also microfinance institutions (MFIs), which provide finance at somewhere between 17 to 23 percent. However, time and again, unconfirmed news keep appearing that some MFIs charge as high as 50-60%. Though its degree is probably milder to what moneylenders used to charge, this also looks ‘usurious’. MFIs have their own logic for charging high rates, but there is no plausible explanation why some of them make healthy profits even at relatively cheaper rates of 17-21%. Since collateral is not asked for extending microcredit, there is a general perception that these loans are risky. Records of repayment over the years prove oth-
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erwise. Default rate is less than 1% in most cases—something big industrial houses cannot boast of. Despite high profits MFIs make and the impressive growth of over 20% the sector has sustained over the last two decades year-on-year basis, benefits of microfinance have still reached barely 25% of the target population. According to Bharat Microfinance Report 2008, prepared by Sa-Dhan, benefits of microcredit reached over 33 million people in 2007-08, up by 9 million over the previous year. The report acknowledges that women have benefited in the areas where microfinance has reached people. Some four out of five clients in India are women. This article will look at the various models of microfinance and investigate why many MFIs extend loans at higher rates.
Different models A MFI can be a non-banking finance company (NBFC), a non-government
organization (NGO), a charitable trust, a company registered under section 25 of the Companies Act 1956, or a cooperative registered under the Cooperative Society Act. There is no one agreed model of disbursing microcredit, though these are disbursed through self-help groups (SHGs). The most popular model in India is that of commercial banks lending to poor people through their own promoted SHGs or those promoted by SHG promoting institutions, as Dr L H Manjunath, executive director, Shri Kshetra Dharmasthala Rural Development Project (SKDRDP), says. This model is generally referred to as the SBPL model. In this case banks deal with the SHGs directly for all kinds of operations. According to the Bharat Microfinance Report 2008, of the total outstanding microcredit portfolio of Rs 22,000 crore (in 2007-08), 75 percent was accounted for by this model alone. The second model, which has inspired many Indian MFIs, is the Grameen Bank model, pioneered by
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sector/finance the Bangladeshi Noble Prize winner Mohammad Yunus. Under this model some 50-60 people gather at one place on a given day in a week and constitute 5-6 groups within themselves. A group representative then goes to the bank, collects money and disburses loans. Repayment also takes place through the group representatives. The third model, which SKDRDP follows, involves the formation of a field office in a village. Instead of the workers going to SHGs, the group representatives come to SKDRDP field offices, take loans and also deposit repayments. There is a fourth model, which Accion International, a Mexican international MFI, has started implementing in India in collaboration with Yes Bank and other MFIs. Under this model, loans are forwarded to individuals directly and they are also solely responsible for repayments. One drawback noticed with this model is that its benefits go to those relatively well off in rural areas. The poorest of poor are not able to get loans under this scheme. This system is, however, nothing new, as Manjunath says. Commercial banks and cooperative societies always extended similar loans. The logic behind loans being forwarded to a group of people and not individuals is to let a peer pressure and joint responsibility mechanism come into effect, which ensures repayment is prompt. Mohammad Anas, who is a senior area manager with SKS Microfinance in Delhi, says, “Nothing works better than joint responsibility and peer pressure.” MFIs are for-profit organizations and, like normal financial institutions, they provide credit to SHGs only after due diligence and compulsory group training. Loans are forwarded for ‘ready’ activities, that is, activities that can start yielding revenues immediately. The loan period varies with the kind of loan product, but to begin with, loan repayment is normally spread over 48 to 50 weeks. Anas says,”SKS Microfinance loans need to be repaid in predetermined equated weekly installments over a period of 50 weeks.”
There is no need for MFIs to look overseas for funds. We get loans for anything between 9 and 10.5 percent from commercial banks. An MFI can negotiate hard to get a loan at a maximum rate of 12.5-14 percent. — Dr L H Manjunath Executive Director, SKDRDP Loan amount MFIs have different loan products, with credits ranging from anything between Rs 2,000 to Rs 100,000. Loans can be extended for emergency causes (like school admission, hospital expenses, etc), for creating income and livelihood activities—agricultural or non-farm activities—for housing purposes, and for starting or expanding a group enterprise, where the group as a whole is given the loan amount. Most MFIs give anything between Rs 2,000 to Rs 25,000 as the first loan amount, which can be increased to anything between Rs 15,000 to Rs 50,000 in the second year for those with a good track record. SKS Microfinance, for instance, Anas says, provides a maximum loan of Rs 12,000 initially. If repayment is prompt, the loan amount can be increased to Rs 16,000 in the second cycle. The company, however, does not mind providing emergency credit of up to Rs 11,000 in between. SKDRDP, on the other hand, starts with Rs 10,000 to those who are en-
rolled with it for at least three months. This can be increased to Rs 50,000 in the second year. The trust, which operates in six districts in Karnataka, does provide housing loans up to Rs1 lakh, which can be repaid over a period of 520 weeks. Manjunath says, “For an amount in excess of Rs 50,000, however, we ask for some collateral security.” Group enterprise loan is given for a rural enterprise and the responsibility for repayment is on the group as a whole. The loan amount can be anything from a couple of lakhs to Rs10 lakh as is the case with SKDRDP. According to the Bharat Microfinance Report 2008, the loan segment between Rs 5,000 and Rs 10,000 has seen the fastest growth in the country. The report attributes these to two factors—firstly, microfinance customers mature to bigger loans over the loan cycles, and secondly, urban microfinance starts with comparatively bigger loans than rural finance.
Reasons for higher rate Though MFI officials acknowledge they have heard of usurious rates of 50-60 percent charged by some MFIs, none of them pointed out any such organizations. An analyst working with the Centre for Microfinance, which is a wing within the Chennai-based Institute for Financial Management and Research (IFMR), says she has never come across such high rates. She acknowledges rates are usually between 26-30 percent for most of the MFIs. However, according to a research paper she has produced, the clients of MFIs think about their loans not in terms of interest rates but only in terms of how much they actually owe on a weekly basis. Thus if a weekly installment for a loan of Rs 3000 comes to Rs 96, a client finds it acceptable without realizing she is paying a flat rate in excess of 50 percent (We found the numbers in a case study shown in the annual report of one of the MFIs). One obvious reason for keeping interest rates as high as 24-32 percent is to cover for the administrative costs. MFIs keep high rates not because the loans APRIL 2009 49
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sector/finance
MFIs: A comparison chart Item
SKS Microfinance
Ujjivan
SKDRDP
Areas of operation
Rural areas
Urban areas and semi-urban areas in and around Bangalore
Rural areas in six districts in Karnataka
Legal status
Non-bank financial institution
Non-bank financial institution
Non-profit organization
Amount of microfinance (in Rs)
12,000-16,000
8,000-30,000
10,000-10,00,000
Purposes for loan
1. Business loan 2. Emergency loan 3. Loan cover insurance
1. 2. 3. 4. 5. 6.
1. 2. 3. 4. 5.
Interest rate (diminishing) (in %)
28.50
24-26
Loan tenure (in weeks)
50 50 -150
50-520
Gross Loan Portfolio (in Rs) (as on March 31st, 2008)
261,718,932
9,110,145
are considered risky, as normal perception is. Rates are high because microfinance, as Samit Ghosh, CEO of Ujjivan, describes, is a ‘low margin high volume’ business. One person is required for processing any loan worth either a few thousand rupees or a few crores. For distributing a loan of Rs 1 crore in values of Rs 10,000 each, an MFI, for instance, will need 1000 persons, which will push up administrative costs. Contrast this to a commercial bank, where only one employee can distribute loans worth a few lakhs to several crore rupees. This explains why banks prefer more clients demanding bigger loans than a number of clients asking microcredit, despite default rate among large loan seekers being higher. Manjunath, however, points out that many MFIs these days are seeking capital financing from venture capitalists like Silicon Valley, Sequoia Capital India, Sandstone Capital and others. They have to earn handsome profit on their investments in these institutions. They are, after all, bound to return to their investors at impressive rates. This compels MFIs to seek higher returns from their clients. Another reason that is driving interest rates high can be seen in the way MFIs are paying fat salaries to the ‘professionals’ they employ. Manjunath says, “Poor people should be employed 50
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Business loan Family loan Housing loan Emergency loan Top up Insurance
to work in rural areas. But MFIs are recruiting people from reputed management institutes. This drives overhead expenditures high.” The Government of India has declared microfinance sector as a priority sector for lending, and banks are ready to provide finance to MFIs, as they themselves get refinanced through NABARD promptly. Manjunath says, “There is no dearth of funds in India itself. There is no need to look overseas for loans. We get loans for anything between 9 and 10.5 percent from commercial banks. An MFI can negotiate hard to get a loan at a maximum rate of 12.5-14%.” Administrative cost, Manjunath says, should not be more than another 7 percent, but others like Ghosh and Anas say these costs come to around 10-11 percent. For Anas, an interest rate of 30-31 percent is acceptable, but SKDRDP makes profit by letting loans on anything between 12.5 to 18 percent. It is their discretion, after all, as to how much they would charge. Mohammad Anas of SKS Microfinance says, “We have to make profits also. We make 3-3.5 percent profit by providing loans at 28.5 percent.”
Future That the microfinance business is quite profitable is proved by the
Emergency reasons Income and livelihood reasons Housing Group entrepreneurship Insurance
17-19
85,164,592
Bharat Micro Finance Report 2008, which shows it growing by 70 percent between March 2006 and 2008. More than 120 MFIs are already working in India. However, a large part of the population still has no access to microfinance, no matter what interest rate is. Making finance available to poor people at reasonable rates is highly desirable. MFIs should be encouraged to cut on their administrative costs. Better competition among MFIs can help achieve this. Some competition can be seen in the south Indian states, as Manjunath also acknowledges. But when it comes to other parts of the country, it is a onesided story all the way. People have either no access to microfinance, or if they have, they have to accept credits at rates MFIs want. When organizations like SKDRDP can lend at 17-19 percent and still manage profits, there is no reason why others can’t do the same. Probably banks should work more closely with MFIs and SHGs and devise methods to cater to more clients using bare minimum of their own human resources. This can be possible through effective use of modern day technologies and creating awareness for them among rural folks. Till this becomes possible, poor people will continue to ‘pay a price’ for DAR E trying to come out of poverty.
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/blogs
Politics & Economics
/Paranjoy Guha Thakurta
A
question that is often posed these days is whether there will be a significant change in India’s economic policy regime should a Third Front kind of coalition come to power in New Delhi. The answer to that question is “yes” and “no”. Yes, because there are certain important aspects of economic policy that are almost certainly going to remain unchanged irrespective of the complexion of the coalition that rules the country for however short or long a period. No, because there will be elements of economic policy changes–often defined loosely as “reforms”–that will not take place, especially if the Left is a part of (or an outside supporter of) an amorphous coalition that could include the political parties headed by two mercurial and temperamental ladies with single names, Mayawati and Jayalalithaa. Politics and economics are often sought to be separated. But they cannot be. The relationship between the two is close and symbiotic. Economic policies are influenced by political considerations and economic issues–such as inflation–provide some of the most potent political slogans. It may be contended that one cannot just run away from politics as it intrudes everywhere, even determining power relationships within a family, between husband and wife, sister and brother. Economics too matters for everyone, for it determines what we eat and how we live. It is often claimed that bad politics is responsible for the slow progress of eco-
nomic reforms. Dr Manmohan Singh has said time and again that there is no difference between good economics and good politics. Be that as it may, it would be worthwhile to further examine the relationship, if any, between political uncertainty and economic policies. It seems logical that uncertainty of any kind, including political, is not good for economic development. Yet it can be argued that a period of economic adversity spurs the political leadership to take tough decisions that it may not otherwise take. Over the last 13 years, as the coalition dharma to run governments in India became entrenched, there has been considerable political uncertainty. But it is far from clear whether this political instability has been all that bad for the economy. Between 1996 and 1999 the country’s gross domestic product (GDP) grew by more than 7% a year three years in a row for the first time during a period of considerable political instability—in this period there were four prime ministers, three governments and three elections. Between May 2004 and March 2008–again for the first time in India’s history–the country’s GDP grew by an average of over 9% each year four years in succession, but there was no change in regime this time round, with a stable UPA government in place. The main point that needs to be made in this context relates to economic growth itself. An economy can grow fast, but the fruits of this growth can be unevenly distributed and benefit only a small section. Economic growth has to be inclusive if it is to bring political returns to incumbents. Growth without creation of employment opportunities is akin to committing political suicide. This is what the BJP realized after its “India Shining” slogan had backfired. This is the dilemma the UPA currently faces. What is the use of boasting about the GDP growth rate when inflation has impoverished large sections of the population? And who does not know that the poor vote in larger numbers than the privileged? The world’s largest democracy elects the political representatives it deserves, who in turn shape the country’s economic policies. While both the UPA and the NDA coalition governments sought
to change economic policy priorities, these attempts met with mixed success despite the fact that there is considerable convergence between the economic policies espoused by the Congress and the BJP. Even as the consensus within the country’s two largest political parties on the virtues of liberalization, privatization and globalization have broken down from time to time, there has been a remarkable agreement cutting across the entire ideological spectrum on what needs to be done–that is, improve the working of the social infrastructure (education and health care) and the physical infrastructure (electricity, roads and water). It can be argued that because of a growing political consensus on many policy issues, the overall direction of the economy would not change even if there is political uncertainty. On the question of unstable coalitions being bad for the economy, it is worth recalling the experience of a few countries. India is by no means unique among democratic nations in having coalition governments, some of them short-lived and unstable. Japan and Italy are proof of the fact that even unstable coalition governments do not automatically result in economic regress. Japan had a series of coalition governments since 1976, when the Liberal Democratic Party lost its monopoly on power for the first time after World War II. That certainly did not prevent the nation from marching swiftly ahead of most of the world to become an economic powerhouse. Italy’s experience is even more remarkable. In the 58 years that followed the end of World War II, it saw as many as 54 governments come and go. While each government lasted just over a year on an average, Italy’s economic development was not seriously hampered. The point being made here is that there are examples of countries that have witnessed political turmoil without it being accompanied by economic chaos. As far as India is concerned, clearly there is no simple relationship between multiparty coalition regimes, political stability and economic development. DAR E The author is an educator, an economic analyst and a journalist with over 30 years of experience in various media—print, radio, television, Internet and documentary cinema. APRIL 2009 51
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hat has been Accel Partners’ international focus? What brought you to India? Accel is a 25-year-old venture fund in the Silicon Valley. We have been very successful in our investments, mostly in the technology area. About seven years ago we decided to move to the UK and create a partnership there– Accel London. More recently, in 2005, we decided to partner with IDG to create IDG Accel China. Last year we decided to start working in India, something that we were tracking for the last three to four years.
Don’t you think your entry has been a little late in the Indian market? The group that is now called Accel India used to work as Erasmic Venture Fund. The fund itself has been around for four years. Erasmic made its first investment in 2004-05. Now Accel is leveraging on the portfolio and contacts built over the last few years. We are looking at Erasmic and Accel as a combined entity. The Erasmic fund has made 18 out of these 20 investments, and the Accel fund (new fund) only two. The new fund is poised to make investments. whereas the older funds have built a portfolio that is fairly diverse. The Erasmic fund has been rolled into the Accel brand. The new fund is called Accel II and the old fund is called Accel I. The
funding/strategy Accel is a venture capital firm specializing in investments in seed and early-stage companies. Before joining Accel as a partner, Subrata Mitra was a partner at Erasmic Venture Fund. At Accel he focuses on technology, mobile and Internet verticals. Subrata holds a Ph D in computer science from the University of Illinois, Urbana-Champaign, and a B Tech in computer science degree from IIT, Kanpur
investor of the month total money invested so far through Accel I would be about US$ 10-12 million. Could you tell us more about your new fund. Which sectors are you focusing on and what do you plan to achieve in terms of return on investment (ROI)? Accel India will continue to invest across a diverse set of sectors, such as technology products and services, healthcare, retail and consumer etc. We would like to be the first institutional investors for most of the companies that we fund. I cannot comment on the ROI. Which are the companies that you have invested in with the new fund? Champak and Myntra. The third one hasn’t been announced. So I will not be able to reveal the name. Myntra is in the personalized gifting space. They are doing online as well as offline stuff. The other one is an Internet company. Given the current economic slowdown, how is Accel reworking on its investment strategy? We started several years ago with a relatively smaller fund and, therefore, it was imperative that we had some basic principles in place right up front, such as investing in really capital-efficient companies, making funds 52
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available in a staged manner as companies grow, and get them to profitability quickly. Thus, we have had to make only small adjustments to our investment strategy in the new environment. No one really knows how bad it is going to get. We had seen that the buying patterns of enterprises was changing with the feedback our customers were giving us. But until September I guess no one knew how bad it would get, and even then we were still trying to figure out where the end to all this is. I don’t think our strategy will significantly change. Even in Fund I maybe about a third were seed and two-thirds were just beyond seed, which we would call early. Overall, we will probably be in the same ballpark. What would your exit strategy be, going forward? We believe that exits are going to be hard to achieve in the current environment, and are therefore open to options, depending on the company at hand, their maturity, markets, etc. In the previous fund we have had two exits, both of which were done rapidly. They were like two years or so, from investment to exit. But then at those times the markets were different. We are pretty long-term investors. We are looking at five-plus year for seed investments, for slightly later stage companies may be four to five years, depending upon how the markets behave. How are your portfolio companies doing in the current slowdown? We spend a significant amount of time with our companies. So there are situations where we meet every week. In all cases, we are very well aware of what’s going on at the sales side and the internal operations side. A lot of our companies are getting to a point where things are getting tougher. But I wouldn’t say that any of them have been completely wrong about what kind of numbers they will hit. We are generally okay with how bad the current environment is. What is your advice to entrepreneurs at this stage? One should look at today’s time as an opportunity where it will be easier to do certain things. For example, you will get a longer time period to try out variations of your products; you can have easy access to talent; and so on. But on the sales side it is going to be a lot tougher. You need to be patient, make sure that you are building value. Most of the times these downturns are cyclical, so you have to figure out strategies to live through it, reduce costs etc.
Are you considering business plans despite the slowdown? What do you look for in a business plan before deciding to invest? Yes. You will probably see two to three announcements from us in the next couple of months. The primary focus areas are the team and the market, but we would also like to be convinced that there aren’t too many players/incumbents in a space, and that the team knows how to execute significant parts of the business plan. In India a lot of entrepreneurial and innovation opportunities exist in small towns. Does Accel plan to tap these hidden treasures? I know there can be ideas out there, but there is a logistical problem. About 80% of our companies are in Bangalore. Even if they are in Mumbai or Chennai, we end up investing less time with them compared to the ones in Bangalore. If are talking of tier-II and tier-III cities, and if it takes two days to go there and come back, there will be no way we would be able to spend the time that we want to at this stage of the company. While I am definitely sure there are smart ideas out there, it just becomes a nightmare to track them and do justice to them. What do you think is a realistic return on investment for a VC? It depends on the stage at which you are coming in. Your risk adjusted return is what you are looking at. The normal way VCs look at this is: if you are taking a high risk, then the return has to be commensurately higher. If you are taking lesser risk, and exit it say in two years, then maybe a 2x and 3x is good. But if you are taking a high risk, and you have to wait for five to seven years, then you look for significant higher returns; it has to be at least 10x to be interesting. But these are very generic numbers. Have there been multiple rounds of investments in your investee companies? Normally, when we come in we have some notion of a reserve for every company. We know that we are putting in some money to test out a few hypothesis, but that will not necessarily get them to the next big milestone because we probably do not know how the marketplace is going to behave. So we set a milestone, which, when achieved, we will be able to put in more money. That works well and keeps the founders motivated. Usually the next round would be of a slightly higher valuation, so that they can move the DAR E company forward.
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Fresh Water Fish Farming Fish culture is practiced in less than 30 percent of the total areas available. This has a potential to create huge job opportunities, provided fish cultivation is done on a scientific basis /Ambrish Jha
I
ndia is a large producer of inland fish, ranking next only to Japan. With an abundance of freshwater resources, India has still not been able to tap even 30% of the potential area for inland fish production. Many entrepreneurs have, however, chosen to take this occupation on commercial scale. This is best manifested in Andhra Pradesh, which with 10,56,000 tons of inland fish production in 2007-08 ranked next only to West Bengal, which is far more endowed with water resources. Andhra Pradesh has emerged among the ranks encouraging farmers to form cooperatives to take up farming in ponds around Kolleru lake. Both the central and state governments have come up with schemes to help the cause of the farmers.
Fish culture in ponds Out of the total inland fish production of over 3.6 million metric tons, more than 60% is contributed by fish culture in ponds and reservoirs. The average productivity from ponds on the national level is around 2,500 kg/ha/year, though in Andhra Pradesh and Haryana it is more than 5,000 kg/ha/year, while in some other states like Bihar and UP it is anywhere between 1,500 and 2,500 kg/ha/year. Fish culture is adopted by all kinds of farmers – small
Fish Species Bred in Ponds 3.6 million metric tons - Annual produce of inland fish in India, 60 % - come from fish culture in ponds and reservoirs, 60 species - cultivated in different parts of India in ponds or reservoirs, 80% - contribution of carps from fish culture
Major species cultured in ponds Indian major carps – rohu, catla and mrigal Exotic carps – silver carp, grass carp, common carp Catfish – magur, ari, singhi. Tilapia – also known as kowai. Trout – golden mahseer, silver mahseer, silver grey mahseer and black mahseer. and marginal ones, relatively larger farmers and those who do it on commercial scale. Sizes of ponds also depend on how affluent the farmers are. Ponds less than 100 square meters in area prove unsustainable, while those above 1 hectare are expensive for small players. Many farmers in Tamil Nadu, for instance, use ponds of sizes 30 feet by 30 feet to make their living. On the other hand, a water spread of anything less than 10 hectares in Andhra Pradesh is treated as a pond. Ponds can be perennial or seasonal. While seasonal ponds can be used for short-term fish culture, provided they retain water for at least four to five months, perennial ponds are suited for fish culture on a larger scale. Since water dries up in a few months, seasonal
ponds are easy to harvest fish. Any perennial pond retaining water depth of 2 meters can be used for fish culture. Dr Gopinath Sai, executive director (technical), National Fisheries Development Board (NFDB), says a water level of 3 to 4 feet is preferable, even in summer. Fish farming can be practiced on scientific lines in perennial ponds only, though seasonal ponds can be used to cultivate fry. Though different pond shapes are being adopted by farmers, rectangular ponds are easier to work on, Sai points out. He says freshwater fish culture is a very profitable business provided farmers take up this on scientific lines. Quality of soil, water, fish seed and fish food needs to be of reasonably good quality to have better yields. The soil for ponds should be able to retain water, and hence clayey soil is preferable. The water should not be acidic in nature, nor should it be highly alkaline. It should be treated with appropriate quantity of lime. Provision for inlets and outlets should be made in ponds, as Sai and C Ratnamachari, joint director, Inland Fisheries, Andhra Pradesh, says. However, Ranjit, a fish farmer from Bihar, now into fish culture and retail trading in Delhi, says, “We do not know about any inlets or outlets in our ponds but we manage a good catch despite that.” APRIL 2009 55
DARE.CO.IN Ponds are not the natural habitat of fish; it is rivers and canals. This makes it imperative for farmers to provide food from outside and also create a desirable environment. Fish food is provided in the form of oil cakes and rice bran. But to create conditions suitable for other organisms to grow inside ponds, fertilizers need to be applied. A combination of organic and inorganic fertilizers is ideal, Ratnamachari says. Their application depends on the soil quality to a great extent. Rajat Sharma of Haryana Fisheries Department has a simple mathematics for fish farming, which he says is followed by most fish farmers in the state. He says what is needed to produce for 1 kilogram of fish is 1 cubic meter water, 1 kilogram of organic manure, 100
opportunity/agri grams of inorganic fertilizer, 1 kilogram of supplementary feed and three fish seeds. Farmers, he says, should wait for one year for the fish to mature. According to his calculation, investment needed for 1 kilogram of fish is anywhere between Rs 15 and 25. The sale price of 1 kilogram of fish to wholesalers is anywhere between Rs 40 and 50, ensuring more than double the income. Being a state subject, the fisheries department also helps farmers get the right quality fingerlings. Private hatcheries have also come up in several parts of the country and government schemes are also aiding this process. Fingerlings must be free from disease because one infected fish may cause widespread damage. Polyculture in ponds is the dominant production sys-
Economics of Fish Culture in Ponds (for 1ha, up to 1m excavation) Items A. Fixed costs Excavation of one hectare land (10,000 cubic meter land to the depth of one meter @Rs 20/cubic meter Construction of inlet and outlet to ponds Equipment and gears Total fixed costs B. Recurring costs Lime 500 kg @ Rs 7/kg Fingerlings 5,000 in number @ Rs 600 for every 1000 Organic manure (cow dung) 15 tons @ Rs 400/ton Urea 330 kg @ Rs 7/kg Super phosphate 165 kg @ Rs 6/kg Ammonium sulphate 63 kg @ Rs 6/kg Mustard oil cake 1350 kg@Rs 12/kg Rice bran 1350 kg @ Rs 4/kg Insurance cost @ 4% of seed and fertilizers Miscellaneous including harvesting, security of ponds, etc. Total recurring cost
Amount (in Rs)
200000 40000 15000 255000 3500 3000 6000 2310 990 378 16200 5400 1200 8000 46978
Total cost
301978
Income Production (from second year onwards ) (in kg) Sale price (per kg) Total Income (from second year onwards) (in Rs)
3000 45 135000
Net income for first seven years Net Income in first year Net Income in second year Net Income in third year Net Income in fourth year Net Income in fifth year Net Income in sixth year Net Income in seventh year SOURCE: Updated from NABARD 56
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-301978 88022 88022 88022 88022 88022 88022
tem in most parts of the country. Carps, both Indian and exotic, contribute to almost 80% of the produce from ponds. Rohu, katla, mrigal and magur are the favorite pond fish varieties.
Harvesting and marketing Entrepreneurs are experimenting integrating fish farming with other animal husbandry activities like dairy, poultry, piggery or duck rearing to ensure a regular supply of organic manure to the fish pond. According to a research paper published by the Center of Freshwater Aquaculture, these measures have often succeeded in increasing productivity by almost 10 tons per hectare per year. They also use aerators to increase oxygen supply in ponds. Despite these, farmers, particularly small farmers, have been seen to be quite impatient when it comes to harvesting. They start harvesting fish from the end of three or four months in most parts of the country. For farmers depending on seasonal ponds, this is more a compulsion. But experts like Ratnamachari call this practice unscientific when farmers using perennial ponds resort to do the same. He says, “Harvesting should be done after the end of first year.” Harvesting can be done either by partially draining water out of the pond through an outlet point, or by repeat netting. It is preferable when the fish attain an average weight of 750 grams, though common species can attain weight in excess of a few kilos. Some ponds in Rajasthan and Haryana supply freshwater fish weighing more than 2 kg to Delhi and other neighboring states on daily basis, as Ranjit points out. He says, “I procure fish from Haryana where there are a number of ponds in and around Rohtak and beyond.” Fish is a perishable commodity and cannot be kept for a long period of time without proper arrangements of preserving them. This is what big farmers from Andhra Pradesh have been doing for the past few years. They have managed to sell their fish in almost all corners of the country. However, there is another method of marketing resorted to these days. Instead of preserving
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opportunity/agri fish, some traders have mastered the know-how to carry them alive to the market. For instance, you can find live fish in Delhi brought from Rajasthan and Haryana. Initially, the quantities used to be less, but with better means at disposal, large quantities of such fish are brought into market. Ranjit says, “This ensures better price for farmers as well as traders. I get my supply from ponds in Sultanpur in Haryana.” He, however, adds that distance is no more a big factor. “I can fetch you live fish from Bihar as well, and that too in the quantity you demand.” For every big trader and fish farmer, there are many small and marginal farmers who have been selling their catch in local markets for ages. They earn more out of the trade involved with their catch, something big farmers are not able to do. The bargaining power of small farmers reduce considerably when they sell their catch in the local market. These farmers have also started to sell their produce in nearby towns where they get relatively better rates. Big farmers hardly ever follow this route, and they sell their catch to wholesalers, who pass it on to local suppliers from whom the retailers buy. This has remained the same even when live fish have been carried over long distances.
Problems with fish culture “The biggest problem with fish culture is the possibility of diseases,” Sai points out. Fish can be infected with fungal, bacterial, ulcer or worm diseases. It is, however, easy to spot infected fish as they become weak and lethargic, and often come to the surface of the water to breathe. In eye diseases, for instance, their eyes become opaque. Infected fish can have open spores on the body, and can also have their scales dropping, something Ranjit says caused him huge losses when he used to cultivate fish. Treatments are available in the form of treating the water with potassium permanganate solution, or with acetic acid and normal salt. Copper sulphate solution and chloromycetin are also used to treat some other diseases.
Any unusual feeding behavior of fish should be taken seriously. It is best to prevent diseases, as once infected, the fish population in a pond can be wiped out, causing big losses of both money and time for farmers. Another problem area can be marketing. Fish procured from ponds are perishable goods. To keep the stock fresh and fit enough to be sold in markets, suitable ice containers and cold storages are essential. It is also mandatory to have good transportation links to main wholesale markets. These are expensive affairs and big entrepreneurs can afford it, but it is not possible for individual farmers. Fish cooperatives assume significance in these circumstances, and also explain why Andhra Pradesh has been more successful than other Indian states.
The future The central government has come up with schemes in association with state governments from time to time to support fish culture. Development of Inland Fisheries and Aquaculture was one such scheme launched during the 10th Plan. Under the scheme, whose cost is borne by the central and the state governments in the ratio of 75:25, farmers are given assistance for building ponds. A subsidy of 20% is given assuming cost for constructing a pond in plain areas is Rs 200,000 per hectare and at Rs 300,000 per hectare in hilly regions. For people from scheduled castes and scheduled tribes subsidy is a little higher at 25%. If an existing pond is to be renovated, subsidy is given at 20% assuming cost of Rs 60,000 per hectare. Details of these can be checked on the URL: http://dahd.nic.in/fish/inlandfish.htm. The National Bank for Agriculture and Rural Development (NABARD) also refinances the banks extending loans to fisheries cooperatives or to entrepreneurs involved in fish culture. The formation of the Fish Farmers’ Development Agencies (FFDAs) was another major scheme launched by the Ministry of Agriculture in the 1970s. These agencies provide financial, technical and other support to
Ornamental Fish Culture • India has over 100 varieties of freshwater ornamental fish which can be cultured in ponds. • 85% of the trade in ornamental fish in India is done from the north-eastern states. • Rest comes from the south Indian states. • India's share in global trade less than 1% • Domestic market for ornamental fish is growing at 20 percent annually. • Domestic market is currently worth over Rs 500 million. • Indian ornamental fish species can be classified into live-bearer types (they do not lay eggs, but reproduce free-swimming offsprings) and egg-layer types. • Most popular of the live-bearer ornamental fish species are guppies, molly, sword tail and platy. • Most important egg-layer types include goldfish, koi carp, zebra danio, red-line torpedo and angelfish. • These are exported mainly to Singapore and Hong Kong. beneficiaries at district level throughout India. Training is also provided through the NFDB. Sai says that the NFDB conducts training for officials from fisheries departments and various NGOs involved with fish farmers. They pass knowledge gained on to the farmers in the field. India produces in excess of 3.6 million metric tons of freshwater fish, but a lot of potential lies untapped. While the area covered by rivers cannot be added, fish production through ponds can definitely be increased by several notches. Fortunately, the stakeholders in the fish business realize this. India has, therefore, fixed a target of over 5.5 million metric tons of freshwater fish catch by 2020. However, more capital investment and technological knowledge is required. There is a need for better resource management and community intervention in all places where fish culture is practiced or can be practiced. Rain-fed areas should also be utilized to cultivate fish. As far as markets are concerned, communication systems among fishermen’s cooperatives controlling marketing need to be enhanced. This would be beneficial not only for farmers, but also DAR E for consumers. APRIL 2009 57
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Geo-psychology and Branding When starting a business, it makes sense to mine the region/country of origin for opportunities that may accrue to your brand. It may even be worthwhile to locate it in a place that would add to the credibility of your brand
/Rupin Jayal
“E
ven in the early days, the use of the place of origin was not limited to identification purposes. Places of origin were also used to signal quality. It is communicated that even in the Greek world, Thasian wine (from the island Thasos, Macedonia region, Greece) yielded a price premium of 20 drachmas for 20 liters” (Nevett and Nevett 1994) (The Role of Region of Origin in Consumer Decision-Making and Choice–Koert van Ittersum) What does geo-psychology mean? In the current context, it is the impact that a geographic location has on the perceptions that people have about a brand. This perception can be purely rational, emotional or sensory, or it could be a mixture of these. As can be seen, region or country of origin has played a very important role in influencing choice over the centuries. Indian spices and Chinese silk created strong geo-psychological value and helped build two of the richest countries in the world at the time. Through the ages, the origins of many products were important in determining the regard and value that these products would command. With the advent of brands this has been diluted to some extent. It could be argued that globalization, mass production and diversified sourcing have diluted the importance of the region/ country of origin further in many cat58
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egories. However, this is still a potent means of influencing the choice of brands. Dehradun basmati rice, Kinnauri apples, Banarsi silk, Agra petha, etc are all good examples of this. Many single-malt whisky brands use the region where they are distilled to drive the perception of distinctiveness for the final product—the depiction of the region actually sets up a virtual product experience even before the bottle has been opened. Likewise, German cars versus Japanese or Italian ones set up distinctly different expectations. A Swiss watch still commands greater respect than watches from any other countries despite a brief period when electronic watches captured people’s imagination. Arguably, the center of the IT world still lies in the Silicon Valley, and Hollywood still has a pivotal impact in the world of movie entertainment. While the region/country of origin plays a stronger role in certain categories such as food products, spirits, wine and luxury goods, it can play an important role in almost any category. It also does not require a large period of time to elapse before a region acquires credibility as a source. As the global world of brands evolve into “glocal”, more and more people will seek out interesting brands from varied sources across the world. Nothing exemplifies this better than the world of wine—where “new world” wines have carved out a very distinctive place for themselves, and Australian, Chilean, South African and increasingly Indian wines credibly match wines from France and the US (California). And this is because while the world is getting increasingly homogenized with global brands and global manu-
facturing, there is a corresponding desire among people to try and be more unique and distinctive rather than belong to a large grey mass. There is a desire to often avoid the obvious and seek the new and unusual. “Foregoing developments have stimulated the marketing of traditional regional products, but additionally have triggered the search and development for new regional products that might be marketed at a profit. This revival of the interest in regional specialities can be noticed throughout the world. For instance, in the Netherlands, SMEs search for the lost regional specialities or introduce new regional products (for example, Van der Meulen 1998). Sanitch (1999) reports the increased interest in local produce in Australia, while Tsurumi (1997) reports the increased awareness among Japanese consumers of high-quality regional products and the growing number of local manufacturers who are looking for new markets for their products. “Today, the resurgence of regional identity, coupled with competitive pressures, leads increasing numbers of producers of a broader spectrum of products to group together at the sub-national level to promote common origin-based characteristics (eg, Florida’s orange and grapefruit growers, California wines and raisins, and Silicon Valley technology)” (Papadopoulos 1993, pp. 18-19) (The Role of Region of Origin in Consumer Decision-Making and Choice – Koert van Ittersum). Region/country of origin credibility can be authentic, acquired, imagined or assembled. 'Authentic' means that the product is sourced, designed/created and manufactured/produced
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/blog from the area from which it draws credibility. Hence, scotch whiskies need to have been sourced from Scotland and should have been aged for at least three years there. In cases when the brand is unknown to prospective customers, the country of origin becomes a very effective way of ensuring that the brand at least enters the consideration set of prospective buyers. Thus, launching a new apparel brand from Italy would have the inherent “style” credibility of that country and could arouse interest, especially if it is priced attractively, as most well-known apparel brands from that country are luxury brands. People choosing this brand would get the satisfaction of wearing clothes from one of the style destinations of the world, yet not have to pay such a high price for the privilege. Similarly, it is important for a new premium watch brand to carry the “Swiss made” tag if it is to have any impact at all on prospective buyers. Technology products too need to be perceived to be designed in “hitech” regions or countries even though, thanks to widespread globalization, they could be manufactured anywhere. In fact, for many categories, especially hi-tech ones, where the product was designed, it would possibly be the best opportunity to use the country of origin to add credibility rather than its place of manufacture. Alternately, a local brand could capitalize on the country of manufacture of its products if it adds credibility. However, implying authenticity when there is none could seriously impact the brand. Recently basmati rice raised a controversy when growers outside India tried to use the label on their produce. Similarly, a Swiss watch does need to be sourced from Switzerland. Attempting to inject pseudo-authenticity by blurring, with phrases such as “designed in”, “inspired by”, “containing” etc, could boomerang as people today have access to far greater levels of information far more quickly and can identify pretenders rapidly, thus seriously impacting brand credibility. Region/country of origin credibility can be acquired by bringing in a brand that was originally from that
country. The brand, therefore, still carries the cachet of that country while it may or may not still be manufactured there. Thus, Rolls Royce still rests on the reputation of authentic British workmanship at its best, even though it is now owned by a prestigious German marque. There are similar examples from other luxury brands and the world of fashion. Certain fashion and apparel brands carry Italian or English sounding brand names to acquire an aura of belonging to those sources of quality and credibility. A region/country/source of origin could also be created. This is used to encapsulate the ability and strengths of the manufacturing company by consolidating all its capability and expertise in a mythical place. That place is projected to be where the magic that imbues the brand is created. This could be especially effective with brands for children. Today, with the Internet, these imagined places from which these exciting brands come could actually be “explored” by children and thus be made virtually tangible, adding greatly to the magic of the brand. Even for adults, creation of fantastical places to build credibility and magic for a brand is a powerful way to add to brand belief. Thus, the mythical world of James Bond lends its credibility to many high-technology brands. Various cosmetic brands have “institutes” where exciting new solutions are created. Retail environments can be created to further the ‘tangibalization’ of these mythical places. Brands that operate just below luxury brands could create mythical worlds of style and fashion, and use these as credibility creators. As the “country/region” of origin is a created one, it could also be unique to the brand, thus adding to its distinctiveness. Sometimes brands “assemble” components of their products and use the region/country of source of these components to build credibility for the final product. Examples abound, such as coffee brands, food products, apparel (for example, Egyptian cotton) and automobiles (for example, engine designed/tested in Germany/Italy/UK). This can also help new or relatively
small brands to appeal to wider audiences and gain credibility. Service brands too have used country of origin as a powerful builder of brand credibility. For example, the use of myriad interpretations of Asian hospitality to promote hotel chains and airlines, the use of German or Swiss origins to create the aura of efficiency, or the use of British origins to sell trustworthiness. When starting a business, it makes sense to mine the region/country of origin for opportunities that may accrue to your brand. It may even be worthwhile to locate it in a place that would add to the credibility of your brand. For example, a wine brand from Maharashtra, an automobile components brand from the south of India, and an ITES brand from Bangalore. Efforts could also be made to promote regions in terms of specialization and hence build source credibility, thereby benefiting all the companies in that category in the region. If Maharashtra emerges as another California in terms of the reputation of its vineyards, it would greatly benefit all vintners from there. Similarly, the reputation of the key regions where large automotive projects are located could be coalesced to create a strong region of origin credibility for the components and automobiles sourced from there. As the world enters a time of extreme turbulence, many existing regions/countries of origin will lose their pre-eminent positions. This will open up opportunities for others to take their place. Similarly many brands will be affected and it will effectively create opportunities for new ones to come in. These could well leverage their region/country of origin to gain credibility and enter “preferred” baskets. Who knows, you might well be situated in a place that could have the potential to add to the credibility of your offering or you might be able to do so by setting up in a region that allows you to do so. So factor this in when you look at all the benefits that a region offers you before you decide where to locate DAR E your business. The author is Director-Strategic Planning at M&C Saatchi. APRIL 2009 59
DARE.CO.IN
/going global
Doing Business in Denmark As a leader in wind power, Denmark offers lucrative opportunities in renewable energy, besides information technology and pharmaceutical space /Vimarsh Bajpai
N
o country other than Denmark could have been a more natural choice for wind turbine maker Suzlon. It set up its international business headquarters at Aarhus, the country's second largest city, four years ago. Denmark today is a powerhouse of wind energy with over 5,000 turbines dotting the landscape to provide for around 20 percent of the country's energy needs. Suzlon, which now has 100 people working in its Denmark office, is not the only Indian firm to have identified huge opportunities in the Scandinavian nation. Tata Consultancy Services has an office there that covers Denmark and Iceland. Satyam Computers and ITC Infotech have their Nordic headquarters in Copenhagen. In the pharmaceutical space, Indian firm Hikal holds a majority stake in Danish firm Marsing. This has helped Hikal to reach out to the lucrative European market. 60
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Trade is a two-way street and Denmark too is taking keen interest in India. Infrastructure, building and construction, metal and machinery and ICT are among the sectors that are seeing interest from Danish companies. Main Danish exports to India include chemicals and minerals, machinery, medical products and other means of transportation. Denmark imports garments and apparels, iron, steel and metal products, oil related products and vehicles, among other things.
Why Denmark? Even though a small market in itself, Denmark is an excellent gateway to Northern Europe and the Baltic states. From here one can cover markets in Sweden, Norway, Finland and Germany. The country’s knowledge economy makes it an excellent hub for research and development. Clean technologies and biotech are some of the major thrust areas.
DARE/key sectors n
Information technology
n
Renewable energy
n
Life sciences
Denmark’s economy is one of the strongest in Europe. The recession has led the government to announce stimulus packages for financial sector. Denmark’s well-educated labor force is a big asset for Indian businesses. The country has 12 international schools offer course in English, German, French and Japanese educational systems. Its eleven universities and colleges offer degree-level education in English language. Around 96% of young people attain secondary education while 35% complete higher education. A variety of study programs are offered and all institutions have in-
DARE.CO.IN
/going global
Given the global economic turmoil, how do you think is Denmark reassuring investors?
At the start of the global recession, Denmark was one of the strongest economies in Europe. We had witnessed very strong growth over a number of years. Our unemployment was at a record low, below 1.5 percent. So we were in a very strong position when recession broke out, and we haven’t been hurt as hard as many other countries. We have been able to react very fast. We have launched a number of initiatives countrywide. Being a small country, it is faster to react, develop new policies. Also, our government has implemented a number of stimulus packages, the two biggest are focused on financial and banking sector. Yes, we are feeling the global recession like everyone else, but the extent of it is lesser compared to other European countries. What is the approach of Asian businesses towards investing in Denmark?
I have been speaking to a lot of investors in China and India over the last couple of weeks. Their reactions have been very positive. People in India are seeing it as something of an advantage because European companies now have to find cheaper ways of producing, etc., and then they would look to India for outsourcing to a greater degree than what they have so far. Also, many companies now see that access to European technology and companies is much cheaper now than it used to be. We are expecting quite a few acquisitions from Asian companies.
Henrik Brandt Jensen Regional Director, Invest in Denmark Agency
If you look at the Asian region, which country do you think is more active in terms of investments in Denmark?
So far, if we talk of Southeast Asia, it has mainly been India, dominated by the ICT sector. We are now seeing more Chinese companies coming up. That does not mean fewer Indian companies. You being based in Shanghai. Is it an indication that you are focusing on Chinese investors?
We have decided to have our regional headquarters in Shanghai. At that time it was to put more resources in China, where we did not have much. As of now we are six people operating in China and Hong Kong. Renewable energy, life sciences and ICT seem to be major areas when it comes to Indian entrepreneurs. Are there any special incentives aimed at investors putting money into these areas?
Overall, our government is very open to foreign direct investments. We have been supporting the outsourcing of Danish jobs for a number of years, trying to create a knowledge society. For that reason, the government has over many years implemented a favorable society for investors as a whole. The environment is very favorable for anyone to do business. As such, we don’t give direct incentives to foreign investors setting up businesses in Denmark. However, there are a number of opportunities for research and development driven set-ups to get access to funding from the Danish government. In renewable energy and life sciences, there are a number of such opportunities. Does the focus of Chinese investors differ from those from India when it comes to investing in Denmark?
We are very focused in our approach because we are a small country. We are only proactively approaching companies where Denmark has proved its stronghold. Those areas fit in well with India’s stronghold. So we focus on life sciences, ICT and renewable energy. We don’t go out and approach countries in other sectors. From our point of view, China doesn’t differ much from India because we only contact companies in these areas. However, I can of course see that China is strong in other areas, but we don’t work in those. We look at investments with two angles – the number and the kind of jobs being created, and the kind of know-how and technology that foreign companies are bringing. How difficult is it to hire and fire the Danish workforce?
One of the things that would attract foreign companies into Denmark is its labor laws. The Danish labor market policy is the most flexible in Europe. One of the reasons why American companies choose Denmark is because we have a very similar labor market policy. It can be very easy to hire and fire people in Denmark. How easy or difficult is it to start or close a business in Denmark?
It is quite easy to start a business in Denmark. The capital requirements vary from company to company, but we generally allow Indian concerns to set up a limited company, for which the minimum capital requirement would be equivalent to US$ 20,000. The registration is free of cost. APRIL 2009 61
DARE.CO.IN
/going global TABLE 1: INDIA-DENMARK TRADE
Note: All figures in US$ Million Source: Ministry of Commerce, Government of India
tensive international cooperation and welcome international students. It has reasonably flexible labor laws, which makes it easier for companies to hire and lay off employees. The government treats foreign investors at par with domestic companies; thus, there are no special incentives for foreign companies. “The Danish government believes that it is important to provide a long-term,
favorable business environment for foreign investors, and spends considerable time and resources ensuring this. This presents a long-term competitive advantage for any company that chooses to locate to Denmark. The focus is on ensuring that Denmark remains competitive in terms of business framework and resources,” says Shanker Subramaniam, Investment Manager, Invest in Denmark Agency.
DARE/doing business Ease of….
2009 Rank
2008 Rank
Change in Rank
Doing Business
5
5
0
Starting a Business
16
16
0
Dealing in Construction Permits
7
7
0
Employing Workers
10
10
0
Registering Property
43
40
-3
Getting Credit
12
13
1
Protecting Investors
24
19
-5
Paying Taxes
13
16
3
Trading Across Borders
3
2
-1
Enforcing Contracts
29
29
0
Closing a Business
7
7
0
SOURCE: World Bank Doing Business 2009 Report
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Among other things that are palatable to foreign investors wanting to set up business in Denmark are quick, informal and cost-efficient establishment procedures; online incorporation of new companies within a few hours; no resident requirements for members of the Executive Board (CEO) and Supervisory Board; shareholders’ and board meetings can be held electronically; dividends can be distributed on an interim basis; no notarial deeds; and Danish company law that is in conformity with current European Union legislation. According to Invest in Denmark Agency, manufacturing may be carried out in various ways. “A foreign company may establish separate production facilities, either by building, acquiring or leasing such facilities, or having products manufactured by establishing contacts to existing producers of similar products in Denmark,” it says. Establishing production facilities in Denmark is most often done by establishing a Danish company (A/S or ApS) and letting the company acquire or lease such facilities. In the services sector a distribution center, a regional headquarter, or a shared service center can be established. Denmark also offers superb research and development facilities. “R&D funding is available from the government for knowledge intensive projects involving Danish research institutions and foreign investors,” says Subramanian, and adds that current themes that are attracting a lot of funding is Clean Technologies and Biotech.
Doing Business 2009 The World Bank’s Doing Business Report 2009 ranks Denmark at 5th place on the overall ease of doing business. According to the report, Denmark improved its position on two parameters – getting credit and paying taxes. It rank remained unchanged on the following parameters – starting a business, dealing in construction permits, employing workers, enforcing contracts and closing a business. The country, however, slipped on some – registering property, protecting investors, and DAR E trading across borders.
DARE.CO.IN
event/ceo summit
Three-city CEO Summit on “Strategies and Tips for Managing Slowdown” DARE organizes a three-city summit in Thane, Bangalore and Gurgaon to discuss the current economic turmoil in India and possible solutions to tackle its effect
G
lobal slowdown is a dreaded word these days. With the world reeling under its effect and India too starting to feel the heat, the atmosphere was intense at the three-city CEO Summit organized by DARE on “Strategies and Tips for Managing Slowdown.” The event, organized in the cities of Thane, Bangalore and Gurgaon during January 28-30, 2009, had speakers from Ras Al Khaimah Free Trade Zone (RAK FTZ), IBM, Adrenalin and Bank of India. The speakers gave their valuable insights
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on the issue and some possible solutions to tackle the turmoil better. Giving an overview of RAK FTZ, Mohammed Nadeem said that it is one of the fastest growing and most cost-effective free trade zones in the UAE. He also said that the trade zone offers several advantages to companies investing in the region such as 100% tax exemption and foreign ownership, no restrictions on capital and profit repatriation, and state-of-the-art communication facilities. Talking on the strategic location of the free trade zone, he said, the region
has proximity to Dubai, and provides easy access to Ras Al Khaimah international airport and a sea port. Rohit Jain of IBM explained the importance of IT in slowdown and shared some IT solutions that can be adopted by companies to manage the slowdown. He spoke about several solution offered by IBM especially for small and medium enterprises that helped in cutting cost dramatically while being efficient. According to Vinay Nair of Adrenalin, in the longer run it is always better to retain employees as it saves
DARE.CO.IN
event/ceo summit
the cost of employing new people and training them to become job ready. Mr. Satish Goel, the Zonal Manager of Bank of India talked about the Credit Gurantee Fund Trust for Micro and Small Enterprises (CGTMSE) plan. He explained that, under the scheme, new or existing micro or small companies
can apply for a loan upto a sum of Rs 1 crore, without depositing any collateral. He said anybody with a good business plan can approach a bank for a loan under the CGTMSE, and if convinced, the banks do provide loans. The scheme raised a lot of curiosity from the audience. An interactive ses-
sion followed the presentations, with the audience raising questions and being satisfied by the panelists. Other key speakers at the event were Suresh Iyer (IBM), SV Atre (Faculty at MDI), Shuvan Misra (Merce technologies), etc. In all, the successful event was DAR E attended by nearly 200 people. APRIL 2009 65
INNOVATION
DARE.CO.IN
R.S. Hiremath Flexitron
e-charkha
This combination of a charkha and a dynamo generates both money and electricity /Aswathi Muralidharan
K
hadi has always been associated with rural India and small artisans. Now, an innovative charkha designed by a Bangalorebased engineer promises to light up their lives, literally, by way of power generation. The brainchild of 48-yearold Rajshekar Shankarayya Hiremath, the e-charkha combines the power of a charkha with that of a dynamo to produce enough electricity to light up a
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bulb or power a radio for several hours in a day. Formally launched by President Pratibha Devisingh Patil in 2007, the innovation has won several awards including a national award for best innovation in the khadi field. Says Hiremath, “Charkhas are used by many people in India to produce yarn from cotton and similar materials like wool. The charkha for many in India forms
ABOUT THE INNOVATOR n Bangalore-based engineer R S Hiremath claims to have created 270 innovations till date. n Three of Hiremath’s innovations have won national awards—the solar battery charger for hearing aids (1995), talking maps for the blind (2000) and the e-charka (2007). n The concept of e-charkha is designed, developed and manufactured under the banner of Flexitron, promoted by Hiremath.
INNOVATION a primary source of income or an addition to their daily income if used by housewives during their free time. However, such people lack many simple basic amenities, such as a light in their huts or homes.” This innovation takes care of both boosting income as well as generating electricity. Hiremath says he was just nine when the idea of an e-charkha struck him while playing with his father’s cycle dynamo and his grandfather’s charkha. It took him almost 30 years before he could give it some shape. “Although the theory is very simple,” he says, “the aggregates never matched. As time passed and technology grew, the search for components was always on, it never stopped.” The breakthrough came when he began traveling abroad extensively. From 2007 to 2009, there were over 15 changes and improvements and the ideal prototype is now ready, he says. The three-time award-winning innovator claims to have created 270 innovations, including a solar battery charger for hearing aids that won him a national award in the year 1995, and talking maps for the blind that won him another in 2000.
DARE.CO.IN
FACTSHEET Innovator
Rajshekar Shankarayya Hiremath
Innovation
e-charkha
Price tag
Rs 1,500 (for the kit) Rs 4,500 (kit plus two-spindle charkha) Rs 11,000 (kit plus eight-spindle charkha)
Features
• Two hours of operation produces a yarn length of 2.4 km and a power backup of 7.5 hours
What is an e-charkha? An e-charkha is a hand-driven spinning wheel that can be used for spinning various materials like cotton or wool. The spinning wheel is connected to a high-efficiency, three-phase generator, with a sealed lead acid battery. When the charkha is used for spinning yarn, the rotational energy of the spinning wheel is converted into electric energy that is stored in the battery. This can be used to power an LED. The battery can also be used to power a small radio. Hiremath says that, “The addition of a radio helps in dissemination of information in villages on many important topics like health, agriculture, disaster management etc. It also helps in breaking the monotony of work with entertainment.” It is designed in such a way that spinning on the two-spindle e-charkha for two hours will produce 2,400 meters of yarn and provide a light output for 7.5 hours. According to the innovator, the
• A hand-driven spinning wheel that converts rotational energy into electric energy
• Generator in the e-charkha is custom designed and is of the three-phase AC version • Weighs 10-12 kg • Patent protected LED light is of the latest type and has an extremely long life of at least 35 years. The generator in the e-charkha is also custom designed for this application and is of the three-phase AC version with no brushes, which makes it last for over three and a half decades. Hiremath has sold over 1,800 echarkhas till date, the biggest consumer lot residing in Rajasthan and Gujarat. He says, “The response till now has been overwhelming. Most users are delighted with the prospect of a charkha generating them money and electricity.”
Current status The e-charkha, which weighs around 10 to 12 kgs, has two models—a two-
spindle one and an eight-spindle one. The universal retrofit kit that can be easily attached to the shaft of any charkha is priced at Rs 1,500, while the two-spindle e-charkha costs Rs 4,500 and the eight-spindle one Rs 11,000. The innovator has applied for a patent for the retrofit kit, which consists of a three-phase AC generator, lead acid battery and intermediate control circuits for charge and discharge. It is currently manufactured at a facility in Bangalore and is mostly produced by disabled employees. The product is currently being marketed by Khadi and Village Industries Commission DAR E (KVIC), Mumbai. APRIL 2009 67
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funding/strategy
DARE.CO.IN
funding/strategy
Venetia Kontogouris Managing Director, Trident Capital
Trident Capital has over US$ 1.6 billion of capital under management, including US$ 400 million in its most recent fund. Trident focuses on health care, information services, Internet and Cleantech. The firm invests across multiple stages, including traditional venture capital investing, as well as investments in micro-cap public companies, buyouts and consolidation
Many startups seek to build scale and valuation while sacrificing profitability and stability in order to drive up their valuation. Can this be avoided? If not, what checks and balances can be put in place to minimize the risks associated with this move? Unless a new venture can have a very short runway to profitability, or some type of proprietary IP, there is little opportunity for growing valuations in the current environment. Like I said before, survival is the main goal and metric. Building scale and valuation is secondary in the current situation. We have heard many experts state that the fastest way to come out of the current downturn is to have more entrepreneurs. But if you take this yearâ&#x20AC;&#x2122;s business school passouts as a benchmark, lesser numbers are taking up entrepreneurship. Do you agree with this view? If not, why? If yes, how can entrepreneurship be boosted globally? I agree that we need more entrepreneurs. And the only way to have more is for government policy around the world to be more business-friendly. But unfortunately, most governments are targeting businesses as a way to boost their own declining revenues and in order to fund increased deficit spending.
investor of the month V
enetia Kontogourisâ&#x20AC;&#x2122;s acquaintance with India goes all the way back to the 1950s and 1960s, when her aunt was a frequent visitor to the country, and she herself has been one since the 1980s. DARE spoke to her about the current economic scenario and other venture capital-related issues. Here are some excerpts: Given the current economic scenario where companies are seeing significant value erosion, what are the options available to investors to (a) protect their investments; and (b) help investee companies that are in trouble to survive and prosper again? This is an unprecedented devaluation of all financial assets that is requiring all companies to curtail unnecessary expenses, with survival being the only important metric. All other things are secondary. So investors have to do everything that is in their power to ensure that their investee companies survive. Assuming that recapitalization is one of the options available, when would be a good time to start recapitalizing? What criteria would you put for selecting suitable candidates for recapitalizing? Recapitalization should be done as soon as possible, before the remaining investor cash is depleted. In my view, a suitable candidate for recapitalization would be one generating positive cash flows.
For someone whose knowledge about India goes way back, your India portfolio is quite slim; just five companies â&#x20AC;&#x201C; Outsourced Partners, Microland, Minglebox, Neilsoft and Elucido. Why? The rest of my India portfolio companies have been successfully sold or exited through the public markets: Cognizant, eCredit, Environmental Data Resources and Risk Management Solutions, among others. My strategy is to focus on companies that are able to bridge the US and India. I have only recently begun focusing on domestic Indian companies and the process is time-consuming, especially in times of the economic crisis. Also, valuations have remained stubbornly high in India, and I am waiting for the right opportunity. As a venture investor and looking back, what is the one decision you are proud of? Why? Deciding to spin off Cognizant from IMS Health as an independent company and helping it grow to become a leading Fortune 500 company, before the outsourcing trend was established. What was the toughest part about implementing that decision? It was very difficult to get the IPO going. It took me nine months of hard work to recruit outside board members and to convince Wall Street to support the IPO. It was tough beAPRIL 2009 69
DARE.CO.IN
funding/strategy
We like to invest in companies in the expansion capital phase for a three- to five-year period, and since the IPO route is pretty well shut for the time being, we look for companies that would make an attractive merger/acquisition candidate for larger publicly traded companies. cause Cognizant was a corporate spin-off, and till then the success rate of a spin-off of a listed business in the share market was pretty slim. Are there any benchmarks you would like to create out of the Cognizant story? Cognizant was originally a US$ 2 million investment that eventually became US$ 1 billion corporation. That is a very good benchmark to have. And the one decision you wish you could change? With respect to India, I passed up investing in several other outsourcing companies since we like to avoid potential conflicts of interest. What is your investment strategy? What sort of businesses do you look to invest in and for what time frame? What is your preferred exit mechanism? We like to invest in companies in the expansion capital phase for a three- to five-year period, and since the IPO route is pretty well shut for the time being, we look for companies that would make an attractive merger/acquisition candidate for larger publicly traded companies. Assuming some one is making an investment pitch to you, what is absolutely essential to make you interested/make you invest? I look for demonstrated ability, passion and commitment from the entrepreneur. How much time do you personally spend on companies that you are a director of? In what areas? I attend monthly/quarterly board meetings in person if possible, and spend time on the phone reviewing operational
issues with more time spent on younger companies, but at least several hours per company per week on an average. Beyond capital, what else does Trident Capital bring to the table for a potential investee? Creative product development ideas, industry and client contacts, sales strategies and overall strategic directions. We also help recruit key management when necessary. As a venture investor, what is your dream? Is it finding and investing in the next Google? I tend to be more modest. I would be happy just helping entrepreneurs achieve their dreams. And if it happens to be the next Google, so much the better. And what is your nightmare? Not having interesting companies to review. What should an entrepreneur looking for investments be vary of? If you are an entrepreneur looking for funds to grow your company, you should be vary of investors (for example, some hedge funds) who invest based on a purely trading mentality. There are many companies starving for funds right now. But given low valuations, is this a good time for them to seek funds. If not, what other options should they explore? Letâ&#x20AC;&#x2122;s face reality. When you really need funds, it is always a good time to seek funds, especially when the future is uncertain as it is today. Other options are to cut costs as much as possible, and have a plan in place in case things get even worse. DAR E
SMS: â&#x20AC;&#x153;DARE <your comments, questions or suggestions>â&#x20AC;? to 56677 EMAIL: dare@cybermedia.co.in WEBSITE: www.dare.co.in 70
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DARE.CO.IN ç PRINTO: WHAT NEXT FOR AN ENTREPRENEURIAL HUSBAND AND WIFE?, CONTD. FROM PG 29
In looking at Printo as a business, Manish Sharma and Lalana Zaveri continue to think about ways to grow. Summarizes Sharma, “We are trying to hone in on customers and products— who will we sell and to whom, and how will we deliver? We have the benefit of three years’ experience to know what we can and cannot do and we now understand what scalable delivery is. It starts with product conceptualization, and there is a whole consumer element we can add on, as there is a lot of demand. But as soon as you come up with a new product, you have to think about how to roll it out,
PERSONAL PRINTING
case/INSEAD promote it in each store and make it a profitable, viable product.” However, the couple is not only revisiting how to grow Printo, but how to link the business more closely to their personal passions. Says Sharma, “Earlier, we were exploring a nebulous opportunity that seemed sexy; now this is a moment of truth. We have to ask what we believe in, what we are passionate about. I’m very passionate about creating a business. It doesn’t have to be just about print; it could be something else. When we started growing this business, somebody asked me why I chose retail and I replied that I love interacting with customers. I have stopped doing that,
To keep costs down and provide better service, the founders decided to keep things simple. “We built our initial choices around a no-nonsense approach to getting things done,” Sharma explains visiting shops and seeing customers on the floor. I have to revisit whether what we are doing is what we believe in and are passionate about.” Adds Zaveri, “We have spent three years trying to do something and now we have put the brakes on in order to revisit some fundamental questions. We are talking more about what we really enjoy about running a business and whether we are getting that every day when we come to Printo. What could we do differently to help us feel great about every day? I never wanted to be an entrepreneur at this scale. I complained that my father’s business didn’t scale, but when I imagine myself running a business. I still think there are lots of benefits to small businesses that are almost boutiques. I worked closely with my team to make the business grow and I feel a little lost when things grow out of control, which to some extent happened with Printo. It’s my own fault—I can get back to the grassroots and work more directly with the team than I do now. What I want is to know my team and my customers
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DARE.CO.IN
case/INSEAD BUSINESS PRINTING
As Printo grew, it was able to secure several highpowered advisor/investors. One was Pravin Gandhi, wellknown throughout India for his efforts as an entrepreneur and as one of India’s few seed-capital venture financiers really well and integrate the two in the best possible way.” With the benefits of experience and hindsight, would these entrepreneurs recommend to other married couples that they go into business together? Says Zaveri, “My sister worked with her husband for three years and practically begged me not to do this. Even if you think you get along really well as a couple and have similar ideas, work is different. I did not pay heed to her, and the business does come into our personal life a little too often. We end up arguing about business at home, and sometimes we stop talking altogether for a while, which is not healthy. Still, for me the experience has been quite positive because I have grown and learned a lot. Manish is a good teacher and listener, and I tell people my marriage certificate has been worth more than my MBA because I have learned more from him than from any school.”
Looking back, Sharma believes the couple would have benefitted from structuring their relationship to Printo differently. He says, “I have developed a lot of respect for Lalana’s business acumen, intuition and gut feel, where she is way ahead of me. I bring in other skills, but I am convinced she is a better business person than I am. I would love to invest in any company she is associated with and I would want her on the board of any company I invest in. However, I was being a bit dishonest when I asked her to help me start Printo, because I told myself the bug would bite her and she wouldn’t want to leave. Next time, I’d make a one year plan and perhaps extend it if we are very successful. It is very different when the same person you spend all your time with at work is also the person you live with. I miss coming home and telling any one-sided story to someone who lends a sympathetic ear because she doesn’t know anything about the business.”
From a business point of view, this couple has experienced moderate economic success, no mean feat when one considers how many ventures fail within three years. Their story illustrates many important principles of starting a successful business—build on prior entrepreneurial and operational experience to address an underserved market with a focused source of competitive advantage for a clear market segment. More importantly, however, their experience illustrates the importance of understanding early what elements of a venture stoke your passions. Entrepreneurs who focus only on the economics of a business always risk building an enterprise that is outwardly successful, but is not as fulfilling as it could be. Taking stock afresh once a business has gained traction and achieved break-even is vital to sustaining the enthusiasm and commitment upon DAR E which all ventures depend. APRIL 2009 73
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opportunity/health
Opportunity in Female Condoms The female condom holds immense business potential in a country that consumes 1.8 billion condoms a year—male and female combined. Rising global consumption could be the icing on the cake
/Amit Panday
Growth Drivers n Women’s empowerment n Population control efforts n AIDS awareness n Aggressive government initiatives n Efforts by NGOs
E
ven as Pope Benedict spoke against the use of condoms on his recent trip to Africa, it does not stop The Global Female Condom Initiative, run by the United Nations Population Fund (UNFPA), from moving in the opposite direction. Thanks to operations in 23 countries, in 2008, for the third consecutive year, access to female condoms rose dramatically, with the distribution of over 33 million pieces to beneficiaries across the world. Ever since the United States Food and Drug Administration gave its nod for the marketing and distribution of this innovative piece of contraceptive in 1993, with significant backing from international health organizations, female condoms have redefined women’s empowerment. Local initiatives such as the one by the UNFPA are further spreading awareness among women. But still, there is a long way to go before female con74
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doms match the market size of their male counterparts.
What is a female condom? It is a 17 centimeter long rubber sheath that has flexible rings at both ends. When initially launched, these condoms were made of polyurethane. However, the newer versions are made of nitrile, another form of rubber, and are cheaper, stronger, smoother, thinner and more reliable than a male condom that is made of latex rubber. The shelf life of a female condom is five years, while that of a male con-
Opportunity Areas n
Manufacturing
n
Exports
n
Distribution and retailing
n
Installation and maintenance of vending machines
dom is only three. The female condom also costs more than the male one. Two brands of the former are available in India—Confidom and Velvet. Confidom is priced at Rs 250 for two pieces. Velvet is available at Rs 100 for three. Both are manufactured by HLL Lifecare (formerly Hindustan Latex), a Government of India enterprise.
Growth drivers One of the biggest growth drivers for the female condoms' business is the prevention of AIDS and sexually-transmitted diseases. India is sitting on a virtual time-bomb of the AIDS pandemic, being home to 2.5 million AIDS patients, with over a third aged between 14 and 24. Among other activities, the government’s National Aids Control Organization (NACO) stresses the use of female condoms as a prevention tool. Its Female Condom Scale Up Program is now targeting sex workers in Tamil Nadu,
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opportunity/health Andhra Pradesh, Maharashtra and West Bengal. Other states are also on its radar. NACO is working with state-level NGOs to get female condoms distributed at subsidized rates of around Rs 3.50 per piece against its cost of around Rs 40 per piece. Empowering women in urban, and to some extent rural, areas is also a big factor in promoting the use of female condoms. According to the UNFPA, “It is the only available method that women and girls can initiate, and in some ways control, that protects against both unwanted pregnancy and sexually-transmitted infections. In this regard it is an important supplement to the male condom. Because of economic, social and gender inequalities, women are often ill-placed to make their partners use condoms, particularly within marriage.” The potential for female condoms can be gauged by the buoyant sales of the Velvet brand of HLL Lifecare, the country’s largest condom producer. “Velvet as a brand was launched only in Delhi almost a year back. Within the first six months of its launch, the brand roped in sales worth Rs 22 lakh,” says a company source who requested anonymity. “Currently, around 7,000 to 8,000 packets of Velvet are sold in a month in Delhi. And 1,500 to 2,000 packs of Confidom [another of HLL Lifecare’s brand] are sold in a month.” “This kind of demand is not even from 1.5 to 2% of the female population of Delhi. This shows the tremen-
Big Players in the Condom Market Company: HLL Lifecare (Moods, Confidom, Velvet) Production capacity: 1.3 billion condoms annually with 10 million female condoms Exports to: Over 70 countries Company: JK Ansell (Kamasutra) Production capacity: 250 million (male) condoms annually Exports to: Over 50 countries Company: TTK-LIG (Kohinoor, Durex) Exports to: Over 40 countries
dous potential of the product in the metro city alone,” he stresses, pointing to the big business opportunity that exists in this sector.
The market While HLL Lifecare is already making inroads into the female condom market, other big players in the male condom business seem to be shying away from entering. This is not because they do not see this as a huge opportunity area, but primarily because of the risk on return on investment involved. Some of the players DARE spoke to do have plans to enter this segment sooner or later. “Cost of manufacturing a female condom is relatively higher than a male condom. We would surely enter this space in the coming future. As of now, it involves a huge risk,” says a source in Mankind Pharma, a Delhibased male condom manufacturer. The company supplies its own brand of male condoms in northern India. “I believe once the market picks up further, private players would also enter it in a big way. It requires huge money, risks and a clear vision to enter the space of female condoms,” says the HLL Lifecare source. Through NGOs, HLL Lifecare works in six states— Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra, Gujarat and West Bengal—to distribute female condoms.
The business Manufacturing is an area worth exploring given that HLL Lifecare is currently the only player in the female condom segment in India. It has a technology sharing agreement with the US-based Female Health Company (FHC). The model of contract manufacturing that exists in the male condom business could also be replicated for female condoms. If a company ties up with NACO to meet its demand, the sales figures would be significant. At present, NACO procures around 1.5 million female condoms and distributes them at the subsidized price of Rs 3.50 each. The government is aggressively supporting the female condoms initiative. “The annual consumption of condoms, including male as well as female
Entry Barriers n
High investment
n
Competition from big players
n
Less popularity of female condoms vis-à-vis male condoms
n
Limited distribution network
n
Brand creation
condoms, in India alone is around 1.8 billion pieces,” says Pritpal Marjara, Team Leader, Technical Support Group, Condom Promotion, NACO. Out of 1.8 billion condoms, 620 to 640 million pieces are distributed at subsidized rates. He says that the annual consumption of condoms is expected to jump to 3.5 billion by 2012. The export market for condoms is huge, given that a host of initiatives are being run in the African continent, one of the worst sufferers of AIDS. The Middle East too is a big market for exports. Distribution and retail opportunities also make female condoms a lucrative business to look at, thanks to the growing awareness of the product.
Challenges One of the challenges is the more intricate process of manufacturing female condoms as compared to male ones. “A female condom is a very niche product. It also requires some technical advancements over manufacturing of male condoms,” says Marjara. Lack of awareness among women is one of the reasons why female condoms have seen less acceptance so far. Also, rural women are still largely ignorant about their use. It is up to the condom manufacturing companies to unleash a targeted marketing campaign for these condoms. It could help them rev up sales of the product. HLL Lifecare is educating women about the usefulness of female condoms. The company is planning to organize some training sessions for the staff of select retail outlets where female condoms are sold. Installation of vending machines is also planned DAR E at BPOs etc. APRIL 2009 75
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event/headstart
Startup Saturday’s Focus on Healthcare and Online Ventures March 2009’s Headstart Startup Saturday witnessed a shift of focus to healthcare and online businesses by participating entrepreneurs, who spoke of their various aspects
N
ew Delhi witnessed the third Headstart Startup Saturday event hosted at the American Center on March 14, 2009. There was an audience of around 50, with a mix of entrepreneurs, aspirants, media and other listeners. The event was segmented into three sessions where entrepreneurs, one for each session, shared their business ideas, purposes, ways to survive and their learning points. The first session was driven by Mrigank Tripathy of an online venture known as Voice Tap. He spoke about his idea of bridging the gap between knowledge seekers, especially the students, and the knowledge givers—the experts. He emphasized the requirement of this platform as there are a large number of aspirants looking for expert advice. In the second session, Varun Khurana, CEO and co-founder, Wirkle Technologies, a Gurgaon-based company working in the space of developing mobile software services, shared his
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experiences in starting his venture and bringing it to its current status, approaching venture capitalists, starting with operations and some of his learning points. “An entrepreneur should focus more on making his/her own revenue model[s] rather than only
thinking about getting funds from VCs,” he said. The third session was on entrepreneurial experience shared by Deepak Shenoy. He primarily spoke about his last assignment, which was an online venture called Moneyoga. He started it in 2007 and had to shut it down the following year for multiple reasons, which he shared with the audiences. Moneyoga was a stock market portal providing analyses on performing stocks, suitable portfolios etc. “Advertisers didn’t really like the idea of investing in something like a Web portal, and that too a stock market portal in the times when stock indices were falling globally,” said Shenoy. Further, he added, “Our concept was good, but the timing of entering this space was a bit wrong.” A few learning points he emphasized were accepting failures and not being emotional about self-made business plans. He also mentioned that while conceiv-
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event/headstart ing a business plan, one should not start with the calculation of profits first, and that knowing when to shut down the business is a must. On the other hand, Mumbai witnessed a Startup Saturday event organized at SP Jain Institute of Management and Research (SPJIMR). Like Delhi, the event was segmented into three. It started with Anand Anupam, CEO, Healthizen.com, a health-based Web portal for people to maintain and track their personal health records. Targeting the age group of 18 to 30, Healthizen.com provides free as well as premium services. He explained the relevance of his venture and his session was quite interactive. Then came Makarand Karkare, India head of Skyscape.com, an online venture based on medical reference information made available on mobile phones. Karkare explained how his venture functions by having the due licenses to share medical information. They have patented this technology. Skyscape presents this information on the users’ mobile device in an easily searchable and intuitive format. The last session was taken by Dilip Patil, CEO, Cryos Interational, a sperm and egg bank and surrogacy clinic. He spoke about the opportunities and trends in small businesses in healthcare industry. He also took up the topics of starting new business ventures
Kolkata
Bangalore
and the difficulties involved thereby. Bangalore, too, witnessed sessions with healthcare as the theme. On the same lines as the other two venues, three speakers drove the show. The first was Rohit MA, Director, The Cradle, who shared the idea of his venture and what made him start something on these lines. He explained how his vision was transformed with the help of some doctors, planners and architects to set up not just a maternity hospital, but a hospital beyond that. He also mentioned that he had started a course by the name of M-B-A that stands for Management of Baby Affairs.
The second speaker was Kesava Reddy. He spoke about his venture, Vaccimo, where they provide customized alerts for vaccinations, medical tests, medicine intake reminders and doctor visits, not just for humans, but also for pets. The third and the last speaker was A Suryanarayanan, COO, N S Raghavan Center for Entrepreneurship and Learning, IIM-Bangalore. With more than 25 years of experience in the field of healthcare, he narrated his serial startups and spoke about conversion of emerging trends to opportunities and further into business models. He captivated his audience with the following statement, “We just need 1% of India to be successful entrepreneurs and the GDP can easily rise threefold.” Kolkata this time had only two speakers. Krishnendu Sengupta, Associate Partner, IBM India, has over 24 years of work experience in the industry. He spoke about the various aspects of a startup, stressing on management in changing times. The other speaker was Siddharth Goyal, a 2007 IIM-Calcutta alumnus, who started his own online venture called Kitnebaje.com, a service delivery portal. He spoke about the content delivery engine, its functions and how he manages that. The lessons and experiences shared in all the sessions were well received DAR E by the respective audiences. APRIL 2009 77
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/INSEAD
ç MENTORED BY MOTHER NATURE, CONTD. FROM PG 47
MOVING CLOUDS
Girish Deshpande, Promoter, Moving Clouds Started in 2004 Promoter Girish Deshpande Located in Pune Nature of business Destination management/Designer Tours Initial Investment INR 0.5 lacs Team size 2 Break even From Day 1 of conducting tour Regulations *Verify credentials of third party specialists/operators *Permits in travelling to restricted areas Safety measures *Internationally-trained instructors for adventure sports *Imported equipment, checked prior to use *Guides to carry oxygen along on hi-altitude treks * For Acute Mountain Sickness (AMS): Briefing 4-6 weeks prior to a difficult routine Pre-departure preparations Medical kit Guidance provided on daily basis Running costs Restricted to travel (in search of new locations) ROI 200% Conversion Ratio 70% Tariffs Starts with USD 150 per couple/day CPAI (continental plan all inclusive) Business Promotion Print advertisements, Giveaways Challenges *Mindset of Indian traveller * Mid-level, clean, no-frills accommodation needs to up scaled everywhere Customer profile *U.S.,Australian, European nationals (premium guests) *NRI’s *High Net Worth & discerning Indian families “India is a vast canvas for tourism of all kinds, with immense potential yet untapped; Respect the Elements and keep innovating” 78
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/INSEAD new houseboat venture by first investing in two small houseboats . “With our experience in the hospitality industry, we got sufficient funds from State Bank of Travancore”. With a seed capital of INR 30 lacs and initial investment of INR 10 lacs, Sreekumar compares Aria Holidays’ running costs to that of a hotel. “Cost-heads”, he spells out, “include booking, reception, housekeeping, food and beverage service and compensation for his 20 crew members. In addition, we have to arrange appropriate routes to suit our guests,
Base of Leo Purgyal Peak (22275ft), Kinnaur, H.P.
River Rafting on Kali
“Being one-man driven, large funding was never required. And as we have outsourced all our equipment requirements to specialists and companies that conduct such tours, we are able to stick to our core competence of planning, organizing, execution of itineraries. So our main cost heads are limited to individual travel to find new routes, properties, itineraries etc”. maintain the houseboat décor, engines and spend on sewage treatment and safety equipment”. Sreekumar’s maintenance costs on an average are INR 3250 per day on the small houseboat and almost INR 6000 for a 6-bedroom boat. Despite these high maintenance costs, the returns on investment until December 2008 have exceeded 25% (a healthy ROI for this industry ranges between 20%-30%). In six years of its existence, Aria Holidays has spent INR 210 lacs on building seven boats (small boats cost upto INR 20 lacs while the 6-bedroom boats costs over INR 100 lacs). “Pollution of backwaters is the greatest threat to him and the indus-
try”, he mentions, and more recently, the economic slowdown. In comparison, the Moving Clouds model required a low initial investment of INR 0.5 lacs in 2004. How? Deshpande answers, “Being one-man driven, large funding was never required. And as we have outsourced all our equipment requirements to specialists and companies that conduct such tours, we are able to stick to our core competence of planning, organizing, execution of itineraries. So our main cost heads are limited to individual travel to find new routes, properties, itineraries etc”. Not surprisingly, Moving Clouds has seen profits coming in from Day 1 and Deshpande’s ROI is in excess of 200%. But Deshpande’s set of challenges are different. “Mid-level, clean, no-frills accommodation needs to be up scaled everywhere. Outdoors safety in recent times has become an issue too. And there is still a mindset about having to pay a fee to have a travel itinerary ‘designed’! Indians are caught up by designer cars, designer homes, designer clothes, but not too many opt for that exclusivity in seeing the hinterlands of this fantastic country of unparalleled beauty-of raw nature, monuments, history and culture”. That said, Deshpande also notes that, “Delayed flights/trains, rasta roko, landslide, cattle crossing, public rally/ procession hold ups, vehicle breakdowns, hotel issues are always waiting to happen, no matter how precisely one has planned”. He vividly narrates two 11th-hour unforeseen glitches from his own personal experience, “A family was travelling to Bhutan last year in hi-peak season. Although all hotels were reconfirmed, they had to wait for their rooms at a remote destination for over eight hours as the booking clerk had left her job abruptly without passing the message ahead. Or when, a hi-profile bureaucrat was taking his African counter part to showcase Agra. The hotel selected was good as per budget. I get a call at 9 pm saying that since the hotel rooms were freshly painted, the smell of paint was suffocating the guests! We had to make quick alterAPRIL 2009 79
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/INSEAD
ARIA HOLIDAYS & RESORTS
Started in
2002
Operating Officer
N. Sreekumar
Nature of business
Houseboating
Initial Investment
INR 10 lacs, Seed fund of INR 30 lacs
Total Investment
INR 210 lacs
Team size
20
Break even
200 day occupancy/year
Regulations
Fire extinguishers, Life buoys, life-jackets
Boat costs
INR 20L for small boats (1-2 bedrooms); INR 100 L for large boats (6 bedroom)
Running costs
INR 3250/day for small boats and INR 6000 for the large boats
ROI
25%
Tariffs
INR 6000/day for A/c room and INR 4500/day for non A/c room (twin sharing, inclusive of food)
Threats/Challenges
Pollution of backwaters; overcrowding of backwaters;economic slowdown
Business promotion
*Through a network of travel agents *Tourism fair participation
Customer Profile
*Age group 20 - 50yrs ; *80% Indian (Maharashtra, Gujarat,Delhi,Calcutta, Karnataka, Hyderabad Andra Pradesh & Chennai) *20% are International(Europe, US, Russia, S,Africa & Australia) *80% of luxury-seeking guests, not on an ethnic/cultural tour
Sreekumarâ&#x20AC;&#x2122;s quote: Try to employ and encourage talent locally 80
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/INSEAD nate arrangements.” Having a majority of international clients, Deshpande advices new entrepreneurs to “set the expectations upfront about India” as a necessary first step, also explaining differences between India as a travel destination and other nations that experience high tourism. Challenges apart, each of the three outdoor ventures enjoy a healthy conversion ratio. Their markets have grown and “repeat customers” is a term we heard often. Has their passion and perseverance softened these hurdles along their journeys to pick best business practices? Deshpande is so passionate about his ‘product’ namely India & the sub-continent that when asked about a lean season, he emphatically replies, “Every season has a region to offer! Summer has hill options, south-west monsoon have rain-shadow regions & east coast, north-east monsoon have the other coast line”. An intrepid traveller, Deshpande is a walking-talking
almanac on tour routes that he has created, a clear edge over other destination-management services. Personalised service offerings have made the markets of both Moving Clouds and Strawberry Outbound “multiply”. Strawberry Outbound’s Doshi says, “Our clients are beginning to understand that we are aiding their growth process”. An impressive range of 120 program formats have been created thus far! Finicky about providing an authentic Kerala experience to his guests, Sreekumar offers bamboo mats in all their houseboats despite their high maintenance. And as value for money to its corporate clientele, one of Aria Holidays’ large houseboats (having 6 bedrooms) has been designed with a large A/C conference hall. Working closely with 250 other players (that own 450 houseboats across Kerala) to maintain the cleanliness of lakes and canals, Sreekumar’s advice to anyone who would like to get into eco-tourism
is, “Any venture like ours ought to try and protect ethnic and cultural ethos. Provide employment and encouragement to the locals and not harm Nature’s balance in any way”. Sceptical about the current slowdown, he plans to whole-heartedly participate in the Travel & Tourism Fest once again this year. Mother Nature, as their mentor, has not just infused perseverence and an innovative streak in them but offered them a vast canvas. The three entrepreneurs on their part, have been eager, never restraining themselves from experimenting with their DAR E wildest of dreams! Irawati Gowariker is a communications specialist with 15 years in the media and IT services industry, She started her career with an export promotion project that handheld aspiring exporters and manufacturers to export to Germany. Philip Anderson is INSEAD Alumni Fund Professor of Entrepreneurship, Director, Rudolf and Valeria Maag International Centre for Entrepreneurship and Director, 3i Venturelab
Website:
Ma
w w / :/ Email:
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p t t h
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www.dare.co.in dare@cybermedia.co.in
SMS: 56677 (SMS Instruction: Type 'DARE <comments, questions, suggestions'> and send it to 56677) APRIL 2009 81
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blogs/opinion
Social Entrepreneurship R
/Anurag Batra
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emember that the happiest people are not those getting more, but those giving more. – Jackson Brown I have always believed that entrepreneurship is a calling; it is a passion that drives a person to achieve greatness in his or her chosen field of entrepreneurial activity. However, it is truly the unique who turn this passion into a social cause and bring about revolutionary changes. Their business is not about sampatti (selfish wealth) – rather, it is about sampada (selfless wealth). To put it differently, they are into the business of making people happy or bringing a cognizable change that improves the lives of people. They invest in feelings and the “dua economy”, and their return on investment is in terms of social change and blessings. Take Arvind Kejriwal as a case in point. He took a sabbatical from being a senior civil servant to bring about a social change of epic proportions – by founding Parivartan, a Delhi-based citizens’ movement that works on ensuring a just, transparent and accountable governance. Together with Aruna Roy and others, he was instrumental in bringing about the Right to Information Act. It was selfless work; it was an initiative for the benefit of people; it was a noble cause. Not that he would have ever made large amounts of money from it – in fact, that was not even the objective of this initiative. But it will make a lasting change and improve the lives of millions by empowering them. Which brings me to a fundamental question – should entrepreneurial success be measured only in financial terms? I think every real entrepreneur will disagree with that statement. All leading entrepreneurs that I know of started their businesses to create
something of lasting value, and not just to make money. True, one needs to earn one’s livelihood, but as Abraham Maslow said in his model of hierarchy of needs, once the basic needs (physiological, safety, etc.) are taken care of, a person yearns to fulfill his need of selfactualization (morality, creativity, etc.). How much financial success does one need? A friend of mine once told me that he reached a certain figure, he realized that he had enough to meet his “needs” – everything beyond that was for “wants”. That, too, would come to an end at some point in time – beyond that, it would just be a figure growing in a bank account. People at the pinnacle of success realize this. Take the Bill & Melinda Gates Foundation, to which Bill Gates and Warren Buffet have given away a large portion of their fortune. At smaller levels all organizations of a certain size recognize their role in the world, and make financial and other contributions towards making the world better for others. Social entrepreneurship coexists with financial entrepreneurship, and entrepreneurs, who are agents of change in any economy, must shoulder social responsibilities as well. I sincerely believe that every entrepreneur, no matter how big or small, should make a social contribution, not just financially, but also in terms of time and effort. An entrepreneur takes risks and makes investment for his own financial well-being and that of his enterprise; but some investment also needs to be made for one’s own soul. D A R E Anurag Batra is real life, first generation entrepreneur who is Much Below Average (MBA) from the prestigious Management Development Institute, MDI. When he is not busy writing such columns, he can be reached at anuragbatrayo@gmail.com. Anurag is the co founder and editor-in-chief of exchange4media group which includes exchange4media.com.
Education & Training Special Interest Group INTENSIVE MENTORING PROGRAM (IMP) TiE Delhi has been successfully running the Entrepreneurship Nurturing Program (ENP) since its inception and hundreds of promising entrepreneurs have immensely benefited from these interactions. The Intensive Mentoring Program is one such unique initiative which has been designed to provide entrepreneurs in the Education &Training space expert mentor inputs to cover the phases of their organization life cycle i.e. • Evaluating the idea & market opportunity • Evaluating product offering • Financial plan and projections • Risks / Controls The objective of the Intensive Mentoring Program (IMP) is to support and nurture carefully hand picked entrepreneurs, over their entrepreneurial life cycle in the education and training space. The program would ensure that the various interconnected aspects of a business plan are addressed together hence eliminating gaps in the process and supporting the entrepreneur to achieve the necessary success. To know more about the process and timelines for this program, kindly log on to www.tienewdelhi. org. You may also get in touch with Manish Joshi at manish@tienewdelhi.org if you have any doubts/ clarifications.
Internet Special Interest Group WORKSHOP ON WEB USABILITY One of the most critical and defining factors for running a successful online business is the aspect of usability, According to market research firm Gartner Group, 50% plus of online sales are lost because visitors can’t find what they are looking for! Web surfers make decisions about your business based on the websites they see: the images, the tone, the layout, overall browsing experience and content. They want to know:• •
What makes the site unique? What makes the site stand out in a clutter?
The TiE Special Interest Group on Internet in collaboration with TVD is pleased to bring to you a one day workshop on “Usability” in a bid to enhance your web presence and bring about an amazing customer experience leading to higher conversions and revenues. Key highlights – Workshop 1) Understanding your users 2) Learning how to design a user effective interface 3) Helping users buy the product Don’t miss this unique opportunity to get trained in enhancing your skills in Usability and generating a more powerful web presence for your site which will be conducted on March 14th at Maple Hall, India Habitat Centre, Lodhi Road, New Delhi from 9 am to 6 pm. If you wish to participate in this workshop, please write to Nitin Agarwal at nitin@tienewdelhi.org. In case you have any doubts/clarifications, feel free to get in touch with us.
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TATA NEN Hottest Startups Awards 2008 Winners Lakshya, activecubes solutions, StarAgri, takeovercode.com and The Loot make it to the final five
S
ix months of heady campaigning culminated on February 27 where India’s first people’s choice awards for startups—the TATA NEN Hottest Startups Awards 2008 were announced. Five innovative and high-potential startups made it to the top—activecubes solutions, Lakshya, Star AgriWarehousing and Collateral Management, takeovercode.com and The Loot. The TATA NEN Hottest Startups Awards, the world’s first people’s choice awards for new startups attracted around 600 nominations, cov-
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ering a wide range of sectors and geographies—with startups from over 40 cities spanning nearly 20 industry segments, making it India’s largest startup contest. For the first time the public was invited along with over 250 top experts, including distinguished entrepreneurs, investors and industry representatives, to help select the winners. The contest fired the imagination of the public, engaging over two lakh voters in the very first year of its launch. The five winners of the TATA NEN Hottest Startups Awards 2008 reflect
the diversity and dynamism of today’s entrepreneurial India, cutting across education, legal and IT consulting, agriculture and retail. In addition, the winners represent a unique blend of cities—with two of the five winners located in tier-II cities: Patiala in Punjab and Kota in Rajasthan, thus mirroring the entrepreneurial revolution happening across India. Interestingly, four of the winning startups are self funded. The five winners are entitled to a host of awards, sponsored by TCS Small & Medium Business (SMB) Group, IIM-B’s NS Raghavan Center for Entre-
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ACTIVECUBES SOLUTIONS
B
angalore-based activecubes solutions, founded by a team of techies with over 100 years of experience between them, is a crusader for 'intelligence technology'. Active in the business analytics space, the startup hopes its consulting, analysis and technology solutions will ring in profits for data-rich but information-poor companies. Started with a shoe-string budget in January 2007, the startup is eyeing the 100 million dollar mark in revenue in five years.
LAKSHYA
I
t all started during a trip to Goa. Four friends, lounging on a sunny beach, decided that they should get together and start something on their own. Being fresh graduates from Indian Institute of Technology (IIT), and having experienced first-hand the struggles of getting into Indiaâ&#x20AC;&#x2122;s most prestigious institutes, they hit upon the idea of establishing a preparatory institute for competitive exams. And Lakshya Institute was born, in small town Patiala, in 2006. Before 2006, the number of selections in IIT from Patiala was limited to four to five. In 2007, Lakshya produced 12 selections from their first batch, a never-achieved record in Patiala. In 2008, they upped their own record by producing 33 selections in IIT-Joint Entrance Examination and 115 in AIEEE, a national-level entrance examination for engineering collegesâ&#x20AC;&#x201D;the highest number of selections from any institute in the whole of Punjab. Growing phenomenally, with an overall growth of 348% in 2007-08, the startup has scaled up to include schools and junior classes as well.
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THE LOOT
J
ay Gupta has built his business on the eight-letter magic word every shopper loves to hearâ&#x20AC;&#x201D;discount. A retail chain that offers upto 60% discounts on top apparels 365 days a year, The Loot has grown from a single store in 2003 to 95 stores in 35 cities as on March 2009. What works for The Loot is their differentiated business model that allows them to source inventory at far lower costs than original price stores, so it can sell them cheaper. With actor Gulshan Grover as its brand ambassador, The Loot is striving to create one of the most successful value retail formats in India.
STAR AGRI
F
our business rivals got together for a common purposeâ&#x20AC;&#x201D;to streamline agriculture warehousing activities in the agrarian parts of Rajasthan. Star AgriWarehousing and Collateral Management, a startup located in Kota and Jaipur provides end-to-end solutions in procurement, warehousing and collateral management of agricultural commodities. According to Amith Aggarwal, one of the co-founders, Star Agriâ&#x20AC;&#x2122;s mission is not only to provide complete agri-business solutions under one roof, but also to safeguard the interests of the farmers by providing modern scientific methods that ensure better farm prices. The startup, formed in 2006, has already posted a profit of Rs 1 crore in 2007-08.
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TAKEOVERCODE.COM
T
he Indian legal system is unique for its plethora of laws. Breaking its complexities is takeovercode.com, a Delhi-based startup that is working hard towards demystifying the regulatory environment especially in the fields of mergers and takeovers. With the use of IT tools, entrepreneur Pavan Kumar Vijay has developed an online platform that automates the process of interpretation and determination of compliances, making preparation of lengthy documentation possible at 1/12th of the usual time.
preneurial Learning (NSRCEL), IIM-A Centre for Innovation Incubation and Entrepreneurship (CIIE), Microsoft and The Gateway Hotel. In keeping with the premise of the contest, to provide value not just to final winners but also the shortlisted finalists, the knowledge partners of the TATA NEN Hottest Startups Awards stepped forward with three ‘Special Awards’ that were handed out at the awards ceremony, including the ‘IIM Ahmedabad-CIIE Mentorship Award’ awarded to the Chennai-based firm,
Ennovasys; the ‘IIM-B NSRCEL Incubatee Award’ awarded to Bangalore’s Wyn Brands, and Belgaum’s Vayavya Labs, and the ‘Microsoft BizSpark Award’ awarded to the Noida-based firm, ITCONS e-Solutions.
Quick snapshot The contest was launched on August 27, 2008 with the goal of providing visibility for entrepreneurs, engaging the public and improving support for startups. The five hottest startups were chosen from among a shortlist of 30 final-
ists, who in turn, were selected based on a combination of expert reviews and public voting. Major partners in this initiative include Helion Ventures, Seedfund and Wadhwani Foundation. Tata Consultancy Services (TCS) and The Gateway Hotel provided support as special partners. Ernst & Young as the official tabulator of the awards, advised on procedures and auditing practices DAR E for the contest. More articles on www.nenonline.org. Content provided by NEN APRIL 2009 87
DARE.CO.IN
/picture story
For the Spa Industry Photo: Iosis Medispa
An overview of certain equipment and elements used in the business of spas /Amit Panday
SPAS: Some facts and figures US$ 60 billion: The estimated size of the global spa market, which has seen a 20 to 30 percent surge in the last few months.
US$ 384 million: The estimated market size of spas in India, with an estimated annual growth rate of 20 to 40 percent.
2,300: The total number of spas in the country. 70 percent: The percentage of spas run by local brands.
Rs 60 lakh to 1.4 crore: Investment required for an average spa center to be operational (including equipment).
1 to 1.5 years: Time required to break even. 3,00,000: The number of therapists required in the Indian spa industry by 2012. SOURCE: Various reports
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BASALT STONES Which therapy: Therapeutic hot/cold massages. Why basalt stones: Iron-rich and retains heat for long. How long can they be used: The stones can be used for more than three years. Availability: Local health care shops like The Body Shop, and spa equipment retail stores. Suppliers present all over India. Color availability: Primarily shades of grey and black. Stones used in one session of massage: 20 to 25. Sizes: All, large sizes for spine/shoulder muscles, small ones for fingers/toes. Duration of a massage: 60 to 90 minutes. Treatment cost: Rs 2,200.
Photo: Iosis Medispa
Essentials
DARE.CO.IN
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EPSOM SALTS
Photo: iStock
Also known has Magnesium Sulphate Which therapy: Bath soaks in spa services. Why Epsom salts: Relaxing effect, anti-wrinkle on skin when soaked, anti-inflammatory. Availability: Spa product distributors, pharmacy stores. Quantity used at one time: Up to 25 gm in 100 ml. Alternative uses: Gardening, medical uses, as a desiccant, also highly effective against eczema, a skin disease.
MASSAGE TABLES/SPA BEDS Photo: Mystic Cures Spas
Functionality: Ayurvedic, regular massage. Standard dimensions: 6.5 feet x 2 feet. Adjustments: The angle can be adjusted for comfort and height. Availability options: Spa equipment retail stores or on orders. Standard cost: Rs 9,000 to 12,000. Types available: Fixed and portable. Market scope: Very high as it is one of the most important items in any spa.
AROMATIC CANDLES
ESSENTIAL OILS
Photo: iStock
Which therapy: All spa therapies, used in all spa rooms. Availability: All home furnishing and lifestyle stores. Standard cost: Rs 200 onwards. Standard dimensions: 3 ž inches tall x 3 inches wide (candles only). Standard duration: 8 to 12 hours if burnt continuously. Substance (wax) used: Soya wax, paraffin wax and palm wax. Fruit wax is also used these days (primarily imported from China). Market scope: It has huge market potential as it is used everywhere, including homes, restaurants and spas.
Which therapies: Aromatherapy, face and body massage. Availability: Home stores, spa equipment retail stores. Standard cost: Rs 100 and above. Types available: Most frequently used are lavender, ylangylang, eucalyptus, tea tree, and peppermint. Substances used: Carrier oil and blending oils. Quantity per session per client: 50 ml of base oil (which could be almond or olive), and few drops of essential oil customized to the clientâ&#x20AC;&#x2122;s requirement. Market scope: Great demand for aroma oils in India and internationally. Aroma plants and oils have been valued throughout history for their therapeutic properties.
REED DIFFUSERS
Photo: iStock
Which therapy: Primarily for aromatherapy. Origin: Grown in south India, also imported from China. Why reed sticks: Reed diffusers are the best alternative to candles, vibrant scents and no risk of fire; absolutely no heat is needed. Oils used: Various, including patchouli, jasmine, sandalwood, ylang-ylang, tea rose, Indonesian teak, vanilla orchid and ginger patchouli. Most effective: When sticks are flipped upside down after regular intervals. Availability in India: Lifestyle stores, home furnishing stores, spa equipment retail stores, etc. Cost: Rs 400 and above. Standard quantity: Eight to ten sticks with 100 ml aromatic oil. Lasts for: Fragrance diffuser oils last for months. APRIL 2009 89
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CLAY MASKS Which therapy: Skin lightening. Kinds of clay used: Green, white, Red, Black, Dead Sea. Disposal: Single use. Availability: Different kinds of clays are available with different spa institutions. Cost: Rs 3,500 (black clay). Quantity used in one session ( one client): Up to 200 gm.
FLOWERS Photo: iStock
Which therapy: Flower oils used in specific therapies and wet flowers for decoration. Relevance: Relaxation and ambience. Availability: Easily available. Life: Fresh flowers few hours, dried ones for days. Cost: Rs 5 to 500. Quantity: As required.
STEAM CABINETS
Photo: Talwalkar's
Which therapy: Steam therapies along with body massages. Availability: Spa equipment retail stores. Standard cost: Rs 25,000 to 1,50,000. Types available: Commercial and personal uses like steam-generating motors of 1.5 kilowatts and above. Standard warranty period: One year. Standard dimensions: 6 feet x 4 feet x 3 feet. Electricity consumption: 1 unit per hour. Temperature range: Up to 230 degrees celsius. Market scope: Good market, sale of five to seven units/month from a retail shop in south Delhi.
HYDROTHERAPY TUBS
MASSAGE STONE HEATERS Which therapy: Required for hot stone therapies. The heater could be multitasking â&#x20AC;&#x201C; one can use it for hot stone massages and for Bolus massages. Availability: Spa equipment retail stores, rarely available. Cost: Rs 5,000 and above. How many stones can it heat in one go: 52. How long can it be used: The heater comes with a one year warranty. Maximum temperature: 120 to 150 degrees celsius. Electricity consumption: 15 units per hour. Usage in India: Only by select spa institutions. 90
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Photo: Iosis Medispa
Which therapy: hydrotherapies. For treating: Muscle spasms, diabetes, arthritis. Availability: Spa equipment retail stores. Standard cost: Rs 50,000 to 1,50,000. Types available: Single or multiple users, plain tub or with water jets. Standard dimensions: 6.5 feet x 3.5 feet to 6 feet x 6 feet. Standard capacity: 500 liters. Electricity consumption: 9 units per hour. Warranty period: One year.
Inputs for this story have been given by Kiran Bawa, Cosmetologist and Managing Director, Iosis Medispa, Mumbai; Jacko Group, New Delhi; Delta Exports, New Delhi; Color Design India, New Delhi; Y.N. Trivedi and Sons, New Delhi; and Fragrance De Energy, Agra, besides various industry and media reports.
DAR E
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Organizations DARE.CO.IN
covered in this issue, in alphabetic order; first appearance
Accel .......................................................................... 53
IBM India ................................................................... 77
Rolls Royce ............................................................... 59
Accion International ................................................... 49
ICI India ..................................................................... 18
RouteGuru ................................................................. 35
activecubes solutions ................................................ 84
ICICI Bank Limited..................................................... 29
Sa-Dhan .................................................................... 48
Adrenalin ................................................................... 64
IDG ............................................................................ 52
Sandstone Capital ..................................................... 50
Aegis.......................................................................... 22
IIM A Centre for Innovation Incubation
Sanitch....................................................................... 58
Aria Holidays & Resorts ............................................ 45
and Entrepreneurship (CIIE)...................................... 87
Satyam Computers .................................................... 60
Bank of India.............................................................. 64
IIM-B .......................................................................... 84
Securitas.................................................................... 33
BASF India ................................................................ 18
IMS Health ................................................................. 69
Seedfund ................................................................... 87
Bessemer Venture Partners....................................... 29
Indian Institute of Technology .................................... 85
Sequoia Capital India ................................................ 50
Bill & Melinda Gates Foundation ............................... 82
Infosys ................................................................. 20, 21
Shri Kshetra Dharmasthala Rural
Bombay University ..................................................... 24
Institute for Financial Management
Development Project ................................................. 48
Cameo Corporate Services ....................................... 21
and Research ............................................................ 49
Silicon Valley.............................................................. 50
CareerLauncher......................................................... 29
Iosis Medispa....................................................... 88, 90
SKS Microfinance ...................................................... 49
Center of Freshwater Aquaculture ............................. 56
ITC Infotech ............................................................... 60
Skyscape.com ........................................................... 77
Centre for Micro finance ............................................ 49
ITCONS e-Solutions .................................................. 87
Star Agri Warehousing and
CGTMSE ................................................................... 65
Jacko Group .............................................................. 90
Collateral Management ............................................. 84
Champak ................................................................... 52
JK Ansell.................................................................... 75
State Bank of Travancore........................................... 79
CIBA Specialty Chemicals ........................................ 18
Jodo Gyan ................................................................. 96
Strawberry Outbound ................................................ 45
Clariant ..................................................................... 18
Kitnebaje.com ............................................................ 77
Suzlon........................................................................ 60
Cognizant .................................................................. 69
Krishna Ceramics ...................................................... 40
takeovercode.com .................................................... 84
Color Design India ..................................................... 90
Lakshya ..................................................................... 84
Tata Consultancy Services ........................................ 60
Cryos Interational ...................................................... 77
Management Development Institute .......................... 35
TATA NEN .................................................................. 84
Cyber Futuristics........................................................ 21
Mankind Pharma ....................................................... 75
TCL ............................................................................ 21
DBS Internet Services ............................................... 24
Marsing ...................................................................... 60
TCS Small & Medium Business (SMB) Group .......... 84
Delta Exports ............................................................. 90
Microland ................................................................... 69
Team Sustain ............................................................. 30
DesiCrew ................................................................... 22
Microsoft .................................................................... 87
The Cradle ................................................................. 77
eCredit ....................................................................... 69
Minglebox .................................................................. 69
The Freedonia Group ................................................ 32
Elucido ....................................................................... 69
Moneyoga .................................................................. 76
The Gateway Hotel .................................................... 87
Ennovasys ................................................................. 87
Moving Clouds ........................................................... 45
The Loot .................................................................... 84
Erasmic Venture Fund ............................................... 52
Myntra........................................................................ 52
Tholons ...................................................................... 21
Ernst & Young ............................................................ 87
N.S. Raghavan Center for Entrepreneurship and
Trident Capital............................................................ 69
Female Health Company ........................................... 75
Learning, IIM Bangalore ............................................ 77
Tsurumi...................................................................... 58
Flexitron ..................................................................... 66
N.S. Raghavan Centre for
TTK-LIG ..................................................................... 75
Fragrance De Energy ................................................ 90
Entrepreneurial Learning (NSRCEL) ......................... 84
United Nations Population Fund ................................ 74
Freedonia Group........................................................ 19
NABARD.................................................................... 50
United States Food and Drug Administration ............ 74
Genpact ............................................................... 20, 22
NASSCOM ................................................................ 20
University of Nottingham ........................................... 26
Google ....................................................................... 70
National Aids Control Organization ........................... 74
Vaccimo ..................................................................... 77
Grameen Bank .......................................................... 48
National Fisheries Development Board (NFDB) ........ 55
Van der Meulen ......................................................... 58
HCL ..................................................................... 21, 22
Navgathi Marine Design and Constructions ........ 30, 31
Vayavya Labs............................................................. 87
Headstart ................................................................... 76
Neilsoft....................................................................... 69
Voice Tap ................................................................... 76
Healthizen.com .......................................................... 77
Outsourced Partners ................................................. 69
Wadhwani Foundation ............................................... 87
Helion Ventures ......................................................... 87
Oxford University ....................................................... 27
Walsons Securitas ..................................................... 33
Hikal........................................................................... 60
Pidilite ........................................................................ 18
Wipro ................................................................... 20, 22
Hinduja Global Solutions ........................................... 22
Printo Document Services ......................................... 24
Wirkle Technologies ................................................... 76
Hindustan Sanitaryware & Industries ........................ 40
Ras Al Khaimah Free Trade Zone.............................. 64
Wyn Brands ............................................................... 87
HLL Lifecare .............................................................. 75
Rediff.com ................................................................. 29
Xerox ......................................................................... 26
IBM ............................................................................ 64
Revons IT Solutions................................................... 21
Y.N. Trivedi and Sons ................................................. 90
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People DARE.CO.IN
covered in this issue, in alphabetic order; first appearance
A. Suryanarayanan ............................ 77
Pavan Kumar Vijay............................. 87
Abraham Maslow ............................... 82
Piyush Gupta ..................................... 35
Aijaz Khan ......................................... 21
Pratibha Devisingh Patil..................... 66
Ajai Bhatnagar ................................... 21
Pravin Gandhi .................................... 28
Amith Aggarwal ................................. 86
Pritpal Marjara ................................... 75
Anand Anupam .................................. 77
Rajat Sharma .................................... 56
Arjun Walia ........................................ 33 Arthur Stinchcombe ........................... 17 Arvind Kejriwal ................................... 82 Bill Gates ........................................... 82 C Ratnamachari................................. 55
Rajshekar Shankarayya Hiremath ..... 66 Rohit Jain........................................... 64 Rohit M.A ........................................... 77 Saloni Malhotra.................................. 22 Sandip Somany ................................. 40
Deepak Shenoy ................................. 76 Sandith Thandasherry ....................... 30 Dilip Patil ............................................ 77 Sanjay Ponda .................................... 18 Dr Gopinath Sai ................................. 55 Satish Goel ........................................ 65 Dr L H Manjunath .............................. 48 Shanker Subramaniam ...................... 62 Girish Deshpande .............................. 45 Shuvan Misra..................................... 65 Gulshan Grover ................................. 86 Siddharth Goyal ................................. 77
DARE is not an acronym. It represents the daring spirit of the entrepreneur. The red color for the R of DARE represents the fire in the belly of the entrepreneur. You could think of the D representing the face, A representing the chest, R representing the belly and E representing the feet of the human body. Hence the red R.
Jackson Brown .................................. 82 Skyscape.com ................................... 77 Jay Gupta ......................................... 86 Somit Doshi ....................................... 45 Kevin Costner .................................... 32
The entrepreneur dares to do things. (S)he dares to do things differently
Sridar Iyengar .................................... 29 Kiran Bawa ........................................ 90 Krishnendu Sengupta ........................ 77 Lalana Zaveri ..................................... 24 Makarand Karkare ............................. 77 Manish Sharma ................................. 16 Mohammad Anas .............................. 49
Subrata Mitra ..................................... 53 Suresh Iyer ........................................ 65 SV Atre .............................................. 65 Trident Capital.................................... 69 Usha Menon ...................................... 96
Mohammad Yunus ............................. 49
Varun Khurana................................... 76
Mohammed Nadeem ......................... 64
Vinay Nair .......................................... 64
Mrigank Tripathy ................................ 76
Viswanath R. Rao .............................. 22
Mukesh Lakhanpal ............................ 34
Warren Buffet..................................... 82
N. Sreekumar..................................... 45
Whitney Houston ............................... 32
SMS â&#x20AC;&#x153;DARE <your comments, questions or suggestions>â&#x20AC;? to
56677 dare@cybermedia.co.in APRIL 2009 95
INNOVATION
DARE.CO.IN
A Microscope made from Bamboo At a time when activity-based teaching is gaining prominence, a low-cost microscope made from bamboo makes learning of elementary science a fun activity for children /Aswathi Muralidharan
R
emember your junior school days—reading about those tiny pores on the underside of leaves or parts of a flower? How did you learn the names and remember their structure? Was it by examining it under a microscope yourself—a more effective method—or by memorizing and repeating the concept by heart? The answer would probably be the latter— the reason being expensive scientific equipment, considered too complex to be handled by children. However, if the New Delhi-based Jodo Gyan has its way, this way of teaching could be changed using a low-cost microscope that it has developed.
A microscope made of... bamboo? About the microscope Innovation
Bamboo microscope
Organization
Jodo Gyan
Price
Rs 200
Features
• Two lenses each of 10x magnification • Made from bamboo • Lightweight • Low cost • Can be assembled and dismantled easily by anyone • Parts can be replaced easily • Not very complex to handle
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“The microscope was a chance invention six years ago,” says Usha Menon, a government researcher and one of the founders of Jodo Gyan. “Earlier, we used to sell plastic microscopes that were being manufactured by somebody else, but it was very low in quality. So we decided to move on to bamboo. It meant manufacturing it ourselves.” Since the first prototype was formed, the bamboo microscope has witnessed several changes, passing through at least four models before the latest one materialized. This model is priced at Rs 200, and is made out of bamboo, two lenses of 10x power each, and a mirror that acts as a
INNOVATION reflector. Of the two lenses, placed one above the other, one can be moved up and down using a screw, and the other can be moved sideways to enable better placing of the sample. The material used in building the microscope imparts several unique features to the equipment. First, it makes it inexpensive and eco-friendly. Says Menon, “In India, there is too much emphasis on memorization of concepts [in education] rather than focusing on understanding of the basics.” Being cheaper, this microscope allows children to experiment for themselves and learn in the process. Second, it makes the microscope compact, light in weight and simple to use. Often, the complexity and delicateness of scientific equipments requires more sophisticated use. This microscope, however, can be used by middle-level children themselves with little training. Third, it can be assembled and dismantled by anyone. This flexibility also helps in case the equipment is dropped, as the parts of the microscope can be refitted easily by anyone, requiring little technical expertise.
Sourcing and manufacturing The organization operates from a rickety building in Shakurpur that houses both the company’s office and the manufacturing unit. The manufacturing unit employs eight people who make a variety of products. For this microscope, the bamboo is sourced from Azadpur market, and the lenses and the reflector from the science bazaar in the Sadar Bazaar area, both located in Delhi. After the bamboo is procured, it undergoes several processes such as cutting, drilling, fining and finally assembling before the final product is made. The bamboo is also given termite treatment to ensure a longer lifespan. When asked as to how many such microscopes can be made in a day, a technician working with the organization explains, “If you calculate from the start, the cutting stage, five microscopes can be made per day. Though not many processes are involved,
DARE.CO.IN
An older version of the bamboo microscope
About Jodo Gyan Registered
1999
Mission
To develop critical thinking and promote learning with understanding using activity-based methods
Areas of work
Primary mathematics and elementary level science
Products
Developed 60 products, including eight made from bamboo
Pricing
From as low as Rs 30 to Rs 550
Marketing policy
Does not stock its products in stores, but believes in approaching its end-consumers directly through: • Holding workshops and training camps for teachers (only when schools approach them), sometimes involving other schools in the vicinity • Participating in fairs and seminars organized by schools • Holding workshops and training camps for school chains
there is a lot of handwork that is done to make the final product.” The organization has sold nearly 3,000 bamboo microscopes till date.
The organization Jodo Gyan, which literally means “linking education”, has over 60 products to its credit, which include several tools to aid education, and games such as puzzles, toys etc, to promote critical thinking among children. The
products range from Rs 35 to Rs 550. The organization adopts a different marketing strategy—their products are not sold through shops, but directly to end-users. For this, it holds workshops for teachers, participates in fairs and seminars organized by schools, and holds training camps for schools. These workshops are conducted across India and till date Jodo Gyan has organized more than DAR E 2,500 of them. APRIL 2009 97
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RNI No.DELENG/2007/22197. Posting Date: 5th & 6th of every month. Posted at Lodi Road HPO.
DL(S)-17/3314/2008-09-2010