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The Leap Year

Jan 27th, 2012
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As an entrepreneur, you would not be found at fault if you thought that this was the end of 2008 all over again. There is an air of uncertainty in India as news of bankruptcies and defaults come flowing in from abroad. As we write this, the news is that Swedish automaker Saab has filed for bankruptcy protection while banks like HSBC and Citibank would cut thousands of jobs across the world.

Much of this news is from the developed and now beleaguered western world. But it is also true that we live in a much flatter world today than in 2008.

And so the soothsayers are out of the closet, calling out 2012 as a year of slowdown and tough times for most Indian businesses.

But these soothsayers are from market hour television, and so their view of the economic scenario is built on the unreliable foundations of stock market movements. The real picture, however, comes from the men (and women) in the middle—the entrepreneurs for whom every year of survival is a success in itself. These are the people who form the real pulse of the Indian economic engine.

That is why it is their view of 2012 that we should look at when forming an opinion of the Indian economy. We are happy to report that their view is anything but negative. True that every entrepreneur is an eternal optimist but, trust us, these are real entrepreneurs making real leaps in the next year.

Entrepreneur talked to more than 50 entrepreneurs and we are republishing the views of 13 of them here. These 13 come from across the ecosystem and offer us a glimpse into what are the hopes, fears, challenges and goals of

their peers in 2012.

There are people like AyurVaid Hospitals’ Rajiv Vasudevan who fears that 2012 may see a drop in consumer confidence and then spending. Then there are people like Hector Beverages’ Neeraj Kakkar who is supremely confident of 200 percent growth, while others like Jairaj Ancillaries’ Rajive Chawla are fighting to make their organizations lean to fight the slowdown.

Some others like Milk Mantra’s Srikumar Misra and Policybazaar’s Yashish Dahiya don’t care about the slowdown; they just want the government to leave their sectors alone. Whoever the entrepreneur, whatever the sector, there are always hopes and fears. But what is important is that every entrepreneur is more positive than he or she is negative. And that is what the narrative of the Indian economy should be as well.

“This year, expansion will be difficult” Kunwer Sachdev, CEO & MD, Su-Kam Power Systems Ltd.

Entrepreneur (E): Are you planning to expand your business in 2012?

Kunwer Sachdev (KS): Whatever plans we had in mind in terms of expansion for this year are being recalibrated and we have decided to go slow on them. The global scenario is tight and we, as a company, are scared that it may eventually affect India. It may not be the same severity that we saw in 2008 but the way our economy is growing and the measures taken to tighten money supply, expansion in 2012 will be difficult.

E: What is your growth plan?

KS: I had growth plans but these are now on hold. In our industry, last year the growth was not very high since temperatures in the country did not go up too much. In the north of India there were very few hot days since monsoon set in early and was prolonged. For the power backup industry, this was a small setback. Although we will grow this year, seasonal vagaries may impact us. We will look to grow only in the battery section since this business is not affected by seasons and does brisk business through out the year.

E: Are you planning on investing in 2012?

KS: No, we will not look for any major investments in 2012.

E: What is the kind of capex are you looking at?

KS: There will only be a minor capex for 2012. However, in our industry it is difficult to gauge this as it depends on sentiments. There may be a situation by March where we may need capex and will be ready to go for it.

E: Will you concentrate on the Indian market or exports?

KS: We will focus on both markets since our exports markets are doing very well. Su-kam is doing well in Africa, the Middle-East, central America and South-East Asia. Our focus on exports will be high. Nationally, Su-kam would like to make inroads into the villages of this country where we do not have a presence as of now. My effort this year would be to create these structures.

E: What is the biggest threat that you perceive?

KS: Currently, the power back-up systems has three major players. While Luminous has been taken over by Schneider, it clearly shows multinationals are entering the area in a big way. In 2012, meeting the competition such multinationals throw up would be the greatest challenge and threat.

E: How are you managing the credit flow?

KS: We are currently tightening the market. Earlier we sold products on 90-120 days’ credit but have stopped it now. Our target in 2012 is to decrease our debt since interest rates are very high. Our target is to repay some of our debts to the banks and at the same time squeeze the market. At present, only people who have money are our distributors rather than Su-kam financing them to run the show.

“Disciplined growth key to 2012″ – Dheeraj Gupta, Founder, Jumboking Foods Pvt. Ltd.

Entrepreneur (E): Are you planning to expand your business in 2012?

Dheeraj Gupta (DG): Yes, we are looking to expand aggressively this year. We will focus on adding new stores as well as on strengthening the existing outlets. That will give our business the right direction this year.

E: What is your growth plan?

DG: We are targeting a year-on-year growth of 35-50 percent. For us, 35 percent of the growth will come from new stores. As far as the existing stores are concerned, we are looking at a year-on-year growth of 15 percent in terms of same-store sales. We believe that strong same-store sales growth coupled with good quality new stores is the sensible way to expand our business.

E: Are you planning on investing in 2012?

DG: Our company expands through the franchise route and will be investing in 24-25 new stores this year.

E: What is the kind of capex you are looking at in 2012?

DG: Our investment per store is about Rs.20 lakh. Since we are looking at about 24 to 25 stores, an estimate on the expected capital expenditure is about Rs.5 crore.

E: Are you looking to expand to newer cities?

DG: We have already expanded to Bengaluru and Aurangabad this year and are adding three stores in each city. This year, we will start operations in Pune and Jaipur.

In our expansion plan for 2012, half of the stores we plan to set up will be in Mumbai, the other half will be in other cities. Our estimate is that upon entering any new market, it takes about a year for operations to stabilize.

So, even though we look at Bengaluru as a market of nearly 50 stores, we want to ensure that the current stores stabilize in operations first.

We will add three new stores in that market in 2012. We grow through regional partnerships in any new market and keep meeting with prospective franchise owners for various other cities.

E: What is the biggest threat that you perceive?

DG: We do not see any major threat to our business in the coming year. We feel that the discipline in growth [50 percent year-on-year is pretty aggressive anyway, I feel] is what will ensure that we remain solidly profitable throughout the year.

This strategy is even more important in a tough economic environment where you need to spend intelligently in order to rake in the profits.

E: How are you managing the credit flow?

DG: We are a zero-debt company. Our entire growth gets funded through the franchise program. Our major investments are in developing systems to support our franchisees, training programs etc. which we manage to finance through our profits. In our stores, the stock turnover ratio is usually very high, so we effectively operate on a negative working capital. We also ensure that our suppliers get paid in time.

In fact, the credit period they extend to the stores is only a week at most times and thus the flow of money through the entire system is always healthy.

That is a very important point that we need to keep in mind at all times.

“I am worried about another slowdown” – Neelam Chibber, Co-Founder, Industree Crafts Private Ltd.

Entrepreneur (E): Are you planning to expand your business in 2012?

Neelam Chibber (NC):Yes, we are looking to expand in 2012 and double our growth.

E: What is your growth plan?

NC: We are looking to expand our growth to reach Rs.30 crore. We are also looking to expand our reach to more rural producers. We have set up a special purpose vehicle with the Andhra Pradesh government to train more rural artisans. We hope to train around 3,000 rural artisans there in 2012.

E: Are you planning on investing in 2012?

NC: We are not looking at any investment of our own in the coming year and will be mostly depending on debt.

E: What kind of capex are you looking at in 2012?

NC: We are looking at a capital expenditure of about Rs.4 crore this year. We are looking at alternate channels of distribution for the Mother Earth products in 2012. So, instead of setting up our own stores, we are looking at other models of distribution for the products.

E: Are you looking to expand to newer cities?

NC: Besides the Indian market, we are looking at global markets in 2012. We are looking to export to the U.S. and Europe in the coming year.

E: What is the biggest threat that you perceive?

NC: The biggest threat to my business will materialize if there is another slowdown.

E: How are you managing the credit flow?

NC: We are looking at banks for a special line of credit through priority sector lending for the back-end of the business. We are also looking at loans for the front-end capital expenditure for the stores. We work with self-help groups and the government is also mandated to give loans to these groups at a certain interest rate. We are also looking to set up a meso lending facility which will help to lend to the self-help groups.

“Regulations are our biggest threat” – Yashish Dahiya,  Co-Founder & CEO, Policybazaar

Entrepreneur (E): Are you planning to expand your business in 2012?

Yashish Dahiya (YD): Yes. We may do some activity in loans and the credit cards business. Also, in mobile phone portability, i.e. a comparison of those services.

E: What is your growth plan?

YD: This year we plan to grow 100 percent in revenues. We have a target of Rs.50 crore-Rs.55 crore for FY2012-’13. We will focus on growing operations as well as the brand.

E: Are you planning on investing in 2012?

YD: Yes, in both sales and brand marketing.

E: What is the kind of capex are you looking at in 2012?

YD: Rs.25 crore-Rs.27 crore: half in branding, the rest in organization building, more call centers for sales and customer support.

E: Are you looking to expand to newer cities?

YD: We will be expanding with the Indian continent.

E: What is the biggest threat that you perceive?

YD: Regulations by the government on insurance companies. It may bring about censorship of content.

E: How are you managing the credit flow?

YD: Companies take four months to pay us. Some pay us an advance, or earlier. We have only equity funding so far. We keep our money with mutual funds [liquid funds] and sometimes with FDs.

“A level-playing field is a must” – Rajesh Razdan, Co-Founder, mCarbon Tech Innovation Ltd.

Entrepreneur (E): Are you planning to expand your business in 2012?

Rajesh Razdan(RR): The idea is to cherry-pick areas and then concentrate on them. There are specific areas of interest within VAS and we shall expand and invest in those areas.

E:  What is your growth plan?

RR: Overall, the growth will come from introducing new services and finding traction around them. There are a bunch of new services planned for launch in the early part of next year and we shall continue to fuel innovation around these services. Our traction with existing customers shall go on as they continue to grow with us. Finding new territories will also be the key, especially in growth areas outside the country.

E:  Are you planning on investing in 2012?

RR: We shall continue to invest in R&D and market-making initiatives while we are carefully watching the market unfold with business paradigms shifting again.

E:  What is the kind of capex are you looking at in 2012?

RR: We are servicing currently all major operators in India and going by the business plan and current traction, capex will be major part of all roll-outs for the new year. Just to give an example, to service a large operator in India for a period of one year requires an investment of around Rs.5 crore, plus one needs to put together a team and roll out a project successfully.

E:  Are you looking to expand to newer cities?

RR: As described above, but selectively.

E:  What is the biggest threat that you perceive?

RR: We reckon one: the business environment currently needs to be conducive enough for the industry at large which includes finances being made available (both debt and equity) and, secondly, the regulatory and more pro-industry policies in telecom need to provide a level playing field for everyone to foster.

E:  How are you managing the credit flow?

RR: We are running frugally by managing cash flow through internal accruals. Cash flow is always a challenge in our business but we do factor this in while the deal construct is being discussed. Yes, these are cautionary times, more so from the finance management perspective and we do hope that we shall sail through this.

“Want to outrun the  slowdown” – Yusuf Motiwala, Founder and CEO, TringMe

Entrepreneur (E): Are you planning to expand your business in 2012?

Yusuf Motiwala (YM):Yes. Currently, over 15 million users in over 80 countries are using TringMe’s retail service and we expect it to grow to around 35 million in the next six months, especially as smartphones are gaining increasing market share around the world. There are some really interesting developments happening that will keep us quite occupied in 2012 and we are extremely excited about them.

E: What is your growth plan?

YM: We are expecting significant growth [projected growth from 15 million-35 million users in six months] as we release updated applications for various smartphone platforms. The technology and platform development to support such widescale deployments is already in place and we are looking to execute in aggressive fashion in the first half of 2012.

E: Are you planning on investing in 2012?

YM: Yes. For the projected growth in 2012, we will invest back a significant part of our revenues into expanding our data centers in all the nine locations we have today. Apart from that, we are investing in some of the research activities and tie-up with researchers in universities around the world. Apart from investing in TringMe itself, we are finalizing plans for seed funding in companies that have application technology relevant to TringMe.

E: Are you looking to expand to newer cities?

YM: TringMe has always been a global player and we will continue to be so going forward. However, India is a significant market for TringMe and we are open for tie-ups and partnerships with companies focused on the Indian market and looking to leverage TringMe’s technology.

E: What is the biggest threat that you perceive?

YM: That in 2012 disaster comes before we reach our projected goal of 35 million customers.

E: How are you managing the credit flow?

YM: We work on the pre-paid model and hence, at any given time, we are in control of the commitments we have to our customers and our providers. TringMe has thrived on being a lean company with efficient execution. We believe in providing innovative solutions at affordable prices. This has brought us a lot of customers which keep us going.

“Want to be the go-to company” – Vishal Dhar, Co-Founder and President Marketing, iYogi

Entrepreneur (E): Are you planning to expand your business in 2012?

Vishal Dhar (VD): iYogi is a young company in the rapidly growing category of remote tech support. Like in previous years, we will continue to rapidly expand our business in 2012 to meet the opportunities from launching new services in new geographies.

E: What is your growth plan?

VD: We have recently launched services for Apple and will continue to expand platforms as the need for tech support for Android devices increases. We are also looking at new services for small businesses. We plan to also expand to new geographies that include countries in Europe and the Middle East. Our aim is to become the go-to provider that is solving the increasing complexity in the interconnected digital home.

E: Are you planning on investing in 2012?

VD: We will continue to invest in people, our technology platform and brand. iMantra, our technology platform, gives us the ability to scale. Our continued investment in iMantra enables us to enhance collaboration, improve efficiency and deliver an outstanding tech support experience. We will continue to invest in building the brand and its proliferation across media, including the Internet, radio, TV and print.

E: What is the kind of capex you are looking at in 2012?

VD: We will continue to invest in technology, infrastructure and in creating a work environment that compliments the delivery of next generation services from India.

E: Are you looking to expand to newer cities?

VD: We will continue to look for opportunities to increase our market share in existing geographies and launch services in new geographies in the future, including India.

E: What is the biggest threat that you perceive?

VD: Our biggest challenge is to scale our business fast enough to keep pace with the growing tech support needs of a rapidly growing market.

E: How are you managing the credit flow?

VD: We are managing our growth through a combination of internal accruals and equity.

“Subsidies must be removed” – Srikumar Misra,  Founder, MD & CEO, Milk Mantra Dairy Pvt. Ltd.

Entrepreneur (E): Are you planning to expand your business in 2012?

Srikumar Misra (SM): So far we have only launched our brand Milky Moo in Orissa. Besides increasing our presence for our flagship products of milk and paneer in Orissa, we are looking to expand in 2012 and take our brand Milky Moo to newer cities.

E: What is your growth plan?

SM: We are looking to increase our brand’s presence in Orissa and launch in Kolkata in early 2012. We are also looking to expand the distribution and availability of our products in the cities of eastern India. We are looking to grow to substantial multiples from our current turnover of more than Rs.5 crore, targeting Rs.25 crore-Rs.30 crore in 2012.

E: Are you planning on investing in 2012?

SM: Yes, we are looking to invest extensively in our sales and marketing efforts and looking to invest more than Rs.5 crore in that area.

E: What is the kind of capex are you looking at in 2012?

SM: Overall we are looking at a capital expenditure of Rs.50 crore in 2012. We are looking to raise funds for our capex; also we are looking at expanding our procuring markets in the later part of 2012.

E: Are you looking to expand to newer cities?

SM: We are currently focusing on taking our brand to various parts of eastern India only. Besides, some of the milk-based drinks will be made available in various metros.

E: What is the biggest threat that you perceive?

SM: The biggest threat operating in this sector is that largely the sector is dominated by state co-operatives which operate with subsidies from the government. Unless the subsidies are done away with and regular market economics come into force, competing with them is one potential threat.

E: How are you managing the credit flow?

SM: For our funding we received venture capital investment from Aavishkar and have investment from the Mumbai Angels. For our debt financing, we have IDBI Bank as our partner. Obviously the interest rate regime is particularly a challenge; it is a complete spoiler for a capital intensive business like ours. Debt is becoming unattractive, and while given our track record it won’t be a major challenge to receive debt financing, whether we would like to depend on it remains a question.

“Slowdown will affect spends” – Rajiv Vasudevan, CEO, AyurVaid Hospitals

Entrepreneur (E): Are you planning to expand your business in 2012?

Rajiv Vasudevan (RV): Yes, but it will be measured and focused growth.

E:  What is your growth plan?

RV: We plan to expand the number of hospitals and day care centers.

E: Are you planning on investing in 2012?

RV: We are in the process of raising series B funding for our business now and, therefore, our investment plans for this year will be based on that.

E: What is the kind of capex that you are looking at in 2012?

RV: We are looking at capex of Rs.6 crore-Rs.8 crore.

E: Are you looking to expand to newer cities?

RV: Yes, but within the Indian market only.

E: What is the biggest threat that you perceive?

RV: Overall slowdown in the economy will lead to reduction in discretionary spending. [Since the spend is on chronic diseases which is deferrable as opposed to acute and emergency care.]

E: How are you managing the credit flow?

RV: We are in a cash business and hence credit flow is not an issue that affects us as such.

“We are looking at 200% growth” – Neeraj Kakkar, CEO, Hector Beverages Pvt. Ltd.

Entrepreneur (E): Are you planning to expand your business in 2012?

Neeraj Kakkar (NK): Yes, as an early-stage company, we don’t have much option but to expand our business this year. Hopefully, the company business environment would stabilize and help in our growth.

E:  What is your growth plan?

NK: We are looking at 200 percent growth in 2012. Overall, we feel the consumer is not severely affected by the economic conditions at present and hope business does not deteriorate this year.

E: Are you planning on investing in 2012?

NK: Yes, we are looking at investing in 2012 both on capex as well as the marketing front.

E: What is the kind of capex you are looking at in 2012?

NK: Approximately Rs.10 crore.

E: Are you looking to expand to newer cities?

NK: We will continue to focus on the Indian markets only.

E: What is the biggest threat that you perceive?

NK: Because of the political situation and, to an extent, the economic situation, there are chances of consumer sentiments turning negative. That will be a jolt to our business.

E: How are you managing the credit flow?

NK: Essentially we are a debt- and credit-free company. So, we are a bit immune to the financial market situation. However, the rising dollar prices is making life difficult.

“Turning lean to manage credit” – Rajive Chawla, Chairman and MD, Jairaj Ancillaries Pvt. Ltd.

Entrepreneur (E):  Are you planning to expand your business in 2012?

Rajive Chawla (RC): No, I am not looking to expand in 2012 as investment is not giving adequate returns. So, no capital expenditure for us unless it is a must. I am not adding many machines as of now as input cost is high. Profits are almost non-existent now, coupled with high interest rates. So, there is no incentive for investment in capital. Having said that, it is only sentiment and in reality I will be expanding to a certain extent. I have capacity constraints and strong demand for export from Latin America, South Africa and Singapore. I have also entered into a JV recently and have to set up capacity for that.

E:  What is your growth plan?

RC: I have organic growth plans.

E: Are you planning on investing in 2012?

RC: Investment will be to the extent I need; not a major one. This, however, can change during the course of the year if things improve and I see the need for investment.

E: What is the kind of capex you are looking at in 2012?

RC: There are no plans for capex.

E: Are you looking to expand to newer cities?

RC: I would concentrate more on the domestic market as sentiment for export is low. Export was primarily to Europe and Australia and that has dried up.

E: What is the biggest threat that you perceive?

RC: Inflation and supply constraints are the biggest threats. Inflation is because of supply side constraints. Unless we become a manufacturing-friendly nation, incentivize productivity, remove bottlenecks, inflation can’t be checked.

E: How are you managing the credit flow?

RC: The only way I am tackling this is by becoming lean. I am implementing manufacturing practices which are prudent, implementing business process management and low cost automation as I have no control over wages, salary and input cost. Recently we have started cluster purchases in Faridabad to get a better deal on many items.

For example, we recently signed an insurance deal with United India Assurance which gave us a 50 percent discount on our car insurances and similarly a discount of 90 percent for fire insurance for the cluster.

“Competition is our biggest threat” – Rajath Kedilaya, Co-Driver, YourCabs

Entrepreneur (E): Are you planning to expand your business in 2012?

Rajath Kedilaya (RK): Yes, in terms of investing in technology and operations in different cities. We are also looking at expanding to two more cities.

E: What is your growth plan?

RK: Our main plan is to build the product. We will invest in the technology to build it, not focus too much on the revenue side.

E: Are you planning on investing in 2012?

RK: Yes, in technology primarily.

E: What is the kind of capex are you looking at in 2012?

RK: Rs.1 crore towards both marketing and technology infrastructure, as well as for regular operations.

E: Are you looking to expand to newer cities?

RK: Yes, we will expand to some Indian cities.

E: What is the biggest threat that you perceive?

RK: Competition, since we have around four-five competitors around.

E: How are you managing the credit flow?

RK: We have no debt, only equity since our business deals with only cash-based transactions.

“Time to go international” – Beerud Sheth,  Co-Founder  and CEO, Webaroo Technology Pvt. Ltd.

Entrepreneur (E): Are you planning to expand your business in 2012?

Beerud Sheth (BS): SMS Gupshup is a group SMS service that allows users to create communities along the lines of shared interests, so in 2012 we are looking to substantially expand our communities and the engagement levels of the users.

E: What is your growth plan?

BS: We are looking to roll out applications for smartphones and android-based phones. We are also looking at global expansion, and achieving a growth of about 50-100 percent.

E: Are you planning on investing in 2012?

BS: No, we are not looking at major investments.

E:  What is the kind of capex are you looking at in 2012?

BS: We don’t anticipate any major capital expenditure. Our data centers are already in place, so no major capital investment is expected.

E:  Are you looking to expand to newer cities?

BS: We will be looking at international markets this year like South-East Asian and Latin American countries.

E:  What is the biggest threat that you perceive?

BS: Our biggest threat is the uncertainty surrounding the regulatory laws of the Telecom Regulatory Authority of India.

E: How are you managing the credit flow?

BS: Our model is such that we don’t see any real credit situation. Users make payments before using the service. And with almost no capital expenditure expected, the credit flow is not a problem for us currently.

iYogi
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