#09 - JUNE 2008 by CyberMedia (I) Ltd

Vol 2 / Issue 09 / June 08

publication

/Rs 30

Percentage

What small businesses and startups plan to do Results of the DARE survey

45 40 35 30 25 20 15 10 5 0 Launch new products & services

Enter new markets

MARKETS

Start new line of business

Acquire a business

Merge with another

Sell all or part of business

Get project funding from banks

M&A

Betting big on public transport Medical and wellness tourism Paints in your future? Juice bar chains The power of franchising Commercialization of underutilized fruits Engineering Plastics: in high demand

Get Angel/ VC/PE funding

Do an IPO

FUNDING entrepreneur of the month/

Ajit Balakrishnan, Rediff.com special/

Prahlad Kakkar on ads for startups innovation/ Gemstone Crafts columns/ Power (and pain) of research Xxxx xxyour xxxxlucky xxxxxxstars: xxxx but at whose cost? Thank Xx xxxxx xxxxxrun! xxxxx xxx Let the Baby

Vol 2 / Issue 09 / JUNE 08

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 Arunjana Das Binesh Kutty Chhavi Tyagi Shilpi Kumar Sreejiraj Eluvangal Vimarsh Bajpai OPERATIONS Ajay Dhoundiyal Product Manager VIjay Rana Design Anil John Photography SALES & MA Jaideep Mario Gabriel Imran Ali Chandan Sengupta Dayanath Levaj Jagadeesh Nivedita Dwarkanath Naveen Barsainya

MARKETING Associate VP West West North South 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, Reader Service Sarita Shridhar Assistant Manager, Reader Service

/cover story

Great times for small businesses and startups 50

Percentage

45 40 35 30 25 20 15 10 5

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: Mirchandani & Co, Mumbai. All rights reserved. No part of this publication may be reproduced by any means without prior written permission.

0 Launch new products & services

Enter new markets

Start new line of business

Acquire a business

MARKETS

Merge with another

M&A

Sell all or part of business

Get project funding from banks

Get Angel/ VC/PE funding

Do an IPO

FUNDING

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 307, 3rd Floor, Ballygunj A.C. Market, 46/31/1 Gariahat Road Tel: 65250117

Prahlad Kakkar

on advertising for startups

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, # 24-09 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

DARE.CO.IN 2

JUNE 2008

Is there any business that can succeed without advertising? Prostitution!

DARE.CO.IN

/contents

opportunity/ Money ﬂows into landscape irrigation ...... 38 Betting big on public transport ................ 48 Commercialization of underutilized fruits................................... 56 Paints in your future? ............................... 60

entrepreneur of the month

Ajit Balakrishnan

Founder and Chairman of Rediff.com

A 1971 alumnus of IIM-Calcutta and the son of a doctor, Ajit is a ﬁrstgeneration entrepreneur. Besides Rediff. com, he also co-founded RediffusionDentsu, Young & Rubicam, one of India’s largest advertising agencies, at the age of 22. Ajit, who is also the chairman of the board at IIM Calcutta, shares his insights into entrepreneurship in a conversation with DARE.

blogs/columns Rupin Jayal ............. 20

Engineering Plastics: In high demand...... 78

opportunity/

The power of franchising

Want to start your own business but not from scratch? Become a franchisee. But don’t forget to do some homework before zeroing in on a business

Solar Energy ............................................. 84 sector analysis/ Medical and Wellness Tourism ............. 22 The slogan of the industry is ‘First World treatment at Third World prices’. Here is a quick primer of the Rs 800 crore business in the making

spirit/ I, Entrepreneur ..................................... 30 Find out the markings of a successful entrepreneur

Paranjoy Guha Thakurta ... 63 opportunity/

Anurag Batra ........... 80

Juice bars chain: the coming of age

coming soon

It has happened with coffee, food, junk food, and such. Now, the time is ripe for fresh fruit juice bars

DARE.CO.IN interactive business models,

wiki proﬁles, business

graph of the day, idea

pic of

the day, sector spotlight, blogs, news, discussion fora, keyword based alerts, rss feeds, contacts,

mentoring, market trends, webinars,

newsletters, live chat,

opinion polls,

leads, slideshows,

professional guidance,

search, on demand,

archives, event calendar, research, directories, faqs

innovation/

Gemming up the decor

Nikhil Tiwari looks at gemstones in a new limelight-- to make home and ofﬁce interiors look sparkling bright!

others / A new model for radio and TV content distribution? ........................ 68 Energy efﬁciency Labels ........................ 72 Registering a private limited company .... 88

strategy / Just-in-time .......................................64 Looking below the line ........................75

NEN /

Today’s Cool, Redeﬁned ......................82 JUNE 2008 3

DARE.CO.IN

blogs/edit

From a speeding bus There are the vast majority of us, who can use technology to enable, enrich and scale our businesses. Unfortunately, most small businesses and startups are reluctant to use technology beyond the regulation PC, desktop and email

am typing this document while traveling in an interstate bus. I am not exactly sure where I am as I type this, nor will I know where I will be when this speeds off to our editorial desk for processing. Well, this is what happened. I ended up helping someone define an online tech platform and that took up more time than I envisaged (these things usually do, but I was optimistic). That left me with two conflicting deadlines – to catch a bus for a long weekend journey and to finish this piece. And without a fairly cheap little device called a data card, I am sure that I would have missed one of them. Or more likely, I was able to spend more time on the platform definition because I knew that the data card would help. This is just one small example of how technology can help you in your business. There are those who have made technology their business. And there are the vast majority of us, who can use technology to enable, enrich and scale our businesses. Unfortunately, most small businesses and startups are reluctant to use technology beyond the regulation PC, desktop and email. The usual concerns of cost, complexity and maintenance headaches are real and understandable. But increasingly a new breed of businesses, called IT as a service (and not IT enabled service) are making it easy for you and me to use technology on a pay as you use model, without the attendant headaches. Take the example of the mail you send us at dare@cybermedia. co.in. That mail is pulled from our mail server by a service called Sproutit. What Sproutit does is very simple. It stores all the mail, allows the entire team (and whoever else we want to) to login and access and respond to the mail and also shows up if you have previously written to us. There are a host of other things, it can do, but this is the basic stuff. We pay for this on a monthly basis, depending on the volume of mail. What this means is that it does not matter whether I am on a long road trip when you write to us. Someone else from the team will answer you. And we do not have the problem of buying the software and hardware upfront and the headache of managing it. It is time you seriously looked at how services like this can be used to enhance and leverage your business. Meanwhile, it is time for me to fire up my data card and send this little note on its way.

/Krishna Kumar

JUNE 2008 5

Exchange DARE.CO.IN

• partners • mentoring • funding • guidance • advice • ideas...

Email: dare@cybermedia.co.in or SMS: "DARE <your msg>" to 56677

esides congratulating you on a job well done, I would also like

am an ardent reader of

to thank you for your laudable match-making services. I believe

DARE, which I am sure

many entrepreneurs and ﬁnanciers have met each other thanks to your feedback section. I teach business statistics to pay my bills and although I read every issue of yours I never quite thought of asking you for help. But here I am.

will promote entrepreneurship. Can you tell me how can I start a ﬁnancial consultancy? Can you tell me the name of some ﬁnancial

I am the co-founder of what is, arguably, India’s premier print-on-

consultancies in Gurgaon, Delhi?

demand service, CinnamonTeal Print and Publishing Services (we were, in

Arvind Kumar Gupta

fact, mentioned in DARE Oct '07 issue). However, we wish to scale up and You can share my

would like to request those who might be interested to help us do that. We

contact details with

have grown considerably for a startup that is still bootstrapping but would

Arvind. I would be glad

like some mentorship and capital infusion to help us grow further.

to help him out.

Scaling up has been a problem because of capital requirements. We

Ronak Thakkar Owner of a ﬁnancial services company and a regular reader of DARE

haven’t been able to convince people to invest in us and although that is probably our problem, it is also because the concept is relatively unheard of in India. VCs and angels are simply not convinced of the market potential of POD. To help us with fund raising, I am planning to contact Nandini Vaidyanathan who, again, I got to know of because of a letter in your feedback section. Leonard Fernandes, Co-Founder, CinnamonTeal Print & Publishing Services Leonard has contacted me and we have signed up to work together. Nandini Vaidyanathan Startups

e are a group of enthusiasts-entrepreneurs working on a couple of ideas related to blogging and

educational startup, which all can be collectively termed as 'axillary media' (a term coined by us). We are also working on a magazine on blogging (never before in India) but lack know-hows of distribution and publication. We hope to come out with our ﬁrst edition by Sept '08. I know we have not done any big thing yet, but we are sure about our capabilities. That coupled with our ideas, zeal and conﬁdence we can really go places. We are looking for someone to listen to our ideas and help us channelize our ideas and hard work towards success. Gaurav Sharma

JUNE 2008

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Exchange DARE.CO.IN

• partners • mentoring • funding • guidance • advice • ideas...

Email: dare@cybermedia.co.in or SMS: "DARE <your msg>" to 56677

am not an entrepreneur yet, but I have all the inclination towards entrepreneurship. Lacking

confidence in my entrepreneurial abilities at present, I have decided to build them by joining a B-school abroad and do an international MBA in entrepreneurship. Before joining the school in October end, I wish to do 3 months internship in entrepreneurship. I have quit the safe haven of my present job, and wish to start the internship from the first week of July, in new startups to gain critical skills. I am a Mechanical Engineer with four years of experience of project management in the manufacturing industry. I have IPMA Level D certification in project management and have done distance learning PGDBA in finance and operations from Symbiosis. DARE has been a source of knowledge and inspiration and I simply love the magazine. Through this entrepreneurship mouthpiece, I want to reach out to new startups who can provide me the opportunity of an internship in and around Bangalore or Nashik. Ashutosh Agrawal, Bangalore

am an MBA graduate, with ﬁve years nine months of sales experience in channel sales,

rural sales, direct sales and market research. I quit my job in March 2008 and started my own enterprise. I am a regular subscriber for DARE Magazine, and I believe DARE also played a role in starting my business. Currently, I am handling distribution for 3M India for super markets and key accounts in Hyderabad. I am also a DSA for Tata Sky. The turnover of my ﬁrm is 3.5 lacs per month, at the moment. I am very interested in market research, and I have very good exposure and experience in primary and secondary research methods, project report, project validation and other important aspects of market research. I am looking for guidance in this aspect. Raghava Krishna Neti DARE: Want to guide Raghava in starting his own

am an autom obile leading dealer t of a w o whe with de e le r com alershi pany, p in M cannot aharas be sha h t r r a e (details d beca the pri use of ncipal t h e c n o o mpany rms of partne ). I am r who looking can in for a for 50% vest ar ound R partne s r s 2 hip. Th crore opport is will unity fo be a g r e n olden trepren The fu eurs an ture of d inves dealers tors. this in hip is v vestme ery bri nt turn g h t . With and pr over ca oﬁt ca n be m n cros u lt i plied s Rs 1 busine ssmen crore. , invest Interes ors, ple ted ase con tact. Rahul Kumar I am a am an

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from H aldwan i. I r a d uate, c g an in u r s r t e i medica tute fo ntly r IIT-JE l coach E i a n n g d . B prelooking esides after m this, I y family am als I am k o busine een to ss. star t m Intern y busi et as ness o soon n the as pos details sible, of Int a n e r d nee net-ba busine d sed se ss mo r v i c e s, d e l s, p t strateg h r e icing ir ies. Fo and m r the r a rk e t i n I need i g ht exe g a ment cution or. of this , runnin

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Sanjay Sharm a We a re in the b manuf usines acturin s of g papads applam , fryums s. Our and brand Papad. name We are i s the 2 nd Ganesh Lijjat p biggest apad, w p la y i t e h a ma r after of ﬁve nufact tons pe uring c r day. apacity I am looking for a produc VC to ts, inno fund n vations ew , expan sion pla n, etc. Harsha l Ch Ganesh heda, Papad

market research venture? Write in to us JUNE 2008

Feedback DARE.CO.IN

I truly appreciate you and your team’s efforts in making DARE a reader’s paradise, particularly for budding entrepreneurs like myself. The thought invoking articles and the courage of content in this magazine easily qualify it to be the best read that I have personally had in many years. Indeed, it is a wonderful experience to go through the rich and insightful content of your magazine. In fact, in the pre-DARE days any information sought was available in bits and pieces; this is the ﬁrst instance when there has emerged a onestop-information-kiosk for all that one ever wanted to know about entrepreneurship. It would be my pleasure to be associated with DARE (Cyber Media) as a loyal reader and also to offer maximum recommendations across all platforms. Keep up the great work and kudos to your team once again!! Ankur Mehra Firstly, hats off to a great publication in the form of DARE. It’s simply too good. Almost all fellow entrepreneurs I have been interacting with have told me that it’s lonely at the top. With DARE around, I don’t really think so. There is so much happening that one can never feel lonely. Here is some constructive criticism. Please take it in that spirit. 1. All stories on ideas in the latest issue “Muga, the silk of Royalty”, “High performance, higher opportunity”, “Branded Puja kits”, “Big bucks in farm banks” and “Think beyond hens” have one thing in common. The cost of making the product and selling price is not mentioned anywhere. So the stories are like saying “I am setting up a pizza restaurant in one corner of Hyderabad and this is a 200 billion dollar business globally”. 2. Each business comes with its own set of challenges and risks. And that again is missing from your stories. Like for the Bird or Rat story, India does not have enough vets or enough medicines to take care of birds in 8

JUNE 2008

case there is an infection. This is a significant risk and can crush the business in no time. As a publication, I feel that this is your responsibility to mention these aspects while giving out business ideas as there might be lots of people who will jump on to the bandwagon and most of them will use the hard earned money from their friends and family. 3. There are a lot of people who are sitting on the fence, with a big education, experience and designation. and not taking the plunge. That’s a big loss for India. If you can convince leading entrepreneurs who run large organization to give a one to six month paid holiday to their employees to work on their dream projects, that would be the real contribution that DARE would make to the Indian economy. Sandeep Saxena Founder and CEO, Acton Biotech I am a software engineer working for a software company in Bangalore. I have always been passionate about being an entrepreneur. Last December, I got an idea for a new venture. I did a survey of around 200 people and realized that my business idea is good and that it will also open another door of business a couple of years down the line. I was more interested in starting out my business first, so I kept the writing of business plan and approaching investors for later. About my business – it is a kind of e-commerce business. I recruited four software engineers in January 2008 to develop the product. As they are not from Bangalore, I have provided them with food and stay with me. As of now, we have got couple of customers lined up and the final product should be rolled out by May 20, 2008. I have been pumping in money for the business from the salary that I get from my present employer. About 90% of my present salary is routed to pay off the salaries of my employees. I have come to realize now that I need to approach investors to take my business to new heights.

Here is my doubt: In your March 2008 edition of DARE, you had mentioned that the management team of a startup is one of the top priorities that VCs consider. This priority supersedes even the idea and other factors to invest. In my case, I am alone in this venture. I had approached some of my friends for partnership, but I did not find them suitable when it comes to taking risks. Will the VCs be interested in investing in my business, even though I am alone? Karthik Selvam DARE: Interested in guiding Karthik? Write in to us The popularity of DARE can be measured by the fact that I am getting almost ten emails daily from people who have read about my company, and then searched online to find my email address. Thanks again for carrying a wonderful piece on my business (DARE, May 2008). By far, this is the best written article on Blessingz. Prakash Mundhra Sacred Moments I am one of the very first readers of DARE. I have been reading your wonderful editions from the very first issue. The search for many unsolved questions concerning entrepreneurship has come to an end. Krishna Kumar’s editorial reads of the mind of the reader, as if the thought of entrepreneurs are being expressed in the best possible way. With DARE, I feel the journey of entrepreneurship has begun and I have a feeling that at some point the unexplored ideas in the mind of the entrepreneurs like me will shape up the industry in a big way. It would be really nice to see a discussion forum in DARE, where people with funds and are interested to invest in new innovative products from startups, reach out to the entrepreneurs. I feel that DARE can be contributing in germinating entrepreneurship. Chandrakant P. Borshe Force Motors

Feedback DARE.CO.IN

This is apropos “There’s no easy way out” (Dare May 2008). Even a small business/professional set up in India requires a large number of acts (laws) to be followed. Even if one is self-employed without any employees, one is required to follow a good number of acts, some of which are illogical and have no practical utility either to the authorities or to the businessman/professional. Just to follow and comply one is required to devote a substantial amount of time or money on it. If the authorities wish, any business can be closed, as there shall be always be violations in one way or the other. Truthfully, if one is running one’s ofﬁce successfully, it is thanks to his stars or the authorities who allow him to run his small business or profession. Mahesh Kumar

Even though you have covered the subject as a business, let me cite an example of performing arts contributes for the success of an innovative product a la an educational tool, for children and as well adults. Three Bros and a Violin, a family of musicians (high ranking performing arts) and their equally talented spouses, are in the business of story telling in audio-CD-books. One visit to their website will reveal certain issues faced by this company, such as how effectively classical music is brought into the album and this has perhaps been done the ﬁrst time in the world. As the ﬁeld of entertainment is supposed to boom further, a detailed coverage on this subject will be useful to the subscribers of DARE and others who read the same. Vishwanath Hariharan

DARE is a magazine that is bold, well-told, and beautiful enough to energize, rejuvenate, and motivate even a shy individual from within. I have experienced during my heydays (I am 69 plus now), as an employed executive as well as an independent business agent, problems as to whom to approach for certain aspects and never got beyond the obvious. To a certain extent, with DARE, I am now encouraged to take up certain assignments that I had left off. The highlights of the coverage are more or less of success stories, comparable to unknown or lesser known areas. Such coverage and more to follow will be a great gift to aspiring entrepreneurs, management graduates, and so on. DARE comes to me through Federation of Andhra Pradesh Chambers of Commerce and Industry, Hyderabad, where I hold the discipline of tourism, as co-chairman of the committee, as also member of Membership Development Committee, and Information Technology. ”The Business of Performing Arts” (DARE, April 2008) got me to mail this note. Many performing arts are now gaining commercial momentum in the area of entertainment.

Back in December 2007, it is quite by accident that I came across an issue of DARE in one of the Landmark stores in Pune. I was so impressed with the title that I bought it. In the subsequent month, I searched for DARE in all big stores such as Landmark, Crossword, etc, in Mumbai, and I could not ﬁnd it. To my surprise, I found that it was easily available in roadside bookstalls. Anyway, it is since back then that I am an avid reader of DARE. It seems to me that I am not the only one with a feeling of RED in my belly. I want to express my sincere thanks to your entire team for bringing up such a wonderful piece of publication. I am presently working in a European MNC since the last two years. Now I am joining one of the best B-Schools of India to do MBA in marketing. I hold an Engineering degree from NIT, Surat. It took me almost two weeks to write this mail. I intend to build a big empire of my own. I have tried lots of things… I have prepared lots of business plans. I talked to lots of people, but every time I was being stopped by one thing viz. the feeling of complacency. I want to come out of this sense of easiness. I know I will do it but I want to come out sooner.

JUNE 2008

I bought a franchisee of India’s Best MBA coaching classes in my home town. I thought I will hire someone to start and then move out, when things settle down. However, I could not find anyone with a similar big dream or vision. I had also, with my friend, prepared a business plan to start a consultancy in green technology. We researched a lot, talked with a lot of professors and professionals, etc. It is then that we realized that this is a field that will boom in couple of years from now. This effectively meant that to enter in this field right now will be highly beneficial. However, the fact is that it requires lot of money, research and knowledge. We lacked all three, so we put the plan in the backseat. With CAT and IIT-JEE going online in a year, I had a thought to start an online coaching institute with great study material, one-on-one voice chat and mentoring. This, I figured, will make it easy for a student to sit at home and study, as not everyone can afford to go to KOTA for coaching. I have since chalked out a plan and am waiting for the right time. These days, I am working on starting a 12-15 people call center. I have one client, and I want it to be cost effective. Honestly, I don’t know when will I start something of my own. With all these examples, I wanted to cite that my inertia of state is very strong. I want to move out of this zone, for this I need some mentoring, I need some resources. I just want to say that I have willingness to do anything and with hard work I can achieve whatever I wish. I simply wanted to express my gratitude to you and your entire team. I will keep on expressing and sharing my views with you. Ankur Jain

SMS “DARE <your comments, questions or suggestions>” to 56677 or Drop us an email: dare@cybermedia.co.in

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/news PE investments to touch $16 billion in 2008 Private equity investments in the country could touch $16 billion in 2008, and the trend is likely to continue in the coming years, according to a report by Four-S Services, a financial consultancy firm. In January and February this year, 84 PE or VC deals worth $4.1 billion were announced. Another research firm, Boston Analytics, predicts that on the back of strong economic growth and lucrative valuations, private equity investments in India will continue to grow strongly upto 2010. The study points out that between 2004 and 2007, PE investments worth $24.8 billion flowed into India spread over 903 deals. Forty-five deals were higher than $100 million.

FTA boosts India-Lanka trade The India-Sri Lanka free trade agreement (FTA), which was completely implemented by March 2008, has increased the bilateral trade by four times since 2000, according to a FICCI study. The study pointed out that the total bilateral trade increased by four times in the postFTA period to reach $2.7 billion in 2006-07 from a mere $685 million in 2000-01. The FTA implementation period for India was from 2000 to 2003, whereas for Sri Lanka, the implementation period was eight years i.e. from 2000 to 2008. The study also observed that India has taken a lead over Japan in the post-FTA period in terms of share in Sri Lanka’s global imports. In 1999, India’s share was 9.5% in Sri Lanka’s imports and it was the second largest importer after Japan. But in 2005, India achieved a share of over 17.3% in Sri Lanka’s imports and became the largest importer.

India to emerge as 6th largest market by 2012 India will emerge the sixth largest market by 2012 because of income and population growth and saving behavior, according to Vinod Sawhny, President and Chief Operating Ofﬁcer, Bharti Retail. At the Retail Conference on ‘Transforming Retailing in India’, held on May 13 in New Delhi, he said the retail sector will grow on the strength of the rising purchasing power of the consumer, which will mainly come from the services sector. Rising population of working women, rising services sector, growing middle-class and easier access to credit are some of the factors that will fuel the growth of retail industry in India. He added that private labels will constitute a big part of organized retail. 12 JUNE 2008

DARE.CO.IN

/news Quicker reforms to boost textile industry The domestic textile industry, which is currently braving various odds, could achieve $55 billion of investments, create job opportunities for 65.4 million workforce and its CAGR could go up at 22% by 2010 provided reforms are initiated into it at a quicker speed, according to ﬁndings of The Associated Chambers of Commerce and Industry of India (ASSOCHAM). In a study brought out by ASSOCHAM on `Indian Textile: Weaving a Global Spin’, it has been stated that with continuing bottlenecks in place, the projected investment for 2010 could fall to $16 billion from the projected $55 billion and job prospects stay for a meager lot of 19 million workforce as against projections for 65.4 million.

Modern trade grows 90% in metros Indian shoppers are going all out to embrace modern trade, according to the latest Nielsen Shopper Trends

Business confidence moderates: CII Survey The CII Business Confidence Index (CIIBCI) for AprilSeptember 2008-09 has moderated by 5.3 points thus reflecting a decline in business confidence compared to the past six months. Uncertain global economic outlook and concerns about high interest rate have affected business confidence, according to CII. Business confidence, however, compared to the corresponding period last year is down by only 2.9 points. Despite concerns, 67% of the respondents to the survey expect increase in investments during April-September 2008-09 in comparison to October-March 2007-08.

Number of Indian millionaires to rise India will become the eighth largest wealth centre by 2017 and will have over four lac new dollar-millionaires, according to a unique Household Wealth Index, developed by Barclays Wealth and the Economist Intelligence

ern trade has grown 90% across India’s eight key met-

Unit (EIU). It says that as the global wealth boom continues, the gap between developed and developing markets is closing. China will accelerate from seventh to third

ros, Nielsen has found that in the past year (Nov 2006-

place and India will jump from twelfth to eighth place in

Nov 2007 period) the number of customers who have

the global wealth rankings, it says.

India report by research ﬁrm AC Nielsen. While mod-

shopped at a supermarket or a hypermarket store in a span of four weeks has also nearly doubled over the same period. Spending at supermarkets has also seen a growth of 50%, according to Nielsen. While the local grocer may be losing out on their share of customers’ wallets, supermarket shoppers continue to visit the local grocer - in fact more often than they did a year ago. The ﬁndings of the Nielsen survey indicate that shoppers generally use the modern format for their weekly and monthly shopping needs and use traditional stores for “top-up” shopping.

Sharp growth projected for services sector New product introductions and more marketing will see India’s services sector posting strong growth over the

Blackstone to put $18 m in Synergy Prop Private equity major Blackstone will invest approximately $18 million for a minority stake with board representation in India-based Synergy Property Development Services. Formed in 2003, Synergy is a project and construction management company and currently has over 500 employees across nine Indian offices, with international offices in Dubai and Kuala Lumpur. Synergy has delivered over 20 million square feet of real estate and is presently managing over 100 million square feet across various asset classes including office, retail, residential, hotels and hospitals. The company also has plans to expand into infrastructure projects such as airports.

next year, according to the spring 2008 KPMG Business Outlook Survey. The survey involving 1,400 services sector respondents, shows highest confidence among the services sector in India with 60% of the Indian firms expecting increased activity. It says that around 58% of Indian firms expect higher revenues on the back of increase in sales and commercial spending. Around 56% of the firms surveyed in India forecast increase in new work, and none expected a fall.

44% private cos plan to grow via M&As Despite the current turbulence in the world ﬁnancial markets, 44% of privately held businesses globally are planning to grow through acquisition in the next three years. Twenty-three percent of those businesses anticipate a cross-border deal, says Grant Thornton. Privately held businesses see domestic and international mergers and acquisitions as a key strategic tool to drive growth. JUNE 2008

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opportunity/franchising

The power of franchising Want to start your own business but not from scratch? Become a franchisee. But don’t forget to do some homework before zeroing in on a business /Vimarsh Bajpai

wo big franchising stories unraveled over the past year albeit in opposite directions. On one side, the franchising bug hit Indian cricket with the Board of Control for Cricket in India (BCCI) unveiling the Indian Premier League (IPL) in September last year. On the other, Reliance Industries decided to pull curtains on all of its 1,432 petrol pumps across the country this month, leaving its franchisees high and dry. While at IPL it has been raining money for the BCCI, franchisees and cricketers, Reliance dealers have seen a dead end to their dreams. But all failures leave us with some learning. Here is one: “The franchisees should have read the fine print of the agreement with Reliance. Difficult exit clauses have left Reliance petrol pump dealers in a lurch. They can’t even sell out and exit now,” says Dwarika Prasad Uniyal, assistant professor of retail management at the Mudra Institute of Communications (MICA), Ahmedabad. Given the subsidy regime in oil retailing that is skewed in favor of the public sector companies, it was indicative right from the start that RIL might not be able to sustain the selling price differential between private and public sector retail outlets. But the Reliance fiasco is only an exception to one of the most successful business models around the world—franchising. Ask Cyril Roy and he will vouch for the success of his franchisee business. Roy runs a Ludhiana-based franchise of Top Careers & You (TCY), which provides college-level test preparation and school-level supplemental education services. The company provides classroom and online teaching from K-12 and to students preparing for competitive exams. Roy, who was earlier the business development manager for TCY decided to switch sides in August last year, having found the business model lucrative. With an initial invest14 JUNE 2008

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opportunity/franchising ment of Rs 3.5 lacs, he opened a TCY center in rented premises. “I got tremendous response from day one. I hope to break even in another two months’ time,” says Roy. His franchisor helped him with advertisements, study material and training of staff. Roy is among the thousands reaping the benefits of the booming Indian franchising industry, pegged at $3.3 billion. “The Indian franchise market has recorded a steady growth of 30-35% per annum in the last five years. The industry turnover touched $3.3 billion and is projected to soar higher in the coming years,” says Zahir Abbas, Associate Director, Technopak Advisors, a leading retail consultancy firm.

What is franchising? Just having the ambition to start your own business is not enough. You have to begin from scratch; going to the drawing board making a business plan, ﬁnding co-founders, if needed, scouting for funds and then building the blocks of your dream plan. The other option could be to take the franchising route. Someone out there has a tried-and-tested business model and is looking to expand. “The franchising model comes into play when the business either has a great product, service or a process and wants to expand. So either it opens its own outlets or ﬁnds out willing partners who would become its franchisees and thus help it grow,” says Uniyal. That ‘willing partner’ could be you. So a franchisee gets the license from the franchisor to operate the same business at a different location using the franchisor’s brand name. The infrastructure is set up by the franchisee, while the brand holder helps the licensee at each step.

What’s driving it? The simple answer is India’s entrepreneurial zeal. With the number of people wanting to start their own business on the rise, franchisee networks are bound to grow. “India is a very diverse country so you need people who understand the local market and expand the brand. So franchising offers a very good opportunity,” says Gau-

“

Franchising is a marriage of convenience for both the franchisor and the franchisee. For a franchisee, it is a kind of piggy-backing on the brand equity of a big business.

”

— Dwarika Prasad Uniyal, Assistant Professor, Retail Management, Mudra Institute of Communications, Ahmedabad

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opportunity/franchising

The Indian franchise market has recorded a steady growth of 30-35% per annum in the last ﬁve years; industry turnover has touched $3.3 billion.

”

-- Zahir Abbas, Associate Director, Technopak Advisors

rav Marya, President, Franchise India Holdings, an integrated franchise solution company. India’s retail sector is growing like never before. According to estimates, the $383 billion retail industry has a miniscule 3% organized sector that is growing at 25-30%. This is backed by the rise in purchasing power of the populace and is fuelling consumerism. Abbas of Technopak believes that fast-growing consumerism, a shift towards services from agriculture and manufacturing, and urbanization are contributing to the growth of franchising. He says the franchising industry employs about 3,00,000 people with concentration in telecom, retail, food and education, as these are the fastest growing sectors in Indian franchising. The Indian telecom sector recently celebrated a record of 100 million users and this number is expected to touch 500 million by the end of the year 2010.

The Business Model For entrepreneurs, franchising offers the opportunity to gain more by investing less. You get the brand name and the business process on the platter; you just have to implement it. "Franchising is a marriage of convenience

DARE/tips for entrepreneurs 1. Give due importance to your interest while taking a franchise 2. Assess the business model carefully 3. Do not fall head over heels for just the brand name 4. Having the right skills helps, but franchisors can hand-hold initially 5. Read into the ﬁner details of your franchising agreement 6. Talk to existing franchisees to get the feel of the business 7. Do not fall short on passion and energy; it is you who has to run the business 16

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opportunity/franchising

“

Take the franchise of the business you have interest for. Don’t jump on the business model that just promises good returns.

”

– Rajeev Manchanda, Vice President, Franchising Association of India

for both the franchisor and the franchisee. For a franchisee, it is a kind of piggy-backing on the brand equity of a big business. Thus franchisors look out for local people who have a good understanding of the market and local networking as well,” says Uniyal. The initial investment and the working capital needed vary a lot depending on the business you want to get in. You pay a one-time franchisee fee to the franchisor and then the royalty. The amount of royalty could be ﬁxed or may vary depending on sales. TCY, for instance, takes a ﬁxed royalty from its franchisees. There are different types of franchising models such as master franchisee, area development rights, unit franchise and joint venture-cum-franchise agreement. The cost of starting your own outlet varies considerably. For opening a salon of a leading beauty and well-

“

Return on investment in franchising varies a lot and depends on various factors, but anything from 15-20% is decent.

”

Since vital rights are at stake, hence the whole (franchising) agreement becomes important and no area should be ignored.

– Gaurav Marya, President, Franchise India Holdings

ness brand, you would need an initial investment of Rs 10-20 lacs, working capital of Rs 2-3 lacs and can expect returns of 30-35% per year. In the case of Shemrock School, for instance, investment of Rs 4-8 lacs would be needed for infrastructure. The returns depend on many factors—the size of the school, the amount spent on infrastructure, marketing, efforts of the franchisee and the staff etc. Says Amol Arora, Managing Director, Shemrock School, “The returns vary a lot depending on these factors. We have seen one franchisee earn Rs 30,000 a month and another Rs 3 lac a month in the same city.” Most franchisors measure prospective franchisees on different parameters. This could be as diverse as the location of the outlet and skills and passion of the entrepreneur. Some franchisors do not approve of two franchisees in a three-km diameter. “Every company has a different criterion for selecting franchisees. For DARE franchising facts some businesses, location • There are over 600 active franchisors in the is a very important factor country because the business needs visibility,” says Rajeev Man• There are over 40,000 franchisees (across chanda, Vice President, sectors) in India today Northern Region Council of the Franchising Associa• The total investments put in by these tion of India (FAI). franchisees in setting up their individual As it is the repuation franchised businesses is over Rs 5000 crore of the frachisor that is at stake, most companies • The total annual turnover achieved by would want to ensure that franchised businesses in India is in the their franchisees would be region of Rs 8000-10,000 crore able to live up to it. “Before signing up with a fran• The total manpower directly employed chisee we have to see so by these franchised businesses is many things because our around 300,000 franchisee is representing SOURCE: Franchising Association of India (www.fai.co.in) us in a particular city, in

“

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”

– Srijoy Das, Partner, Archer & Angel Law Firm

all aspects – classroom delivery and courseware, etc. We ensure that he follows our standardized approach,” says Kamal Wadhera, CEO, TCY. The onus of making the franchising partnership a success rests with both the franchisor and the franchisee. "If the franchisee sees that the franchisor is making money and he is not, then the relationship does not work," says Manchanda. He favors that the two should be in constant touch with each other. There are many hot sectors, but education, food and beverages, beauty and wellness, services sector, luxury goods, particularly clothes and shoes, and telecom are seeing brisk growth.

The Fine Print The franchise agreement is the most important document for a franchisee. According to the FAI, franchise agreements vary from franchise to franchise and it would be impossible to identify every term and issue that should be considered in every situation. Thus the FAI has come out with a checklist that would beneﬁt those interested in buying a franchise. However, it is advisable to take legal help to understand the terms and conditions in its entirety. The legal fee would vary according to the complexity involved. It could be from Rs 1-10 lacs, according to Srijoy Das, Partner in the national law ﬁrm Archer & Angel. “A franchise agreement or system involves the transfer of various rights (proprietary) of a franchisor to the franchisee including intellectual property, technical and non-technical knowhow. All these rights per se are vital to the franchisor and their protection is of DAR E utmost importance,” he says. JUNE 2008

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/blog

The power (and pain) of research Research makes sense only when you interpret it in the right manner /Rupin Jayal

“It is the new and different that is always most vulnerable to market research.” Malcolm Gladwell, Blink: The Power of Thinking Without Thinking, 2005

“If we knew what it was we were doing, it would not be called research, would it?” Albert Einstein (1879 - 1955)

“Advertising people who ignore research are as dangerous as generals who ignore decodes of enemy signals.” David Ogilvy Ogilvy & Mather advertising

o this isn’t an article on the intricate technicalities of formal research in advertising and brands. There are many far better qualiﬁed to write on that subject. 20

JUNE 2008

What this article is about is reflected in the three quotations above. Research is truly a paradox. Many point out that most of the really big inventions, creations, paradigm shifting ideas, etc, were not the result of clusters of eight people sitting in a room answering questions. It is also true that there have been many new products and ideas that did very well in research and then bombed afterwards and vice versa. While still others talk about great ideas that came out of research or how if people had listened to what the research really said the product, brand or campaign disaster might have been avoided. And that is the paradox. They are all absolutely right. The fact is that research is merely a tool. It isn’t a mysterious black art that will reveal the secrets of the future nor is it a means of getting inside the complex mechanism of the human brain. At the end of the day, all research largely depends upon how people respond and how “experts” interpret that response. Just like any tool it can be marvellously effective or horribly wrong depending on how it is used and the intent behind it. Also just like any tool it works within a system. This system comprises individual human minds interacting with each other and the world around them in myriad ways. Some of these are easier to identify, understand, interpret and explain. Others however are driven by factors that lie far deeper and are much more complex. Within each of us there are conflicting imperatives, needs and desires. Different categories create different interactions amongst these. Sometimes brands transcend their category dynamics and operate at a far higher level and are thus even more difficult to neatly analyze and interpret. Yes the echo of “New Coke,” that epiphanic moment in the history of modern

marketing, is loud and clear. That moment is a vivid metaphor for the complexity that researching human beings entails. It should have been a success—it wasn’t. Its failure should have doomed that brand – it didn’t, in fact it strengthened and refreshed people’s relationship with the brand. Is the answer to simply go by gut feeling? Or can it be resolved by ever more complex methodology aided and abetted by the vast leaps in computing power? Actually the answer lies elsewhere. Research helps you understand what people say they think about something. It gives you a sense of where they are at. If you use it to explore and understand their relationship with a category or a brand it can be very illuminating. If you use it to check comprehension or how something new might be received, what the barriers might be and what the real strengths are, then research can be very insightful. If you use it to understand how people deal with the contradictions of life and how they use brands to resolve these contradictions or challenges then (with sensitive and insightful analysis) research can truly be a enlightening. If you seek to understand a particular piece of research within the larger context of the brand, the category and of society itself, then just like a piece of an inﬁnitely large jigsaw puzzle it would “ﬁt in” and probably be very useful. However the basis for research sometimes lies elsewhere and that can be a problem. There are four major errors that often happen in research: • One doesn’t really know what that one key objective is for a particular piece of research or there are multiple reasons • The methodology is so complex that it becomes the focus rather than the research itself (it is amaz-

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/blog ing to see how often professionals who recommend a particular methodology struggle with executing it afterwards) • The research is being done either to pass judgement or protect or demolish a project—in other words the research is motivated • The respondents are incorrectly or inaccurately defined In addition there often is a lack of a larger contextual understanding against which to interpret the findings. There are very few consumer choices that occupy a significant portion of a person’s day. The brands that we sweat over so assiduously do not occupy even a fraction of that space in most people’s lives. So when people sit for a couple of hours in a room talking about just one thing or when they fill out long questionnaires it often is no longer a true representation of the actual space occupied by that brand (and category) in the lives of most people. Their responses too can become exaggerated. Their responses therefore need to be understood in that context and therefore what is actually driving them has to be understood. Sometimes the most revealing information comes from pure observation and not intrusive questioning. Often responses when understood against a larger social context become far more meaningful. So if you asked most people how important safety is when buying a car they are most likely to give it a fairly high rating. However few, if any, automobile brands sell in India on the basis of safety. Why this contradiction? First of all ours is a youth-driven country (half our population is below the age of 25). We are also “young” as consumers—the real fruits of liberalisation, an open economy and the availability of a wide variety of brands, are barely 15 years old. The average age of customers for many categories is falling. We are fascinated by the excitement of new technologies, of the availability of the “latest, latest,” we are excited by all the opportunities and options that increasing incomes are beginning to allow us. The future looks promising

and the “rise of India” story has now acquired a certain conviction. We are, not surprisingly, one of the most optimistic countries on earth. So we seek things that excite us. We seek things that challenge and stimulate us. We seek to juice the maximum out of this new world that is coming up around us. Health is now more about “healthfulness”—having the energy and positivity to achieve our aspirations, enjoy life more and look younger, rather merely maintaining one’s health. Even insurance investment is about allowing people to retire earlier from work rather than from life and to continue enjoying a youthfully exuberant life. So when an automobile brand tries to talk about something as defensive as “safety” we pay lip service to it and give it a very high ranking when asked, but pretty much pass it over when we actually choose, prefer and buy. And to complicate things further, indoctrinated by an educational system that emphasizes the “right” answer, respondents sometimes tend to try and give the “right” answer rather than express an independent opinion. So understanding the larger context is critical. Every piece of research is like a precision component in a highly complex organic machine. It cannot describe the machine itself and if viewed in isolation it could be very confusing at the very least. If the four deficiencies are factored in, it could be doomed from the start. So what should be done? Here are some pointers that might help: • Understand what people really seek from the category and your brand • Understand what role it plays in their lives • Define very sharply what it is that you seek from the research that you intend to do • Do not get people to judge your concepts, communication or positioning • Ask the right questions. If you have a good sense of the first two, you should be able to do this • Don’t interpret the findings in isolation. Set them against what you understand is happening around you,

what the category dynamics are, where your brand is at and most of all what the research expert’s experience has been when addressing similar categories or talking to similar people • Try and identify personal biases and as often as possible avoid allowing them to cloud the results. But do not subordinate your experience and judgements when deciding the way forward (this balance is sometimes the most difﬁcult to achieve) Research is very helpful and in most cases can play a critical role—ignoring it is truly as dangerous as “generals who ignore decodes of enemy signals." However, if not used with care and understanding it does endanger new ideas, new concepts and anything that departs from the familiar. At the end of the day we do research because we are not absolutely sure of the answers. We do it because we want to discover and understand.

“If you want to study a river you don't take out a bucketful of water and stare at it on the shore. A river is not its water, and by taking the water out of the river, you lose the essential quality of river, which is its motion, its activity, its ﬂow.” Alan Watts: The Wisdom Of Insecurity

“If I asked my customers what they wanted they would have said a faster horse.” Henry Ford

“The truth is more important than the facts.” Frank Lloyd Wright DAR E

The Author is Director-Strategic Planning at M&C Saatchi. JUNE 2008

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/sector analysis

Medical and Wellness Tourism in India

The slogan of the industry is ‘First World treatment at Third World prices’. Here is a quick primer of the Rs 800 crore business in the making. /Shilpi Kumar

t was the year 2003, when twoyear-old Noor Fatima arrived in India with her parents on the Lahore-Delhi bus service to undergo a heart surgery. The entire country was hooked on to their television sets, as all of us prayed for little Noor’s speedy recovery. Even Sonia Gandhi could not resist and wrote a special letter to Noor admiring her courage and praising her “indomitable spirit.” Noor’s case opened up a new avenue for India’s healthcare sector, awakening people to exploit the potential that lies in medical tourism even more. The Indian government eased out visa restrictions for other Pakistani children requiring medical attention and also announced that they would ﬁnance the travel, treatment and accommodation of around 20 children. That was the year 2003. Five years later, in 2008, we are looking at around 170,000 foreign patients coming in annually, with the medical tourism market at around US $300 million. According

22 JUNE 2008

SUJIT CHATTERJEE CEO, Hiranandani Hospital

to ASSOCHAM, the market is expected to grow to US $2 billion by 2012.

Healthy Traveling As the name suggests, medical tourism refers to traveling to different countries for healthcare purposes. The healthcare sector and the tourism industry are working together in facilitating this process. Medical tourism is rapidly catching on, especially in western countries, as they have to put up with exorbitant healthcare charges and long waiting lists. Also, with international traveling becoming easier and affordable and with improvements in healthcare technology and infrastructure across the world, medical tourism is fast becoming a preferable way to mingle leisure with health and wellness. Besides India, industry experts believe Singapore, Thailand, Hong Kong, Malaysia, the Philippines, Colombia, Costa Rica and UAE to be some of the hot destinations for medical tourism.

An overseas traveller comes in with a perception of a hospital that can be compared to western standards. When the patient can actually see glimpses of that hospital here in India as well, they feel satisﬁed.

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/sector analysis Indian Advantage What attracts tourists the most towards India is its low cost treatment, compared to western standards. Research shows that the cost is lower by an average of 40 to 60%, when compared to the US or UK. This includes the stay, cost of treatment, as well as the fare to and from India. This is not to say that the quality of medical care suffers. As the popular slogan that goes around in the industry says, India offers “First World treatment at Third World prices.” India produces around 30,000 doctors and nurses each year and is known worldwide for its qualified and competent professionals in this field. As said by Sujit Chatterjee, CEO of Hiranandani Hospital, “Even in their own countries, patients prefer consulting an Indian doctor, as they are on the forefront of medical care.” An added advantage is the fact that the Indian government issues a medical visa for those who come in for medical treatment. Up to two family members or attendants can also be granted a visa, to accompany the patient. The visa is valid for a year or the period of treatment, depending on whichever is less and can be extended for another year. It also enables a tourist to travel to India three times in a year. India’s National Health Policy clearly states that “the treatment of foreign patients is legally an export and eligible for all fiscal incentives extended to export earnings.”

DARE/most sought treatments Ayurvedic treatments Bone-marrow transplant Brain surgery Cancer procedures (oncology) Cardiac care Cosmetic surgery Dental procedures Dermatology Dialysis and kidney transplant Drug rehabilitation Gastroenterology Gynecology and obstetrics Health checkups Internal/digestive procedures Joint replacement surgery Neurosurgery and trauma surgery Nuclear medicine Ophthalmic procedures Orthopedic surgery Osteoporosis Preventive healthcare Refractive surgery Rheumatology Spine-related Urology Vascular surgery Weight-loss surgery

Industry Glimpse According to ASSOCHAM, ayurvedic and medical tourism industries are likely to gain around Rs 800 crore from the 2010 Commonwealth Games. Out of this, it has been predicted that the market for medical tourism alone is around Rs 300 crore, the rest accounting for that of ayurvedic remedies. The breakup of tourists spending on medical tourism will fall in the band of around Rs 40,000-Rs120,000 on an average; whereas the amount spent on ayurvedic-related treatment will be around Rs10,000-Rs35,000. Job opportunities for about 40,000 professionals are expected to arise in these ﬁelds. A CII-McKinsey report (Healthcare in India: The Road Ahead) states that medical tourism can be a much bigger business, provided we have proper infrastructure and networking amongst hospitals, hotels and tourism agencies.

In Demand Apollo Hospitals enterprises is estimated to be the largest medical corporation in India that specially caters to medical tourists. Apollo has attracted patients from

SOURCE: Various Websites

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/sector analysis SANDEEP BAFNA

CEO, Travel India Company

I get a lot of queries for kidney transplants, cosmetic surgeries and ayurvedic treatments. Patients also enquire about dental treatments, although I do not recommend this unless you are coming to India for vacation or a business trip. It is not pocket-friendly to make a trip here exclusively for dental care. Southeast Asia, Africa, and the Middle East and has tied-up with various hospitals in Mauritius, Tanzania, Bangladesh and Yemen. Patients can avail of package deals that include ﬂights, hotels, treatment and a post-operative vacation. Other popular hospitals include the Escorts Hospital and Research Centre, All India Institute of Medical Sciences, Kerala Institute of Medical Sciences and Institute of Cardiovascular Diseases. What treatments are these medical tourists coming for? Says Sandeep Bafna, CEO of Travel India Company, “I get a lot of queries for kidney transplants, cosmetic surgeries and ayurvedic treatments. Patients also enquire about dental treatments, although I do not recommend coming all the way to India for it. If a patient is coming on a vacation or for a business trip it is more feasible to get this done, but a trip made exclusively for dental care is not pocket-friendly at all.” Patients are also coming to India for heart surgeries, hip and knee replacements, infertility treatments, as well as for rehabilitation. If it is medical safaris that attract tourists in South Africa, India is famous for its Rajasthani heritage tours and Kerala backwater tours. “After a treatment, patients usually prefer going to a place that is green, outside the city and is serene, where they can just sit back and relax,” says Sandeep. Annu Puri, director of Indicure adds, “Unless there is a speciﬁc location that has been recommended to them, people usually prefer visiting places that are closer to where their hospital is located. For example, a patient who 24 JUNE 2008

got treated in Mumbai usually makes a stop in Goa for a holiday. Rajasthan is also becoming an extremely popular destination since celebrities like Madonna have been spotted there.”

Attracting Patients When it comes to luring medical tourists, hospitals follow different

DARE/preferred health centers AIIMS Apollo Cancer Hospital Apollo Hospital Aravind Eye Hospitals Ayurvedagram BM Birla Heart Research Centre Christian Medical College Escorts Heart Institute and Research Centre Hiranandani Hospital Indraprastha Medical Corporation Institute Cardiovascular Diseases Kalari Kovilakom Kerala Institute of Medical Sciences KG Hospitals PD Hinduja National Hospital and Medical Research Centre Tata Memorial Hospital Wockhardt Hospitals SOURCE: Various websites

approaches. Hiranandani Hospital boasts of its high-class infrastructure, a bed-to-space ratio of 1:1600 square feet and pre-hospitalization services that include providing cost estimates for treatment and stay, as well as assisting with arranging accommodation for relatives that accompany patients. On arrival, there is airportto-hospital conveyance provided for the patient. “An overseas traveller comes in with a perception of a hospital that can be compared to western standards. When the patient can actually see glimpses of that hospital here in India as well, they feel satisﬁed,” says Sujit. He continues by saying, “We don’t advertise on a regular basis and neither do we go overseas for conferences, pitching for our medical value. We don’t even have special partners that send patients to us from abroad. We give our patients a one-stop service. They simply logon to our website and apply.” Kerala Institute of Medical Sciences (KIMS) also has great infrastructure and well-qualiﬁed doctors with international experience. According to EM Najeeb, executive director of KIMS, “There were around 25,000 foreign patients last year from the Maldives, the Middle East and other neighbouring countries.” However, when it comes to medical tourists, they work differently from Hiranandani. They have a tie-up with International Patient Division and several such organizations that source international patients to them. They offer tailor-made packages after investigating the medical history of the patients and determining the logistic support that is required.

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/sector analysis E M NAJEEB

Executive Director, Kerala Institute of Medical Sciences

We work with the Great India Tour Company, a sister company of KIMS, to arrange for tourism packages, hotel reservations, as well as ticketing and travel for the patients. The tourism packages usually consist of boat and backwater cruises, beach holidays, ayurveda tours and wildlife tours. “We work with the Great India Tour Company, a sister company of KIMS, to arrange for tourism packages, hotel reservations, as well as ticketing and travel for the patients. The tourism packages usually consist of boat and backwater cruises, beach holidays, ayurveda tours and wildlife tours.” claims Najeeb.

Facilitating Agencies There are several agencies that are working towards organizing the health service sector and acting as a facilitator between patients and various hospitals, hotels and tour companies. They also provide advisory services to medical tourists related to their treatment and stay in the host country. While there are some agencies that focus strictly on medical tourism, there are others that have expanded their parent companies into medical tourism as well. One such agency is that of Sandeep Bafna, based in Bangalore. He started his tour company, Travel India Company, about four years ago and medical tourism in just one of the divisions of the company. “While most travel agencies just put a section on their parent website, my portal (indian-medical-tourism.com) launched in 2006, is a dedicated website just for medical tourism,” says Sandeep. He coordinates the entire medical treatment process, as well as arranges for airport pickup and drop, accommodation and packaged tours for the patients. According to him, 10% of the total revenue of his agency is generated from medical tourism. Indicure, another such agency, provides comprehensive and customized

services strictly catering to medical tourists coming to India. Says Annu Puri, director of Indicure, “We work in coordination with the services of consultants, hospitals, travel and transportation companies and hotels to make the experience of coming to India for healthcare completely hassle free for the tourists. It is like a chain and we are like a thread leading the entire chain.” Indicure has a network of spas and resorts and provides rejuvenation and side-trips to the patients as well. When it comes to accommodation, Indicure has a variety of options ranging from star hotels to fully furnished and serviced apartments. “It is a complete end-to-end solution that we provide to our clients. We don’t want our patients to get any surprises,

“

We lose out on medical tourists to countries like Thailand and Bangkok, because the prices are very comparable and

the destination is multifavorable, with its good hospitals, pleasant climate and hot tourist

”

destinations.

— Annu Puri

Director, Indicure

so it’s a complete trust building exercise that we do, even before the actual treatment starts,” says Annu. The price of such services varies depending on the kind of treatment required, what hospital and accommodation the patient chooses and whether or not they are looking for a recuperative holiday after their treatment.

Challenges en-route “The Indian government does not have a standardized policy regarding medical tourism yet, which can pose as a hurdle in the growth of the industry. The fact that there is no uniformity in accreditation makes a tourist hesitant towards coming here,” says Sandeep. Also, there is tough competition for India coming in from countries like Thailand and Singapore. “We get around 300 queries in a month, but the conversion rate is really poor. We lose out on medical tourists to countries like Thailand and Bangkok, because the prices are very comparable and the destination is multi-favourable, with its good hospitals, pleasant climate and hot tourist destinations. India still is often associated with pollution, malaria, bad roads, trafﬁc and unhygienic water,” says Annu. What works in favor of places like Thailand is the fact that the Thailand government works in conjunction with the healthcare industry in a public-private partnership. Also, aggressive international marketing is done in association with the tourism industry. India should work in a similar manner to shatter the image of India as a Third World country and to attract more DAR E tourists to the country. JUNE 2008

DARE.CO.IN

opportunity/f&b

Juice bars chain: the coming of age It has happened with coffee, food, junk food, and such. Now, the time is ripe for the coming of fresh fruit juice bars

/Binesh Kutty

JUNE 2008

DARE.CO.IN

opportunity/f&b

magine a bar that actually nourishes the customers’ health. The bar serves shots all right, just that it is in the form of vitamin and protein boosters. The ‘kick’ is such that it is perfectly okay for anyone to drink and drive! What we are talking about is a long due revolution of fresh fruit juice chains.

So, what is the idea? Simply put, the idea is to have a bar with the ambience and goodies that are at par with those in coffee shops. The key difference being that this bar offers fresh fruit juices instead of coffee. The idea is to conceive brands like Café Coffee Day and Barista in the space of fresh fruit juices. The idea, one might say, is not original. Give it a second thought, and you already know that not many out there are exploiting this space as much as one can. Call it a coincidence, the launch of one such chain happened during the gestation of this story. Bloom Juices is the brainchild of 28-year-old Amit Roy Sharma. In the scorching month of May 2008, Sharma launched his first concept store in Mohali, backed by a solid investment by Canadian investors. Soon the store will have a presence in Chandigarh and Panchkula. Bloom claims to be India’s first fruit drinks outlet to offer an array of drinks made from fresh fruits without the use of any artificial colorings or flavors. Going further, it also boasts of offering ayurvedic health boosters that are 100% organic and packed with nutritional values.

The concept of a chain of fresh fruit juice bars may be of novelty to India, but this concept has garnered good volumes of business in the west since decades. Smoothie is what fresh fruit juice is popularly known as out there. Dubbed as a high-end smoothie restaurant chain, Jamba Juice of the United States of America has more than 700 outlets within and outside the country, with reported annual sales of over $300 million (January 2008). Other smoothie giants abroad include companies such as Booster Juice of Canada, Boost of Australia, New Zealand Naturals, and others.

Is there a market? Of course, and it is a huge market at that. However, as one might guess, it is highly unorganized. The forerunners in this space, in all the cities, are the numerous roadside vendors and handful of fruit juice shops. There are questions of hygiene, quality, and health in the minds of the consumers. Do they have much of a choice though? Increasingly, the buzzword in the metros and other big cities is on the lines of health, good living, yoga, etc. For this, they have gymnasiums and spas coming up to tone their bodies. Nevertheless, where do they hang out? Places that serve caffeine, alcohol? Again, do they have much of a choice here? Take a look at the recent data, based on a market study, on fresh fruit juice consumption across the country (see box). That is the market, thirsty and ready, and still, not it in its entirety.

DARE/Indian cities fruit juice consumption

Bloom Juices Market Study

Roadside thelas/carts

Average sales per day

Tier - III Tier - II Tier - I

230 glasses 350 glasses 420 glasses

Avg price per glass of juice

Rs 20 - Rs 40 (depending on size & mix)

Traditional juice-parlors

Average revenue per day

Tier - III Tier - II Tier - I

Rs 15,000 - Rs 20,000 Rs 20,000 - Rs 25,000 Rs 30,000 +

If reports online are to be believed, the fresh fruit juice market in India is nothing less than Rs 300 crore at the moment, and will steadily grow at 3540% per year.

Sourcing the fruits Thanks to the improved roadways and transport systems in the country, the wholesale fruit mandis have an ample supply of local fruits from other states as well. “When we were gestating, we realized that importing frozen fruits like blueberries, blackberries, etc will get the cost of each smoothie to go up to Rs 200, which was a price tag that we were not interested in anymore,” recalls Sharma, “Instead, we source all fruits from the local markets. In a city like Chandigarh, I honestly do not know how they get it, but I get all the fruits there. For instance, I can easily get kiwis, mangoes, four different kinds of apples—the UP apple, the Chinese apple, the Fiji apple, and the Himachal apples.” However, dependence on these markets as the only point of sourcing is not enough. It is all the more beneﬁcial for the business if coconuts from Kerala, apples from Kashmir, mangoes from Maharashtra, and pineapples from West Bengal reach all the outlets of the fresh fruit juice bars. This is where logistics and supply chains come into play. One needs to devise a plan to get this movement happening, in a cost-effective way while preserving the freshness of the fruits. Of course, frozen fruits are widely available. These, however, will not give the same effect that one would desire at a fresh fruit juice bar. But inevitably, as the season heads towards winter, some fruits such as mangoes that have demand all year along, have to be replaced with sliced frozen mangoes by suppliers. One big challenge in this line of business is to keep the supply of fruits consistent all year round. “The workaround or trick is to have two menus at the bar. One is the ﬁxed menu consisting of fruits that are easily available throughout the year,” says Sharma, “The other menu has to be a rotating menu, which consists of JUNE 2008

DARE.CO.IN AMIT ROY SHARMA Bloom Juices

The way we hope to win is largely based on selling the Bloom experience, where the ambience, the customer service, the coolness factor is played up such that they would not want to go back to the thelas or coffee shops again. seasonal fruits. This way the bar can avoid disappointing customers who see some mix on the menu that is not available at that moment due to its seasonal nature.” Besides this, one could also try exploiting the good base of fruits that are readily available in the country, but is hugely underutilized. This issue of DARE has a story on such underutilized fruits and the ways to commercialize them, which you might want to read. Similarly listed is a list of exotic fruits, in the said article, which could deck up the menu of the fresh fruit juice bars to quite an extent.

Working out the add-ons It is obvious that the menu if kept limited to just juices would not be appealing enough for the customers, and not to mention would also limit the revenues to quite an extent. So what is it that one could do differently? The smoothie chains abroad offer what they call health boosters, which include vitamin boosters, protein boosters, and such. 28

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opportunity/f&b Sharma is doing the same, but differently. At Bloom Juices, the customer walks into the store and orders a smoothie from the menu. The attendant will ask if the customer would like to go for a shot of one of their ayurvedic boosters, which are again of the vitamin, protein, and other such forms. Bloom Juices has full-time ayurvedic doctors who lead the R&D team. These doctors do the mix-andmatch to come up with health boosters for the store. The lead doctor of Bloom Juices, Dr Rahul Mishra, has a new extraction method apparently. For instance, the awla powder that one gets in the market is brown, but by the use of their unique method the powder is sea green in color. The testing of the nutritional value of this extract was done at a lab in Canada, and in some cases the value was supposedly over 400% more than what one usually gets in the markets. “Herbs in India are vastly underutilized. Herbs are in themselves both preventive and remedial by nature,” says Sharma, “We have come out with our own boosters, based on ayurveda, which we call herbal boosters. These essentially contain things like alkaloids and glycosides, which are not present in fruits as such.” For sourcing the herbal extracts, Bloom Juices has tied-up and placed bulk orders with one of India’s largest suppliers. The doctors at Bloom Juices instruct them as to how exactly they want the extraction to happen, after which the mixes are made in the R&D labs of Bloom.

Setting up the chain There is a lot that goes into setting up a single store—the ambience, the blenders, the mixers, table-top freezers, and other equipment, the refrigerators, the attendants, and so on. It is very important to get all these minute details right for the ﬁrst bar. It is even more important to replicate all of this in the gradual chain of bars. Talking about the consistency in his drinks, Sharma cites, “After a lot of permutations and combinations, when we conclude that 7 seconds and 30 microseconds is the

blending time perfect for a certain drink, we make sure that this particular drink blends for exactly those many seconds every time it is served.” To set up one such bar, there is a need of pumping in enormous amounts of money. The success of the kind of chain that we are talking about here, spanning the length and breadth of the country, relies a lot upon franchising. However, all the hard work, and heavy investment could all go down the drain if the franchise ends up with the wrong vendors, who would often take shortcuts and hence spoil the experience. “Just to make sure that we create an identity of our own, and maintain the quality of juices and experience we offer, we intend to spread with the COCO (company-owned, companyrun) model,” adds Sharma. He claims that he has got offers for franchising from several parts of the country, and one Southeast Asian country as well. He says he is considering these offers, but that will be in time. This business, like coffee shops, holds potential in the kiosk version too. However, the experience in its entirety cannot be sold at the kiosks. More so, the room for equipment and backend operation is much limited as compared to a store. It is hence recommended that the kiosk version have a different menu altogether. Let us move on to human resources now. For this concept, human resources are readily available. There are scores of institutes churning out a huge workforce for the hospitality industry. Moreover, there are always the coffee shops and junk food joint attendants, who are experienced in the industry, and looking for a change. The key here is, fresher or experienced, the human resource that runs this chain has to be trained to sell the experience of the store to the customers. Like in any other F&B business, one has to get proper certiﬁcations to start up. After all, the store has to have munchies that go along with the smoothies. Next up, electricity supply is erratic nationwide. As the store is supposed to sell its ambience, and a

DARE.CO.IN

opportunity/f&b DARE/market potential estimate

Who are the customers?

This one is tricky. Tricky beMetros 5 cause there is a huge cusJuice Bars per metro 300 tomer-base overlap with the coffee-slurping yuppies, and Total Juice Bars 1,500 average Indian walking on the Average price per glass 55 Rs street, parched for a refreshAverage juice sales per day 650 glasses ing drink. These customers Good business days in a year 260 days already have Café Coffee Day Juice revenue per annum 1,394 Cr Rs and the roadside thelas. Then Average snacks sales per day 5,000 Rs there are customers out there Snacks revenue per annum 195 Cr Rs at the hospitals, gymnasiums, Average Kiosk sales per day BPO centers, and the likes of it. (juice+snacks) 3,000 Rs Sure, this fact is going to pose as a challenge, but then the No. of Kiosks in ﬁve metros 1,000 kiosks case is not very different from Kiosk revenue per annum 78 Cr Rs the chains of coffee shops, Total Revenue 1,700 Cr Rs junk food, et al. Ask Sharma on how he Other Cities 30 plans to rope in customers Juice Bars per city 100 that are already standing by Total Juice Bars 3,000 the thelas or chilling out at the Average price per glass 55 Rs coffee shops, and he responds, Average juice sales per day 400 glasses “We have kept the price of our drinks at an average of Rs 40, Good business days in a year 260 days which is more or less the same Juice revenue per annum 1,716 Cr Rs as the thelas and drinks at Average snacks sales per day 2,500 Rs the coffee shops. The way we Snacks revenue per annum 195 Cr Rs hope to win is largely based Average Kiosk sales per day on selling the Bloom experi(juice+snacks) 2,000 Rs ence, where the ambience, the No. of Kiosks in thirty cities 2,250 kiosks customer service, the coolKiosk revenue per annum 117 Cr Rs ness factor is played up such Total Revenue that they would not want to 2,000 Cr Rs go back to the thelas or coffee Market Size per annum (Rs Cr) 3,700 Cr Rs shops again.” DISCLAIMER: This data and analysis are indicative and Cybermedia makes no guarantees about The actual target audience its accuracy. You are advised to do your own analysis if you are evaluating a similar venture. is anyone and everyone who lot of refrigeration is required to main- is health conscious. There is no point tain the quality of fruits and juices, it is in pushing the thought that too much of utmost importance to have the right of caffeine consumption is not healthy. Those who want to have coffee will load of electricity supplied to the bar. In this business, inevitably, there is have coffee. However, there are cusa lot of waste generated. While running tomers at the coffee shops whose oba business that is based on natural and jective is more so to hang out. Given a fresh ingredients, you can do your bit choice of having a cool hangout that for the environment too. The residue offers healthy drinks instead of cafleft after extraction of juice from fruits feine, would they want to come to the holds the potential for creating many juice bar? The answer is a possible yes. by-products. The Food and Agriculture Organization of the United Nations has Challenges a comprehensive article on ‘Principles India does not have genetically modiand practices of small- and medium- ﬁed fruits available. This gives rise to scale fruit juice processing’ (http://ti- a problem that the taste might difnyurl.com/56f7ep), which can work as fer in every glass served, even that of a handbook for this. the same drink. “Frankly speaking, we

have not found a solution to this problem,” says Sharma, “However, we do have ingredients and mix-and-match in place that will ensure that the taste remains within a 95-100% consistency range.” Every morning, Bloom Juices measures the pulpiness of the supplied fruits to know what mix-and-match to use for the day. In addition, one has to keep in mind that what works in the west need not work in India. For instance thinking that a smoothie sold in the US for $6, if sold in India for $3 will win consumers is a wrong notion. This math does not work in this country. Moreover, that sort of a price slash is also not economical for a business. For keeping the price reasonable, while serving high-end smoothies, the tried-and-tested solution is to come out with drinks with the right mix of fruits. For example, if kiwi is sourced at Rs 20 a piece, the bar has to somehow adjust the kiwi content in the drink, and mix it with other fruits to make the pricing attractive and the drink itself delicious. One other factor is the Indian taste. McDonald’s has had to tailor their menu for the Indian customers. In fact, Gujarat is probably the only location where McDonald’s has pure vegetarian outlets. Bloom Juice is thriving on its Indian taste mix-and-match ayurvedic boosters, and will have to constantly study the taste of the Indian customers for fresh fruit juice consumption, and gradually evolve and change its offerings. The main challenge though is to attract the customers into the bar, as this business is also about selling the experience of the outlet as much as the fresh fruit juice itself. Sharma of Bloom Juices has advertised about his stores in all the newspapers, plans to hold events at the colleges, has tied up with FM radio stations for contests and has roped in radio jockeys to be there at the store to pull in crowd. Whether the chain’s success come as smooth as its smoothies or not, is something only time will tell. However, our hunch is that the Indian market is ready for its next coffee shop revolution in the DAR E form of fresh fruit juice bars. JUNE 2008

DARE.CO.IN

/spirit

I, Entrepreneur DARE sets to ﬁnd out the markings of a successful entrepreneur /Sreejiraj Eluvangal

he Merriam Webster dictionary deﬁnes entrepreneur as “one who organizes, manages, and assumes the risks of a business or enterprise.” But how do entrepreneurs see themselves? What makes a successful entrepreneur? DARE ﬁnds out the three characteristics that set apart the successful entrepreneur from the rest, right from the horse’s mouth.

DRIVEN BY THE IDEA The ﬁrst characteristic is at odds with the popular conception of the entrepreneur as someone who set out to win for themselves great riches

JUNE 2008

and fame. While many who start their own businesses are motivated primarily by the money factor, Raman Roy, one of the most crucial people who established India’s BPO industry, points out that the truly stellar achievers are primarily motivated by other factors. “To think that entrepreneurship is about making money is to belittle the entrepreneurs themselves,” Raman, who pioneered outsourcing to India at his stints with American Express, GE and Spectramind, explains, “There are a lot easier ways to make money than to start out on your own.”

However, it is the entrepreneurs who today own the biggest personal riches in the world—Bill Gates, Steve Jobs and closer home, Dhirubhai Ambani are cases in point. Yet, says Raman, the true entrepreneur is usually motivated by something far simpler than the idea of amassing huge wealth. “First of all, entrepreneurs are not rational people... I had a great job in GE and it is not rational to quit such a job. It is not rational to drop out of Harvard, but Bill Gates did. As such, I am not sure if entrepreneurs can aim to be rich. For example, Gates did not set out to be the richest person in world. But, at the

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opportunity/muga

/spirit AVNISH BAJAJ

Chairman & CEO, Baazee.com

If we look around, we can ﬁnd lots of examples of opportunities where things can be done better. For example, you and I know that there is an opportunity in setting up an AC cab business in Bombay. But the challenge is not there. Everyone can just sit and say this could be done, but only the entrepreneur actually gets down and does something.

RAMAN ROY

Indian Angel Network

First of all, entrepreneurs are not rational people... I had a great job in GE and it is not rational to quit such a job. It is not rational to drop out of Harvard, but Bill Gates did. As such, I am not sure if entrepreneurs can aim to be rich. For example, Gates did not set out to be the richest person in world. But, at the same time, he was possessed by a great idea—that of Windows. It is this idea that motivated him to quit Harvard. He was possessed by it. 32 JUNE 2008

same time, he was possessed by a great idea—that of Windows. It is this idea that motivated him to quit Harvard. He was possessed by it,” he says. R Satya Narayanan, who left a well-paying job in Ranbaxy in 1995 to start a training center in Gole Market in Delhi, agrees. “Making money is not at the core of a good entrepreneur, if it were, the enterprise wouldn’t survive long enough. There has to be another core purpose. Money is an inevitable aspect that the entrepreneur must address in a disciplined manner to accomplish this purpose,” says this alumnus of IIM Ahmedabad and the chairman of Career Launcher. Satya, who believes that bottomlines can also mean other things than ﬁnancial returns, cites his own life as an example. “The choice of getting into education was led by this. I saw myself as contributing very directly to capacity building in the country, enabling a youngster move purposefully in his life. No other entity could come close to it, including providing healthcare, in terms of social value it adds.”

HAS MORE GUTS Yet being possessed by an idea is not enough, says Avnish Bajaj, who founded and later sold the e-commerce portal baazee.com to US portal eBay. Bajaj points to the success of baazee.com, originally inspired by the success of eBay itself, to prove that even standard ideas, if implemented well, can make all the difference. “What an entrepreneur does, at a broad level, is to spot an opportunity and execute, on the basis of this insight,” he says. “If we look around, we can ﬁnd lots of examples of opportunities where things can be done better. For example, you and I know that there is an opportunity in setting up an AC cab business in Bombay. But the challenge is not there. Every-

DARE.CO.IN

/spirit R SATYA NARAYANAN Chairman, Career Launcher

Making money is not at the core of a good entrepreneur, if it were, the enterprise wouldn't survive long enough. There has to be another core purpose. Money is an inevitable aspect that the entrepreneur must address in a disciplined manner to accomplish this purpose. one can just sit and say this could be done, but only the entrepreneur actually gets down and does something.” Avnish too has a life story to tell, to illustrate his point. “In the late 90s, I was working with Goldman Sachs in the US. Then I decided to move back to India to start baazee.com. My father said, ‘you have such a good job, it pays well, it’s a good proﬁle, please don’t give it all up and come back’. But I still did.” Raman too points out that ultimately, the most successful entrepreneurs are the ones who took the highest amount of risk, who staked everything on an idea. “The biggest deﬁning fac-

tor in entrepreneurship is risk... risk that can impact you individually. It can be a risk to your job; it can be a risk of not knowing how to continue. When I was in AmEx and I wanted to show what could be done from India, I went to my boss. He put me onto the HR and what they said in short was either you succeed or you have no job. If my family had known this, they would have not have let me take it,” he points out.

AND A STROKE OF GOOD TIMING Thus, entrepreneurs are possessed by ideas and have enough courage to stake their personal well-being on

them. However, there is one more factor that determines whether the two factors lead him or her from being an entrepreneur to a successful one. “There are people who have passion and the ability to put their ideas to practice, but still fail,” says Avnish, who now manages the venture capital ﬁrm Matrix Partners. “The venture can still fail because sometimes the entrepreneurs create their product in isolation from the market. It may be a great idea and well implemented, but it could still be ahead of its time. To achieve success, you need to have a good instinct for what the market needs,” he says, pointing to Tata Nano, as an example of good market timing. Satya sees success of the entrepreneur as the meeting of the internal goals with an external need. “To me, what a successful entrepreneur does is connect the two dots in his life—one inside him and one outside. The one inside is the answer to the question ‘what would I enjoy doing’ or ‘what am I born for?’, the second dot is the here and now reality of what is happening in the world around me." “If he can connect the external reality with the idea inside him, he becomes a successful entrepreneur. And an entrepreneur does not mean he has to be a business man. What matters is whether you are able to successfully do what you enjoy. Shah Rukh Khan and Sachin Tendulkar are good examDAR E ples of entrepreneurs too.”

JUNE 2008

DARE.CO.IN

34 JUNE 2008

startups/advt

DARE.CO.IN

startups/advt

Prahlad Kakkar On advertising for startups

Is there any business that can succeed without advertising? Prostitution!

ow can small businesses and startups create and deliver impactful ads?

Simple—be original and do something different as compared to what the bigger companies are doing. Typically, bigger companies tend to play safe as they have lots to lose in case an ad goes bad. However, in the case of small companies; they have the advantage of being able to take extremely high risks, as they more or less have nothing to lose. As it is they cannot afford huge advertising campaigns, so if they cannot be path-breaking in terms of advertising then there is no point in them advertising at all. Because if they are not original enough, they will end up competing with the bigger companies and losing out in the ordeal. When I say take risks, I am talking about doing things with great ideas that bigger companies refuse to accept. The refusal could be simply because they think that the idea is too avant-garde, too radical, or that the people will not accept it, it is too funny and people will not take the product seriously, and so on. These are the problem-aspects that most MNCs face. Let us take Britannia for instance. When Sunil Alagh was heading Britannia, they had a huge budget of around 40 crore rupees for advertising. What no one realized is that, within that budget, there were 30 brands that needed to be advertised. Effectively, each brand had about 1 crore 20 lacs at disposal to spend on advertising. Alagh said it publicly that he could not afford to be safe, as he did not have huge money. So he decided to be ﬂamboyant, in-your-face, and do things that others would not dare to do. This is what made Britannia so unique, because they took a lot of risks.

What makes an effective advertisement? Honesty, originality, spontaneity, and graphically very well designed.

As a thumb rule, how much of one’s monies should be pumped in for advertising? This really depends on the product. Sometimes it is as high as 10% of its turnover. The thumb rule, usually though, is 5% of the turnover. If it is a brand new product that has no turnover but has a unique selling proposition, then I think that you should pump in enough monies to give the product a chance to survive and compete. Sometimes it is not the money that counts, and it depends entirely on how original and gutsy you are. Let me cite an example here: In the US, there used to be this small manufacturer of vests. The entrepreneur did not have much money on him. At that time, there was this huge million-dollar campaign by Rolex. This campaign was based on the idea that wherever you take the Rolex, whatever you do to it, it always works. They had Rolex on the moon, under the sea, in the jungle, in the monsoon, etc. So this vest manufacturer made this small cheap little ﬁlm—a takeoff on the Rolex campaign. He had this guy who was standing at the edge of Niagara Falls, and the JUNE 2008

DARE.CO.IN

startups/advt

The time for playing safe is gone, now is the time to take risks, the world is opening up to you and will accept you. Businesses are all about risk taking, and if you do not have the balls to take risks, then get out of the business! announcer says, ‘We are going to do this historic test on the vest. We are going to throw the vest off the Niagara Falls and see what happens to it…’ This guy is trying to take the vest off, that is when two bigger guys show up and throw him along with the vest over the Niagara Falls. Then you cut to the bottom of the Niagara Falls, where everyone is waiting for the result of the test. The announcer goes, ‘We come to the end of the historic test. We are looking for the vest; there is no sign of it…’ Then you see the man ﬂoating past them, face downwards. They grab him with a walking stick and pull him out. The almostdrowned guy in the vest, all drenched, says ‘Hey, look at the vest. Nothing has happened to it. It is not even wet.’ While saying this, he is shaking his wrist near his ear, and someone asks him, ‘What’s wrong?’ To this he replies, ‘My watch stopped.’ This ad was run on the television just once or twice, because they could not afford anymore. However, every time the Rolex ad was aired, people were reminded of the vest. So you see, this worked brilliantly for them, but it took a lot of guts to do it.

Is choosing the right media luck, art, or science? It is actually insight and instinct. For small companies, I would say go to a small and hot agency, which would give them radical solutions to one’s advertising problems.

How much does roping in a celebrity to endorse a product help in advertising? It depends on how well or how badly you use the celebrity. For instance, nobody has ever used Salman Khan properly. Everybody is trying to make him look respectable. While the truth is that he is the bad-boy of Indian ﬁlms, so you have to use him as the bad-boy. His fan following as a bad-boy is much bigger than the fan following of people who hope he is going to become good. As a matter of fact, if he becomes good, he will become boring. Advertising constantly is trying to make him look good, instead of trying to make him look bad, which is his forte. The success of an ad does not 36

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solely depend on by roping in a celebrity; it really depends on how you use the celebrity.

Is there any business that can succeed without advertising? Prostitution! (Laughs) They have their own way of advertising by standing in the balconies…

Any thoughts on lifestyle advertising versus feature advertising? This can be determined by knowing what is required for the product at that particular point of time. It is very crucial to have an insight into your consumer. There are two consumers—one is the consumer that you see in front [of you], and the other one, who is your real consumer, is a secret person hidden inside the consumer’s mind. Every consumer has an opinion of himself, which he never divulges to anyone else. Everybody has an aspiration, a secret dream that they are too embarrassed to talk about openly. Reality sucks! If I want to sell you something, I have to actually try to know you well enough to ﬁnd out what is your mind saying, what makes you tick, and so on. The trick lies in tapping into that aspiration. The moment you are able to tap that one dream, the ad has served its purpose.

How can small ad agencies make a mark in the industry? By doing great work… convince a small client, get them to let you run with the advertisement. You take the responsibilities of the advertising, and you create a piece that actually works for them. Do this and everyone will notice who you are. Only your work can sell you—it is as simple as that. You need to have a proving ground, where they allow you to prove yourself.

Got something to say to the entrepreneurial community? Now is the time, buddy. This is your day. Grab it with both hands. The time for playing safe is gone, now is the time to take risks, the world is opening up to you and will accept you. Businesses are all about risk taking, and if you do not have DAR E the balls to take risks, then get out of the business!

DARE.CO.IN

opportunity/irrigation

Money ﬂows into landscape irrigation

With the rise in the number of golf courses, corporate greens and hotel chains, the market for landscape irrigation systems and equipment is a whopping Rs 10,320 12,580 crore /Arunjana Das

‘kiss’ can revive not only low spirits but dull grass and plants as well! KISSS (Capillary Irrigation Sub-Surface Systems) is a landscape irrigation technology devised by an Australia-based ﬁrm, Irrigation and Water Technologies. This and many other such innovative technologies are fast reshaping the techniques of landscape irrigation. So what is landscape irrigation? Irrigating a piece of land for a utility other than agricultural products is termed as landscape irrigation. Done usually with an aesthetic purpose in mind, it is generally used for growing goodquality grass on lawns, parks or golf courses. With the rising number of such golf courses, corporate greens and hotel chains dotting the country, the market for such irrigation 38

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systems and their equipment is on an upswing as well. According to DARE estimates, this market is worth over Rs 10,320 crore. Wherever there is greenery, there has to be water, and hence, means of dispensing the water. In a country that witnesses utter droughts and overwhelming deluges, all possibly within a few hundred miles of one another, conserving the water and using it efﬁciently for irrigation assumes great importance. Landscape irrigation works on this basic concept of water management using techniques that provide irrigation, which is not only better but smarter! The “smarter” part is not just a ﬁgure of speech; irrigation consultants or architects employ smart sensors to help track the requisite quantity of water that your plot, or

DARE/equipment list Equipment for sub-surface irrigation l

Pipes

Valves Nozzles Pumps Switches and other electrical components Sensors and controllers

l l l

even a single plant or blade of grass on your plot, may require!

How is it done? Landscape irrigation is different from the traditional irrigation systems, in that aesthetics is as important an aspect of the irrigation process as the utility. You cannot leave your sprin-

DARE.CO.IN

opportunity/irrigation

DARE/technology Sub-surface irrigation is done below the surface of the soil. Drip pipes are installed below the surface of the soil at a specific depth. Drip emitters, stationed at regular intervals on the pipes, let out the water to irrigate the soil. The equipment required to set up the systems comprise pipes, valves, pumps, sensors, nozzles and several other pipe fittings. The irrigation network is timed according to the requirements of the soil, and can be manually switched on or automated using sensors. It offers several benefits, ranging from 30%-40% water conservation, precise application of water to plant roots and flexibility of design to accommodate uneven terrain and differing plant lifecycles. klers running on a golf course while a few from the Ambani clan are sealing a deal teeing off with the Soros of the world. Hence, sub-surface irrigation is the way to go. Sub-surface irrigation is just that—irrigation that is done below the surface of the soil. Drip pipes are installed below the surface of the soil at a specific depth. Drip emitters, stationed at regular intervals on the pipes, let out the water to irrigate the soil. The equipment required to set up the systems comprise pipes, valves, pumps, sensors, nozzles and several other pipe fittings. The irrigation network is timed according to the requirement of the soil, and can be manually switched on or automated using sensors. It offers several benefits ranging from 30%-40% water conservation, precise application of water to

plant roots and ﬂexibility of design to accommodate uneven terrain and differing plant lifecycles. Many architects also install sensors to track the real-time requirements and performance of the soil and the plants (grass). Known as smart controllers, these sensors are mostly climate-based, that is, controlled by the climatic conditions of the area, or soilmoisture-based, which, depending on the amount of the moisture content present in the soil, trigger the dripemitters. Several other new innovations are now coming up and going a long way in pulling down the initial setting-up investment and making it easier to maintain such systems.

Finances Quite often architects come up with new variants of the KISSS and it means

big moolah for both the architect and the corporate entity who’s buying the service! Monetarily, one such deal converts into around Rs 2 lacs per acre or more depending on the location of the plot, weather conditions prevalent and soil conditions. Golf courses in the country range from around 50 acres to 200 acres in area. Corporate greenery would be a couple of acres per ofﬁce complex. Throw in the thousands of parks, hotels, municipality facilities, etc, which require landscape irrigation, and you see yourself standing on greenbacks worth over Rs 12,580 crore. Those who have already calculated the value of the greenbacks are now calling themselves irrigation architects or consultants, who are usually of two kinds. The ﬁrst kind offers consultancy regarding design of the systems or inJUNE 2008

DARE.CO.IN

opportunity/irrigation

DARE/estimates GOLF COURSES No. of golf courses Average area per course Total area

: : :

110* 100 acres 11,000 acres

SHOP/OFFICE COMPLEXES Average no. of acres per complex Total number of shops/ ofﬁces No. of ofﬁce complexes with landscape irrigation

: : :

2 13,390,287** 134,000 #

Total acres

268,000

HOTELS/GUESTHOUSES Average no. of acres per hotel Total number of hotels/guesthouses No. with landscape irrigation Total acres

: : : :

2 521,654** 5200 # 10,400

COLLEGE/UNIVERSITY GROUNDS Average no. of acres per college/university Total number of schools/colleges/universities No. with landscape irrigation Total acres

: : : :

5 1,502,273** 7,500 # 37,556

PARKS/OTHER GREEN AREAS Average no. of acres Approx. no. of units Total acres Total green area Average price per acre of irrigation Total market potential

: : : : : :

2 100,000 200,000 63,000,000 acres Rs 200,000 Rs 10,327 crore

NOTE: # Assumption: 1% of total shops/ofﬁce complexes and hotels/guesthouses and 0.1 % of total no. of schools/colleges/universities go for landscape irrigation * Source: Golf Today ** Source: 2001 Census 40

JUNE 2008

novative irrigation solutions. The second one offers not only design solutions, but also irrigation products and equipment. Rain Bird, a privately-held American irrigation company belongs to the second category. Besides offering several kinds of irrigation services, it sells over 4,000 irrigation products in over 120 countries. Classic Golf Resorts in Delhi employed the golf course irrigation services of Rain Bird to lay down its irrigation network. Eagleton Golf Village in Bangalore is one other major client of Rain Bird in India. As a matter of fact, over 80% of the golf courses in the southern part of India use Rain Bird systems. There is also another entity—the infrastructure providers. Not much consulting is involved here. These are small to medium enterprises offering irrigation products directly or through an architect to the end-customers. Premier Synthetics India is one such company. They have tie-ups with several manufacturers and distributors for valves, pipe-ﬁttings, pumps and other such accessories necessary for setting up an efﬁcient landscape irrigation system. They are, in fact, the exclusive distributors of Rain Bird in India and Sri Lanka. Headquartered in Coimbatore and with operations in 11 states of the country, its business from golf courses and race clubs alone is over Rs 12 crore.

Getting more out of it When there is a Wills Golf Championship in the offing, you can be sure of big chunks of the business cheese coming your way. A Golf superintendent or a keeper is a finicky person. With a Wills on the sponsors’ list, s/he is bound to get finickier and this means bigger business for the service providers. If you happen to be one of the architects providing your irrigation solutions to them, the bigger business will transform into not only bigger money, but also bigger brand equity. Golf is just one of the many avenues that are green. There is more - green in the literal, figurative and monetary sense. All that is required is perhaps an efficient DAR E KISSS to seal the deal!

DARE.CO.IN

cover story/survey

Great times for small businesses and startups The ﬁrst-ever survey of small businesses and startups across the country shows that these are good times for them, with better days to come /Krishna Kumar

his survey was conducted during the end of April and the beginning of May when most organizations had a sense of how performance during the past ﬁnancial year was and what to expect from the current ﬁnancial year.

Planned strategic initiatives What are going to be the key growthrelated initiatives that small businesses and startups are likely to take in the ﬁrst half of 2008? The answer is in the graph given below. We divide these into three types —

market related, M&A related and funding related. Of these, we ﬁnd that product and market related initiatives top the agenda, followed by those related to funding. M&A initiatives get the lowest priority, possibly because the respondents are in a stage where organic growth can still be very signiﬁcant. Within market-related initiatives, launch of new products and services is the highest on the agenda, with as many as 46% of the respondents stating that they are looking at launching new products and services. Thirty-two percent stated that they are planning at

entering new markets, while 27% were actively contemplating launching a new line of business. Together, these represent a very healthy prognosis of future prospects and a very bullish outlook for the segment. As far as funding is concerned, bank funding for new projects and venture funding were on an equal footing with two-thirds of the respondents saying they would be looking at considerable funding infusion into their operations. Given the size of the businesses we are covering in this survey, it is natural that not too many IPOs are being planned.

Planned strategic initiatives 50

Percentage

45 40 35 30 25 20 15 10 5 0 Launch new products & services

Enter new markets

MARKETS 42 JUNE 2008

Start new line of business

Acquire a business

Merge with another

M&A

Sell all or part of business

Get project funding from banks

Get Angel/ VC/PE funding

FUNDING

Do an IPO

DARE.CO.IN

cover story/survey It is interesting to note that 16% of the respondents are contemplating an acquisition or a merger in the immediate future! We divided the survey into three sections, covering performance during the second half of 2007-08, prospects and plans for the first half of 2008-09 and impact of environmental factors on their business. Slightly more than half of our respondents came from IT and related industries and we covered ten industry verticals across fifteen states. The survey was conducted online through a predefined database. The total sample size was 200 businesses, in the sunrise segments. To cut the long story short, these are great times to be a startup or a small business in India.

Robust growth For starters, as many as 66% of the respondents saw their businesses growing in rupee terms during the previous half year and only slightly under 10% reported that there businesses actually shrunk. Forty percent of those that reported a negative growth in rupee terms came from the technology-enabled services sector. This is slightly surprising, given that the services sector is experiencing robust growth.

Robust growth

In rupee terms my business... Shrunk Remained the same Grew

Very good performance 35 30 25 20 15 10 5 0 less than 80% of target

Very good performance It is a good thing to experience actual growth. But how did it measure up against expectations? To answer this question, we went to the budgets. How was the performance against budgets and targets? Here also, the picture is more or less similar. Fifty-nine percent of the respondents achieved 90% or more of what they targeted, with 11% stating that they actually did better than expected. Amongst the 18% who said that their performance was less than 80% of what they had budgeted, we had a fair spread across industry verticals and states.

Strategic activities in last six months Out of seven speciﬁc strategic tasks that they had undertaken during the last six

Percentage

80% - 90% of target

90% - 100% of target

Marginally better than the target

Much better than the target

Strategic activities in last six months 50

Percentage

45 40 35 30 25 20 15 10 5 0

Funds for new projects

Funds for current projects

Recruit key people

Launch new products & services

Get new business partners

Get new key clients

Entered new markets

Did not do any of these JUNE 2008

DARE.CO.IN

cover story/survey

Industry Arts & Handicrafts Banking / Financial / Insurance Consumer Goods Energy Industrial Goods Infrastructure Media / Communications / Advertising Other Services / Consultancy Social sector Technology / IT

State Andhra Pradesh Bihar Chandigarh Delhi Gujarat Haryana Karnataka Kerala Madhya Pradesh Maharashtra Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal NA 44 JUNE 2008

DARE.CO.IN

cover story/survey

Number of employees 45

Percentage

40 35 30 25 20 15 10 5 0 less than 10

10 to 99

100 to 499

500 to 999

Anuual turnover

1000 or more

We thank all of those who participated in this survey. As promised, you will get a report incorporating extra results than those that have been presented here.

40 35 30 25 20 15 10

5 0 <50 L

50 L - 1 Cr

1 Cr - 10 Cr

months — launch new products, enter new markets, acquire new key clients, get new business partners, recruit key personnel and organize funding for new ventures and existing project — the least successful was recruiting key personnel. Incidentally, recruitment of key personnel was the third most important task taken up during the last six months amongst the respondents

10 Cr - 100 Cr

> 100 Cr

after acquiring key clients, with almost half of the respondents having tried to recruit someone important in the last six months.

The environment We looked at four environmental factors that could have an impact on the fortunes of small businesses and startups – the Central budget, the respec-

tive state budgets, the stock exchange and the dollar exchange rate.

The government’s budgets Given the size of these businesses, one would have expected a signiﬁcant impact of the budgets on our respondents. Surprisingly, the truth seems to be otherwise. As can be seen from the graph, the state budget has an even lower impact than the central budget. As many as 70% of the respondents said that the respective state budgets have no impact on their businesses, as compared to about a half of that (38%) JUNE 2008

DARE.CO.IN

cover story/survey

who said that the central budget has no impact on their businesses. Is this because the budgets do not specially focus on small businesses and startups? Our guess is that this is a critical aspect that needs further analysis. What is more interesting is the absolute symmetry of the two graphs! Those who are impacted and those who are not and the extent of the impact are absolutely symmetrical!

Stock exchange and dollar rates

The government’s budgets 80

Percentage Central budget

70 State budget 60 50 40

10 0 Large negative impact

Small negative impact

No impact

Small positive impact

Large positive impact

Stock exchange and dollar rates 60

Percentage

Stock market Exchange rate

50 40 30 20 10 0 Large negative impact

Small negative impact

No impact

Small positive impact

Large positive impact

Future prospects 50

Percentage

Future prospects

How does the future look like? How are the prospects for the next six months? Eighty-one percent of our respondents state the prospects are somewhat or signiﬁcantly higher than the previous six months. Only 8% said that prospects are somewhat lower and almost no one rated their prospects as signiﬁcantly lower. Of those who rated their prospects as somewhat lesser, almost all had turnover under Rs 10 crore, with half of them having a turnover of DAR E under Rs 1 crore.

35 30 25 20 15 10 5 0 Signiﬁcantly lower

What is the impact of these two factors on your business? More than the impact of government budgets is what our respondents have to say. The specific questions we asked where “How would you rate the impact of the current turmoil in the stock markets on your business?” and “How would you rate the impact of the decrease in the exchange rate of the Rupee on your business?” Here again, the impact of the dollar rate is more than the impact of stock exchange fluctuations. Those who benefitted significantly from the rupee appreciation (7% of the respondents) included those dealing with industrial goods as the most significant segment. Those who derived a slight benefit from the rupee appreciation were almost entirely from the IT segment and interestingly, almost all of them were small companies with a turnover of under Rs 10 crore. From amongst the small number of those who said that they derived significant benefits from the fluctuations in the stock markets, almost all came from Maharashtra!

JUNE 2008

Somewhat lower

Same

Somewhat higher

Signiﬁcantly higher

DARE.CO.IN

opportunity/transport

Betting big on public transport Public private participation in public transport, speciﬁcally in bus services is a huge opportunity waiting to happen. Indore has already shown the way and UP has just advertised for operators willing to come in with at least 4000 buses each /Chhavi Tyagi

t is said that opportunity is just the other side of crisis. Going by the adage, the Indian public transportation scenario – with the blaring horns, overﬂowing buses, accidents and in some cases, by its sheer absence, represents both a

JUNE 2008

crisis and an opportunity of mammoth scale. Giving a concrete shape to the opportunity is the example of the newly implemented model of Indore and the National Urban Transport Policy (NUTP), drafted in 2006. The biggest

opportunity comes from the policy’s call for the involvement of private companies in providing mass public transport services in Indian cities. Public transportation in India has traditionally been a government monopoly. It was only after 1980 that some

DARE.CO.IN

opportunity/transport

“

Advertisement issued by the UP government in newspapers.

states started permitting privately run services. Until then most of the transportation services were run by State Transport Corporations. However, the increasing number of personal vehicles on the road, in spite of the rising fuel costs, bears testimony to the fact that state corporations have failed to meet the demand for public transport. “There are two reasons for the current state,” says Alok Nath Bansal, a retired World Bank expert on transportation. “On the one hand, government run public transport is incurring very high costs and on the other, the private operators do not seem to follow any rules”… “In many places, the private sector is conﬁned to tempos, three-wheelers and, mini buses.,” he points out.

In Bombay the BEST is running very well. We are not saying that the public (transport) is bad all the time. BEST has the best record, even better than the private ones. So one has to try different models

”

— Alok Nath Bansal Retired World Bank transport expert

According to a review done by the Association of State Road Transport of the performances of all STUs (State undertaking transport Utilities) for the year 2005-06, the net loss was a whopping Rs. 2660 crore excluding Andhra and Pune!

The Indore model However, change is on its way. Take the case of Indore with a population of 2.72 million in 2001. Towards the end of 2005, local authorities established a public limited company -- Indore City Transport Services Ltd. (ICTSL) – to take care of the city’s public transportation needs. “The company is an umbrella organization in charge of implementing the new model,” says Vivek Aggarwal, JUNE 2008

DARE.CO.IN

opportunity/transport

DARE/estimates Basis Singapore population

4,600,000

Number of buses

300

Number of buses per million

London Population

8,000,000

Number of buses

8,000

Buses per million

1,000

Indian buses per million population (assumed)

500

Percentage for private operators

0.7

Organized private operators

0.5

Total number of cities taken

Estimated number of buses

54,000

Estimated total for private sector

38,000

Estimated organized private sector

19,000

The rest of the country, including long distance services would also need a signiﬁcant number of buses and our estimate is that this will be three times the above number. Total countrywide estimate for organized private sector

76,000

How big is this number? To give you a sense of scale, Ashok Leyland sells slightly more than a thousand buses every month in the country. Volvo sold 3,672 buses in the ﬁrst quarter of 2008, worldwide! So, we are talking some really big numbers here.

How big is the pie?

Note: An efﬁcient transport system is not a one size ﬁts all system. Buses of different capacities (and sizes) should be used depending on route needs. DISCLAIMER: This data and analysis are indicative and Cybermedia makes no warranties about its accuracy. You are advised to do your own analysis if you are evaluating a similar venture.

Executive Director, ICTSL. “It is based on a public-private partnership model. We provide the regulatory framework and the private companies operate the routes.” At the core of ICTSL experiment lies the belief that cities should develop their own regulatory and enforcement capabilities. This framework should then promote competition in public transport in the city while ensuring ﬁnancial viability of the operators. 50

JUNE 2008

“

Explains Vivek,”Five kinds of private operators are now providing their services to the Indore public; bus operators, advertising team, pass operators, GPS and public information system operators and those building bus stops”. The process was tender based and 17 routes had already been selected. Now premiums were quoted, the maximum limit being Rs. 7000. The pricing, minimum number of buses (4 buses per route) etc., were all pre-decided. Vivek points out that the project has not achieved the status of a money-spinner yet. “But the things are fast moving ahead,”. “As the density of population and the number of routes are increasing, we are bringing more and more buses on the road”, says Roshan Aggarwal, director of Dayajeet Nimay Logistics, one of the private bus operators involved in the project. How is it going? Roshan Aggarwal points out that “When we started out, we had a minimum fleet of buses but now we own a fleet of 110 buses. Apart from that we have also come out with a new fleet of radio taxis plying on the Indore road. Income is not just from the fare; we also carry advertisements inside and outside our buses, out of which we were earning Rs. 25,000 per bus per month. That too has gone up”.

The business is expanding and we can say that we are happy and satisﬁed and think that we have a taken the right decision to enter this ﬁeld

”

— Roshan Aggarwal Director, Dayajeet Nimay Logistics: Indore bus operator

There are more than 30 cities in India that have a population of more than a million and a study done by the World Bank recommended that these cities should have urban bus transport corporation that owns 30 percent of its own buses and contracts 70 percent of buses from private contractors and operators.

Future prospects India’s urban population is currently around 30% of its total population. Experience across the world has been that as economies grow, rapid urbanization takes this proportion to over 60% before it begins to stabilize. Thus, it is projected that India’s urban population would grow to about 473 million

DARE.CO.IN

opportunity/transport DARE/capital cost of buses %

OTHERS

TOTAL

19000

38000

57000

0.25

4750

9500

0.5

9500

0.25

4750

Total Large buses Medium buses Small buses

VIVEK AGGARWAL

BIG CITIES

UNIT PRICE(L)

TOTAL (L)

14250

712500

19000

28500

570000

9500

14250

99750

Executive Director, Indore City Transport Services Ltd.

14000 Crores Note: this is just the investment in buses. Infrastructure, spare parts, training, manpower etc. are all extra. in 2021 and 820 million by 2051, as against only 285 million in 2001. Also going in favor of the business opportunities in this sector are the increasing levels of pollution, heavy traffic jams, scarcity of parking space etc. that plague the bigger Indian cities today. Add to this the galloping cost of fuel and there is likely to be a move towards public transport, away from personal transport. “One way of making private players interested in this business model is first to give them enough subsidies and more importantly they should be allowed to ply their buses on more profitable corridors so that they have a fair ROI and the government should keep the less profitable ones”, says Dr. S K Singh of IIT Kanpur.

insiders, some of the bus models originally chosen for Indore failed to meet requirements. This was apparently because buses meant for airport services were pressed on to harder city roads.

Challenges

Increasing congestion on the roads While increasing congestion on the roads may force government intervention to encourage public transport, left unchecked, it can also cause problems for the bus operator. As per the Ministry of Urban Transport estimates, on an average, while the population of India’s six major metropolises increased by about 1.8 times during 1981 to 2001, the number of motor vehicles went up by over 6 times during the same period.

Untested waters This is a new business model for India and as happened with Indore there will be several trials and errors in the quest for a perfect mix. According to industry

DARE/cost elements • • • • • • •

Personnel Fuel & Lubricants Tyres & Tubes Spare parts Interest & Depreciation Insurance Taxes (Motor Vehicle Tax, Passenger Tax, etc.)

Multiple authorities Transport is a heavily regulated area in the country and most investments into the sector has come from the central as well as the state governments. There are multiple agencies within each government overseeing the sector. One of the frequent complaints from participants in this ﬁeld is that there is no cohesiveness amongst the various government departments and agencies in areas like road planning and maintenance, trafﬁc control licensing, etc.

Uncertain business model The highly regulated nature of the industry typically frightens the private sector from making big investments, while such projects depend on private

Five kinds of private operators are now providing their services to the Indore public; bus operators, advertising team, pass operators, GPS and public information system operators and those building bus stops. sector participation and involvement. For example, in Indore the entire investment of Rs. 50 crore made in ICTSL is done by the private operators. “It took a lot of convincing from the government side to rope in the skills and the capital of the private world. When we initiated the process, private companies were reluctant to come as they were not sure of the business aspect of it but slowly and surely the conﬁdence levels are rising,” Vivek remembers. Heavy investments To become an operator of some size requires heavy upfront investments. To go back to the UP tender, putting into operation 4000 buses could mean a capital investment of about 1200 crores just for the buses! But going by the looks of it, providing mobility to the public can become one of the largest businesses in private DAR E sector in the country. JUNE 2008

DARE.CO.IN

52 JUNE 2008

/bio

DARE.CO.IN

/bio

AJIT BALAKRISHNAN

FOUNDER AND CHAIRMAN OF REDIFF.COM A 1971 alumnus of IIM-Calcutta and the son of a doctor, Ajit is a ﬁrst-generation entrepreneur. Besides Rediff.com, he also co-founded Rediffusion-Dentsu, Young & Rubicam, one of India’s largest advertising agencies, at the age of 22. Ajit, who is also the chairman of the board at IIM Calcutta, shares his insights into entrepreneurship in a conversation with DARE.

hat was your family background like? Was it entrepreneurial?

My father is a doctor and so was my grandfather. They had private practices of their own, but you cannot call ours a business family. In fact, I did not know the word entrepreneurial till much later, but I was always into starting college magazines and things like that. When I graduated in 1971, it was a grim period in India’s history. The Naxals were bombing, Nehru had died six or seven years ago, there was inﬂation, the China war. We were going through crisis after crisis. My friends at the time were joining the Levers and the Tatas. But when I asked myself, is that what I wanted to be, I couldn’t say yes. I did not want to be a cog in a big wheel. I wanted to do something with media, communication, technology. I joined an ad agency. The technology companies had not started at that time. If you look back, technology and media have always been my areas of interest. I worked for about ten months there and then Arun Nanda and I left to start our own creative ad agency.

What prompted you to leave your ﬁrst job after just ten months and start on your own? We thought we knew better (laughs). The folly of youth. Arun was several years my senior and had been in Levers before joining the agency. We were partners for six or seven months and understood each other. At that time, there was very little creativity in ads and people used to imitate ads from abroad. We thought

entrepreneur of the month we could do better, start a ‘creative’ ad agency, and do original things. And I don’t think we were very wrong. By the 12th month, we had won all the awards at that time. Some of our ads, like ‘whenever you see colour, think of us’ became big hits.

How did you start Rediff.com? Rediff.com was started in 1995, when I was 42. I was always in the technology, media and communication space. I had been associated with technology companies, so I could read code as easily I could read an article. So I told Arun, you run it (Rediffusion), I will start something else. It was easier then because I had personal cheques to write.

How much did you invest in Rediff.com? I wrote cheques for Rs two crores and had zero revenue for three years.

What do you think is the role of a professional investor (VC or angel) in a startup? When should an entrepreneur look for funding? Depends on which type of investor it is. The ﬁrst role is for an angel investor. This is typically someone who has a job or is a businessman, but keeps investing ﬁve or ten lakhs now and then in businesses. They are the ones who have the time to go deep [into your company and plans]. That allows the entrepreneur to build his mousetrap [the product]. It’s a concept risk. This stage can be seen through with an angel or savings. Angels JUNE 2008

DARE.CO.IN

/bio

can also be very valuable in other ways. You can get a lawyer or an ad agency through them. They can give you informal advice on how to structure the company. But the problem in India is that we don’t have enough angels. Once you have made the mousetrap, it is the stage of the early market risk, when an investor should look for an early stage VC. We have around 20 or so in India, but we need 200 to 300. Once you start selling your product, you can look for a normal VC—to scale up, to build a factory, hire people. We have plenty [of investors] at this level.

If the choice is between relatives and an outside investment, in the early stage, which one should an investor choose? Taking funds from a relative is not a good idea. At an early stage, the entrepreneur needs someone to push him to get early results, but at the same time, not hurt you too much. Relatives tend not to have the expertise and understanding [to do this]. In India, however, we do not have enough angels. We have fraternal capital. For centuries, some communities have been pooling their resources to help out one of their youngsters. So, if you are a Gujarati, you get help from the Gujarati community, if you are a Marwari, from the Marwari community and so on.

you can see a different quality of entrepreneurs who are coming in.

What have you noticed to be the innate characteristics of a successful entrepreneur? Are they different from normal people? Deﬁnitely. They are very self-reliant. They take on a problem and assume personal responsibility to solve it. They take the job and see it through. They are relatively less daunted by adversity. I often go to these entrepreneurial functions and sometimes I am asked “What should I do if I fail?” That person is not going to make a good entrepreneur. A true entrepreneur knows he may fail, but that is not part of his primary focus. He is always thinking of what happens if he succeeds.

Is this quality taught or inborn? What percentage of the general population would you categorize as entrepreneurial – 5% ? Self-reliance is taught at a very early age. It is part of the way your parents brought you up. It is culturally acquired. In India, the entrepreneurial population is much higher than 5%. The organized sector gives jobs to only 18 or 20%. Everyone else is on his or her own. The pan-bidi wala, the small farmer—they are all entrepreneurs. It’s only a small

MANTRA/A TRUE ENTREPRENEUR KNOWS HE MAY FAIL, BUT THAT IS NOT PART OF HIS PRIMARY FOCUS. HE IS ALWAYS THINKING OF WHAT HAPPENS IF HE SUCCEEDS

Do you interact a lot with young wannabe or actual entrepreneurs these days? If yes, are they very different from their compatriots one or two decades ago?

minority that works for others. In India, a deep well-spring of entrepreneurship exists.

I do. I keep an open door. Every week, I meet three or four young entrepreneurs. They just call and sit and chat. I also often go to the functions where entrepreneurs congregate. Fundamentally, today’s kids are far brighter than they were in the 60s or 70s or 80s. They are a different class and style of entrepreneurs.

Does a formal education, especially business degrees such as MBA determine one’s success as an entrepreneur? Did your MBA from IIM Calcutta help?

Are you saying Indians have become smarter in two decades? No. The type who would have gone to research or gone abroad, who would not have considered entrepreneurship as a viable career option 20 years ago, are today looking at it as acceptable. Society and the system too is saying it’s the right thing to do. The culture of the times is to lionize successful entrepreneurs. Earlier, [the bright people] would have gone for safe jobs. The second factor is that you are seeing a lot of technologically oriented people [in entrepreneurial ventures]. In the 21st century, the success of a new business would have technology at the center of it. In the 60s, it was largely your ability to get licenses or scarce resources. Now it’s much less asset or license based. Young technology entrepreneurs today have a chance. So, 54 JUNE 2008

It doesn’t make a difference one way or the other. However, most ventures today are technology based. So the important ones come out of technology institutions. In addition, within a product’s lifecycle, there are different stages offering chances for different kinds of people. Early on in the lifecycle, it is the product or technology. Later, it becomes more the style of business. For example, early on, the PC market was dominated by players like Apple, and later you have players like Dell, which are based more on the efﬁciency of the business model. So, while an MBA is not necessary, a technology degree helps in having a better understanding of your business, like when you have to think about scaling up. Of course, if you are from one of the premier IIMs, your peers and investors will tend to view you differently. In that sense, you have greater access to talent and a network to tap into. In my own case, I used a lot of what I learnt at IIMC. But if you ask me if I would not have become an entrepreneur if I hadn’t gone to the IIM, I can’t answer! D A R E

DARE.CO.IN

opportunity/agri

Commercialization of underutilized fruits Venture into the wild side, and you have a huge list of tropical and subtropical fruits that hold tremendous potential but are vastly unexplored

/Shilpi Kumar

AVOCADO

DURIAN

ll of us know that an apple a day keeps the doctor away. After all, beneath the tempting and glossy appearance lies a fruit that not only tastes great, but is also low on the calorie count, builds up your immune system, and helps prevent heart diseases, tooth decay and even cancers! It is one of the most widely cultivated fruits, with around 55 million tons grown internationally in the year 2005. According to the Food and Agricultural Organization of the United Nations, India is the tenth largest apple producing country, reaching a value of about $422 million in 2005. However, not every fruit has such a good fate. There is a wide variety of wild tropical fruits in India, for example, with high nutritional and medicinal value that are yet to be exploited to there full potential. Take karonda for example. Besides having a huge scope for commercialization in the processing industries, its rich iron resource can be extracted to create medicines for anemic patients. According to Dr AK Singh, principal scientist at the Central Institute for Subtropical Horticulture in Lucknow, “A large number of lesser known fruit species that have a rich potential are yet to be utilized fully. These fruits are an important source of minerals and vitamins and have 56

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high therapeutic value. They also have the ability to grow successfully even under adverse agro-climatic conditions, making it a business worth looking at.” Dr RC Srivastava, Director of Central Agricultural Research Institute in Port Blair, backs this up with, “Tremendous scope lies in the introduction, evaluation and exploitation of these tropical and subtropical fruits at a commercial level. These minor exotic fruits are in great demand in the national and international market and are growing well in other tropical countries with the same agro-climatic conditions as India.” Before getting into the practical details of the business, let us ﬁrst walk you through the garden of these tropical fruits.

AVOCADO Native to Mexico and Central America, avocado is being grown in Tamil Nadu, Kerala, Maharashtra, Karnataka and Sikkim in a limited and unorganized fashion. Weighing between 100 and 1000 grams, this pear-shaped fruit is rich in potassium and vitamin B, E and K. The pulp is said to be rich in proteins and fat, but low in carbohydrates. Avocado fat is similar to olive oil in composition and the peel extracts are said to have antifungal compounds. Avocados thrive in climatic conditions ranging from tropical, subtropical, to warmer parts of the temperate zone. They are extremely sensitive to water-logging and saline conditions. In India, the fruit is commonly propagated through seeds, which start bearing fruits in about ﬁve years after planting. The avocado tree, which can grow up to 20 meters, can produce up to 120 avo-

cados annually. In a commercial scenario, an avocado orchard can produce an average of seven tons per hectare every year. According to Dr Singh, “Avocado also has great export potential. During the year 2000, about 3.5 lac tons of avocado valued at $331.8 million were traded in the international market.” USAGE: Salads, sandwich ﬁllings, toast spread, milkshakes, ice creams, desserts, drinks, puree, and its fat is used in cosmetics production.

DURIAN Native to Brunei, Malaysia and Indonesia, the durian is widely known as the “King of Fruits” due to its large size—around twelve inches long, six inches in diameter and weighing between two to seven pounds. It is commonly described by people as a fruit that tastes like heaven and smells like hell! In fact, its smell is so overpowering that the fruit is banned in certain places like hotels and public transportation in Southeast Asia. Durian is said to contain high amounts of sugar, vitamin C and potassium. Durians grow in strictly tropical climates, where daily temperatures do not drop below 22° Celsius. A typical durian tree bears fruit after four to ﬁve years and has one or two fruiting periods per year. The fruit matures in roughly about three months. Currently, Thailand is one of the major exporters of durians. USAGE: Flavoring of candies, cakes, mousse, chips, ice creams and milkshakes, sugared and salted preservatives, seeds roasted, boiled or fried for consumption, leaves and ﬂower petals for cooking, and it also serves as an antipyretic.

MANGOSTEEN Native to the Malay Peninsula, mangosteens can now be found in Australia, Singapore, Thailand, Malaysia, Vietnam, Indonesia, India, Burma, Columbia, the Philippines and Sri Lanka. Mangosteens must be grown in strictly tropical areas and require abundant moisture, which is why they should be ideally planted near bodies of water.

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opportunity/agri DARE/worth exploring SOME TROPICAL EXOTIC FRUITS Abiu Black sapote Mandarin Miracle fruit Sweetsop White sapote

Guava Mulberry Star apple

Jackfruit Sapodilla

Lychee Star apple

MORE UNDERUTILIZED FRUITS Alligator’s apple Bilimbi Chironji Custard apple Khirni Laseda West Indian cherry Wild rose apple

Bread fruit Garcinia Madhuphal Wood apple

Carambola Karonda Rose apple

Chalta fruit Khatta phal Soursop

Fruits start appearing after six to twelve years from seed and usually occur during summer or after periods of heavy rainfall. Fresh fruit can generally be marketed upto 21 days after harvest. USAGE: Jam, preservatives, jellies, seeds boiled or roasted for consumption, twigs used as chew sticks, fruit rind used for leather tanning and black dye, wood used to make spear handles and for construction work, dried fruits for medicinal use, skin disorder ointment, astringent lotion, leaf and bark extracts used to treat diarrhea, dysentery and urinary disorders.

RAMBUTAN Native to Malaysia, this fruit is being cultivated in countries like Africa, Cambodia, the Caribbean Islands, India, Indonesia, Malaysia, Sri Lanka, Australia and Hawaii. Currently, Thailand is the largest producer of rambutans. Sensitive to temperatures below 10° C, rambutans ﬂourish in deep soils that are high in organic matter. It is usually propagated by grafting, air-layering or budding. In India, however, this fruit is usually propagated by seeds, which take around nine to 25 days to germinate and bear fruit after ﬁve to six years. Budded trees fruit after two to three years, with optimum production occurring after eight to ten years. Flowering occurs from late March to early May and the fruits mature from June to October. An average rambutan tree can produce around 70 kg fruit or more. USAGE: Seed used in cooking, manufacturing of soaps, candles, roots, barks and leaves used for dyes, wood suitable for construction, astringent, used in medicines for headaches, diarrhea, dysentery, fever and other infections.

used in the manufacturing of textile sizing powder, especially jute and cotton yarns. The kernel is used as a creaming agent for rubber latex, and as a soil stabilizer. The wood can be used for ﬂooring and making furniture.

PASSION FRUIT

TAMARIND Native to Africa, tamarinds can be found in tropical America, Bermuda, Bahamas and the West Indies. Although it is being grown commercially in Mexico, Belize, Brazil and parts of Central America, India is said to be the world’s top producer of tamarind (Imli), with thousands of tons of seed, seed powder and fruit pulp exported annually. Yet, according to Dr Srivastava, “There lies a lot more potential for commercially exploiting this fruit.” Tamarind cultivation is divided into the sweet and sour category. India mostly grows sour tamarinds in orchard-like plantations. Trees take around 13 years to bear seed pods, which take around eight months to ripen. However, the trees are long-lasting and continue to produce fruit each session till about 60 years. USAGE: Spices, sauce, chutneys, herbal tea, ayurvedic medicines for gastric and digestive problems, heart tonic, brass cleaning agent, desserts, drinks, laxatives and heart tonic. Seeds mostly

“

These fruits are an important source of minerals and vitamins and have high therapeutic value. They also have the ability to grow successfully even under adverse agroclimatic conditions.

”

— Dr AK Singh Principal Scientist, Central Institute for Subtropical Horticulture

Native to South America, this fruit is being cultivated commercially in South America, New Zealand, the Caribbean, Brazil, Australia, Israel and Hawaii. In India, it grows wild in places like Nilgris, Kodaikanal, Coorg and Malabar, and is being cultivated in Himachal Pradesh, Nagaland and Mizoram. Passion fruits can be propagated by seeds, cuttings and grafting on rootstocks. The fruit is expected to be produced in eight to twenty months after planting and the plants can usually produce fruits throughout the year, for about three to six years. Passion fruit juice helps in lowering of cholesterol and is a good source of antioxidants. It is said that drinking one glass of passion fruit juice fulﬁlls 50% of the day’s vitamin C requirement, 60% of the day’s vitamin A requirement and 40% of the day’s potassium requirement. It is also said to contain ingredients that can inhibit growth of gastric cancer cells. The seeds of the fruit help in digestion, breaking down complex carbohydrates and stabilizing your body’s glucose and cholesterol level. USAGE: Fresh and canned fruit added to salads, dessert topping, soft drinks, jams, syrups, ice creams, pies, cocktails and yogurt. The seeds produce oil with sunﬂower and soybean like properties that is edible and can be used for industrial purposes. JUNE 2008

MANGOSTEE N

RAMBUTAN

TAMARIND

DARE.CO.IN JAMUN

PASSION FRUIT

JAMUN

Native to India, Pakistan and Indonesia, this fruit can now also be found in the Philippines, Myanmar and Afghanistan, Suriname and Brazil. In India, jamuns are being cultivated in Haryana, as well as the rest of the Indo-Gangetic plain. It takes about eight to ten years for a seed to attain maturity. Through the grafting technique, the tree is expected to start bearing fruit in the fourth or ﬁfth year, in the month of May or June. One tree can yield up to 80 to 100 kg of fruit. The demand for the fruit is very high as it is not being cultivated on a large scale. One kilogram of the fruit can fetch up to Rs 60 to 80. Jamuns are a good source of vitamin A and C and are said to be good for diabetics, as well as for blood puriﬁcation purposes. The stems, leaves, and fruit contain essential oils. The seeds are rich in protein, carbohydrates and calcium. It is a hardy crop and can easily be grown in wastelands and areas where other fruits and plants cannot grow. USAGE: Beverages, jam, jelly, squash, pickles, wine, vinegar, seed used in ayurveda, medicine for digestive ailments and blood pressure, powdered for diabetic medicines, twigs used as painting brush, dried, salted and preserved as a digestive powder, seeds used as cattle feed, bark used as tonic and astringent, wood used in making agriculture implements, cheap furniture, house construction.

LONGAN Native to China, this fruit can LONGAN 58

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opportunity/agri DARE/possible industries for commercialization

India, ideal locations for growing this tree 100% pure juices and purees Pastes/spreads are in Tamil Nadu, 100% juice blends Pie fillings Karnataka, Kerala, 100% juice beverage blends Confectioneries Andhra Pradesh and Carbonated beverages Cocktail mixes north-eastern states. Fruit leathers Yoghurt/fermented dairy products Average yield of a tree Ice cream and sherbet Smoothies per year is about 50 Jams and jellies Wines kg and the producFlavor bases Baby foods tion could reach up to Natural colors Sports drinks 1.2 tons a hectare by Natural nutrients/Phytochemicals Mineral supplements/medicinal source the tenth year of planFruit flavored waters Nectars and nectar bases tation. The internaBaked goods Syrups tional price of macSOURCE: Food and Agricultural Organization of United Nations adamia nuts is around also be found in Indonesia and South- US $14 per kg. Macadamia nuts have high levels east Asia. The tree grows best on sandy soils and requires the temperature to of mono-saturated fats, similar to olbe above 5° C, as it is extremely sensi- ive oil. Research shows that its contive to frost. They also cannot tolerate sumption reduces total cholesterol by around 9% and decreases the risk of water logging or saline conditions. Longans can be grown by seed, cut- heart disease. tings, air-layers or grafting. Seedling USAGE: Oil used in skincare cosmettrees take upto seven years to produce ics, soaps, sunscreens, shampoos, fruit, whereas grafting or air-layering food and as an alternative to mink oil. can produce fruit in three to four years. Kernels dried or roasted as snack nuts, A mature tree can produce about 200 chocolate-covered candy, ingredient in ice cream and cakes, also produce kg of fruit per year. USAGE: Dried longan in soups, snacks, oil, husks used as mulch. desserts, canned in syrup, refreshment drinks, liqueur from longan flesh, MAHUA seeds used in shampoo, wood used for Mahua is an Indian tropical tree, comagricultural implements, furniture and mon throughout the Indian subconconstruction, fruit ingredients used as tinent including Bangladesh. The tree medicine for fever, insomnia and as can grow in a wide variety of soils, but antidote for poison. prefers sandy soils. The fruit is berrylike and egg-shaped and the flowers are fleshy and off-white in color. The MACADAMIA NUT Australia is the largest commercial flowers are said to be rich in sugar, producer of macadamia nuts, with minerals, vitamins and calcium. It is around 40,000 tons of nuts produced mostly cultivated in warm regions for per year. Apart from Australia, it is also its seeds, flowers and wood. A mature being commercially produced in Ha- tree can produce around 200 kg of waii, South Africa, Brazil, California, seeds annually. The Mahua tree has high economiIsrael, Kenya, New Zealand and Malawi. Only two species, Macadamia In- cal value with diverse uses. The linotegrifolia and Macadamia Tetraphylla, leic acid found in mahua oil reduces are said to be of commercial use. The blood cholesterol and is therefore recrest of the nuts in the genus are said to ommended to heart patients. The tree can be planted on a commercial scale be poisonous or inedible. The tree can be propagated by seed, on roadsides, canal banks and in socuttings or grafting and begins to pro- cial forestry programs, particularly in duce nuts in about seven to ten years. tribal areas. They should be preferably grown in USAGE: Wood used for making pulp fertile, well-drained soils, with a favo- and paper, used as timber, flowers and rable temperature of around 25° C. In fruit pulp used as raw material for fer-

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opportunity/agri DR RC SRIVASTAVA Director, Central Agricultural Research Institute

The market for fruits like apples and bananas is already saturated. In case of these underutilized fruits there are no existing players to compete with, so once you have entered the market, the market is yours. mentation and production of alcohol and vinegar, seeds for soap manufacturing, oil used in lubricating grease and candles, medicine for skin diseases, rheumatism, headaches and laxatives, seed cakes obtained after extraction of oil constitutes fertilizer.

fruits like apples and bananas, simply exporting them gets you a proﬁt margin of up to 40%. Whereas once these fruits are processed, proﬁts start pouring in heavily. The same rationale applies for these underutilized fruits.”

Route to commercialization? Is there a catch? Don’t worry; we aren’t painting any rosy pictures here. The reason why commercialization of these fruits has not happened on a large scale yet is simply because not many people are aware of the health beneﬁts and business potential of these fruits. Entrepreneurs also shy away because the market for such fruits is unorganized and needs to be established properly. A triangular system should be in place, where farmers, researchers and entrepreneurs can work together to cultivate the fruits, develop the production technology, process and package the fruits, and monitor the supply chain. Dr Srivastava comments, “The market for fruits like apples and bananas is already saturated. In case of these underutilized fruits there are no existing players to compete with, so once you have entered the market, the market is yours! In addition, like in the case of

Heavy investment has to be made in researching and developing favorable methods for developing the processes and products to commercially produce these fruits. Jamun, mahua, khirnee, karonda, tamarind, wood apple and chironji for example, require a subtropical climate. Fruits like avocado, durian, garcinia, macadamia nut, mangosteen, passion fruit, longan and rambutan, however, require a tropical climate for quality fruit production. In terms of land, Dr Srivastava says, “If you are already into the business of fruits, there is not even a need to replace the existing fruit crops, as these fruits can also be a supplement to what is already growing. For starters, however, there is around 175 million hectare of area that is degraded and this vast wasteland can be used to grow these fruits.” Depending on where a particular fruit can be grown, there are several horticulture institutes across the

country that can not only give you advice on growing these fruits, but also provide you with fruit seeds for germination. The Indian Council of Agricultural Research has been working on the National Network Project on Underutilized Fruits since 2005, and has collected a large number of fruit crops from different parts of the country and from abroad. “We have also standardized the best propagation techniques for most of these fruits so that the plants can multiply in number. Softwood grafting has been recommended for jamun, mahua, khirnee and wood apple, for instance, “says Dr Singh.

MACADA MIA NUT

What are the hurdles? The good news is that the Indian Council of Agricultural Research is already working on conducting farm trials to see how well these fruits can adapt to the new environment and how much they yield, which can save a lot of time, effort and money. Challenges come in while convincing farmers to cultivate these fruits in the first place. According to Dr Srivastava, “As these fruits aren’t being cultivated for commercial purposes, the entrepreneur has to gain the confidence of the farmer assuring him that the fruits will give returns. While the fruits are in their gestation period, which can take about three to five years, duo-farming can be done with vegetables, so that both the entrepreneur as well as the farmer do not have to wait long to get income.” Other challenges include developing technology for the optimal extraction of vitamins and minerals from these fruits and converting them into end-products. After that, as Dr Srivastava puts it, DAR E “The sky is the limit!” JUNE 2008

MAHUA

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opportunity/paints

s Mahesh Apte leaves home every morning for his paints manufacturing unit in Miraj in Sangli district of Maharashtra, a couple of issues keep his mind occupied. How can he offer his products at competitive prices while increasing his customer base? Apte owns Rainbow Paints, a company started by his father 40 years ago. Times have changed a lot since then. With major Indian and global paints manufacturers holding a lion’s share of the market, it is quite a challenge for businessmen like Apte to hold forte and capture more customers. In a price-sensitive paints industry, low on margins and high on raw material costs, a new player may find it difficult to grow a market for his products. But still Apte feels “there is enough profit to be made, provided one continues to expand his customer base.” Paint is a volumes business— the more you sell, the more profit you make. In this story, DARE looks at both the growth prospects for a newcomer and the barriers to entry that could act as dampeners.

Growth Drivers

Paints in your future? While the Indian paints market is witnessing a steady growth, some entry barriers for entrepreneurs could act as dampeners /Vimarsh Bajpai 60

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India’s robust economic growth has had a direct impact on the infrastructure sector that has grown at around 10% in the last five years. While roads, sea-ports and airstrips are garnering major investments through publicprivate partnerships, the housing and commercial real estate sector has witnessed a 35% growth year-on-year and is pegged at $15 billion. The sector is also seeing record inflows with global players having pumped in an estimated $10 billion over the last few years. This has given a big impetus to several downstream businesses such as cement, steel, construction equipment and paints. “A robust economic expansion (in India) will occur in concurrence with a booming construction sector, thereby benefiting the paint industry,” according to the World Architectural Paints 2011 report by the Freedonia Group, a US-based market research firm. Its says that the current per capita architectural (decorative) paint consumption in

opportunity/paints

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JUNE 2008

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DARE/barriers to entry for new players

Group. This phenomenon is usually a sign of rapid eco1. Big players (organized segment) control nomic and infrastructure about 70% of the paints market. development in a nation, which holds true in the case 2. The sector requires high input costs and of India, it adds. it is raw material intensive. Low capacity utilization underlines this industry, with 3. Sharp rise in crude and petrochemical most manufacturing units prices. operating at around 40-50% capacity. However, some mar4. Profit margins are low. Thus volumes play ket leaders also utilize around a major role. 60-70%. “The sector is also raw material intensive and 5. Building brands is a major challenge. input costs are high. Some6. Modern and updated production times 60% of the cost is that of raw materials. This reductechnology needed. es profit margins,” says Apte. India is among the lowest in the world Around 300 inputs (mostly chemicals) and has significant growth potential. are used in paint manufacturing. These From 2004-2006, exterior paints have are of various types, such as binders, been the fastest growing architectural pigments, solvents and additives. Paint paint market segment in India, regis- is a highly price-sensitive commodity. tering around 20% annual growth. Therefore, any change in the cost of raw material could impact the manufacturing cost of the final product. With Business Segments There are mainly two segments of the crude and petrochemical prices touchpaints industry—decorative (architec- ing new highs, the cost of production tural) and industrial paints. Decorative would invariably be affected. paints comprise exterior and interior wall paints, wood finishes, enamel and Market Prospects other products such as primers. Ac- The demand for paints in India stands cording to Equitymaster, a stock mar- at 1.22 million tons, according to Inforket research firm, “decorative paints mation Research (IRL) that provides a account for over 75% of the overall range of market research and analysis paint market in India.” Asian Paints is services to the global paints and coatthe market leader in this segment. ings industries. This could grow to two Industrial paints find major us- million tons by the start of the next age in the automotive, aviation and decade. Indicus Analytics, a research consumer durables sectors. “Three firm, estimates that by 2015, there will main segments of the industrial sec- be a demand for over 24.3 million new tor include automotive coatings, pow- dwellings in urban India alone. This der coatings and protective coatings. would translate into further growth of Industrial paints’ market size stands the industry. Rural market also holds at around Rs 950 crore,” says Equity- big promise for paint companies. master. Kansai Nerolac holds a major Taking a cue from FMCG companies, share of this market. The per capita paint manufacturers could work on consumption of paints in India is quite products targeted specifically for the low as compared to that in developed rural markets. countries. With construction activity “Demand for architectural (decopicking up fast, the demand for paints rative) paint in India is projected to is only set to grow. increase 8.7% per year through 2011 Unlike much of the rest of the world, to one million metric tons, among non-residential buildings account the strongest performances expected for a majority of paint demand in In- of any country in the world,” says the dia (57% in 2006), says the Freedonia Freedonia Group. Export opportu62 JUNE 2008

opportunity/paints DARE/quick facts 1. India’s booming real estate sector, growing at 35% yearon-year, is driving the demand for both decorative and industrial paints. 2. Paints’ demand stands at 1.22 million tons, and is projected to grow to 2 million tons by the start of the next decade, says research ﬁrm IRL. 3. In volume terms, the paints sector posted a 16% year-onyear growth in FY07 4. Rural markets offer new opportunities for growth. 5. Demand for decorative (architectural) paint is projected to increase 8.7% per year by 2011, which constitutes 70% of the paint market. nities also beckon entrepreneurs as globally the demand for paints is also expected to rise, although slower than that in India. According to estimates by the Freedonia Group, global demand for architectural paints is estimated to rise 3.9% per year through 2011 to 21.5 million metric tons and will be valued at $47 billion. Majority of the demand will come from developing countries in the Asia Paciﬁc region including China. Big players dominate India’s paints market—Kansai Nerolac, Asian Paints and Berger Paints. In the industrial paints segment, Kansai Nerolac holds a 47% share while Berger has a 13% hold. The decorative paints segment is led by Asian Paints with around 45% market share, with Berger (16%) and Nerolac (12%). Several international paint companies are also entering India. Norway’s Jotun Group is increasing its operations with a new production facility at Pune while Nippon Paint is reported to be mulling investments of around Rs 3.5 billion to build a new DAR E plant in Gurgaon.

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/blogs

Thank your lucky stars: but at whose cost? Government subsidies keep fuel prices low, but in the process oil and gas ﬁrms suffer losses /Paranjoy Guha Thakurta

nternational prices of crude oil and petroleum products have touched record highs. Never before in the history of humankind have oil prices gone up to the extent they have in recent months. On May 22, world crude oil prices hit the US$135 a barrel mark—prices may come down in the near future, but the days of cheap oil are clearly over. We would only be deluding ourselves if we believe that new reserves of this non-renewable energy source would be quickly discovered and the world would be able to continue with its old habits of guzzling hydrocarbons or fossil fuels that take thousands of years to form. Many people in India do not realize how lucky they are because our government subsidizes petroleum products. Most other countries pass on the increase in international oil prices to domestic consumers. India currently imports roughly three-quarters of the country’s total requirements of crude oil; around two-thirds of this quantum comes from countries in West Asia. If all subsidies were withdrawn from the three major public sector oil marketing and refining companies—Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL)—and these companies were allowed by the government to charge prices that would ensure that no losses were incurred, retail prices of petroleum would shoot up. At the time of writing (May 26), if no subsidies were provided and oil companies were free to charge customers prices that would enable the firms to merely break even (namely, neither incur a profit nor a loss), each liter of petrol (or motor spirit) would cost Rs 16 more, each liter of highspeed diesel would cost Rs 23 more, each liter of superior kerosene oil would sell at a price that would be Rs 28 higher and, finally, each cylinder of liquefied petroleum gas would cost Rs 300 more. So we should indeed thank our lucky stars that we live in India. Still, as the old saying goes, there is no free lunch. Somebody has to pay the price and in this case, the ones who are suffering are the oil companies fondly described as navratnas by our political leaders. These companies are at present in a terrible financial crunch. The three oil companies lost an amount in the region of Rs 70,000 crore in the twelve months that ended on March 31, 2008.

One estimate is that during the third week of May, IOC, HPCL and BPCL were together losing not less than Rs 550 crore each and every day. This would add up to a staggering total loss of Rs 200,000 crore over a twelve month period. To place this figure in a proper perspective, it is around 5% of India’s national income or gross domestic product! If the government allows oil companies to increase prices of petrol and diesel, it will add fuel (literally) to the inflationary fires that are raging. This would obviously make the government even more unpopular than it already is—especially at a time when the next general elections are less than a year down the line. Yet, if the government does not allow the prices of petroleum products to go up substantially, the losses of the three companies would continue to rise and these firms would turn sick. During 2007-08, the Ministry of Finance had issued bonds worth more than Rs 11,250 crore to the oil companies. But these bonds are just pieces of paper that are neither tradable in the market nor can be used to raise funds from banks and financial institutions. In any case, the issuance of bonds merely postpones the problem; it does not solve it. The other way out is to cut taxes as various levies—imposed by the central as well as the state governments—together comprise approximately half the retail price of petrol and around 40% of the price of diesel. The Ministry of Petroleum and Natural Gas has suggested to the Ministry of Finance that it cuts the customs duty levied on imported crude oil from 5% at present to, say, zero, and brings down the import duties on petrol and diesel from 7.5% to 2.5%. It has also been suggested that the Finance Ministry reduce the excise duty rates applicable to the two petroleum products. But cutting taxes may create a new set of problems as the petroleum sector is the single biggest contributor to the revenues of the government that come from levying customs and excise duties. Once the government’s revenues get squeezed, it may have to curtail its expenditures on important schemes, for instance, programmes for the social sector such as healthcare and primary education. The options before the government are limited. Its hands are tied. It cannot keep everyone happy. What is likely is that the government will try and reduce the burden on the consumer to the maximum extent while squeezing its own revenues and those of the public sector oil companies. So, once again, thank your lucky stars you are Indian. Others are not DAR E so fortunate. 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. JUNE 2008

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strategy/inventory DARE/the JIT principle

Just-in-time

Waste identiﬁcation and reduction for saving on inventory costs

The just-in-time model of inventory management has worked wonders for global manufacturing behemoths. But it needs superb strategic planning to get the desired results /Arunjana Das

bomber an hour is not a slogan. Neither is it a bestseller. It is the rate at which automotive giant Ford had manufactured B-24 Liberator bombers in Willow Run, the aircraft manufacturing and assembly plant in San Diego, during World War II. Charles Sorenson, Vice-President of Production for Ford and the man behind the ﬂoor layout came out with a plan for manufacturing an amazing 18 bombers a day on average. That was the predecessor of just-in-time, literally, the Big Bang in the history of costeffective inventory planning. Just-in-time (JIT) is a management philosophy that focuses on executing tasks as and when required, eliminating the need of maintaining an inventory. The tasks could be anything, ranging from acquiring and supply of raw materials to processing and shipment. The basic concept involved is reduction of wastes at every step. The waste could be in the form of time

64 JUNE 2008

(machine-setup time, idle time, transportation time, etc.), product (excess production, defective batch, etc.) and raw materials (inventory and stockpiling of raw materials and assembly components). To be able to execute tasks just in time, the raw materials, assembly components and the machine need to be on-hand. Stock-piling increases costs and, in many cases, has been found to make the system

Following sources of wastes in manufacturing have been identified: O Downtime O Machine setup time O Overproduction O Worker idle time O Intra-factory transportation time O Work-in-process time O Inventory O Defective batch sluggish. Reducing the inventory of such materials makes the system lean and exposes its weaknesses, which can then be rectified. The JIT concept came up as a result of Japan’s extensive efforts in beating the American automobile industry to become an industrial giant. First employed in the Toyota manufacturing plant in Japan in the early 1970s, it was conceptualized with inspiration drawn from Willow Run. Although started in a manufacturing plant as a quality control measure, it has, however, grown into a complete management philosophy over the years. Goran Svensson, a professor from Oslo School of Management, Norway, has defined its basis as that “no non-essential activity should be committed prior, during and after any production phases and wherever beneficial, outsourcing is regarded as good as in-house production.”

DARE/what is just-in-time (JIT)? O

It is a management technique that focuses on executing tasks as and when required, eliminating the need of maintaining an inventory. The task could be anything, ranging from acquiring and supply of raw materials to processing and shipment. According to The Association of Operations Management, JIT is the philosophy of manufacturing based on planned elimination of all waste and on continuous improvement of productivity. The model has been highly successful in manufacturing industries, particularly automotive. Other sectors such as logistics, services and recruitment and staffing too have beneﬁted.

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strategy/inventory How good is just-in-time in the Indian context? Just-in-time (JIT) as a philosophy is good in most environments, including India. Its core philosophy is identifying and eliminating waste and continuous improvement. This is important in a country like ours where resources are scarce. There are auto component companies in India that have excelled in implementing the JIT concept. Inventory management using JIT has been Jishnu Hazra used by many companies in the inbound Professor, Operations Management, IIM Bangalore (supply side) part of the supply chain. The JIT concept, however, does not work well when there is a high degree of uncertainty in the system. Therefore in certain industries such as fashion apparel, implementing JIT might be difficult and challenging. Can JIT be teamed up with certain other inventory planning systems required in the case of natural disasters and the ongoing food-fuel crisis? It is not easy to implement JIT in a situation where you need to manage inventory in a short duration with a lot of uncertainty in the environment. I believe a push system of inventory management would be more appropriate, especially in the initial phases of disaster planning. How can JIT be skillfully employed, if at all, in a financial services setup? JIT can definitely be used in financial services especially when financial services are using IT extensively to interact with customers. There is a lot of scope in waste reduction, for example, sending mailers to customers; typically a customer gets multiple copies because the customers has subscribed to multiple products; the financial services can use process improvements to send a single copy of some advertisement that can reduce mailing cost drastically. There are many other processes in the financial services sector where JIT can be used in document processing.

The Implementation JIT, at a micro level, aims at the reduction of inventory. Lowering inventory levels is seen to be as important as shedding extra flab. As the basis is to cut down on wastes and to ensure that a raw material or a specific item is available only when its need arises, implementing companies employed several mechanisms to make the system efficient. An early system, mastered by Toyota, was the Kanban system. Kanban, in Japanese, means a card. It’s a pull mechanism that relies on putting orders through cards for specific quantities of items as and when they get used on the shop floor. Kanbans, or cards, containing product details are used to acquire raw materials and other components from the

suppliers depending on the rate of production and usage. In an automated setup on the shop ﬂoor, this pull mechanism can be initiated by a signal, such as an infrared emitter. The signal would be triggered when the stock for immediate requirement falls below a certain level, thereby initiating a demand for the concerned material throughout the supply chain. Kanbans have now also been incorporated into the ERP (enterprise resource planning) systems of implementing companies. Known as e-Kanbans, they help in better penetration of the demand signaling in the supply chain and reduce human errors to a signiﬁcant extent. JIT lies in the heart of lean manufacturing. Often, companies have been

KURT COBB

Editor, Resource Insights

Businesses need to become much more discerning about what materials they can risk including in just-in-time systems and what they must stockpile. Will there ever again be a time where such concerns are unwarranted? For the next decade or two, I think perhaps such concerns would disappear only in the event of an economic depression. able to cut costs ranging from 25% to 30%, thanks to the implementation of JIT. It requires effective measures at every step of the manufacturing process, right from the ordering of supplies from vendors to quality testing of the ﬁnished product. Alertness and agility is the name of the game, which is why an effective information backbone is required to track the movement of items to, on and from the shop ﬂoor. SHADOW, a software tool recently unveiled by Intelligent Business Systems (IBS), is one such inventory planning mechanism based on JIT.

In Manufacturing and Elsewhere With its beginnings etched in the automobile industry, JIT made its beneﬁts felt widely amongst companies involved in the manufacturing and assembly of machine products. With a fruitful experience gained in the automobile sector, many other industries working on the assembly-line principle JUNE 2008

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strategy/inventory

Your company recently unveiled SHADOW, a software tool based on JIT. What benefits does SHADOW have for manufacturing companies? SHADOW is a powerful inventory management and control system from Intelligent Business Systems, providing efficient and secure control and maintenance of inventory in an organisation. The software has been designed using modern technologies, keeping Dr Kaustubh Chokshi in mind a simplified approach to Co-founder and CEO, Intelligent Business Systems stock administration and reporting by including just-in-time stocking principles backed by sophisticated analytics. Detailed descriptions of all items in inventory can be input, with multiple levels of categorization. A wide range of essential documents and reports can be generated whenever required, including purchase orders, invoices, product details, supplier details, stock summary, etc. What inventory planning practices does it employ? The current market scenario demands a system that is more proactive to the finer details of inventory control and management. Since the advent of Electronic Data Interchange, software revolving around the needs and requirements of businesses has grown manifold. The business community has finally grown to become techsavvy and has finally begun demanding software applications and technologies to be created and customized according to their requirements. In the present situation, what enterprises need among other things is a solution that will enable synchronisation of stock strategy with day-to-day inventory operations in a measurable fashion, and a user-friendly interface whereby stock can be regulated and managed online in a more efficient manner. How scalable and adaptable is SHADOW? SHADOW basically ensures that every minor detail pertaining to all items in inventory, beginning from detailed descriptions of items, to maintenance of stock levels, supplier details, order details and supply status is taken care of. The entire inventory cycle—ordering and receipt of stock, quality checks and storage, queries on individual items, packaging and dispatch—can all be managed seamlessly in SHADOW. With very little hassle, it identifies the item dispatch and arrival details along with the alerts for items nearing the reorder date. Password protection with variable levels of authorization ensures the integrity of all data entry and transaction processing, as well as complete security for every information to control and manage the inventory. in the manufacturing sector employed it successfully. Apart from the automobile sector, the chemical products industry and the machine-goods industry have also been the beneficiaries. The utility factor, however, spills into several other sectors as well. JIT has been used successfully, to some extent, 66

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in logistics, services and even recruitment and stafﬁng on a global scale.

In India From empirical evidence, implementation of JIT in the country has shown mixed results. In a research report by Prof B Mahadevan of IIM Bangalore,

the reason behind this has been cited to be the uniqueness of the country and the nature of its business enterprises. He has listed a few factors that need to be examined in detail for implementing JIT successfully in the Indian context. Mahadevan’s report was based on a survey of a number of organizations in India that have used or tried JIT. He found the implementation to be satisfactory for only those Indian companies that had incorporated JIT as part of their strategic planning, with a lead-time of two to three years and tremendous commitment from the management at all levels. Those who had opted for it on an ad hoc basis, or as part of quick system overhaul or modiﬁcations faced confusion and wasteful expenditure. Mahadevan also states that certain Indian enterprises that were otherwise well-versed with the concept of JIT, had trouble internalizing the concept into their actual procedural systems. Reasons behind the failure range from lack of proper and long-term planning to a deﬁcit of adequate commitment from the management.

For startups A startup might not have a vast network of suppliers or distributors that an established player possesses. Hence, the former would be required to hen-peck and build a network with the capacity of conforming to a JIT climate. For an established player, it might just be a matter of acclimatization. A startup, however, might score on quite a few other counts. Incorporating JIT in the framework of the system from the very beginning would prevent expenses that would otherwise have to be borne on account of the changemanagement procedure. As inventory levels are low, corresponding costs are kept low too, leading to better use of available cash. In addition, startups are generally smaller in size and possess fewer levels of management, leading to a faster percolation of ideas. With an adequate degree of commitment and proper planning, JIT can help keep a DAR E startup lean.

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/I&B

A new model for radio and TV content distribution?

can create channels about your travels, your hobbies, or your children’s sports teams, or just put up a great webcam,” he adds. All that TVU’s free software requires is a five Mbps broadband connection, which is classified as home broadband in many countries. (While some providers offer upto eight Mbps on a residential connection, many offer only a maximum of two Mbps in India.) And if you just want to watch TV on your PC using their software, you need a connection with only one-tenth of the speed. Of course, viewers will also need to download the viewer application. The biggest difference between these services and the older, browserbased services is in terms of the enduser experience. While on a browserbased service like youtube.com the selection of videos are of shorter duration (usually two to ten minutes), the new breed of services offer continuous channels in addition to videoon-demand. In addition, unlike the low-quality (low-resolution) videos on most web-based services, the new services offer resolutions from standard definition TV to HDTV.

How does it work?

New internet-based delivery technologies hold out the promise to disrupt traditional media delivery mechanisms and make TV moguls out of every one, challenging traditional business models /Sreejiraj Eluvangal

ver considered launching a television or radio channel of your own? The biggest entry barrier today to a new media venture, particularly broadcasting, is distribution. If it’s a TV channel, one has to book space on a satellite and negotiate with cable operators across the country to carry the new channel on their platform. While satellite capacity can be relatively cheaper, persuading cable operators to carry your channel is another story, involving both money and considerable on-the-ground lobbying.

JUNE 2008

Now imagine launching a TV channel on a platform that reaches millions of viewers across the world—with just a home broadband connection. Sounds impossible? Not if you have heard of companies like Joost, Livestation and TVU Networks. “Aspiring broadcasters need only content of their own, a Windows or Linux PC, a broadband Internet connection, and our freely downloadable application,” says Kap Shin, EVP at California-based TVU Networks. “Even if you are an amateur broadcaster, you

The new breeds of services get their edge from the difference in the way in which they deliver content to the enduser. While the traditional method of delivering content on the Internet is no different from the one that is used to deliver normal web pages, the new services use different approaches. Traditionally, content is transferred when a user’s computer (the client) requests for some information from another computer on the Internet that hosts it (the server.) The server then chops the content into packets, slaps on the address of the end-receiver on each packet and pushes it onto the Internet. Once out there, the packets are further pushed or guided to their end-destination by many devices called routers, based on the destination address found on them, much like a courier service that routes a packet meant for you. While the system worked very well for text, for heavier content such

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/I&B as high-quality audio and video, it becomes increasingly unsuited and uneconomical. “The world is moving towards video as a main form of communication and the older method may not be the best solution,” says Ranajoy Punja, VP with Cisco. “Under the earlier technology, if there are 100 people who want to watch a particular video stream or event, the server replicates the content 100 times and sends it out 100 times, one to each viewer,” Punja explains. “While that was okay for text, there are two problems when you apply it to video. One is that replicating the video stream for each new viewer takes up too much of the server’s processing capacity. Second is that it consumes too much bandwidth.” To get an idea of the difference in scale, a typical webpage, on which a user may spend two to five minutes on, usually ‘weighs’ between 200 to 600 KB while a compressed, standarddefinition video stream of five minutes will be at least 20,000 KB. Jeremy Penston, a London-based networking consultant estimates on his ‘IP Development Network’ blog that bandwidth requirements at the consumer end will increase 159 times if people started watching TV on the Internet. Under traditional Internet models, when the end-user data usage goes up, it also means the servers where the content originates also become busier by a similar extent. “We spend around Rs 7,000 every month on server and bandwidth,” says Shreyas Shrinivasan, who along with Gaurav Vaz own ‘RadioVeRVe’—a Bangalore-based Internet radio service. Though an audio streaming service such as RadioVeRVe takes up bandwidth of only one-sixth to one-tenth of an online video streaming service, every extra listener increases the load on the server. RadioVeRVe currently sees around 20,000-30,000 unique visitors a month. “We have to pay extra if more people tune in,” says Gopal Swami, proprietor of Tamil Nadu-based Flash Networks that operates summaradio.com. While an increasing audience is cause for

unadulterated celebration in a normal media ﬁrm, for Swami it has also meant that his hosting charges have now come up by 40% of his total expenses of Rs 60,000 last month. “The usage has been increasing ever since we started the service four months ago. It was three lakh listeners last month, up from around one lakh in the month before that,” he says. Swami also has to pay Rs 12,000 a month as royalty charges for the music from around 2,000 ﬁlms, every month. Compared to this, Swami’s only income is the Rs 30,000 per month that he gets from selling advertisements on the radio station. Both RadioVeRVe and summaradio. com use the traditional server-client model of transmitting information, which means that each new user increases the load on the server. The economics of broadcasting on the Internet become even more daunting when one moves to video due to the high server capacities needed. It is this problem that the new breed of broadcast technologies is trying to address.

The New Solutions The new solutions get around the problem of high server costs by shifting the job of multiplying the streams further down the channel. While in the current system, a server would send out 100 channels of the same content to 100 listeners, the attempt is to reduce it to a few, or even just one. The job of multiplying the stream is passed onto the users, in case of the majority of new solutions, or the routers, for a certain niche and emerging technologies.

Router-level Multiplication The concept can be explained by an example of a stream originating in the US and being consumed by 100 different listeners in different parts of Bangalore. Under the traditional method, each of the 100 listeners sends requests for the stream to the US-based server. The US server ﬁrst makes 100 copies of the same stream and sends all of them across. So the routers too get 100 copies of the same stream and have to redirect all of them to Bangalore. Once

MATTEO BERLUCCHI CEO of Livestation

As television struggles at offering a credible timeshifted service, more and more people will migrate to interactive platforms based on IP. in Bangalore, they automatically ﬁnd their different clients, based on the address slapped on the packets. Under multicast, each of the 100 listeners makes a request for the stream. The request is passed on from router to router until it reaches a router that already has the stream passing through it. The router then duplicates the stream by itself and sends one copy to the new client, instead of passing on the request for content further upstream to the server. In our Bangalore example therefore, only one copy of the stream goes all the way from the US to Bangalore, where routers further duplicate it to cater to all 100 or more ‘subscribers’ to the stream. The technology however has not been a success. Out of the major broadcasting platform providers like Joost, Babelgum, Livestation etc., only one has tried to implement it—the Israel- based Intercast Networks. “It is not widely deployed in the Internet due to practical issues associated with its operation, its implementation requires modifying existing routers’ functionality or replacing them,” says Manimaran Govindarasu, Associate Professor at the Department of Electrical and Computer Engineering, Iowa State University. JUNE 2008

DARE.CO.IN RANAJOY PUNJA

VP with Cisco’s Advanced

/I&B As a result, unless all the companies enable at least some of their routers with the functionality, commercial models utilizing multicast will not be successful. For now, companies like Intercast and Cisco are targeting situations where the server and the client are both in the same network.

Client-level Multiplication

The world is moving towards video as a main form of communication and the older method may not be the best solution “But, it is not required to have all the routers supporting multicast. If there are multicast enabled routers in the network, they can be used as part of the server-to-clients paths for efﬁcient bandwidth sharing” Govindarasu points out. The biggest problem before implementing multicast solutions on the Internet is that the path from a server to a client usually crosses multiple networks owned by different companies.

SHREYAS SHRINIVASAN AND GAURAV VAZ Radio Verve - a Bangalore-based internet radio service

We spend around Rs 7,000 every month on server and bandwidth we currently see around 20,000-30,000 unique visitors a month. 70

JUNE 2008

The second technology, one that is more mature and has already seen considerable commercial action, is client-based multiplication. While multicasting uses the routers to multiply a stream, thus allowing a single stream to end up with millions of users, client-based multiplication achieves the same result by using the consumer’s terminal to multiply the stream. Drawing heavily from the file-sharing or the peer-to-peer technology pioneered by the likes of Napster and Kazaa a decade ago, software providers like Joost, Livestation, Babelgum, Miro and TVU Player take the load off the server and turn users’ machines into mini-servers. The new types of Internet broadcasters utilize the ‘distributed serving’ model of the traditional peerto-peer networks, but have re-implemented it for live or streaming content. Using this modified file-sharing technology, the companies have evolved four different business-models. One is where the application can be used to watch only the programs from one particular broadcaster. For example, variants of the Kontiki player are distributed by BBC, Channel 4 and Sky of Britain. Three months after it was released, the BBC’s iplayer, for example, claims a user base of 2.2 million. The second business-model is where the developer of the software acts as a content distributor, like a DTH-operator. Here, only those channels that are approved by the distributor are allowed, like in the case of Joost. The third model is where the technology provider does not control the content and users can start their own channels, like TVU. The fourth model has grown out of a particular issue with this technology—storing the content on the us-

ers’ machines, increasing chances of piracy. As a result, under this model, the application does not store content on users’ computers. The downside to this is that no video-on-demand is possible and the user can watch only live programs. Nearly all have so far stuck to the ad-supported model, though they tailor the ads according to the user’s proﬁle. The ad-revenue is shared between the platform owner (such as Joost) and the broadcaster (such as Viacom). Joost, launched a year ago by Niklas Zennström and Janus Friis, inventors of Skype and Kazaa, claims to have nearly ﬁve million downloads and 20,000 shows available. Says Kap Shin of TVU, “We have more than 15 million downloads to date from users from over 200 countries. Viewers watch over 11 million hours per month. There are over 300 channels.”

Gazing at the Future Matteo Berlucchi, CEO of Livestation predicts that over the coming years, IP-based systems, whether based on multicasting or client-based peerto-peer networking, will become the norm rather than the exception for entertainment. “There is a strong chance that the IP network could seriously undermine the current economic models around entertainment. In particular the question is around the value of watching entertainment in a linear way. Besides “first runs” and the value of being able to talk about last night’s episode over coffee or around the water cooler, there is little value in watching an episode of the latest fiction or a movie in a non-time-shifted way. As television struggles at offering a credible time-shifted service, more and more people will migrate to interactive platforms based on IP,” he points out, adding that ‘live’ will live on, irrespective of platforms, for certain types of content such as sports and news. “For sure, we see first hand that Internet TV based on efficient P2P protocols can scale to millions of viewers. There is no theoretical limit. TVU once sustained 150,000 concurrent viewers on a single channel,” says Shin. D A R E

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AUGUST 2007

opportunity/geo

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/15 min. guide

Energy Efficiency Labels Since 2006, energy benchmarks have been making it easier for consumer appliance companies to cite actual efficiency and the cost benefits that a consumer derives by buying their product. Here is an overview of what these labels are and how to get one /Binesh Kutty

nergy efﬁciency labels are informative labels afﬁxed to products, describing their energy performance, usually in the form of

energy use or efficiency on a comparative scale across brands. Energy labels provide consumers with information to make informed purchases. The Bureau of Energy Efficiency (BEE) is the agency that ensures compliance to the standards and labeling scheme laid down under the Energy Conservation Act 2001. Energy efficiency labeling has been in use in several other countries for quite some time now. In many of these countries, it is mandatory for manufacturers to get them. In India, however, getting the label is voluntary as of now.

How to get a label The label itself is a standard set by BEE, and manufacturers have to test their equipment and self-declare their rating level. Ask whether there is a standard norm as to how the efﬁciency is achieved, BEE mentions, “There is no restriction as to what technology is used to achieve the set energy efﬁciency rating, which is totally the manufacturer’s call.” After this, he can apply for a

72 JUNE 2008

DARE/energy-efﬁciency labels Already covered under the scheme: Domestic refrigerators Air conditioners Fluorescent tube lamps Distribution transformers Still to be covered: Fluorescent lamp ballasts Electric motors Washing machines Boilers Furnaces Storage water heaters Heat pumps Submersible pumps Ceiling fans Television sets… and more SOURCE: www.bee-india.nic.in

label at BEE, the details of which are then scrutinized by the agency. If there are no queries by BEE within a month, the manufacturer can afﬁx the label, in the prescribed format, under intimation to the Bureau if an agreement for participation in the scheme has been entered. Getting BEE labels is not expensive at all. Manufacturers of equipment, importers, and persons-in-trade can enroll themselves in the scheme by

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/15 min. guide R.T. RAJAN

Director (Sales and Marketing), Haier Appliances India

Energy efficiency levels are emerging as the third most critical factor influencing purchase decisions after price and brand. entering into a three-year agreement with BEE for a meager amount of Rs 100. For getting the label though, a separate application is required for the equipment and each of its models, for a fee of Rs 1000 each. Also, an additional labeling fee per unit manufactured is payable in advance (e.g. Rs 10 per refrigerator, Rs 0.05 per tubular florescent light) The forms for application, agreement, and application for labels are available at the Website of BEE. These documents include all information and schedules (energy labeling requirements) for all the equipment.

Label veriﬁcation BEE veriﬁes the label contents, and the manner of display of label for each

equipment/model on a regular basis. It determines the frequency of the veriﬁcation test depending on the nature of equipment and time required for testing. The test itself is conducted in an independent, National Accreditation Board for Testing and Calibration Laboratories (NABL) accredited laboratory registered with the Bureau. BEE or its representatives will identify and seal the equipment samples as per the sampling procedure speciﬁed in the Schedule of the scheme (for all equipment).

Beneﬁts? Haier very recently introduced a new range of ‘four Star Rated’ refrigerators. Ask RT Rajan, Director (Sales and Marketing), Haier Appliances India, why

should any manufacturer affix an energy efficiency label in the first place, and he mentions, “Energy efficiency levels are emerging as the third most critical factor influencing purchase decisions after price and brand,” he adds, “Every appliance comes with two price tags, one that only mentions what it costs to buy it and the other that includes what it costs to operate and maintain it. Ratings qualified appliances incorporate advanced technologies and use 10 to 50% less energy than standard appliances.” For the future, he speaks of the actual benefit of affixing the label, “Energy efficiency labels give a consumer a clear idea on the energy efficiency for the power consumed, and therefore the cost saving that he can derive from that particular product. So this not only leads to greater acceptance among our customers for the products, but we as manufacturers also gain trust and confidence for the products, which ultimately reflects in the sales of the products.” D A R E

JUNE 2008

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strategy/marketing

Looking below the line Unconventional marketing strategies can be a start-up’s best friend /Chhavi Tyagi

n today’s cut-throat competition, below-the-line promotions have become indispensable tools for both start-ups and large organizations, thanks to the low cost factor. “At least 70% of the decisions on whether to buy something or not is made at the shop ﬂoor,” says Vijay Singh, MD & CEO of 141 Sercon, a below-the-line (BTL) promotion agency. DARE explores the possibilities and limitations of this powerful tool.

What is BTL? It is everywhere and almost everyone is doing it yet to deﬁne the scope of BTL is quite a difﬁcult task. While some in-

74 JUNE 2008

clude everything that is not mass media advertising in BTL promotions, others include only activities that are done for a certain class of consumers or target audience. It helps marketers establish one-to-one relationship with consumers while mass promotions, by definition, make it difficult to gauge consumer-response, except at the time of sales. Examples include telemarketing, road shows, promotions, in- shop and shop-front activities, display units and entertainment events. Purists like Singh insist all micro promotions, in which a narrow group is targeted, do not qualify as BTL marketing. “All agencies that were small startups, event companies, promotion companies etc. have suddenly become big BTL houses. But that’s not all what BTL is,” he says, emphasizing the two-way nature of the process. “BTL is about ensuring interaction. You need to define new consumers and do activities where there is an experience of interaction. BTL, by definition, has to be a long interaction and it has to be told. You need to tell the consumer

DARE/versus Above-the-Line Media…

Below-the-Line Media…

Are tailored to reach a mass audience Establish brand identity or reinforce emotional concept surrounding a product or brand

Are targeted at individual consumers, based on their expressed needs and preferences Issue a “call-to-action,” inspiring speciﬁc customer activity or tailored messages about a product or a brand

May or may not drive customer response

Drive individual responses

Are difﬁcult – if not impossible – to measure with any accuracy

Are highly measurable, allowing marketers insight into their return-on-investment, as well as those tactics that are (and are not) working

Cater to the mass market

Establish one-to-one relationships between consumers and marketers

SOURCE: V12 Group

strategy/marketing

DARE.CO.IN Why is BTL gaining more importance these days? The BTL industry has been around for a very long time, it’s just that now there is a little more recognition that what was earlier very fragmented is actually a fairly structured BTL business. Traditionally brand managers have been spending money on three broad areas -- one is ATL, second is marketing services or BTL and the third being PR. Earlier, rather than it being a structured as marketing services, people used to look at it as promotions being done separately, shop-front activities being done differently, product placements, etc. been done differently, etc. Now more and more brand managers are clubbing it into a single BTL format. They want an agency that can possibly give a solution for all that.

Is the increasing presence of BTL felt only in the FMCG and the durables market? No. The B2B business already has the majority of the spend. What was not happening was that FMCG in terms of percentage was not spending as high a percentage as what they are doing now on BTL. Also BTL is not just about niche products. Look at soap, it is Vijay Singh definitely not niche as everyone uses it. If you were to reduce the BTL spend on soaps, MD & CEO, 141 Sercon let’s say you don’t do any shop-front activities, you don’t do any inside the shop activities, so and so forth, you will need to bring down your sales focus. What kind of ATL and BTL mix would work for a startup operation? It is dependent on the product category and the kind of consumer you have. A startup I am assuming doesn’t have a lot of money so a startup typically would want to ensure that whatever the expense it gets some quick results that is where a BTL would come in. But if it is a startup with a lot of money, for instance, someone got lucky and got a lot of funding and is first looking at building the brand and then do sales then I would assume that he would first want to use some TV commercials, a lot of focus on print ads then from there start doing demand generation. How many companies are spending a substantial amount of money on BTL these days? In India our current estimate is on an average it is about 45% of the spend on BTL and I am including areas such as research marketing, a little bit of digital, etc. The difference with ATL is that the vehicles of delivery are fairly very well established. For e.g., out of a great idea and great strategy, I create a great TVC and I give it to established television channels to run it on their vehicles, and nothing goes wrong. When it comes to BTL, I still need to have a great strategy and a great creative idea but I need to implement it on ground. I’ll need to do promotions, I’ll need to do road shows, and I’ll need to do one-on-one interaction. And if I don’t implement it well, the possibility of a BTL campaign backfiring is very high. If I am a consumer and the person interacting with me doesn’t do a great job, that particular campaign will fall flat on its face. So the moments of truth on a BTL are too many. What is the ROI on these BTL initiatives? If you ask an ATL guy, he is normally going to talk in terms of increase in brand recall. If you talk to a BTL person he’ll give you hard numbers, in terms of revenue increase. Recently, for example, we ran the “Grand Kerala Shopping Festival” campaign with the Kerala government and they spent close to Rs 15 crore on the entire festival. It was a six- month initiative, and at the end we were able to increase the VAT collection of the state to the extent of approximately Rs 75 crore. This is hard money-to-money comparison but we also had to built the brand and do a lot of ATL with that campaign. The deal is if you cannot really measure the return on investment on a BTL campaign, then it’s not really a good campaign. As compared to ATL, what is one big advantage and disadvantage of BTL? The big disadvantage is that BTL is not the best information vehicle, a mass information vehicle. If the idea is just to convey the brand, then BTL is not the right solution. Turn it on its head, if the objective is to create a conversation about the brand and to get engagement with the consumer then BTL is the right solution.

JUNE 2008

DARE.CO.IN V RAMACHANDRAN Director, Marketing, LG India

A big challenge that BTL has is that it requires a much high usage of resources. Implementing a BTL program is more challenging than an ATL campaign. something and the consumer needs to experience it and ask you question”.

BTL and the Start Up “Given the proliferation of media and brands using them, the media market has become extremely cluttered,” says Pankajj Chaturvedi, Executive Director (South Asia), Baskin Robbins. “This has made addressing your core target audience a difﬁcult and expensive task. As a result, BTL advertising is increasing its share in marketing budgets. Even the larger brands are spending a fair share on BTL,” he points out. While most big consumer brands like LG, Samsung and Nokia have a range of BTL activities; this method of promotion is especially suited to newer companies and products. For a new product, consumer interaction

JUNE 2008

strategy/marketing and feedback during a BTL campaign helps in ﬁne-tuning the offering and positioning of the brand. While there’s nothing stopping you from launching a conventional massmedia based strategy, which would only help you in your brand creation, according to experts, it might be a good idea to initiate a BTL campaign and check which way the wind would blow as per your sales. “We are an innovation driven company, so we are continuously launching new products. Our products have new and exciting features, which are required to be communicated to the consumer and therefore require investment in the form of above-the-line (ATL) AND BTL”, says V Ramachandran, director, marketing, LG Electronics India. Besides ﬁne-tuning the product and brand, another big reason for a startup to favorably consider this tool is the cost factor. BTL offers a wide spectrum of dirt cheap to more expensive activities, starting from distributing pam-

“

BTL is at its best when applied to a small or medium sized market [geographically] or to an extremely speciﬁc consumer group. Spread it over too large an area or audience and you risk high costs as well as loss of focus and implementation effectiveness.

”

— Pankajj Chaturvedi Executive Director, South Asia, Baskin Robbins

phlets, brochures, newspaper inserts, etc. to holding seminars and product launches. “Unlike traditional advertising, the impact of BTL activities is far more measurable, since it is less about brand building and more about increasing sales”, says Singh. Besides new products and startups, another natural fit are companies with a niche, but geographically spread-out customer-base, such as that for precision engineering tools. In such cases, a seminar or trade show may bring you a much bigger bang for your buck than a TV ad. Sometimes, even if the product can have a national appeal, a company may choose to start off with just one town or city. BTL options such as pamphlets, mall events etc. fit the bill in this case. “We have always (nationally as well as internationally) been more of a BTL-led brand, given that our customers are specific and not mass market,” says Chaturvedi of Baskin Robbins. “In India, the popular and regular activities are leaflets, cross-promotions with retail chains or outlets and school contact progrmmes,” he says.

Limitations The BLT industry is fragmented with many small players dotting the market and doing a bit of everything. The industry size was estimated at Rs 13,200 crore in 2006. However, despite all the hype, BTL initiatives cannot be the answer to all your marketing requirements. Its biggest strength, an extremely focused approach, is also what prevents it from being a complete marketing solution. Besides the absence of cost-effective scalability to address a mass market, BTL activities may also require a higher involvement of the organization than DAR E an ad-based approach.

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/marketing

25 years of

our focused

VISION To expand globally in the knowledge domain through quality media products and services

JUNE 2008

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Opportunity/Engineering Plastics

Engineering Plastics: in high demand With plastics fast replacing metals in most spheres of engineering, and the industry growing at 12-15% annually, the pie is big enough for entrepreneurs to take a pick /Vimarsh Bajpai

lastics have kept Vijay Nagpal afloat. This first-generation entrepreneur manufactures raw material for engineering plastics at his unit in Bawana on the outskirts of Delhi. After completing his degree in plastics engineering from the Central Institute of Plastics Engineering and Technology (CIPET) in 1991, he started Nagpal Enterprises. But the business failed and he had to close down in 2000. This did not deter Nagpal from returning back with a vengeance. He reopened his unit three years back, and is now doing brisk business. “Plastics is a lucrative business. It is fast replacing metals in every sphere of engineering. The demand is growing at a rapid pace,” he says. Nagpal reflects the optimism of a number of entrepreneurs who are entering the plastics business in a big way. The market potential can be gauged by the fact that Satyam Computer Services, a global consulting and IT services provider, on April 2 announced that it has signed an MoU with CIPET, Hyderabad, for developing new engineering plastic materials through an industry-institute collaborative approach. This association is a part of Satyam’s plans of getting a global advantage in

DARE/why plastics? Plastics are being preferred over metals because they are: • Cost-effective • Rust-resistant • Have mechanical properties • Have high production volume • Lightweight

What are Plastics? According to the US Environmental Protection Agency, plastic is a material made from petroleum that can be molded, extruded, or made into various shapes. There are many different kinds of plastics made from different combinations of compounds. Alexander Parkes, a British inventor, created the earliest form of plastic in 1855. On the basis of their physical characteristics, plastics are usually divided into thermosets, elastomers and thermoplastics. Elastomers have a high degree of elasticity and once shaped, heating cannot reshape them. They are used in automobile tyres and are also called engineering plastics. These are more expensive in per unit weight, are high heat resistant, have more mechanical strength, rigidity, and ﬂame retardency. Thermoplastics become soft when heated and hardened when cooled. On the other hand, thermosets become permanently hard and rigid. The thermoplastics polyethylene (PE), polyvinyl chloride (PVC) and polystyrene (PS) are used, for example, in packaging applications and are also called commodity plastics. Thermosets are used to make light switches.

Per Capita use of Plastics (kg) World Average

India

North America

Western Europe

Latin America

Eastern Europe

China

South East Asia

10 0

complete engineering solutions for its global customers. Other big players in the sector include Reliance Industries, Supreme Industries, LG Polymers, and Saudi Arabia Basic Industries (SABIC), which bought GE Plastics last year for $11 billion.

• Good insulation properties • Decorative

Plastics Omnipresent

• Do not corrode

Large-scale industrialization has brought about a sea-change in the use

JUNE 2008

100

of complex materials such as wood, glass, metals and alloys. With new manufacturing technologies replacing older ones and cost-effectiveness becoming the mantra of modern-day competitiveness, plastics were quick to replace various metals such as aluminum. Plastics are almost 50% lighter than aluminum. The automotive industry is one of the biggest consumers of plastics. “A luxury car possesses

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Opportunity/Engineering Plastics DARE/plastic facts • Engineering plastics are widely used in automobiles, aircrafts, ﬁberglass boats, electrical and electronic items, medical equipment, and machinery • Plastics are replacing metals in industries • Indian plastics industry is growing at 12% per annum • Consumption of plastics is projected to touch 12 million tons in 2012, compared to just 5 million tons at present • The per capita usage of plastics in India is just 5 kg compared to the global average of 25 kg • The sharp rise in crude oil prices over the past two years have made plastics manufacturing costlier and have hit the margins of plastic-makers around 500 different parts that are made out of plastics. It is also used for light ﬁttings, upholstery and interior body design of a modern car,” says a report by the Multi Commodity Exchange (MCX). Some estimates point out that a small gear can be made out of a suitable plastic for about 1% of the cost of a machined metal and one and half to two-thirds of a cast metal one. Metals are being replaced by plastics because the latter is cost-effective,

its volume-wise production is high, it has mechanical properties, and it is abrasive and lightweight. Besides the automotive industry, plastics are also being used in aviation. The use of plastics makes planes lighter, safer and more economical, according to Ensinger, a global engineering plastics manufacturer that specializes in plastics for airplanes. “This is by no means the case for just the interior, but also for sophisticated technical parts, structural elements and propulsion components,” it says. Before plastics are approved for applications in aviation and aerospace, they normally have to undergo testing, which

DARE/green plastics Whatever the usefulness, plastics earn the wrath of environmentalists because these compounds take over 500 years to decay. To tide over the situation and make them environment-friendly, a team of scientists at the Missouri University of Science and Technology is working on manufacturing biodegradable and bio-available plastics that would disappear within four months of getting discarded. Bio-available plastics contain substances that can be absorbed by living systems during their normal physiological functions. The team is said to be working on creating optimal blends that can be used to make agricultural ﬁlms, bottles, biomedical and drug delivery devices.

DARE/plastics in aviation • For every extra kilogram that a plane weighs, it requires more energy to move, and therefore, costs more • The use of modern polymer materials and reinforcing ﬁbers make it possible to achieve lightweight constructions and hence fuel savings • Plastics are approximately 50% lighter than aluminum • High-performance plastics used in aircraft are inherently ﬂame retardant • They have high chemical resistance even at raised temperatures SOURCE: Ensinger

is speciﬁc for the components. Thus, Ensinger processes high-performance plastics to satisfy special needs. On the sea front, ﬁberglass boats have gained popularity and are widely used by coastguards. These boats are strong, rust-resistant and do not corrode.

The Big Market With India becoming an automotive hub, and the electrical and electronics market seeing boom time, the demand for engineering plastics is set to grow at a rapid pace. The Indian plastics industry is growing at the rate of 12-15% annually. The consumption of plastics is projected to touch 12 million tons in 2012, compared to just 5 million tons at present. This would translate into India becoming the third largest consumer of the commodity after USA and China. The rise in the prices of crude oil has hit the margins of plastics manufacturers. Recently, global crude prices touched an unprecedented $120 per barrel. There is also immense scope of export to developed countries such as USA. The demand for engineering plastics in the US will grow by 3.5% per year, according to the Freedonia Group, the US-based industrial market research ﬁrm. It says, a resurgent electrical and electronics market, increasing per vehicle usage and continued replacement of metal and other materials will drive gains in the US engineering plasDAR E tics demand through 2010. JUNE 2008

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blogs/opinion

Let the Baby run! Comparing the business of creating an enterprise with bringing-up and raising a baby /Anurag Batra

Like the dilemma faced by parents of most adolescents, corporate parents are also confronted by the question of how much to control and guide this grownup baby? It is not an easy decision.

hen an entrepreneur or a group of entrepreneurs start a company, they give birth to a baby. When a startup is born, it’s like a child coming into the family of business. Like the parents of a newborn baby, the entrepreneur and the ﬁnancier (assuming there is one and it could be a HNI or a VC) are very fond of and possessive of this newborn baby. They take care of the baby and see that

JUNE 2008

the baby starts crawling, walking and eventually grows up. Like the dilemma faced by parents of most adolescents, corporate parents are also confronted by the question of how much to control and guide this grownup baby? It is not an easy decision. The parents have an emotional and sentimental connect with the teenagers or shall I say screenagers (as all teenagers seem to do everything in their life through screens whether mobile, TV, laptop etc.) and want sometimes to be the guiding force to the semi-mature grownups. Let me state that the startup is the equivalent of an infant and a teenager is the equivalent of the transition from a startup to a semi-mature business. So when does the baby (now a grownup as a business) become a man or a woman? The man or woman being the equivalent of an enterprise. What are the skills needed for making sure the parents still remain a guiding force and a positioned catalyst without being a hindrance? Suddenly, I am sure I have confused you and you are thinking whether I am writing a column on bringing up children or about creating an enterprise. Let me reassure you that you are reading an entrepreneurship magazine and yes, I am Dare-ing to compare the business of creating an enterprise with bringing-up and raising a baby. Similarities between the two are more than the dissimilarities. Like the baby, a newly set up enterprise has to be tutored for growth, with the right values, practices and ethos infused in it. The founder’s vision and philosophy, like that of the head of any family makes all the difference. And let me tell you that adoption also happens in the business of nurturing companies. Families adopt children and this can happen in the case

of any entrepreneurial venture as well. It may be aimed at further extension of the business goals or a logical progression of business processes such as takeovers, brand extensions and diversification plans. The enterprises need huge infusion of resources including capital and technology. That is why it is crucial that the enterprise should be nurtured in a way that there are healthy bottom lines as a healthy baby will grow up to become a healthy individual. To run an efficient business, one needs to have both energy and resources. Energy can be considered as the human capital and resources as the machinery and cash reserves. And when you have all these as in the case of an energetic, healthy individual who can face problems and conquer all obstacles; an enterprise with productive human capital, welloiled cash-flow and machinery as well as resources can go running. So the key question is when and how much to let go? Too many overaching fathers have left their anointed heirs to take charge and let them be on their own and I know that it’s not easy. However, whenever the young adult is left on his or her own, he or she will shine. The best philosophy that a founder of a business or the father of a child can practice is as Edward Everett Hale said: Look up and not down; Look forward and not back; Look out and not in; DAR E Lend a hand. Anurag Batra is a real life, first-generation entrepreneur who is a Much Below Average (MBA) individual 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 the exchange4mediagroup that includes exchange4media.com, Impact, Pitch, Franchise Plus and Realty Plus.

ARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DAR ARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DAR ARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DAR ARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DAR ARE DA DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE RE DAR DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE RE DAR ARE DA ARE DA RE DAR DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE ARE DA RE DAR DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE RE DAR ARE DA ARE DA DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE 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Today’s Cool, Redeﬁned New age startups bring in the latest ‘cool’ trend

et’s begin with a coolness test. What do you think is cooler—Indian Premier League cheerleaders or a company that hires four people per minute? Shahrukh Khan’s six-pack or a startup that lets you design your own products? Kareena Kapoor’s size zero or software that lets you record your life minute-by-minute? The advertising world may not have been able to shed their Bollywood hang-ups when it comes to deﬁning ‘cool’, but Gen-E is showing signs that it has moved on. Observe these recent developments. Three years ago, only 2% of the graduates of Bangalore-based Indian

82 JUNE 2008

Institute of Information Technology (IIIT) joined startups. Today, over 20% of its graduating batch is planning to join startups. Campuses are also witnessing a phenomenal increase in entrepreneurial activities and participation by students. National Entrepreneurship Network, India’s largest catalyst of entrepreneurship education, recently conducted its NEN Semi-Annual Campus Survey to measure entrepreneurship activity levels on NEN campuses. The results were astounding. Since ﬁve years ago, NEN’s survey ﬁndings show a combined increase in activity of over 12,000%.

Ankur Gulati, a student of Indian Institute of Management-Kolkata, who recently founded his own Internet company Life in Lines, feels that more and more youngsters today are getting excited about being associated with startups. “Startups represent passion, power and learning. Working closely with the company’s founders makes you share their enthusiasm too, which makes your job far more meaningful. That’s cool,” he says. Ankur feels this change in attitude is being driven partly by the realization that careers are not solely about money. “If your startup is successful, you can earn several times more than if you

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Introducing: NEN Coolest Startups Behind each startup is a story, often greatly inspiring. But startups can be hard to find, and don’t always get the attention they deserve and need to succeed. So National Entrepreneurship Network is launching the NEN Coolest Startups Annual Awards to recognize a select group of these unsung heroes of the Indian economy. How does it work? Three steps: You nominate the companies you think are cool. NEN shortlists. Each of the short-listed companies will be profiled on the home page of NEN Online. You vote for the “NEN Coolest Startups 2008” from the short-listed companies. The five companies that get the most votes win. Criteria for cool We’ve researched hundreds of new companies, and have found certain elements we think are cool. Is the company... • Capitalizing on an unexpected opportunity—not another company with been-there, done-that? • Gaining traction—are customers loving it or has R&D broken new ground? • Making a gold mountain out of a cash molehill? It’s really not too cool to turn $20 million into $21 million. • Doing well while doing good? • Combining passion and opportunity? Coolest entrepreneurs find a way to make it work.

Being a ﬁrst timer can be fun

Cut new ground

Don’t be trendy

“The startup should have the vision to change the way human beings behave. If you look at history, Microsoft Excel was such a huge success just because it was able to change the way human beings behave... the transition from paper to software was an amazing change,” feels Vaibhav Pandey, techno blogger and co-founder of Open Coffee Club.

Rashmi is currently working on a television program on young entrepreneurs, and the ones she thinks are cool don’t follow ‘fads’. “An entrepreneur packaging the traditional Ganga jal in a trendy way is far cooler than one starting yet another social networking site in an already saturated market,” she points out.

Find your niche Make the next best

Be original; trash the formula

“A cool startup is very sharply focused on a niche market, does something different and differently and creates a need or takes a pain away,” says Padmaja Ruparel, Vice-President of Indian Angel Network. A sensible startup works in a domain that has enough opportunities to grow and scale, adds Sasha. DAR E

Thirty-two-year-old Vishal Gondal, CEO, Indiagames feels the cool quo-

Content provided by NEN

For Sriram those who establish next best practices that the world follows are cool. “The vision of the startup should be to create practices that are not just the best today, but also tomorrow,” he explains.

So, what makes a startup cool? Any practice that makes the world a

Cool startups do their own thing and follow their own passions without caring much about what others think. Though accepting and working on feedback is important, it should not lead to compromising on what you feel is right, explains Vaibhav. “Perhaps, this is why they ‘become’ popular,” he adds.

better place is cool. Achieving worldclass excellence and becoming global thought leaders are important goals for an ambitious startup, feels R Sriram, CEO of Crossword Bookstore.

Laura Parkin, Executive Director, NEN

Be world-centric

It is not a popularity contest

Rashmi Bansal, popular blogger and founder of JAM magazine, finds firstgeneration entrepreneurs cool. “It is challenging to begin from scratch, when you don’t have anyone to fall back on when things go wrong. It also makes the startup experience more exciting and cool,’ she says. Foundermember of Mumbai Angels and senior investment director of BlueRun Ventures Sasha Mirchandani thinks early stage startups that think creatively to make profits become innovative and cool. “A strong domain experience also helps,” he adds.

We look forward to your help to recognize great startups. Please spot, nominate and vote on www. nenonline.org.

were working for someone. If it fails, you may not be rich but it leaves you with a wealth of learning. So you gain both ways. That’s the kick,” he explains. At the heart, however, it’s the changing nature of startups that is creating the change in perception. Ten years ago, new companies were generally associated with the small scale industry. Five years ago, they weren’t regarded as innovative. Today, startup companies are seen as high-impact, interesting places that allow self expression while building value for society. And Gen-E has decided that is cool. However, Gen-E does not assign the “cool” label to just any startup. When young entrepreneurs, venture capitalists and bloggers talk about why they are excited about a company, they refer to very specific aspects of a startup. These specifics sometimes reflect personal values, but many resonate across individuals.

tient of a startup comes from the originality behind a business idea or the innovative twist given to an existing idea by the entrepreneur.

JUNE 2008

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opportunity/solar energy

Solar Energy Rural India offers a whopping Rs 3,000 crore opportunity for ‘solar entrepreneurs’. With the government doing its bit, the sector is all set to light up /Arunjana Das

he power of Sun finds mention in Indian epics such as the Mahabharata in which unmarried Kunti bears Sun’s invincible child Karna, one of the central figures in the epic. Bearing children may be the stuff of epics, but there is enough power in the sun to light up thousands of homes. Quantification of the power would yield electrical energy worth over Rs 300,000 crore. If a mere one percent of this is utilized to light up rural India, ‘solar entrepreneurs’ would be able to rake in Rs 3,000 crore.

84 JUNE 2008

The reason why we are talking rural is because with the present technology and current prices of electrical energy in the country, a full-blown conver-

sion to solar energy would prove very expensive, ranging from ﬁve times to a mind-boggling 20 times! Inadequate technology combined with expensive

DARE/scope Opportunity

Scale

Nature of engagement

Solar products

Small and medium

Private

Solar farms/power plants

Medium and large

Private and publicprivate partnership

Solar townships

Large

Public-private partnership

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opportunity/solar energy setups, are some of the biggest bottlenecks to the commercialization of products and services based on solar energy. We cannot, of course, bank on fossil fuels, unless we want oil prices to break all barriers! When the question of covering the last mile crops up, the cost factor is somewhat overshadowed by factors such as infrastructure, ease of setup, portability, durability, etc., which is why solar energy is beginning to get preference over conventional energy sources for remote and rural areas of the country. For once, the bureaucracy is taking action while the iron is still hot. The government is now focusing at both micro and macro levels to bring succor to rural India. At a micro level, it is encouraging the use of solar products such as solar lanterns, torches, heaters, cookers, etc.; and at a macro level, it is laying the groundwork for private participation in providing solar street lighting, and even in constructing solar townships.

Technology Almost all technologies currently available for the conversion and utilization of solar energy can be categorized under the umbrella of photovoltaic (PV) or thermal conversion, out of which the photovoltaic technology is the more popular choice. Solar thermal power, on the other hand, is somewhat cumbersome and its suitability is on a case-to-case basis. PV technology relies on direct solar-to-electrical energy conversion using solar cells made of silicon wafers doped with required impurities. The average conversion efﬁciency is around 10-15% although research is on to rev it up to 28%, which is supposed to be the theoretical limit. Solar cells,

DARE/solar energy for rural India Advantages O O O O

Portability Ease of setup Possible on smaller scales Can be stand-alone or grid connected

DARE/opportunity value chain offshoots SOLAR FARMS SILICON PRODUCTION

PV CELL MANUFACTURE AND DISTRIBUTION SYSTEM SETUP AND MAINTENANCE SERVICES

DEVELOPMENT OF ALTERNATIVES TO POLYSILICON

SOLAR FARMS/ ISOLATED SYSTEMS

PLASTIC SOLAR CELLS MANUFACTURE AND DISTRIBUTION

SOLAR THERMAL POWER PLANTS SOLAR REFLECTOR PRODUCTION AND SUPPLY

SYSTEM SETUP AND MAINTENANCE SERVICES

SOLAR THERMAL POWER PLANT

MANUFACTURE AND SUPPLY OF PUMPS, TURBINES AND HEAT-EXCHANGERS or PV panels, are available in ﬁxed dimensions and power output. When connected to a switchboard through an inverter with corresponding power speciﬁcations, it makes a complete system. PV cells can be used on a small scale using a couple of solar panels, perhaps installed on a rooftop, or on a larger scale through solar farms comprising rows and rows of such panels and connected to a grid.

Solar thermal technology employs the heat energy generated by solar collectors, mostly solar reﬂectors, to produce steam, which in turn, is used to rotate turbines, thereby producing electricity. Such solar thermal plants are usually grid connected at small or large scales.

Value chain and the offshoots Opportunities for solar startups lie at

DARE/solar production in the country Potential production capacity Amount of solar energy India receives annually Average conversion efﬁciency Assumption: Percentage utilization is 0.1%

5000 trillion kwh 15%

Amount of solar energy converted into electrical energy

750 trillion kwh

Amount of solar energy utilized annually

0.75 trillion kwh

Cost per unit electrical energy in India Total cost of electrical energy that can be produced from solar energy

4 Rs 3 trillion Rs

Assumption: 1% of the total potential is utilized for the rural populace Potential size of business out of solar energy for rural India

0.03 trillion Rs 3000 crore Rs JUNE 2008

DARE.CO.IN

opportunity/solar energy How was Solar India Solutions started? Solar India Solutions started by providing solutions for domestic backup energy requirements such as solar lighting systems, solar lanterns and water heating systems. The approach being not cost-effective, it was difficult to sell to the masses. Hence, we ventured into a conceptual technology involving space heating and cooling. I learnt the technology and its functions from Michael J Kapps, the then director of Geothermal and Climate Master Inc USA, and a dear friend. Now with more than eight years of specialization in this technology, we are gradually trying to make a mark in the field of geo-thermal air conditioning. Having successfully completed four small residential installations in India—the first and the only ones in the country till date—we continue to work on further prospects. We understand very well that solar, wind, geo-thermal air conditioning, solar with LED technology, and the likes comprise the only solution available to combat the rising energy consumption that the world is witnessing with no corresponding increase in generation.

What are the opportunities available in this sector? A Chandra Sekhar Today the concept of renewable or alternate energy CEO, Solar India Solutions efficient systems are in vogue and are being tried out all over the world to meet the threat of global warming and acute water scarcity in the near future. To meet these challenges, Solar India Solutions is gearing up to provide energy efficient systems in line while using natural resources to supplement energy savings. How do investors view this sector? Investment in the sector is very high. It also needs to be taken up at the government level, for instance, encouraging its usage by offering rebates, subsidies and soft loans for its function. As for long-term profitability, it is measured taking into account high initial investment costs vis-à-vis energy saving costs spread over the life span of the system. Calculating the benefits of its existence in our lives takes into account factors such as growth, feeling of good living, mixed levels of margins in profit and a new emerging sector in business with a neverending tenure. It’s the widespread feeling that the emergence of renewable conceptual technologies to benefit the earth and its inhabitants is the next best thing that can happen today. This very ideology is now being backed by numerous global organizations and the very fact that institutions and products are enhanced for certifications related to gathering points in LEEDS (Leadership in Energy Efficient Design Systems), CDM (Clean Development Mechanism) and carbon credits is making a case for investing in solar energy. How do you see the sector evolving in the future? As a technocrat and an innovative entrepreneur, I have analyzed the present trend in these technologies and can say confidently that this is not only the present of India but the future of India and the world at large. 86

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opportunity/solar energy DARE/power plant economics

ating power in solar power plants and feeding to grids are offered production-based incentives under the Grid Interactive Solar Power Generation Scheme. Companies engaged in R&D in solar power are also offered several subsidies and tax exemptions.

Solar power plants 10 MW solar power plant with generation cost at Rs 15 per unit Figures released by Ministry of New and Renewable Energy: 1. Cost of setting up 1 MW: Rs 16 crore to Rs 20 crore 2. Cost of generation per unit : Rs 12 to Rs 15 Cost of setting up 10 MW plant Cost of generation per unit (1 kWh)

20 crore Rs 15 Rs

Assumptions: 1. No. of daylight hours: 10 2. Average no. of sunny days a year: 200 Generation cost annually

30 crore Rs

every step of the value chain. Under product manufacturing, production and supply of PV cells and the raw material, that is, silicon holds great promise. According to industry estimates, revenues obtained from PV technology are over Rs 38,000 crore globally and are expected to rise to over Rs 89,000 crore by 2012. Globally, the demand for PV cells is such that there is a shortage of raw material. The global silicon shortage is acting as a necessity that is mothering the invention of alternatives, what have come to be known as plastic solar cells. Research is still underway. To the rescue have also come thin-ﬁlm technologies. Nano-deposits of semiconductor material on glass and polymer foils are able to simulate the actual solar-electrical energy conversion to quite an extent. Again, research on these alternative technologies is still going on. Besides these products, an entrepreneur can consider offering system setup and maintenance services to solar farms. The same can also be offered to solar thermal power plants. In addition to the service part, pro-

duction and supply of solar reﬂectors, pumps, turbines, heat-exchangers, etc., are all potential opportunities for a solar startup.

The bureaucratic take The Indian Renewable Energy Development Agency (IREDA) has come up with several schemes to not only encourage the use of solar-powered systems, but also facilitate businesses in the arena. It has come up with a fourpoint financing model based on corporate, co-operative, NGO and dealer mechanisms for benefiting end-users and entrepreneurs alike. The PV Pumping Program provides opportunities for startup financial and solar companies to act as intermediaries for offering solar products to rural users under specific leverage schemes to combat the high cost of initial setup. The Ministry of New and Renewable Energy (MNRE) provided financial assistance to the installation of around 33 grids of solar photovoltaic power plants, producing around 2.5 million units of electricity in the country annually. Private companies gener-

DARE/four-point solar ﬁnancing model under IREDA O

Corporate model

leasing and hire-purchasing

Co-operative model

rental and leasing

NGO model

leasing, rental

Dealer model

direct sales to end-users

Solar startups Several solar startups in India are offering solutions for rural lighting and electrification. SELCO Solar Light, founded in 1995, was one of the first solar startups to offer customized rural lighting solutions to families living below poverty line. It has also tied-up with several banks to facilitate easy financing to enable the rural poor to avail of its lighting solutions. SELCO’s business model is unique in facilitating solar businesses and further spreading the net of solar entrepreneurship in the country. Solar India Solutions, headed by A Chandra Sekhar is another startup offering innovative solutions to the Indian populace. “We had recently completed four residential installations in the country—the first and the only ones in India till date”, says Chandra Sekhar. It is offering solar lighting and space heating and cooling solutions to the rural and urban population. Tata BP Solar, a joint-venture between Tata Power and BP Solar, offers both large- and small-scale solutions in solar energy. Being one of the largest companies globally operating in the solar segment, it has its own manufacturing and assembly plant. Its solutions include home and street lighting, pump-operation, heating and cooling, power systems for railways and offshore rigs, etc. Cosmos Ignite Innovations, a startup combining social entrepreneurship with clean technology came up with Cosmos Ignite, a solar-powered torch. It’s not a run-of-the-mill torch though. With a one watt white LED and microprocessor-controlled, it can be used as a wall, mobile or wide-angle light source. With a reach as far as the remote villages in Panama and South Africa, solar power has truly changed DAR E lives at a micro level. JUNE 2008

DARE.CO.IN

/guide

Registering a private limited company DARE brings you a step-by-step guide to register a private limited company. /Chhavi Tyagi

hinking of setting up your own business but skeptical of the “long, complex” procedure of getting that incorporation certiﬁcate? DARE brings you a step-by-step guide to register your business as a private limited company. Before the registration process, let's look at some of the rules that apply to a private limited company (see box).

DARE/rules of a pvt. ltd. For incorporating a private limited company: • A minimum of two directors

•

• •

•

are required and minimum two shareholders. The right to transfer shares is restricted as per the articles of association. The number of shareholders is limited to ﬁfty. An invitation to the public to subscribe to any shares or debentures is prohibited. No invitation or acceptance of deposits from persons other than members, directors or their relatives is allowed. Lesser number of compliance requirements.

The route to registration The registration of companies as also subsequent ﬁlings can be done online. Still, there are a couple of stages where an authorized person has to make a personal appearance—for instance, during the vetting of the memorandum and articles of association and during the stamping of the documents.

DARE/fees The fees for the various applications for registration can be paid either through: • Cash • Credit card • Internet banking • Challan 88

JUNE 2008

Before starting the process of registering your company, the prospective directors must have director identification numbers (DIN) and digital signature certificates. After acquiring the two, you have to get the name of the company approved by the concerned Registrar of Companies (RoC), which is done by filling Form 1A. You can give a maximum of six names and the RoC replies within seven days as to the availability of the names. In practice, however, the name-approval process only takes two to three days. (See Box the process) Once the name is approved, the next step is drafting the memorandum and articles of association (MoA and AoA). The difference between the two is that the articles contain only those clauses that define the internal functioning of the company. On the other hand, the memorandum of a company defines important clauses such as authorized capital clause and the object clause. The authorized capital clause determines the extent to which the ownership base can be expanded by issuing fresh shares or other instruments in the future. The object clause defines the objectives of the company and has two sections; one for the main objectives and the second describing the other businesses that you might want to get into at a later stage. After the MoA and AoA are prepared they are printed and sent to the concerned registrar for vetting and to mark out objections, if any. The documents are then stamped (the stamp duty varies from state to state) and finally all the documents along with some other details like particulars of appointment of managing director, directors, manager and secretary are sent to the concerned registrar. The last step is to pay the registration fee, which varies on the basis of the company’s authorized capital, after which the company gets registered

DARE/the process

Obtain Director Identification number Time taken: One day Charge: Rs 100/- w.e.f. 1st July, 2007 Get your digital signature certificate Time taken: Four days Charge: Rs 400 to Rs 2650 Get the name of the company approved Time taken: Two to three days (within seven days) Charge: Rs 500 Memorandum and articles of association vetted and printed Time taken: within six months of name approval Charge: Nil Get the documents stamped Time taken: One day Charge: Stamp duty varies from state to state Get the memorandum and articles signed by at least two subscribers Time taken: One day Charge: Nil Get the certificate of incorporation Time taken: Five to ten days Charge: Registration fee varies on the basis of the company’s authorized capital as a private limited company under the Companies Act, 1956 and gets its certificate of incorporation. The whole process to get the certificate of incorporation for a private limited company takes roughly about 15-20 days. One thing to keep in mind is that the registration must be done at the regional office of the Registrar of Companies where the registered office is to be located. There are some more things that are required by a private limited company, like getting a permanent account number and a company seal, after it is registered. However, unlike a public limited company, a private company can begin its operation right after getting a certificate of incorporation and complete the rest of the formaliDAR E ties simultaneously.

DARE.CO.IN

/straight talk

Negotiating— How hard should you push? Do angels negotiate hard with entrepreneurs? What if you can’t work out an agreement on ownership?

know a lot of entrepreneurs who actually come and say: at the time of the IPO of my company, I want to end up with 25% ownership. And from that they will work backwards and say, this is what I want now.

I tell them: Look, focus on what you are trying to build. Ten percent of a billion dollars is better than 50% of a hundred million. In negotiating with an angel or a VC, you want to end up where both are equally dissatisﬁed with the result. That’s the right balance—the investor thinks he gave too much to you, and you think you gave too much to the investor. If one of you is happier than the other, then it feels the same as when I am buying rugs. When I’m walking away from buying a carpet, feeling like I have got a great deal, and the guy smiles and says “Thank you”, I feel, “God! I got screwed again.” 90

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/straight talk

I think you should not end up in that position, so I encourage entrepreneurs not to negotiate too hard with their angels.

But do angels negotiate hard with entrepreneurs?

Sridar Iyengar Bessemer Venture Partners

ctually investment bankers tell us there is a big formula for arriving at ownership percentage. But for the ﬁrst deal, I guess it was a question of the fact that we felt a little soft at that moment and, I think, kind. If I was wearing a different hat, maybe I would have taken closer to 50% for this deal. But I felt that what we did, taking 28% was a signal to everybody else about the kind of deal we were doing, and we just wanted the deal done.

What if you really can’t work out an agreement on ownership, even if you feel you are not negotiating hard?

R. Ramaraj The Chennai Fund

ifﬁcult to say, but then there are a number of instruments by which you can work a variable valuation.

For example, if I am putting in half a million dollars and if I say that the money buys me 25% of the company; that makes the valuation of the company $2 million. But perhaps the entrepreneur feels the valuation should be $4 million because this is a great idea, and it’s going to become a $100 million dollar business in ﬁve years. That is the sort of thing that you will work out using some sort of a warrant. I would say, ﬁne, if what you’re saying happens, then the valuation is $4 million. You can have ownership back. But right now it is $2 million.

Pradeep Gupta CyberMedia and Indian Angel Network f the entrepreneur proposes this type of structure, I say, absolutely.

Because when they get that ownership back, it is because of the fact that they have built additional value. And while I am not getting as much of that additional value because the entrepreneur is getting more ownership, I am getting some of it. And the entrepreneur is committing to building that value, as that is the only way he will get back to the equation he wants. I think this is the right way to go.

Sridar Iyengar Bessemer Venture Partners

DAR E

JUNE 2008

Organizations DARE.CO.IN

covered in this issue, in alphabetic order; ﬁrst appearance

141 Sercon ........................................ 74

Christian Medical College .................. 24

Indicure .............................................. 24

Open Coffee Club .............................. 83

AC Nielsen......................................... 13

CII ...................................................... 13

Indicus Analytics ................................ 62

Oslo School of Management ............. 64

All India Institute of Medical Sciences............................... 24

CII-McKinsey ..................................... 23

Indore City Transport Services .......... 49

Cisco.................................................. 69

Indraprastha Medical Corporation ..... 24

PD Hinduja National Hospital and Medical Research Centre .................. 24

Crossword Bookstore ........................ 83

Information Research ........................ 62

CyberMedia ....................................... 91

Institute of Cardiovascular Diseases ............................................ 24

American Express ............................. 30 Apollo Group...................................... 23 Apple ................................................. 54 Aravind Eye Hospitals........................ 24 Archer & Angel .................................. 17 Ashok Leyland ................................... 50 Asian Paints ....................................... 62 ASSOCHAM ...................................... 13 Ayurvedagram ................................... 24

Dayajeet Nimay Logistics .................. 50 Dell .................................................... 54 eBay .................................................. 32 Equitymaster...................................... 62 Escorts Heart Institute and Research Centre ............................... 24 Escorts Hospital and Research Centre ............................... 24

Barista ............................................... 27

Food and Agricultural Organization ... 56

Rain Bird ............................................ 40 Rainbow Paints .................................. 60

Iowa State University ......................... 69

Ranbaxy ............................................ 32

Irrigation & Water Technologies ......... 38 JAM magazine ................................... 83 Jamba Juice ...................................... 27 Jotun Group ....................................... 62

Flash Networks .................................. 69 Barclays ............................................. 13

RadioVeRVe....................................... 69

Intercast Networks ............................. 69

Kalari Kovilakom ................................ 24

Babelgum .......................................... 69

Premier Synthetics ............................ 40

Kansai Nerolac .................................. 62

Rediffusion......................................... 53 Reliance Industries ............................ 14 Rolex ................................................. 35 Samsung ........................................... 76 Satyam Computer Services ............... 78 Saudi Arabia Basic Industries............ 78

Kazaa ................................................ 70

Baskin Robbins.................................. 76

Food and Agriculture Organization of the United Nations ......................... 29

BBC ................................................... 70

Ford Motors ....................................... 64

KG Hospitals...................................... 24

Bessemer Venture Partners............... 91

Four-S Services ................................. 12

KPMG ................................................ 13

Berger Paints ..................................... 62

Freedonia Group................................ 60

LG ...................................................... 76

Bharat Petroleum Corporation Ltd ..... 63

GE ..................................................... 30

Livestation ......................................... 68

Bharti Retail ....................................... 12

Gemstone Crafts ............................... 95

Matrix Partners .................................. 33

Blackstone ......................................... 13

Geothermal and Climate Master ....... 86

McDonald’s ........................................ 29

Bloom Juices ..................................... 27

Goldman Sachs ................................. 33

Merriam Webster ............................... 30

BlueRun Ventures .............................. 83

Haier Appliances ............................... 73

Microsoft ............................................ 83

BM Birla Heart Research Centre ....... 24

Hindustan Levers ............................... 53

Ministry of Finance ............................ 63

Board of Control for Cricket in India... 14

Hindustan Petroleum Corporation Limited ............................................... 63

Ministry of Petroleum and Natural Gas ....................................... 63

Tata Memorial Hospital ...................... 24

Hiranandani Group ............................ 23

Miro.................................................... 70

Tata Power ......................................... 87

IIM Ahmedabad ................................. 32

Mudra Institute of Communications ... 15

The Chennai Fund ............................. 91

IIM-Calcutta ....................................... 53

Mumbai Angels .................................. 83

Top Careers & You ............................. 14

IIT Kanpur .......................................... 51

Nagpal Enterprises ............................ 78

Toyota ................................................ 64

Indiagames ........................................ 83

Napster .............................................. 70

Travel India ........................................ 24

Indian Angel Network ........................ 83

National Accreditation Board for Testing and Calibration Laboratories .................... 73

TVU Networks ................................... 68

SELCO Solar Light ............................ 87 Kerala Institute of Medical Sciences .. 24 Shemrock School .............................. 17 Sky..................................................... 70

Boost ................................................. 27 Booster Juice ..................................... 27 Boston Analytics ................................ 12 BP Solar ............................................ 87 Britannia ............................................ 35 Bureau of Energy Efﬁciency .............. 72 Café Coffee Day ................................ 27

Skype................................................. 70 Solar India Solutions.......................... 87 Spectramind ...................................... 30 Supreme Industries ........................... 78 Synergy Property Development Services............................................. 13 Tata BP Solar..................................... 87 Tata Group ......................................... 33

Career Launcher................................ 32

Indian Council of Agricultural Research ........................ 59

Central Agricultural Research Institute.............................. 56

Indian Institute of Information Technology, Bangalore ...................... 82

National Entrepreneurship Network... 82

US Environmental Protection Agency 78

New Zealand Naturals ....................... 27

Viacom............................................... 70

Central Institute for Subtropical Horticulture ..................... 56

Indian Institute of Management, Kolkata ........................ 82

Nippon Paint ...................................... 62

Wockhardt Hospitals .......................... 24

Indian Oil Corporation ....................... 63

NMIMS............................................... 95

World Bank ........................................ 49

Central Institute of Plastics Engineering and Technology ............. 78

Nokia ................................................. 76

Young & Rubicam .............................. 53

Ogilvy & Mather ................................. 20

YouTube ............................................. 68

Channel 4 .......................................... 70 92 JUNE 2008

Indian Renewable Energy Development Agency......................... 87

United Nations ................................... 56

People DARE.CO.IN

covered in this issue, in alphabetic order; ﬁrst appearance

A Chandra Shekhar ........................... 87

Niklas Zennström............................... 70

Ajit Balakrishnan ................................ 53

Noor Fatima ....................................... 22

AK Singh, Dr. ..................................... 56

Padmaja Ruparel ............................... 83

Alan Watts ......................................... 21

Pankajj Chaturvedi ............................ 76

Albert Einstein ................................... 20

Pradeep Gupta .................................. 91

Alok Nath Bansal ............................... 49

Prahlad Kakkar .................................. 35

Amit Roy Sharma .............................. 27

R Satya Narayanan ........................... 32

Amol Arora......................................... 17

R Sriram ............................................ 83

Ankur Gulati ....................................... 82

R. Ramaraj......................................... 91

Annu Puri ........................................... 24

R.T. Rajan .......................................... 73

Arun Nanda ....................................... 53

Rahul Mishra, Dr. ............................... 28

Avnish Bajaj ....................................... 32

Rajeev Manchanda............................ 17

B Mahadevan..................................... 66

Raman Roy........................................ 30

Bill Gates ........................................... 30

Ranajoy Punja ................................... 69

Charles Sorenson .............................. 64

Rashmi Bansal .................................. 83

Cyril Roy ............................................ 14

RC Srivastava, Dr. ............................. 56

Dhirubhai Ambani .............................. 30

Roshan Aggarwal .............................. 50

Dwarika Prasad Uniyal ...................... 15

S K Singh, Dr. .................................... 51

Edward Everett Hale .......................... 80

Sachin Tendulkar ............................... 33

EM Najeeb ......................................... 24

Salman Khan ..................................... 36

Frank Lloyd Wright ............................. 21

Sandeep Bafna .................................. 24

Gaurav Marya .................................... 17

Sasha Mirchandani ............................ 83

Gaurav Vaz ........................................ 69

Shah Rukh Khan ............................... 33

Gopal Swami ..................................... 69

Shahrukh Khan .................................. 82

Goran Svensson ................................ 64

Shreyas Shrinivasan .......................... 69

Henry Ford......................................... 21

Sonia Gandhi ..................................... 22

Janus Friis ......................................... 70

Sridar Iyengar .................................... 91

Jawaharlal Nehru............................... 53

Srijoy Das .......................................... 17

Jeremy Penston ................................. 69

Steve Jobs ......................................... 30

Joost .................................................. 68

Sujit Chatterjee .................................. 23

Kap Shin ............................................ 68

Sunil Alagh ........................................ 35

Kareena Kapoor ................................ 82

V Ramachandran............................... 76

Laura Parkin ...................................... 83

Vaibhav Pandey ................................. 83

Madonna............................................ 24

Vijay Nagpal ...................................... 78

Malcolm Gladwell .............................. 20

Vijay Singh......................................... 74

Manimaran Govindarasu ................... 69

Vinod Sawhny.................................... 12

Matteo Berlucchi ................................ 70

Vishal Gondal .................................... 83

Michael J. Kapps ............................... 86

Vivek Aggarwal .................................. 49

Nikhil Tiwari ....................................... 95

Zahir Abbas ....................................... 16

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. The entrepreneur dares to do things. (S)he dares to do things differently

SMS “DARE <your comments, questions or suggestions>” to

56677 dare@cybermedia.co.in JUNE 2008

INNOVATION

DARE.CO.IN

Gemming up the décor Gemstones as adornment are not restricted to jewelry. They are now being used in interiors, and the outlook there is sparkling bright!

/Shilpi Kumar

eyond that gleaming rock on your ﬁnger, if you believe that gemstones have no other purpose to serve, think again! These pre-

cious stones can now be used not only to decorate your body, but also the interiors of your house and ofﬁce. Just picture yourself walking on a ﬂoor made

NIKHIL TIWARI CEO, Gemstone Crafts

We had to literally handpick and source these amazing quality stones from mines and exotic oceans located all across the world. Not only do we design these product concepts but also provide customized and tailor-made interiors to our clients. 94 JUNE 2008

INNOVATION of amethyst, sleeping in a bedroom walled with rose quartz and bathing in a bathtub made from mother of pearl. Sounds like quite a royal experience, doesn’t it? Well, Gemstone Crafts, a company that manufactures and distributes gemstone tiles, slabs and semi-precious stone products for interiors, is dedicated to doing just that. According to Nikhil Tiwari, CEO of Gemstone Crafts, “Italian marble is passé and gemstone for interiors is slowly catching on. Gems not only add beauty, but also durability and class to interiors. In addition, these stones add the positive energy of nature and earth, while providing a modern look to interiors.” Besides manufacturing wall and floor décor out of gemstones, the company is also using semi-precious stones to create bathroom sinks, bowls, shower rooms, basins, table-tops and vanity counters. And for the customers who are tempted but don’t quite have the budget, there are always decorative pieces like vases, medallions, strips and borders of walls and mirrors, or even fittings and fixtures such as knobs and pulls all created with semi precious stones that they can go for. For those who have a passion for gems or believe in the healing power of gemstone therapy, this is definitely good news!

Gems in a new light Working with gems was not new to Nikhil. His family was already in the business of gemstone mining and

DARE.CO.IN processing and Nikhil was familiar with them from a young age. “I used to accompany my father on business trips to Jaipur, the main market for gems and jewelry, and it was all quite fascinating to me,” he says. It was this fascination that got Nikhil to read up and research extensively on gems, bringing about the idea of using gems beyond the traditional ornamental usage. “The market for gems as interiors was quite a small one abroad, and in India it was non existent. After completing my MBA from NMIMS in 2004, I decided to take the plunge and by 2005 the business was ready to be rolled out.” Nikhil claims to have made an initial investment of around one crore for the business. Initially, Nikhil was procuring the gems from Jaipur, as they are readily available there. However, things started looking up for Nikhil within the next three years and soon enough he was getting so many orders that obtaining the gems from Jaipur was no longer lucrative. “An area of one square feet needs about five kilograms of gems. I needed the gems in huge quantities and it was getting quite expensive to get them from the local markets in Jaipur. It was then that I decided that I should source these precious stones from oceans and mines located in various countries.” The gems are now being sourced from various parts of the world including Central and South Africa, Afghanistan, Australia and Brazil. Also, Nikhil had initially decided to target only foreign clientele, and therefore was only exporting his products. “It would have been difficult to tap the Indian market at that stage, as it was a new concept, and customers would have been hesitant to shell out that much money for it,” he says. However, thanks to the good response he was getting from his customers abroad, Nikhil decided he was now ready to hit the Indian market and launched his first showroom in Mumbai in January this year.

Classy bunch of customers Ask Nikhil, what kind of custom-

ers he is catering to and he says, “We are dealing with a few customers who are mostly of the lifestyle conscious sorts. Our products go to the royal families in the Middle East and to high society people in the United States and United Kingdom.” Dining tables and bathroom vanity counters seem to be a popular buy for these customers. In India, there are some big hotels, like the Radisson hotel in Goa that are using these gemstone interiors. As Gemstone Crafts also provide their clients with the option of customized and tailor-made interiors, many architects and designers also serve as their clients, providing them with their drawings and asking them to manufacture the products accordingly.

Smooth sail so far When asked about the challenges faced, Nikhil promptly replies, “As my father was already dealing with gems, I did not face too many difficulties. Immediately after I had made my first sample ready, we got orders from a gem interior marketing startup in Germany, for whom we kept manufacturing for.” On second thought, he mentions traveling abroad so frequently to handpick and check the quality of gems is a challenge, as its not only expensive, but also time consuming. Also, penetrating into the Indian market has been somewhat of a challenge. “There was no existing market for gemstone interiors in India, so we had to develop the market for it. It is difficult to convince customers to buy such expensive material, when the concept isn’t tried and tested before,” he says. The price of the products ranges between Rs 7000 and Rs 15,500 a square foot, depending on the material being used. Despite these challenges, Gemstone Crafts managed a turnover of Rs 2.5 crores, in their first year of business alone and is right now looking at a turnover of around Rs 10 crores. Nikhil plans to expand his business and open up more showrooms, particularly in the city of Delhi and Bangalore, by the DAR E end of the year 2008. JUNE 2008

DARE.CO.IN

OCT 2007

JAN 2008

MAR 2008

JUNE 2008

/exit

NOV 2007

DEC

200

FEB 2008

APR 2008

M AY

8 0 0 2

RNI No.DELENG/2007/22197 Posting Date: 5th & 6th of every month. Posted at Lodi Road HPO.

DL(S)-17/3314/2008-09-2010

DARE

JUNE 2008

WHAT SMALL BUSINESSES AND STARTUPS PLAN TO DO

VOLUME 2 ISSUE 9