Forbes India 29 November 2013 (e-magazine full)

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I N D I A

Tablet Edition Welcome to the

In Association With

The Market

for Good Enough

The purpose of business is to create a customer

and keep him, said Peter Drucker In India,

finding customers has been less of a problem than

keeping them One reason is the sheer size of

the total market and its varied demographics, which makes

it easier for eagle-eyed entrepreneurs to spot untenanted

niches or even a motherlode of mass unmet demand

From Karsanbhai Patel’s Nirma to Asian Paints’ mini-cans of

paint for rural India to the Re 1 Velvette shampoo sachet, Indian

entrepreneurs have found mass markets that were eminently

addressable with a little bit of price cunning and distributive

chutzpah These and many other success stories were not the result

of great product or technological innovation, but an acute insight

into what loads of customers wanted: A good enough product at a

great or accessible price The operative phrase is “good enough”

This, in short, may be the story so far of Micromax, which

has emerged from nowhere to become No 2 in the Indian

smartphones market Its competitors dispute this, but their silence

on Micromax also suggests that they have begun taking this

upstart seriously Seriously enough to not dignify it as an equal

This is not to suggest Micromax is the cat’s whiskers in

smartphones It is one thing to pump up volumes based on smart

pricing, and cheaper and commoditised components, quite another

to become a real contender for the top slot based on service

quality and innovative technology It is easy to find a customer,

but tougher to keep her if you are not improving your game all the

time The customer is not a fixed target, but a moving one with

constantly evolving tastes and rising sophistication This is the

chasm between early success and long-term reality that Micromax

has to bridge Read Rohin Dharmakumar’s fascinating story on

Micromax to find out how it is coping with this challenge

Facing a different kind of perceptional challenge is

politician-businessman Naveen Jindal An ambitious Congressman, Jindal’s

JSPL is embroiled in controversy and scandal, especially in the

wake of the Comptroller and Auditor General’s scathing report

on coal block allocations, of which Jindal was a major beneficiary

But Jindal is a fighter, and he believes that this too shall pass He

is sure he will play a bigger role in politics, even while running

a big business In a nation where the nexus between politics

and business is only now beginning to be exposed, Jindal faces

twice the risk, as he is both businessman and politician Prince

Mathews Thomas takes a close look at how Jindal is going

to let his two passions coexist without conflict Read on

The customer is not a fixed target, but a moving one with constantly evolving tastes

Volume 5 | Issue 25 | November 29, 2013

18 Story Power: The Hero’s Journey

Business should adapt the eternally

appealing plotline to tell stories

Features

Cover Story

26 Pretender No More

Micromax succeeded by addressing

gaps in the market What lies next

80 A Tale of Two Countries

How India’s and China’s richest stack up against each other

36 The Shetty School of Thought

Mahesh Tutorials standardised teaching methods, and is now looking to expand digitally

The smart phone

maker: Rahul Sharma

for the homegrown maker?

handset-World’S moSt poWerful people

62 Michael Bloomberg: The Exit Interview

Will his power and influence grow once his term as NYC mayor ends?

66 Mexican Revolutionary

President Peña Nieto is set to overturn the country’s notoriously closed policy on oil

90

56 Naveen and the New Normal

Before becoming a full-time

public servant, Jindal has to

fix his company

CroSS Border

25 Insider Trading For Talent

LinkedIn uses its own database

to hire smart Here are some tips

42 How General Motors Was

Really Saved

The plan to rescue GM was hatched

within it, not by the Obama

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Building steam: TT Jagannathan

Dual mode: Naveen Jindal

More than just designs: Joan Behnke

17 World Watch

94 Thoughts

Life

reCliner

84 The Billionaires’ Curator

Joan Behnke educates her super wealthy clients, before redesigning their homes

87 Marketing to Your Nose

Scents and fragrances are being used to build brand experiences

appraiSal

89 Phone: The LG G2 is Impressive

LG gets the premium feel right, and takes on competitors spec for spec

The ones that preceded the Bitcoin

93 Tip-Off & F-Index

Life  Daily Sabbatical Magazine  Upfront Features Multimedia Blogs News Lists

the very concept of schooling

is like playing a game

Here’s how we learn from the games we play

Is It diwali Time For India’s beleaguered Telcos?

a merged entity could now

be permitted to hold up to 50 percent share of subscribers

in any telecom circle that’s far higher than what national competition authorities normally allow in any market

How Many Poultry Farmers do 1.2 bln People need? — Part I

urbanisation and industrialisation continue

to reshape the world’s economic order, creating a global consuming class

The economist: Thriving in the age of digital Media

With the advent of digital media, traditional print media publishers

have struggled to survive The

Economist, however, has bucked this

trend and evolved to thrive on both print and digital media platforms in this interview with andrew Rashbass,

former Ceo of The Economist, we

learn how the publication has come out stronger despite the disruption

in print media

Innovation requires More Than

systems and Tools

broad-based engagement in innovation has to

be carefully nurtured and actively monitored

status: When and Why It Matters

status plays a key role in everything from the

things we buy to the partnerships we make

Professor daniel Malter of Harvard business

school explores when status matters most

tune in to youtube.com/forbesindia

to watch the full video of Forbes india

leadership awards 2013.

Mohandas Pai vs harsh Mariwala

on where to invest

debaTe

MICROMAX GROWS UP

The 100 RICheST IndIAnS

by Rohin

a Call to action on Water!

The recent flooding of Bangalore lakes is due to the lack of understanding and abuse of the water cycle

Bellandur Lake

Click Here Click Here

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I N D I A

Refer to ‘Health Check’

(November 15, 2013, issue). india

is said to have a low doctor-patient ratio but the distribution is not the same across states for example, the state of bihar has about four teaching hospitals whereas bangalore has about seven teaching hospitals (institutions) overall the density

of doctors and health care facilities

is better in southern states i have not yet come across any infographic

on the differences in health care facilities across places within india

Chetan, on the web

we have been growing bt cotton on

my farm and we are getting good economical benefits from this in the last 11 years, we have never sprayed any pesticides to control bollworm and that is the beauty of this tech-nology Those who are against this awesome technology should visit my village and take the survey there

more than 5,000 acres of bt cotton are grown by 400 farmers here

Politicians should not come under the trap of vested interest groups like nGos that are opposing such a good technology which is a boon for cotton farmers

Hitendra Rajput, on the web

people from the land of aryabhatta

Ritesh Das Singh, on the web

The Real Challenger

Refer to ‘The Art of Focus and Refocus’ (November 15, 2013, issue) Percentage comparison is not the correct way; 100 out of 1,000 is 10 percent and 10,000 out of 100,000

is also the same still there is a size difference in CTs and TCs in head-count and numbers TCs is still leading in all terms Let’s not talk percentage here, size also matters

Paras, on the web

i agree that given its size, TCs’s performance is amazing but at the same time Cognizant is not minuscule (compared to TCs) anymore Today Cognizant is 70 percent of TCs and it is 20 years younger than it Cognizant’s revenues from north america are very close to beating that of TCs not only in percentage terms, Cognizant’s absolute incremental revenues are higher (than TCs’s)

in the last three of the eight quarters That is the story of the company

Cognizantlongtimer, on the web

Unpopular Bourses

Refer to ‘Market Maker’ (November

1, 2013, issue) i saw one of [Chitra] ramkrishna’s presentations in an international seminar but wasn’t quite impressed investors in indian capital markets have pulled out substantially What is the utility

of such a performance [by nse]

if it ultimately fails to restore investor confidence? soon there will be no retail investor, and thus

no nse, bse or sebi

Shila, on the web

$72,900,000

the cost of india’s mars

mission It is about $30 million

less than the budget of Gravity—

a space-centred film—and

even lower than the Gujarat

government’s nearly $340

million-plan for the construction of a

Sardar Patel statue in the state

/ aperture /

India’s Polar Satellite Launch Vehicle (PSLV-C25), carrying the Mars orbiter, lifts off from the Satish Dhawan Space Centre in Sriharikota, near Chennai

on November 5 It is India’s attempt to become a key budget player in the interplanetary space race by overtaking China which failed in its attempt in 2011.

/ TOYS /

/ eYe On The SkY /

this summer a 1954

Mercedes-Benz W196R

Formula 1 single-seat coupe

became the most expensive

car ever sold at auction,

commanding $30 million

at the Bonhams Goodwood

Festival of Speed sale in

England It had won the

1954 Formula 1 world

championship with the legendary Argentinean driver Juan Manuel Fangio behind the wheel and was the only W196R left

in private hands Here, a collection of some of the most expensive vehicles ever sold at auction

– hannah elliott

as two foreign airlines

girdle up for new

launches in India, the

five incumbent carriers

in the Indian skies are

battling tough times The two biggest carriers by fleet size, Jet Airways and Air India, are bleeding the most Jet has lost Rs

The 600bhp “Arno XI”

V-12 racer set a record

for classic wooden

$1.2 mln, 2009

The “Tin Goose”

launched Henry Ford’s short-lived attempt to branch into aviation

only 199 were built.

BUS

1950

GM FUTURLINER

$4.3 mln, 2006

Just a dozen of these, conceived by the leg- endary designer Harley Earl, were made for GM’s parade of progress traveling exhibit.

mOTORCYClE

1915

CYCLONE BOARD TRACK RACER

$521,000, 2008

A Vincent Black shadow that was the world speed record holder

in 1948 went for $1.1 million in 2011, but not at auction.

Sources: Car: Bonhams; Boat: Hagerty, Woody Boater; Plane, Bus: Barrett-Jackson Auctions; Motorcycle: Thevintagent.com; Toy Boat: Sotheby’s.

From Air Deccan to IndiGo: How the Share

of Low-cost Airlines Is Growing

Data Source: May OAG

1,400 crore in the first two quarters of 2013-14, more than it has earned

in the past 10 years

The national carrier,

on the other hand, has projected losses of Rs 4,000 crore for the year, while SpiceJet has lost

Rs 609 crore in the first six months of the fiscal

The two others, leader IndiGo and GoAir, are unlisted and don’t report quarterly numbers

market-As the airlines struggle

to stay profitable, domestic capacity is rapidly shifting to the low-cost model But

it seems that charging

for meals and baggage aren’t enough to offset higher fuel prices and

a depreciating rupee

The only silver lining: The December quarter is traditionally the best time

of the year for airlines

All the five carriers are reporting better revenues and higher margins

Other than GoAir, all the others are launching new foreign routes that will bring in higher dollar earnings This is good news as it offers a natural hedge against the volatile rupee and fuel is also cheaper overseas

improving This is borne

out by the fact that a

majority of the world’s

top PE executives are

either positive or neutral

about the fund-raising

environment this year,

a marked improvement

from last year This is one

of the key findings of a

global survey conducted

by Grant Thornton As

many as 54 percent of

those surveyed said they

were either positive or

neutral about this year’s

environment, compared

How do you View the Current Fund-raising Environment?

is the result of in-depth interviews conducted with 156 senior PE practitioners worldwide

Even as sentiment improves, a new PE roadmap seems to be emerging The survey

shows 56 percent of GPs (General Partners) predicting an increase

in alternative fund structures over the next three years as LPs (Limited Partners) prefer options other than the traditional 10-year blind pool fund The preference now seems to be for

deal-by-deal engagement, where investors are presented opportunities

on a case-by-case basis

The survey also shows the lines between fund-raising and investor relations are blurring

Fund-raising is now being seen by PEs as

a constant process of engagement With the power clearly shifting in favour of LPs, they are being wooed by concessions, co-investment rights, advisory board seats and fee discounts

– Sourav MajuMdar

/ FUND SpeAK /

Will midcaps outperform the large caps in the next one year? Which sectors are expected

to do well? Pravin Palande asks the experts.

the cnx midcap Index has underperformed the broader market by almost 18-20 percent due to sluggish demand,

high interest costs and cost

pressures We expect these

factors to ease in the coming year

Midcaps are trading at a discount

of about 20 percent to large caps

With better earnings growth and

the valuations gap closing, we

expect them to perform better

We also expect the consumption

cycle to continue on the back

of strong rural demand

sanjay chawla,

CIO, Baroda Pioneer AMC

midcaps are impacted more

by broader economic factors: They are likely

to suffer in a downturn and perform well when a recovery sets in The economy is likely

to see greater stability next year and the probability of midcaps outperforming the large caps is high Export-oriented segments are expected to do well Companies focussed on long-term demographic plays

in FMCG, retail and financials will offer good opportunities

nilesh sathe,

Director & CEO, LIC Nomura MF

the midcap and the small cap stocks start moving up only after the initial euphoria moves

up large cap stocks That’s because in the midcap stocks, liquidity is not as high as large cap stocks A sector-specific approach may not work as there are many midcap companies and the size of the segment is large

Yes, they would outperform the large cap stocks, though not all midcap stocks are expected

to beat the large cap ones

michael jackson raked

in $160 million over the past

year, by our estimate The

most successful star who still

breathes, madonna, didn’t come

close she made $125 million,

according to our Celebrity 100

list How did the King of Pop

do it? He’s making a mint from

two Cirque du soleil shows:

Immortal, which has grossed

more than $300 million since

opening in 2011, and One,

which brings him back from

the dead with a hologram-like

doppelgänger performing ‘man

in the mirror’ He also profits

from sales of his recordings

and from his half of the sony/

aTv music catalogue, which

owns the copyright to hits by

superstars including the beatles,

Lady Gaga and Taylor swift

He reclaims the no 1 spot from

elizabeth Taylor, who died in

2011 Her earnings plunged

from $210 million a year ago,

after a series of big auctions,

to $25 million this year

–Dorothy Pomerantz anD zack o’malley GreenburG

For the third time in five

years the world’s

highest-earning celebrity isn’t

even living Here are the

top moneymakers from

beyond the grave

2 elvis presley Singer, actor

$55 millionDied: Aug 16, 1977 Age: 42 Graceland gets 600,000 visitors a year.

3 charles m schulz Cartoonist

$37 millionDied: Feb 12, 2000 Age: 77 There’s still gold in Peanuts.

4 elizabeth taylor Actress

$25 millionDied: Mar 23, 2011 Age: 79 White Diamonds fragrance

earns millions.

5 bob marley Musician

$18 millionDied: May 11, 1981 Age: 36 More than 75 million albums sold since death.

6 marilyn monroe Actress

$15 millionDied: Aug 5, 1962 Age: 36 The new face of Chanel No 5.

7 john lennon Musician

$12 millionDied: Dec 8, 1980 Age: 40 Thriving from both recording and songwriting.

Note: Earnings from October 2012 to

October 2013, except Madonna’s earnings

(from June 2012 to June 2013)

1 michael jackson Musician

$160 millionDied: June 25, 2009 Age: 50

Can make $200,000 from a single

Cirque performance.

8 albert einstein Scientist

$10 millionDied: Apr 18, 1955 Age: 76 Montblanc’s Einstein pen sells for $3,000.

8 bettie page Actress

$10 millionDied: Dec 11, 2008 Age: 85 The pin-up girl has a chain of boutiques.

10 theodor geisel Author

$9 millionDied: Sept 24, 1991 Age: 87

Dr Seuss’s 2012 The Lorax grossed

$349 million.

10 steve mcqueen Actor

$9 millionDied: Nov 7, 1980 Age: 50 Deals with Tag Heuer, Persol and Lucky Brand.

12 bruce lee Martial artist, actor

$7 millionDied: July 20, 1973 Age: 32

A CGI Lee stars in a Johnnie Walker ad.

12 jenni rivera Singer

$7 millionDied: Dec 9, 2012 Age: 43 She’s sold 880,000 records since her death.

The Pursuit of Happiness

TAIWAN 9%

SOUTH KOREA 11%

POLAND 17%

MEXICO 12%

COLOMBIA

26%

VENEZUELA 18%

ISRAEL 5%

CZECH REPUBLIC 8%

UNITED STATES 30%

AUSTRALIA 24%

CANADA 16%

JAPAN 7%

SPAIN 18%

SWEDEN 16%

FRANCE 9%

NETHERLANDS 9%

GDP per hour of work

GERMANY 15%

UK 17%

Gallup; The Conference Board

human resources people worry a lot

about worker productivity and ‘engagement’,

aka happiness but are the world’s happy

workers the most productive? do they work

a lot or a little? The circles, representing

countries, are larger where workers

are happier The horizontal axis shows

productivity (GdP per hour worked); the

vertical, hours worked per year The Us is

happiest, with 30 percent of its workforce

engaged, while its GdP per hour is a high

$63 outside the Us two of the happiest

nations—Colombia and brazil—are not all

that productive The french and the dutch

put in short workdays and boast high GdP

per hour, yet fewer than 10 percent of them

are happy it’s good to be an american

Through her many professional lives—as First Lady, US senator, secretary of state, lawyer, author and presidential candidate-in-waiting—

Hillary Clinton can be linked by a

very short chain to nearly all Forbes’s

World’s Most Powerful People It’s

a small world after all These are some of the direct connections

u p f r o n t:w o r l d wat c h

Friends

of Hillary

8 King Abdullah bin

Abdulaziz al Saud 21 Sonia Gandhi

u p f r o n t:c o l u m n

The year’s surprise

megahit movie is Gravity,

starring Sandra Bullock

and George Clooney

Warning: I’m about to spoil the

plot Stop reading if you want to

see the movie with fresh eyes

While orbiting Earth in a space

shuttle, Bullock and Clooney survive

a collision with debris Clooney, the

veteran astronaut, and Bullock, a

medical doctor and space rookie, now

must find a way to get back to Earth

Their plan: Get to a Chinese space

capsule and blast home Things go

haywire, and Clooney sacrifices

himself so that Bullock has a chance

to live But she is overwhelmed by the

challenge of getting back to Earth by

herself She accepts her fate and turns

off the oxygen in the space capsule to

begin a painless death by hypoxia

The movie doesn’t end with

Bullock’s suicide, of course It ends

rather heroically, which is why

Gravity has been such a smash

hit with men and women, old and

young It’s an updated version of a

classic plotline: The hero’s journey

John Ford, the great Hollywood

film director of the mid-20th century,

had a favourite saying Every good

movie Western, Ford said—and he

made dozens of them— shared the

same story: “The bad guys show up

while the hero is still evolving.”

Don’t you love that? It’s the short-

est and best summation of what the

late scholar Joseph Campbell called

the hero’s journey In fact and fiction,

as well as in religion and secular life,

the hero’s journey is an eternally

appealing story: Abraham Lincoln, Jesus Christ, Luke Skywalker, a near crippled Kirk Gibson hitting a game-winning home run for the Dodgers in the 1988 World Series opening game

The mystery is why businesses are so reluctant to tell their stories

in this way Most businesses do the opposite They take good raw material about their customers and turn it into Barbie doll stories, fake and plastic An example is that old yawner, the customer case study As told by most corporate marketers, it goes like this: “The customer had a problem Our company’s complete suite of [snore] and [zzzzzz] solutions was implemented The customer was happy and went on to greater heights.”

Really, that’s it? No sweat? No arguments? No false starts and false dawns? No harrowing walk through the valley of the shadow of death?

Everything just worked, right from the start, as if by immaculate conception?

Such is never the truth Even worse, it’s boring Stories drive change

As story expert and executive con-

By rICh Karlgaard

story power

the hero’s journey

It is a mystery why businesses don’t follow this eternally appealing plotline

sultant Nancy Duarte told me, “For thousands of years story has been used to transfer insights and morals, keeping entire cultures knit together And this is preliteracy—thousands

of years of preliterate people.”

In our personal lives we think in stories, talk in stories, communicate

in stories and even dream in stories When we’re asked what we did over the weekend, we don’t provide some analytical abstraction—we tell a story When asked about our dinner out last night or our vacation, we tell a story And these stories have characters, multiple plots and plenty of drama

No matter the form, a good story- teller describes a conflict The main character, the hero, is called upon

to make decisions, take action and, ultimately, discover a new truth

“With storytelling, in particular, the thing that we love is watching someone transform,” says Duarte

“The three-part story structure

is clear: One, you meet a likable person; two, that person encounters roadblocks; three, that person emerges transformed Storytelling creates a tension and release that is

so important to creating change.”What does this have to do with business? Well, business is terribly competitive Who doesn’t wish it were easier? Blame slow growth, the march of cheap technology, internet transparency—which erodes pricing power—or global competition Stellar strategy and execution once offered protection, but these can be copied What survives? The best stories

Rich Karlgaard is the publisher at Forbes

be kidding!

FirstAgro’s KN Prasad (left)

and Nameet MV In its third

year of operations, FirstAgro

is shipping nearly 30 tonnes

of vegetables every month to

top retailers and fine dining

places in Bangalore

nameet mv mildly frets

about the tomatoes lying in the beds on his farm mildly, because

if these white, purple, chocolate and yellow tomatoes don’t reach the retail shelves or chefs’ kitchens

in bangalore, they would go for sun drying or seed making The torrential rains, much more than what the region had experienced in previous years, had hit the Heirlooms, the san marzanos, the romas and 15 other varieties of tomatoes that nameet grows on his farms many plants still have full bunches; the strawberry-red cherry tomatoes are luscious with just the right mix of sweet and tart

in contrast, and true to their fiery nature, the pepper plants stand firm in nearby patches bishops Crown, the Ufo-like green and red peppers, guard the corners Like a gastro-masochist, nameet introduces the chillies: “This is bullet, grown commonly in the UK; this is badmash—the green-purple chillies pointing up are more pungent than their downward pointing cousins don’t these Jasmine bouquets (off-white chillies in green leafy bunches) look classy?”

in dazzling colours and crazy shapes, the chillies look lovely so does the 45-acre farm in Talkaad, 110

km from bangalore and a popular scenic weekend getaway for city

When even WHO

doesn’t seek zero

chemical traces,

FirstAgro’s ultimate health food has people excited Can it achieve scale with the speed its customers want it to?

BY seema singh

F e at u r e s :E ntE r pr i s E

dwellers most of the patches in

nameet’s farm have not been tilled

for several years nameet, his brother

naveen and cousin Kn Prasad, who

founded firstagro in 2010, look for

near-virgin lands even though they

are harder to till but it’s the first step

in growing zero-pesticide crops in

india, where crop production suffers

from systemic overuse of chemicals,

with pesticide levels ranging from

5 to 150 times higher than world

standards, setting global benchmarks

in pesticide-free horticulture is

almost like setting a counterculture

it hasn’t been easy “it took us six

crop cycles of experimentation, of 90

days each, to get farming methods

and input proportions right,” says

Prasad, who is chief operating officer

but the founders, who have invested

nearly $2 million from friends and

family money, are in no hurry There

was no “venture capital[ist] hanging

like a sword over our head,” says

Prasad in its third year of operations,

firstagro is shipping nearly 30 tonnes

of vegetables and exotic greens

every month to top retailers and fine

dining places in bangalore, including

the two hip hotels that opened in

the city in the last two months—

ritz Carlton and JW marriott

for most retailers the buck stops

at regular red tomatoes and green

lettuces now that they see varieties,

there’s no pausing at double Lola

rosa and Triple Lola rosa (a type

of purple lettuce) or Komatsuna

(Japanese mustard spinach) and

mizuna (Japanese mustard)

supply isn’t keeping pace with

demand retailers say zero-pesticide

produce is flying off the shelves

in the startup world, this is an

enviable situation to be in but

when you are firstagro and decide

to go even beyond the World

Health organization standards

of pesticide-free crops, scaling

up is the biggest opportunity as

well as the toughest challenge

‘short-termism’ is not what chief executive naveen mv lives by He’s looking at 10-15 years from now when firstagro would create a niche category in the country The startup will close at rs 6.8 crore

in revenue in march 2014 and has ambitious plans to clock $75 million

by 2018 through 16 agro clusters across the country for the sons of the soil, the toil has just begun

GERMINATION

The idea had its genesis in 2008 in san francisco when naveen and his younger brother nameet got together

naveen was then handling the asia

Pacific business of Hewlett-Packard; nameet was a commercial pilot in vancouver, Canada slowdown was squeezing nameet’s flying time, and

he had an entrepreneurial idea they could pursue flying over large green houses in Canada, he had fallen in love with horticulture He often flew red-eye planes which gave him day hours

to work with small local farmers He collected agri knowledge and some farm wisdom too (in Canada, even the smallest farm exceeds 100 acres.) naveen left the iT industry and nameet gave up flying to start firstagro Cousin Kn Prasad, a supply chain professional with experience in various industries,

Fennel bulb, which hotels are sourcing from FirstAgro These are used

as part of do-it-yourself salad/seasoning or to create a garden ambience

in dining spaces

joined them later The trio brings

complementary skills to the farm

in boots and shorts, nameet looks

like the tech-loving farmer he is He

even knows why his three dogs like

Japanese cucumber more than the

indian varieties Prasad, who comes

from a farming family, is the manager

on the ground in jeans and

flip-flops, he is as relaxed accosting stray

visitors to the farm as handling the

local power or water supply glitch

The savviest among them is

naveen Largely based in Japan, he

runs an iT management consultancy

there He is now scouting for local

farm opportunities to supply to

the local market “We don’t have

export ambitions, but we plan to use firstagro expertise to serve some asian markets, especially in the hospitality sector,” he says He visits bangalore and Talkaad every quarter but don’t mistake him for a roving, long-distance chief executive His excel sheets reflect precisely how many beds in how many patches grow what crops and when they are due for harvest “if i make any changes here,” says younger brother nameet,

“he calls to inquire the next day.”

“This is part of the standardisation plan i bring the iT industry’s systems and processes,” says naveen if they proceed as per their plans, they will have a 90-100 acre cluster in

16 locations, all within motorable distance from major cities so that the farm produce reaches the market within five-six hours

india is the second largest producer of fruits and vegetables in the world, but with farm wastage, urbanisation and increasing disposable incomes, these products seem to be in perpetual short supply

increasingly, people don’t blanch

at higher prices if the quality is good

in firstagro’s case, the maximum retail price is 15-20 percent higher than regular produce “We’ve developed loyal customers and they stick with this brand… The base is small but it’s growing nearly three-fold,” says ashutosh Chakradeo, chief merchandising officer of HyperCiTY retail which stocks premium products and is part of the raheja group

He thinks firstagro is filling a big hole in the broad organic products category where retailers don’t know where the produce is coming from

in retail’s dynamics, traceability

is also important for forecasting if

a store sells 100 kg of tomato, then

it needs to stock 110 kg “for regular

stocks, i am dependent on the mandi

i might require 100 kg of cauliflower but i might get only 80 kg With

professional brands like firstagro,

i can forecast my requirement,” says Chakradeo, who also does category awareness for customers

DIFFERENTIATION

The organic movement of the 20th Century is big business today The well-being of the soil, the crops and of the people who consume the produce, form the basis of organic agriculture for some it is a spiritual quest, for others it is a way to be environmentally sensitive it is catching up in india too, moving from being a fad to a conscious health choice However, very few growers certify their produce

retailers say they have to work with organic suppliers to get them certified; some don’t know while others wear the label casually

nameet likes to describe them as

“students who study for 10th grade but never care to pass the exam”

“very few organic growers go to the lab,” he says in such everything-goes-in-the-name-of-organic environment, firstagro has set itself up for stringent public scrutiny its products not only comply with the CodeX standards prescribed by the WHo (which food exporters in india have to follow), but go a step further and declare themselves totally pesticide free

To keep the standards and the farming rigour high, the founders say they would never do three things: Contract farming (which could compromise compliance); digress from zero pesticide (which could dilute the brand); retail directly or sell loose (which could adversely influence their farming practices)

BLOOM

if there is one community that loves this seemingly-crazy idea of zero-pesticide horticulture, it is the chefs internationally, farm to fork is a proven model and most chefs worth

F e at u r e s :E ntE r pr i s E

their ingredient grow some bit of

herbs and greens They like to know

where their stuff is coming from

anupam banerjee, chief chef of

ritz Carlton, who has relocated to

india after 15 years and is india’s

first michelin star-rated chef, is

delighted after visiting the farm, he

has been working to synchronise his

menu with nameet’s seeds and crop

cycle “if we can sustain two-three

dishes in each restaurant [at ritz],

it’d be a good start,” says banerjee

for whom firstagro has developed

a patch in the hotel on residency

road, an upscale bangalore locality

at JW marriott, executive chef

surjan singh Jolly, or Chef Jolly as

he is popularly known on various

Tv shows including MasterChef

India, says when he relocated from

renaissance in mumbai to bangalore,

he missed his agri patch terribly

He isn’t complaining now “in less

than six hours the produce from the

farm is in my kitchen it also helps

me plan my menus if i plan for my

next palm hearts [a baby cabbage

dish] or if i want my candy beets,

i can work with them,” he says

not just big hotels, even smaller

restaurants are happy after suffering

for years for want of the right

heirloom tomatoes for pasta sauce

or right daikons or fresh jalapeños,

vibhuti bane is now experimenting

with menus “nobody is growing zero

pesticide crops The kind of flavours

you get from this farm is really good,”

says bane, corporate chef at three

fine dining restaurants including

City bar in chic Ub City mall, whose

garnishes come straight from Talkaad

internationally, restaurants

grow their own “living wall”, which

treat customers to do-it-yourself

salads or seasoning nameet is just

getting around to growing these

“walls” with micro-greens, herbs

and other salad ingredients some

want it circular, some vertical and

some are even going for hydroponic walls (where plants are grown in a nutrient solution) which have inverted tomatoes all in the name of taste, style, and, of course, differentiation!

Chefs like to think of their dishes

as fables They spin yarns and when there is a passionate grower like nameet who likes to tell stories about his seeds and farm practices—

how he learnt to kill black moth using basil or how touch-me-nots repel insects—it is a feast for all

ROUGH WEATHER

in the near term, firstagro customers see no challenge, though most retailers would certainly want bigger and more regular stocks Their stocks disappear

in no time, says Hari menon, founder and chief executive of big basket, an online grocery store in bangalore firstagro has just moved from twice-a-week supply to thrice-a-week supply but that is not sufficient

co-in a consumer’s grocery budget, fruits and vegetables constitute 25 percent of the budget but for modern retail stores these categories make

up only 6-8 percent of stocks “it’s fundamentally a supply chain issue and our aim is to drive it up to 10-15 percent at big basket,” says menon

nameet and Prasad are trying hard to increase production They intend to invest $20 million in the next five years, mostly from debt and internal accruals nearly 45 varieties are in production, 40 more are in field trials but this isn’t run-

of-the-mill farming apart from the standard crop rotation and resting period, a patch of land requires at least six-eight weeks to prepare it’s not difficult to understand why troubles of farming have led nearly 2,000 farmers, going by 2011 census,

to quit cultivation virtually every day for the last 20 years The brothers are also aware that as they expand, land acquisition—though they are open to long-term leasing—would be

a challenge; as would be water and power availability menon suggests they work with local governments to speed up things but the promoters are wary, lest their business acquire any political tinge after three years

of Talkaad, their next cluster is coming up in Pali in maharashtra

it is not just land and staff that require preparedness Customers and retailers need education as well Prasad still looks aghast when he describes how a retailer rejected four crates of wild rocket (a kind

of lettuce used in gourmet food) because some leaves had holes, which is a hallmark of the rare wild variety, not of pest infestation or, how another store rejected ripe green cherry tomatoes saying green meant raw and wasn’t ready to sell naveen believes the new food and safety standards act which has come into effect will drive awareness This year the national CodeX contact point has become active in educating growers and retailers about food safety

back at the farm, you look at damaged lettuces and strewn tomatoes and wonder if the founders have bitten off more than they can chew Having nature play a decisive role in your business is a risk factor “You can’t fart against a thunderstorm We know what we’ve gotten into…nothing goes waste here,” says nameet, with

a jovial wave of his hand, pointing

to the seeds and compost pit

THEy INTEND TO INvEsT $20 MILLION IN THE NExT FIvE yEARs

NEARLy 45 vARIETIEs ARE IN pRODUcTION

F e at u r e s :C ro s s Bo r d e r

LinkedIn CEO Jeff Weiner knows how

to exploit his own network to hire smart

Here are the house secrets

so what about Linkedin itself?

Weiner runs a fast-growing operation—revenue was up

59 percent last quarter—and constantly needs more engineers, salespeople and corporate managers sure enough, Linkedin’s own recruiters have a lot to teach others through their incessant and demanding use of house products, constantly testing new features in search of more powerful results

start with something as fundamental as where to look

Linkedin’s databases can generate heat maps of the Us, showing local variations between job listings and available talent for specific industries so while Linkedin still does much of its software engineer hiring in the obvious places such

as silicon valley, seattle and new

York City, it is alert to “hidden gem” markets such as the Washington, dC metro area and dallas/fort Worth

To catch candidates’ attention, Linkedin’s first moves are disarmingly low-key anyone who happens to glance at a Linkedin employee’s profile is likely to see a nearby ad

or piece of sponsored content from Linkedin sharing a bit of itself The goal is to induce these site-surfers to

“follow” Linkedin’s company page once that happens, it’s easier to aim job ads or more content at them

such digital serenades are known as

“adding warmth” in a recent hunt for systems-infrastructure engineers, Weiner’s team discovered that more than 35 percent of leading prospects were people who were already digitally acquainted with Linkedin another lesson learnt the hard way: Just because you can create a fussy list

of criteria for candidates doesn’t mean you should When Linkedin hunted for its first data-centre manager, the company’s own site originally found only seven identifiable people on earth who met all conditions so Linkedin loosened up it lopped off four dubious requirements, such as insisting that candidates have spent at least three years in their current jobs voilà!—126 candidates Within a few months, the job was filled “We don’t need eight

to ten years of people doing x,” says

Weiner “in fact, we may not want someone who has spent too much time working in a large-company culture.” even in data-rich Linkedin, Weiner emphasises intangibles that don’t show up on a résumé—leadership, resourcefulness and humour When

he interviews candidates, he often asks how they want to see their career

in 20 to 30 years, to discern who is well-aligned with Linkedin’s culture

“it’s a lot like m&a People sometimes get too caught up in getting the deal done, when maybe they shouldn’t be doing the deal at all,” Weiner says Jonathan Sprague / R

By harnessing opportunities ignored by its bigger competitors, Micromax has emerged as a serious challenger

in the mobile phone market But now that the gaps are disappearing, can it create newer markets as well?

BY Rohin DhaRmakumaR PhotogRaPhs BY amit VeRma

Pretender

no More

Cov e r S to ry

o n august 29 , 2012 , as jk shin, president of samsung

electronics, unveiled Galaxy note 2, the second iteration

of his company’s flagship ‘phablet’ smartphone series,

in berlin, a guerrilla shipment of 10,000 similar devices was selling big in stores across india it had been brought

in only a week ago ❡ Well, the devices were almost similar

❡ The Canvas a100 smartphones had 5-inch screens as against the 5.5-inch ones on the note 2 but the resolution was not half

as detailed; the batteries were two-thirds the capacity; the processors had just one core compared to the four on the note 2; and ram was just a fourth in comparison ❡ Then there was the price: rs 9,999 compared to the note 2’s rs 39,900 at the time of its formal launch in india in november that year.

Rahul Sharma:

“We’re targeting one billion dollars by the end of 2013”

at 25 percent of the note 2’s cost,

the devices seemed to make sense

to the indian customer—so much

so that in another three weeks, they

would be all but sold out This was

the signal its makers, the

Gurgaon-headquartered micromax, had

been hoping and waiting for

Within days its supply chain,

distribution and marketing machinery

started shifting into attack mode

specifications were mapped and

orders sent out to China for a

newer version featuring a

dual-core processor, a better quality

and higher resolution screen, more

internal memory and an upgraded

camera The improved Canvas 2

was unveiled in the first week of

november, a little over two months

after its predecessor’s 10,000-unit

test launch had proved successful: it

still sported the rs 9,999 price tag

The phone turned out to be a

winner for micromax, selling out

across many stores within days and

commanding a premium over its

retail price for nearly six months

supply constraints certainly

contributed to the instant sales

(micromax underestimated the

popularity of the devices) but there

was no doubt that the company

was on to something significant

“our multinational competitors

offered one or two smartphone

models in every successive screen

size—3.5 inch, 4.3 inch, 4.7 inch,

5 inch, etc it was as though they

were checking each [screen size]

box with a few models,” says rahul

sharma, 37, one of the four

co-founders of the company and

easily its most recognisable and

dapper face

so what did sharma and

micromax do over the next year?

“from a rs 6,000 Canvas viva to

a rs 19,000 Canvas 4, we have put

a 5-inch smartphone next to each

of their boxes We bet the house

on 5-inch smartphones and that market just exploded!” he says

Yesterday’s Scrappy Challenger Is All Grown Up

micromax has come a distance since making its first mobile phones in

2008 according to research firms idC and Cybermedia research (Cmr), the company is the third

largest seller of mobile phones in india behind samsung and nokia The mobile phone market is currently going through a major upheaval as hundreds of millions

of users in india and around the world upgrade from cheaper and less-capable feature phones to smartphones in the smartphone race, both these research firms place

A Tale of Two Research Methodologies

When it comes to market share, there will always be debate about the accuracy

of quoted figures Regarding mobile phones, IDC and CMR collate their figures by tracking

“shipments”—the number of handsets that leave domestic manufacturing premises or enter the country via imports

In contrast, GfK-Nielsen, another research firm that is preferred by older players like Nokia and Samsung, tracks retail sales by sampling a subset of retailers across the country.

In other words, IDC and CMR track the supply of phones into the market, while GfK-Nielsen

tracks the demand for phones from the market.

The trick lies in not ing those apples and oranges, but looking at the trend within each research provider’s data over time, assuming it is im- possible for any company to manipulate data quarter after quarter.

compar-Cov e r S to ry

From left: Amit Mathur, who leads Micromax’s international business, with Chief Marketing Officer Shubhodip Pal and Ajay Sharma, the head of the smartphone business

micromax firmly at the number

two position behind samsung in

market share—22.7 percent versus

samsung’s 31.9 percent, according

to Cmr; and 22.2 percent versus

25.7 percent, according to idC

samsung india declined to speak

with Forbes India for this story a

spokesperson said the company

did not believe the idC and Cmr

figures were accurate; they were

more convinced by the

GfK-nielsen numbers (a proprietary

subscription service, the specifics

of which samsung did not disclose)

“We do not consider micromax a

competitor,” the spokesperson added

sharma is amused when he hears

that samsung does not consider

his company a competitor “i think

mahatma Gandhi said it best:

‘first they ignore you, then they ridicule you, then they fight you, and then you win’!” he says

and winning they are

according to sharma, micromax has already surpassed last year’s revenue of rs 3,100 crore in the first six months of this year “We’re targeting one billion dollars by the end of 2013,” he says

vikas Jain, another co-founder, says, “in most countries where samsung has a local subsidiary and has been in operation for over 12 months, they are usually number one if we defeat them in india, this might become the first country where that stops being the rule.”

With its coffers filling up with revenues from the sale of over 2.5 million handsets each month, micromax is setting its sights even higher a stunning new global ad campaign featuring australian actor Hugh Jackman was rolled out recently The company claims it is spending rs

30 crore on the campaign alone

Gone is the diffidence and scrappiness of before in its place is

a belief that it can vault itself up the global pecking order of smartphones where the downslide of nokia and rim has left a vacuum “Though it accounts for less than 10 percent

of our revenue today, in three years we want our international revenue to be equal to our india

revenue—or $2 billion each,” says sharma as with most micromax senior executives, the line between confidence and bombast is blurred

The Smartphone Rider

When micromax crashed into the mobile phone market in india with its low-cost feature phones which had innovative attributes like dual-sim and large batteries, it was dismissed

as a one-trick pony The arguments: They had no r&d; they merely sold phones offered by contracted Chinese phone-makers in shenzhen; they were only about cheaper prices.Perhaps the biggest contention was that as ‘dumb’ feature phones gave way to advanced smartphones, the likes of micromax wouldn’t stand

a chance and yet, the company has not only made the transition, it has improved its ranking in the process.meanwhile, with only around

18 percent of indian phone users using a smartphone, the upside

of the shift in preference is still massive in June, india pipped Japan to become the third largest smartphone market in the world after China and the Us by next year,

it is likely to be the second largest.The rise of Google’s free android

os was easily the biggest factor that aided micromax’s rise in the pre-android era, phones were compared and bought based on their hardware and software features but android almost completely took software differentiation off the table as both,

a rs 10,000 smartphone and a rs 45,000 smartphone, carry nearly the same operating system (os) features.being free, android attracted most phone makers from across the world and as volumes grew, it drew in more apps and their developers a ‘virtuous cycle’ was created where users preferred android phones due to the vastness of its ecosystem, and phone makers chose android because users

“I thInk MahatMa GandhI saId It best: ‘FIrst they IGnore you, then they rIdIcule you, then they FIGht you, and then you wIn’!”

did nokia and rim have struggled

largely due to the diminishing

appeal of their os platforms for

developers and consumers alike

“What is surprising in the case of

smartphones is the speed at which

commoditisation is happening in

just six years, we have gone from

the first generation of touchscreen

smartphones, which seemed

almost magical, to them becoming

commodities,” says Horace

dediu, founder of mobile analyst

firm asymco, widely regarded as

one of the foremost experts on

smartphones and on apple

so far, this has worked

quite well for micromax

“When a samsung invests billions

of dollars in r&d, it has to recoup

that money so while it comes up

with its [custom-designed] exynos

processors, micromax simply goes

and buys mediatek or snapdragon

processors buying what is available

in the market is always cheaper

than custom-building it,” says

Katyayan Gupta, a technology

analyst with forrester research

adds ajay sharma, the head of

micromax’s smartphone business

who formerly led HTC india: “if

i can make a smartphone that

has everything that a competitor

offers at double the price, why

will consumers not choose it?

our Canvas 4 smartphone costs

rs 18,000, not rs 45,000.”

This means that micromax is

riding on the slipstream of

cutting-edge r&d being done by moneyed

players such as samsung and nokia; it

is choosing to buy technology that is

one generation old—and remember, a

generation in the smartphone space is

often measured in just a few months

“The anxiety for larger companies

is that if they build a new category—

like, say, a tablet or smart watch—it

gets commoditised in three years after

it has, maybe, spent four to five years

to design and develop it,” says dediu

“if the market life of your product

is shorter than its development life, then you have a problem This is why apple was so worried when android copied its user experience early on—it happened so fast, before they had a pipeline of new [product] ideas.”

While nokia, rim and samsung are caught in the ‘damned if you

do, damned if you don’t’ dilemma, micromax continues to claw at their marketshare by offering ‘good enough’

options for a fraction of the price charged by the ‘premium’ products

neither can micromax afford to play the billion-dollar r&d game like its bigger competitors, nor does it feel the need to follow the terms set by others

How long can this continue?

satish babu, founder of Univercell, one of india’s largest mobile phone retail chains, says that while the average selling price for a phone in the country is rs

5,000 currently, consumers are willing to spend 1.5 times that price

at the point of upgrade “and they are upgrading their phones every nine months today,” he adds

dediu believes that “when

a technology product reaches commodity status, functionality becomes less important as it cannot be dramatically different across products That is when marketing must change the message to other attributes like convenience, price or style.” Yet, it is not impossible to differentiate your brand even within a commoditised space like smartphones

“apple’s approach has been

to disrupt the market through technology, and once commoditisation sets in, to preserve a premium

segment for itself They did it with PCs and now they are doing it with smartphones,” points out dediu

“There is a reason why they recently hired the burberry Ceo—clothing is the most commoditised category in the world, but even there you can still capture value at the premium end everyone doesn’t wear $3 T-shirts and even the Chinese, who make those T-shirts, aspire for european brands.”The rationale for micromax’s ballooning marketing and advertising spend is readily apparent now since features and hardware specs cease to be differentiators,

it needs to build a brand that can compete with a samsung, one that consumers can aspire to

“even folks in faridabad and Gorakhpur will know Hugh Jackman eventually they will think of us

as a high-end brand We want to

be a Zara or a mango; not a Peter england, but not a Gucci or Prada either,” says rahul sharma

Target: Samsung

Though the stated objective of most micromax executives is simply to grow the company’s revenues and

Where Micromax Stands

Cov e r S to ry

NOKIA CMR, Q2, 2013 (Overall) IDC, Q2, 2013 (Overall)

0 5 10 15 20%

SAMSUNG MICROMAX KARBONN

NOKIA SAMSUNG MICROMAX KARBONN

0 5 10 15 20 25 30%

CMR, Q2, 2013 (Smartphones) IDC, Q2, 2013 (Smartphones)

customer base in india, there is a

certain unsaid ambition that seems

to unite them—to unseat samsung

as the leading smartphone player

“beating samsung is not going

to be easy The Koreans have

good designs and innovations in

each product, a good service and

distribution network and solid market

knowledge Plus, they can really be

aggressive,” says babu of Univercell

micromax’s biggest weakness

so far has been the perception that

its phones aren’t very reliable,

and getting one serviced is a pain

“micromax phones are not bad in

terms of quality even samsung and

nokia phones have issues, but the

companies are able to resolve them

quickly on the other hand, micromax

has had challenges in responsiveness

because they didn’t have enough

service centres,” says babu

To address this, the company

is nearly tripling the number of its

partner-managed service centres

from 436 last year to 1,250 by march

2014 (currently they are at 745), says

bharat malik, micromax’s service

head (who was hired from nokia)

across these centres, malik’s team

of 200 claims to oversee 6,50,000

customer walk-ins every month

it wants to reduce the turnaround

time to less than seven days from

the current 15 “To do that we are

transitioning to holding spare part

inventory instead of the earlier

Just-in-Time ordering system,”

says malik a new Crm system will

go live before the end of the year

“service is one area where we need

lots of improvement,” says sharma

senior executives have been reading

case studies about companies with

impeccable service offerings, such as

domino’s Pizza for instance, he adds

“Like domino’s 45-minute delivery

guarantee, can we move towards, say,

a 48-hour repair guarantee? We are

piloting a home pick-up and drop of

our phones in mumbai and delhi

We would like to roll this out in a bigger way in six months,” he says

on the retail front, it is trying

to formulate a bottom-up, to-retailer approach supported by brand advertising instead of trying

direct-to emulate the strong channel relationships nurtured by the deep-pocketed nokia and samsung

Through its ‘elite Circle’ channel promotion initiative, it tracks the sales of its phones directly from retailers on a daily basis (through a proprietary sms-based app) instead

of waiting up to weeks for that data

to flow in via multiple distributors levels depending on how they fare

against the sales targets, incentives get wire-transferred directly to retailers

Then, of course, there is the product portfolio

since its inception, micromax has been known for two things: an uncanny ability to spot product gaps in the market, and the speed with which its supply chain responds to them

While both of those still stay valid, its scale now gives it a direct seat across the table from global ecosystem biggies ranging from Google to intel to Qualcomm to mediaTek

sharma’s aspiration to be seen

as a Zara (the spanish fashion giant that launches 10,000 new designs every year, with some going from design tables to stores in as little as two weeks) is as much about the

responsiveness of his supply chain as

it is about the attributes of the brand

“everyone has to act like a Ceo of their own domain and take quick decisions our culture

is to be quick and nimble Thus,

a wrong decision is often better than no decision at all,” he says.micromax’s Canvas Hd smartphone was the first product globally to use mediaTek’s quad-core processor Later this year,

it will be another micromax phone that will sport mediaTek’s first octa-core processor too

another american semiconductor giant is said to be offering it an india-specific LTe chipset instead of the off-the-shelf ‘multi-mode’ ones that support all global frequency bands This, in turn, will allow it

to bring a 4G smartphone to the market at a significantly lower cost than what currently exists.sharma is also insisting that global hardware and software makers treat his Chinese manufacturing partners—Tinno and Longcheer—as extensions

of micromax in response, the world’s best known PC processor company has already embedded its engineers within these firms to help in the joint-development of products, he says.Through these tightly-coupled partnerships, micromax reckons it can react even faster than samsung

or nokia which are vertically integrated “supply chain speed is

a factor of your mind, not of your backend capabilities,” sharma says

a good example of this would be how the company reacted to nokia’s asha series of feature phones that use the older symbian series-40 operating system (nokia insists these be called smartphones, but most analysts dispute that “Let the company say what it wants to but asha is not a pureplay smartphone

at best, it is a ‘smart feature phone’,” says forrester’s Gupta)

Cov e r S to ry

“beatInG saMsunG

Is not GoInG to be easy the koreans have Good desIGns and InnovatIons…

and solId Market knowledGe Plus, they can really

be aGGressIve”

“after nokia launched asha,

samsung got edgy and launched its

own feature phone line, rex We

debated whether to launch our own

feature phone sub-brand but then

we checked if we could get android

to run on just 256 mb of ram which

an entry-level phone might sport it

did, but games like Angry Birds and

Temple Run didn’t,” says sharma “my

own r&d team advised me against it

but if Google allows me to run android

on 256 mb of ram, why can’t i?

so, in two months—not a year—we

launched our bolt series of entry-level

android smartphones priced between

rs 3,500 to rs 6,500 it turned out to

be a huge success and we are selling

around 5,00,000 units every month.”

running android on lower-end

phones appears to be a strategic

priority for Google, given its work

on the latest Kit Kat version to

ensure it can run smoothly on

phones with just 512 mb of ram

“for 2014, our goal is [to figure out],

how do we reach the next billion

people?” android head sundar

Pichai said at a company event on

october 31 in san francisco

“micromax seems to be seeing

an opportunity and executing its strategy well i see local players like them having the potential to disrupt samsung The problem for samsung

is that they need to constantly reinvent what they do Take nokia, for instance—from gaming and media phones to music and email as a service, it had strategic ideas for well over a decade, and in all directions,”

says dediu “Plus they had their own platform [unlike samsung, which relies mostly on android] very few companies historically have had the ability

to ‘self-disrupt’ and cannibalise

their own business does samsung have what it takes when nokia,

HP and sony didn’t?”

Chefs and Cooks

micromax, as a company, was formed

in 1991 by rajesh agarwal He was joined by rahul sharma, vikas Jain and sumeet arora (all engineering college mates) as equal partners in

1999 for nearly a decade, the firm sold software, telecom services and computer hardware to enterprises till, in 2008, sharma convinced the others to branch out into the mobile phone space Their first phone, the

rs 2,150 X1i, touted a battery life of nearly 30 days and was a big success

in rural india They went on to dual-sim, a feature which would emerge as their breakout hit and establish the company as a serious player as sales started skyrocketing, people began to take note Private equity firm Ta associates invested

$45 million in early 2010 while bollywood actor akshay Kumar came

on board as its brand ambassador.most of its homegrown peers are primarily and, in some cases, entirely, founder-led micromax,

on the other hand, has used its scale and success as a trigger to induct senior industry leaders into executive positions in the company.deepak mehrotra, an ex-airtel executive, had been playing the role

of Ceo for the last two years (While

Forbes India was still reporting on this story, micromax informed us that mehrotra had quit for personal reasons it would later turn out that he had joined global education services company Pearson as its india head.)ajay sharma, the former head of HTC india, heads the smartphone business amit mathur, the former head of sales at rim india, leads the international business bharat malik took over the service vertical after joining them from nokia

Vikas Jain, co-founder: "If

we defeat [Samsung] in

India, this might become

the first country where

[its being No 1] stops

being the rule"

“[you] take quIck decIsIons our culture Is to be quIck and nIMble

a wronG decIsIon

Is oFten better than no decIsIon

at all”

sony ericsson executive Khaja

muzaffarullah came on board as

the driver of the still significant

feature phone business while

former entrepreneur shubhodip Pal

became the chief marketing officer

meanwhile, the founders have

taken on more strategic roles in the

company sharma is clearly the one

making the biggest bets He says

he decided to appoint Hollywood

bigwig Jackman as brand ambassador

even though a company dipstick

revealed that nearly eight out of 10

customers had not heard of him

“The standard approach would

have been to pick someone who

is popular among 80 percent of

the customers but i said we need

to influence the 20 percent who

really matter—the opinion makers

and influencers,” he says

earlier this year, he also enrolled

at Harvard business school (Hbs)

for its owner/president management

programme which trains business

owners and entrepreneurs over a

three-year period to become better

leaders The trigger, he says, was

when the Hbs academics had visited

micromax to compile a case study

on it “as they asked us questions

for the case study, i had my own

questions for them, including whether

we should go global or continue

expanding in india,” he says

Unfortunately, a week into the

programme, he had to rush back

after one of the co-founders, rajesh

agarwal, was arrested by the

Cbi for allegedly bribing officials

for a real-estate transaction

agarwal has since resigned

from the company

“The divide between the founders

and professionals is this: They manage

all the day-to-day operations while we

handle the strategic elements,” says

sharma “i handle products, strategy,

marketing and sales without getting

into things like retail or channel

strategy sumeet [arora] looks at after-sales and iT infrastructure without getting into, say, what specific spare parts need to be ordered vikas handles all our relationships with operators and closes big deals before passing them on to operations and finance, which was handled by rajesh,

is now split between the three of us who have always been hands-on.”

While on paper this division of responsibilities may look sensible, four co-founders and five business heads may be a case of too many cooks unless micromax can continue to grow at a breakneck speed for the foreseeable future

Going international, therefore, becomes imperative

From India, With Love

The walls of amit mathur’s cabin at micromax’s Gurgaon headquarters are plastered with maps and posters

among them are maps of bangladesh and sri Lanka, peppered with red, black and blue dots and stars, each representing a retail or service presence There is a smaller one

of moscow too There are sinhala (an ethnic sri Lankan group with its own language) posters as well, for two of its entry-level phones

mathur himself is in sri Lanka, busy consolidating the company’s position during a telephone conversation, he says:

“in bangladesh, nepal and sri Lanka, we are the number two player; six to eight months ago,

we weren’t even in the top five.”

This is micromax’s second attempt at going international its first forays, two years back, ended mostly in failure when consumers

in Latin america, africa and the middle east didn’t quite take a fancy to its feature phones

“feature phones often require customisation, which becomes a hassle when they are being sold

Two of the Fastest Rising Smartphone Players

MicroMax (india)

foR 2013

10 MLn ANNuAlly

GooGle ANDRoID

rahuL SharMa , Co-fouNDeR AND IN ChARGe of pRoDuCT DeSIGN, MARKeTING, STRATeGy & SAleS

$88 MLn oveR TWo RouNDS, fRoM TA ASSoCIATeS, SequoIA CApITAl, SANDSToNe CApITAl, MADISoN INDIA CApITAl

MoSTly ReTAIl SAleS ThRouGh pARTNeRS

No 2 IN INDIA

expANSIve AND RApIDly ChANGING pRoDuCT lINeup, SolD AT heAlThy MARGINS

offeR SIMIlAR/

SlIGhTly leSSeR feATuReS AND TeCh- NoloGy AT RouGhly hAlf The pRICe of MNC bRANDS

Lei Jun , Co-fouNDeR AND Ceo, AlSo CAlleD

“ChINA’S STeve JobS”

$347 MLn

oveR ThRee RouNDS, fRoM MoRNINGSIDe, qIMING, IDG, quAl- CoMM, TeMASeK

pRIMARIly TIMeD AND lIMITeD oNlINe SAleS, WhICh Sell ouT veRy fAST

Sell CuTTING-eDGe phoNeS AT A veRy SlIM MARGIN, opTING To eARN MoRe vIA SofTWARe AND SeRvICeS

CuTTING-eDGe phoNeS WITh hIGhly CuSToMISAble SofT- WARe ThAT IS CoN- TINuouSly RefINeD bASeD oN WeeKly uSeR feeDbACK

SMART-GooGle ANDRoID WITh pRopRIeTARy MIuI uSeR INTeRfACe

14-15 MLn ANNuAlly

foR 2013

xiaoMi (china)

Cov e r S to ry

across multiple countries We were

prudent enough to pull back and

consolidate,” says mathur “When

i joined in January, we decided our

gameplan would be to strengthen

our presence within the saarC

countries We could leverage our

existing advertising because most

[television] media plays there too.”

and its bolt line of entry-level

android smartphones can be

targeted at newer markets far more

efficiently than feature phones

“android has removed customisation

as a hurdle for us,” says mathur

next up are myanmar, russia,

romania and Ukraine Like

india, these markets too have low

smartphone penetration and are

gradually shifting towards retail

sales (as compared to the

operator-subsidised model in many western

european countries and the Us)

micromax is assuming that as

consumers are forced to pay retail

prices for their phones, they will

tend to place less of a premium

on brand and more on value

“in russia and its neighbouring

countries, the biggest challenge,

often, is the language not in terms

of phone customisation, but as far as

communications is concerned nokia

used to have a good presence but

that is reducing… so that is a plus,”

says mathur “but samsung is trying

to take over its share, so you have to

fight them in some cases, there are

strong indian brands like fly too.”

dediu points out that “there

is nothing wrong with an indian

company aspiring to become a

global brand after all, we have seen

companies from Japan and Korea

do it earlier and, later, China The

emergence of asian brands is the big

cultural phenomenon of this century.”

Only the Paranoid Survive

Till this point, micromax’s strategy

has been to spot significant market

opportunities left untapped by bigger competitors, for instance, the dual-sim market by nokia or the 5-inch ‘phablet’ space by samsung

but those gaps are getting harder

to find “Cheaper prices alone will not

be sustainable because other players are launching inexpensive devices

do you think microsoft [which now owns nokia] will not aggressively price Lumia devices below rs 10,000?” says forrester’s Gupta

There is also the blind spot that comes from being a marketing-driven innovator, when your customers cannot tell you what they want because they cannot imagine what they want “How will micromax spot

the next generation of technology that may be portable or wearable? maybe instead of a larger screen there will

be no screen at all How will they compete?” says dediu Given the pace

of innovation and competition in the smartphone space, his questions ought to worry micromax

by way of answer, sharma talks about two of his yet-unreleased potential blockbusters, neither of which is a remainder

of a competitor’s strategy

The first is a hybrid device that combines two vastly different products into one Yawn, you probably think Haven’t those been around for a couple of years now?

not like this one: it features two

full-scale and side-by-side operating systems and chipsets—a global first

“i want to attack the iT industry from the sidelines,” he says, refusing

to reveal the name of this product.another creation he shows is a full-featured smartphone with a battery life of seven days—wishful thinking when today's smartphones need to be charged multiple times

a day “even then, mobile phone hardware is going to become like PC hardware it is commoditised—what else can you add now?” asks sharma.Like the PCs got eaten up by the tablets and smartphones of the “post-PC world”, so too will smartphones one day What then?

“Why can’t we build the next flipkart without replicating their backend infrastructure? i have got millions of customers, many of whom use 5-inch devices which are great for shopping We are figuring out how to sell them products though; for example, a white-labelled e-commerce site whose fulfilment

is handled by someone else and i get a cut out of every transaction,” says sharma “Customers, on the other hand, will want to use micromax phones because they get exclusive offers and services.”

He claims to make close to rs 100 crore annually by charging developers for downloads and exclusive

apps on micromax’s proprietary android store (which coexists with Google’s Play store on its phones)

“We are working on an app that can translate a conversation from english to Hindi in real-time, as it

is being spoken We are working

on our own currency so we don’t need to rely on operator billing We want to buy software companies,” says sharma “in the next five years, our software division will earn more than the hardware The future lies in the internet—i’m 200 percent convinced of that.”

“the dIvIde between the Founders and ProFessIonals Is thIs: we handle the strateGIc eleMents whIle they ManaGe all the day-to-day oPeratIons”

F e at u r e s :E ntE r pr i s E

worried man The year was 2005, and

it was soon after the sudden death of his accountant,

atul dhaga, due to a heart attack

The tragedy of the loss of a

36-year-old who had worked with him for a

decade was only compounded by this

quandary: dhaga’s demise had left

the finance department at a standstill

What if something was to happen

to him? shetty feared his business

would become rudderless as would

the people who had been working

with him for the last 17 years

He decided it was time for

mahesh Tutorials, his coaching

class business, to become a

corporate entity that would survive

independent of his presence “as a

corporate, the company would be

taken care of whether i am a part

of it or not,” says the 49-year-old

His classes, a rs 25-crore

partnership firm at the time,

had acquired cult status in the

unregulated rs 2,000-crore tutorial

industry for Class 10 board exams

(the industry size is as per company

sources) This transition, as shetty

envisioned it, was based on building

redundancies—not allowing anyone

to become indispensable This philosophy has carried forward to the super-standardised method of teaching that defines the success and growth of his tutorial business That strategy seems to have worked Consider the growth trajectory

in 2006, mahesh Tutorials acquired businesses that led to it getting rebranded as mT educare and, in

2007, it finally became a corporate entity with Helix investments as

a private equity (Pe) partner its turnover in 2008 was around rs 44 crore; the Pe firm invested around rs

32 crore for a 30 percent stake five years on, for fY2013, the company has a turnover of rs 154 crore with a net profit of rs 18 crore and a market capitalisation of rs 400 crore

in april 2012, the company was listed at rs 90 against an issue price of rs 80, allowing Helix to sell 25 percent of its stake for a 2.5x return Currently the stock trades at rs 102 per share

marquee investors such as shivanand mankekar, with a net worth of rs 355 crore and known for his early investments in Pantaloon

Mahesh Shetty’s strategy for scaling up the

usually ‘localised’ tutorials business is based

on standardising teaching processes And, to

overcome the constraints of the brick and mortar model, he now has his eye on the digital classroom

Mahesh Shetty's first teaching assignment paid him Rs 500

a month

F e at u r e s :E ntE r pr i s E

and radico Khaitan, picked up

around five percent stake (along

with his wife) at the iPo stage The

institutional shareholding has gone

up to 27 percent as on september 30,

2013, against 23 percent last year, even

though the share is underperforming

the markets by around seven

percent shetty is also buying back

his stock from the market and has

increased his stake from 43 percent

to 45 percent since march 2013

and the business has expanded

beyond just teaching mathematics

to Class 10 students; it has entered

the commerce and science streams

as well (these now account for

50 percent of the turnover)

despite the apparent growth,

some analysts believe that mT

educare has peaked as the business

is very local and expanding into

newer cities is not easy

“margins get sacrificed with

growth, thus many competitors

don’t want to scale upwards,” says

a competitor who had worked

with the company earlier but the

management is confident that mT

educare can become a rs 500-crore

business in the next five years and

institutional investors are biting

avendus Capital’s fund iii,

an alternative investment fund

(aif), has recently purchased a 2

percent stake in the company “mT

has an asset light business model

with negative working capital and

low capex The business generates

very good cash flows and has a high

return on equity We also believe that

india is starved for good education

institutes and supplementary

education will continue to be in

great demand,” says manoj Thakur,

Ceo, avendus Capital-aif

The opportunity is evident

according to the department of

industrial Policy and Promotion,

the market for india’s education

sector is around rs 3.41 lakh crore

and has been growing at roughly 15 percent over the last five years Crisil,

a rating and research agency, says the coaching business is expected to expand at 17 percent CaGr, from rs 40,187 crore in 2010-11 to rs 75,629 crore in 2014-15, on the back of rising disposable income and infrastructural bottlenecks in the formal education sector mT educare is targeting board exams, engineering and medical entrance tests and Ca exams

The young teacher who couldn’t afford to pay the rent for his new business premises has indeed travelled a distance

shetty’s first teaching assignment

was with shetty’s academy (no relation) in mulund in 1984 He

had completed his bachelor’s from ramnarian ruia College in maths and statistics The job did not pay well—

he earned around rs 500 a month shetty, whose father worked with idbi bank, knew that if he took up a job with a bank, he would probably earn around four to five times more but it was not about the money He liked the idea of teaching, with all the associated problems The classes went on for eight hours; also, the continuous writing

on the blackboard created throat problems that are typically associated with chalk dust but he was so well-prepared that, often, he was not in

a position to talk to the students but they still chose to attend

by 1988, shetty had acquired a cult following in the small mumbai suburb of mulund which was known for its well-to-do middle class it was around that time that he had a falling out with shetty’s academy These two factors—his popularity combined with the discord—

led to the launch of mahesh Tutorials on november 24, 1988, near st Pius Church which was located close to two of the most important schools in that area His plan: To build a coaching academy that creates world-class teachers who are also well paid inevitably, as he moved into the small shop floor space to start his new classes, almost all his students followed suit “That was not my intention i never wanted to move with all the students They just followed me,” shetty says

The classes started but he did not have the money to pay rent for the premises and the 130 kids who had moved with him had already paid their fees at shetty’s academy since it was november, they had only about four months

to go before their board exams shetty decided to not charge

business in The nexT five years

and insTiTuTional invesTors are biTing

these students as they would have

to pay twice but on learning that

he was in financial trouble, Pushpa

bhagwan, the mother of a Class 9

student, got in touch with the other

parents and asked if they would

be willing to pay the annual fee

in advance They agreed and the

first roadblock was surmounted

“it was the simplicity that he

brought to the class once mahesh

explained the concept, it kind of

stayed with you permanently,”

says murli subramanium, an

ex-student at shetty’s academy who

now works at mT educare

The students kept coming, despite

the fee disparity mT educare

charged rs 1,000, a one-time annual

fee for science and maths for Class

10, while its closest competitor in

the same area asked for around

rs 200, that too in instalments

ironically, his own popularity

had started worrying shetty

His students had joined

the class because of his teaching

style if the business had to grow

in size, it became important to

create more teachers like him

The first step was conducting

workshops with teachers to

understand the difficulties being

faced by students That led

to standardised solutions and

teachers who were replicable

but this process needed educators

who did not carry any baggage shetty

wanted young individuals who were

open to his vision of teaching by

1990, he had created three maths

teachers who followed the same

principles as him: shetty did not

show his back to the students; he

kept the blackboard writing to a

minimum, maintaining eye contact

with the students most of the time

These eventually became part

of the standardisation The idea

was to move the focus away from

the teacher and to the student

interestingly, most of the senior managers of mT educare are former students of shetty They understand the idea of creating mahesh shettys out of the teachers and believe in a process-led approach towards teaching

but while these steps were taken, shetty, an educationist, did not know how to completely ‘corporatise’

his classes enter Chhaya shastri who, at the time, was an advisor to Polymath, an investment banking firm she specialised in turning small and medium enterprises into big-ticket corporates

in 2006, shastri was helping neptune, a real estate company

which wanted to raise money from the markets neptune was started

by shetty’s friends who wanted him on the firm’s board—and that was how he met shastri

He asked if she could help in the transition process at mahesh Tutorials too she found the business interesting and started to visit the office every saturday The firm was already at rs 25 crore with 20 branches for it to become a rs 100-crore venture, she needed to prepare it for Pe investment shastri knew that investors would ask questions related

to scalability and sustainability but the good news was that the business was asset light and operated

on a negative working capital it generated free cash flows and there was a visibility of revenue for at least three years more importantly,

it had a consistent return on investment of around 20 percent.despite that, when she went on

a road show to the middle east, investors were doubtful about putting money into supplementary education The business was looked down upon by many and it was believed that the company would cap its growth at rs 40 crore

There was also the issue of the ‘star teacher’ model and low margins to boot nobody quite bought into the process-driven approach of the company that, to shetty’s mind, assured scalability

The impetus came when

shetty decided to get into chartered accountancy (Ca) coaching classes in 2006 at that time,

sK Thakkar, who too operated from mulund, was the biggest name in Ca coaching in mumbai shetty had a meeting with Thakkar and discussed his vision Thakkar was convinced enough to sell him his classes

“in the very first meeting, i realised

MT Educare operates as a classroom trainer in all the streams that include school, commerce, prep tests and science and faces competition

in each of its streams than as a whole.

When it comes to the coaching industry, there are not many companies in the listed space Educomp and Everonn operate more as software providers than classroom trainers in the education business Then there is Career Point which concentrates on IIT coaching and has a market capitalisation of Rs 155 crore.

Since it is a low capital intensive business,

it attracts high competition So the brand becomes very critical This is especially true in the case of Class 9 and 10 where there is a lot

of local competition but very few brands MT Educare, which gets 50 percent of its revenue from this stream, has established itself as a strong brand in this segment which is gener- ally dominated by local classes.

But the company does face competition for IIT and CA entrance from the likes of Pace and

JK Shah which are now brand names in these segments There is also huge competition from Kalrashukla which is gaining reputation in the science stream.

On Competition

F e at u r e s :E ntE r pr i s E

that mahesh shetty had a very clear

vision about how to take forward

the coaching class business,” says

anish Thakkar, who now handles

mT educare’s Ca vertical, the

biggest across india He has a 30

percent pass ratio for the Ca final

classes against an all-india number

of 10 percent (source: iCai) This

acquisition meant they were getting

clearer in their growth strategy

shetty also bought Lakshya for iiT

prep and CPLC for mba coaching

Later that year, mahesh Tutorials

brought all the partnership

classes under one umbrella: mT

educare during the same period,

Polymath introduced shastri

to Helix investments, a private

equity firm that belonged to the

bloomingdale family, known for its

bloomingdale's chain of stores

The fund was looking for long

term investments in the indian

market david danziger, a director

with Helix investments, visited

the mT educare office and was

sold on its idea of growth

on august 17, 2007, Helix offered

rs 48 crore but mT educare needed

only rs 32 crore The turnover

at the time was rs 42 crore

“i think danziger really understood

what we were planning to do He

asked us the right questions We

were happy that someone believed

in our story,” says shastri

she now owns five percent of

mT educare and actively looks

after the strategy Helix entered

the company at an average cost of

rs 32 and exited at rs 80 when it

was listed in august 2012; it still

owns five percent of the company

“We liked the fact that teachers

were empowered and had a career

path and the entire teaching

methodology was process driven

That enabled scalability,” says

sumit Tayal, director, Helix

investments advisors india

mT educare gets fees

upfront from the students and is in a position to operate on the negative working capital model The fees that are received are treated as deferred revenue into the current liabilities and are booked as revenues only after the services are delivered

since the business generates cash, it also has the ability to

create a higher return on equity (roe) but mT educare’s roe is down from 23 percent in fY2012

to 18 percent in fY2013

This can be attributed to the iPo proceeds that added to the net worth—

the funds were used to build a college

in mangalore as a proof of concept

to get into the Karnataka market

now, while the issue of scalability continues to nag mT educare, investors are also concerned about

the amount of capital that the brick and mortar business consumes

(see The Cost Effect) This is why,

over the last year, the company has started to dabble with technology

by reaching out to students in classes 5 to 8 via the internet

Currently, they have around

500 students in this module where one teacher holds an online class for 10 students each shastri says that eventually these students will stick around for classes 9 and 10 too This product, called ink, or integrated network knowledge,

is expected to be the main driver for mT educare in the future

The company has started to record these lectures and is now selling them separately as another product called robomate

in terms of the offline model, however, Karnataka has become the biggest bet for mT educare The company has tied up with nine pre-university colleges in the state

it generates income from two sources here: one, for administratively managing the colleges and the

staff, with mT getting 15 percent

of the college fees Two, from test preparation or coaching classes conducted on the college premises The company keeps 85 percent

of the coaching fees; 15 percent goes to the college trusts The pre-university colleges are co-branded and, today, account for eight percent of mT educare’s revenue

if that doesn’t answer the question

of scalability, shetty crunches the numbers for us: 220 coaching centres across india addressing 80,000 students with a faculty of 2,015 and, as for creating an organisation that isn’t dependent

on one individual, the worrylines

on shetty’s forehead seem to have been smoothened The cloning has been successful evidence: shetty stopped teaching a few years ago

The Cost Effect

 The size of a centre works out to an average 1,500 sq ft and accommodates three classes

The overall architectural cost per sq feet is around Rs 2,000, or Rs 30 lakh, per centre Add

to this, Rs 10 lakh paid for deposit and the overall cost runs to Rs 40 lakh

 It takes around two years for MT Educare to break even per centre In the third year, it can make an operating margin of around 15 per- cent; it goes up to 40 percent in the sixth year

 Today, MT has 220 classes in various stages

of operations But, at any given point, 10 percent of the classes are below the one-year stage or not adding any profitability to the business.

 Institutional investors feel that the asset light model of MT gets negated as it needs

to put in more capital per class to generate income and this affects the overall margins.