Vijay Mallya, chairman of the UB Group- on his future plans

Source: Mint.
Flamboyant billionaire Vijay Mallya, chairman of the UB Group, one of the country’s most diversified business houses with annual revenues of $2.17 billion, is not one who believes in resting on his laurels. After two strategic acquisitions in the past month in the whisky and airlines businesses, Mallya is busy plotting leverages, such as using Air Deccan to get Kingfisher into overseas markets and bringing in the White & Mackay whisky brands to India before Diwali. Soon after announcing his latest deal, a 26% controlling stake in Deccan Aviation Ltd, which runs India’s first and largest low-cost airline, Air Deccan, Mallya sat down with Mint. Edited excerpts:

Will the expected cost savings by a combined operation of Kingfisher and Deccan lead to a fare war in the Indian skies?
The combined operation of these two airlines, that are complementary to each other, will make the business more efficient. It will not necessarily lead to a fare cut but will make sure that we need not sell the ticket at a loss. I am fairly certain that this will certainly trigger more consolidation in the Indian aviation space. Another big advantage we expect through our strategic investment in Deccan is that our airlines will be able to operate in overseas routes by next year onwards, as Deccan will be completing five years of operation by 2008 to qualify for overseas schedules as per the current Indian aviation law.

That’s Air Deccan but Kingfisher cannot fly overseas.
For all practical purposes, we will be one entity. We will have an internal arrangement to lease out high-capacity Kingfisher aircraft to Air Deccan to maximize the benefit of overseas routes.

What else?
Since Kingfisher-Air Deccan group becomes the largest domestic airline with a fleet of 71 aircraft, including 41 Airbuses and 30 ATRs, the combine would cover all segments of air travel from low fares to premium fares and offer the maximum number of 537 daily flights, connecting 69 cities. Kingfisher and Air Deccan will also work closely together in areas of operation and maintenance, ground handling, baggage handling, pilots, increased connectivity, feeder services and distribution penetration, besides sharing reservation services, service stations and even parking bays at airports. The consumers too stand to benefit from the combined operation. If there are cancellations of Air Deccan flights, Kingfisher will take the passenger with no additional fare despite Kingfisher being a premium service airline.

How will you fund the Air Deccan deal?
The deal will be funded through borrowings made by UB Holdings, which has assets worth Rs4,000 crore in real estate, breweries and airlines. In addition, several investors have shown interest in the aviation business of our group. So there will be a preferential allotment of equities in the airline entity.

In the first week of May, you made headlines by taking over the Scottish spirit maker Whyte & Mackay for Rs4,800 crore. Now, one more acquisition—a 26% stake in Air Deccan for Rs550 crore with an offer to buy another 20%. What do these two high-cost deals mean to your group?
Whyte & Mackay, one of the world’s large Scotch distilleries with a brand portfolio of international repute along with a high-value inventory of vintage Scotch, will give the UB Group access to a ready global whisky market besides making its presence in the premium segment in India. Frankly, the Scotch was a missing link in our spirit business. A controlling stake in Air Deccan will make our airline business the largest in India by market share as well as its strong presence in both premium and low-cost service segments.

Tell us more about the synergies that you want to exploit both in the airline as well as liquor space.
By working together, Kingfisher Airlines and Deccan Aviation will save Rs300 crore in the first full year of operation. The savings would come from a common sharing of engineering services, spares, employees, pilots, other crew and ground-handling facilities. The combined revenue of Kingfisher and Air Deccan airlines in 2007-08 is estimated at Rs6,000 crore. Initially, the two airlines will continue to be run independently as a premium service provider and a low-cost airline respectively, but would work out an optimal route strategy, wherever possible. In terms of volume of passengers, the combine will have the largest market share.
In the spirits business, we are No. 1 in the country with our large Indian-made foreign liquor portfolio and also with the largest selling beer brand. However, the Scotland-distilled whisky and foreign premium spirit was a missing link in the business to become competitive in the fast emerging premium spirit market in India and also to make our footprint in the global markets.

How are you going to leverage the Whyte & Mackay strength in the domestic market?
Since Whyte & Mackay was a takeover deal, the business consolidation is currently on and is expected to complete by the end of the year. At present, Whyte & Mackay is a 100% subsidiary of United Spirits Ltd (the spirit business arm of the UB Group) through an intermediary holding company established for the acquisition.
Whyte & Mackay owns the world’s most popular Scotch brands, including (single malt whiskies) Dalmore, Isle of Jura, Fettercairn, (Scotch whisky liqueur) Glayva, Vladivar vodka and Whyte & Mackay blended Scotch. The Scottish distiller has 140 brands—some of them are dormant but that can be revived. We will bring the Whyte & Mackay brands into India and China and there will be a revamp of the product portfolio, depending on the requirements of these markets. United will launch all the six popular brands of Whyte & Mackay in India in November, just ahead of Diwali. These whiskies will be launched at competitive prices in the local market. Since the government is likely to slash the duty on imported liquor, we hope the cost of imported bulk whisky will be quite supportive to our local pricing strategy. This will give us an edge in the local market over the competitors in the premium segment.

Face to face with, Azim Hashim Premji- Chairman and CEO of Wipro Ltd

Source: Mint.
Azim Hashim Premji, the 61-year-old chairman and CEO of Wipro Ltd, owns more than 80% in the company, which transformed itself from making vegetable oil to a global software services business with annual revenues of around $3 billion (Rs12,300 crore). In a wide-ranging interview at Wipro’s Bangalore campus, Premji, who chooses his words very carefully, spoke candidly about Wipro’s acquisition strategy, its ambitious plans to establish centres in the US, the ongoing controversy over H1B visas in America as well as how being “humble” and not being an overt posterchild of Indian technology is actually helping Wipro differentiate itself from rivals. Edited excerpts:

We find many Indian companies today expanding their global footprints by making big-ticket acquisitions that are over $1 billion in size. What is your philosophy for inorganic growth?
Unless it has a lot of strategic value for us, we will not look at a $1 billion kind of acquisition. But we are looking at acquiring companies larger than the eight firms we have acquired in the past, certainly those between $200 million and $300 million in size. We are looking at companies employing 50-300 professionals. Good companies are never cheap; the issue is whether they can add value to our company in terms of the existing customer base, or a new technology.

Even though you serve global customers, your workforce is still almost 90% Indian, based in the country. What is the offshore story beyond India?
What is an Indian company and what is an American company? Take Accenture, for instance. They have around 37,000 professionals in India today. At the end of this year, they will employ 40,000-45,000 people in the country and there are around 42,000 employees globally. So, is Accenture an Indian company? IBM has already got 48,000 people in India, and they say that they want to go up to 75,000 professionals in the country. They are downsizing in America and laying off people in other locations. So, what is IBM two or three years from today? I think we need to get ourselves branded as a global company, which works in a global set-up and has a workforce which is reasonably global. Today, we employ around 3,500 people in Europe, out of which around 1,300 are locals. Foreign workers outside India account for 7-8% of our total workforce currently, and we would like to take this up to around 20% in the coming few years.

India is still a predominant centre because the cost economies and the talent economies are just unbeatable. You can’t move out just for the sake of it, you do it because you have to have insurance. You cannot ignore the prospects of China, but India is still very high value. We now have a centre in Shanghai, and are looking at another one in China. We have a centre in Romania, Brazil, and Mexico. We are now looking at three centres in the US. There will be cost savings because they will not be in mainstream New York city and even the state governments are willing to give a package of grants for setting up these centres. We will also become huge, huge local heroes by employing the local people (there). This will help in combating whatever anti-offshoring sentiments are there. This also gives you insurance for new visas. Not only are you doing a community-sensitive service, you are also generating local talent. You also globalize the company by these initiatives. Today, business models require your people working on the customer sites, so we would have around 10,000 professionals working on customer sites in Europe, America, Japan, Middle East and Asia Pacific. These professionals are paid local salaries standard in those geographic locations because the laws demand that. In order to achieve cost benefits there, we are doing local hires, who could be brought back to India for training. The three centres coming up in the US will employ anywhere between 250 and 1,000 professionals in each of the states.

One of the advantage companies such as IBM Corp and Accenture Ltd have over you is their business and management consulting expertise, which helps them in getting those long-term engagements with clients. Do you find it a challenge to get into the consulting space?
We have today about 2,000 people in the consulting division, which accounts for about 6.5% of our revenues ($195 million) currently. Our objective is to have 15% of our revenues coming from consulting in three to four years. We have a central consulting team for Europe and America, headquartered in Boston. We also have embedded consultants in each of our verticals, who work with the customers. We have around 300 consultants in our quality engineering division, apart from a 300-member strong India consulting team that serves customers in India and the Middle East. At present, we are covering IT consulting, domain consulting and process consulting. We are now trying to build our expertise in management consulting and strategy consulting, which will have a broader perspective. We are hiring consultants from Accenture, IBM Global Services and Deloitte Consulting.

What keeps you up?
Maintaining the solidarity of the company’s culture is a huge challenge, which requires huge amount of time and effort. I spend a lot of time doing this at open forum, question and answer sessions with employees even when travelling. Fighting complacency and retaining the same hunger with the growing size are other big challenges.
At the macro level, what is this all nonsense going about the visas? They want us to open our retail, and we have around 20 million retailers. Eventually it will help around 80 million of Indian farmers with better margins. But those 20 million retailers would get hurt because of this. These are very, very bold decisions, which the Western world must see and realize. They must realize that we are creating markets, and their companies will grow by accessing bigger markets.

That is why the biggest lobby for services globalization is the American companies, because they have their vested interests. IBM was the largest recipient of H1B visas this year; while we (Wipro) were No. 3 with Infosys probably at No. 2.

You and your family own around 80% of the company. Will you have a significant say in the company going forward?
We have a significant stake in the company and its strategy going forward. I think you need to divorce the ownership issue from management of the company. Enlightened owners don’t shoot themselves in the foot. We have consistently displayed a very high degree of professionalism, in spite of very high concentration of ownership. Why don’t you look at Infosys, which is owned by institutional investors? They own around 50% in the company. These investors control the markets today; they can make and bring down the markets. The retail investors hardly have any say. I don’t think ownership is a bad thing. Look at our top 25 leaders in the company and see the variety, and compare it with our competitors.

How sustainable is the restructuring of your top management that resulted in four CEOs for each of the business units? Will you ever have a group CEO or a similar position at Wipro?
There is no immediate succession plan for me, nothing immediate that we will announce. The idea is to engage with clients more comprehensively. The software model is getting very complex now, situations are very dynamic, global requirements are very intense. Our model of having around four functional CEOs for our different business units works better because it builds knowledge and depth in terms of customer proximity. This model works well when you are growing more.

In the global software services landscape, many India-based vendors such as Tata Consultancy Services Ltd, Infosys Technologies Ltd and Wipro Ltd seem to be facing the challenge of differentiation? What is Wipro’s strategy for differentiation?
I think there are three drivers of differentiation as compared to our competitors: the Wipro way, which is our integrated quality management system, is the first one. I use the term quality management carefully, because it’s not just the way we write software programs, but it’s more about understanding customer requirements, the way we solution the customer and manage all our processes. We integrate (quality benchmarks) to deliver measurable benefits to our customers. We believe this puts us ahead of all our competitors.
The second driver for differentiation is our deep investment in innovation: about 10% of our revenues this year will come from innovation. Last year, we got around 7% of our revenues from innovation. Innovation for us means a new market segment, a new product that could be licensed and can be applied to solve business problems. Analysts are saying we will do around $4 billion in revenues this year: 9-10% of those revenues will come from innovation, and that's a substantial amount. We are not talking small investments; some of these projects will pay back this year, while some others the year after.

We have a central innovation council, which champions innovation projects and funds them centrally at my level. Then we have a 'quantum innovation' centre where we are changing the game. We have five projects running, and we use external consultants to help us facilitate them. We will do six more innovation projects this year, in the areas of people productivity, infrastructure services.
First we form project teams, which are given incentives based on the commercial success of an innovative idea. They have a variable component as part of their compensation that takes into account the profit their initiative may have generated for the company. Another level of innovation is based on our centres of excellence, which are very embedded in each of our verticals (industries that Wipro groups its clients into). The third area, which we believe is an important differentiation, is the fact that as a company we are more humble. We listen to our customers all the time, and are more sensitive to them, which I think is a very important attribute and philosophy in this services business. I could have told you more differentiators, such as our specific domain skills, or training programmes, but those are all incidental. These three attributes are fundamental philosophies, which we think differentiate us from our competition. We are always trying to be two years ahead of the competition; it is difficult to build a lead time beyond that period. There are superior companies in this field, and India is definitely mainstream for these companies.

As you continue to grow your revenues ($3 billion now) exponentially, and also expand your employee base, (68,000 now) what happens when you become, say, a 150,000-people company? Wouldn't you like to pursue non-linear models of growth and address the productivity challenges?
I think the industry has to drive non-linearity in this business. I don't think we are necessarily doing a great job of achieving this. If you are talking about 75,000 people, it (the growth) can still be managed over the next three years. I can’t, however, tell you what happens beyond 2010. But we believe it's a scalable model, the talent is available, and we can change skill sets by de-skilling at times. In one of our innovation projects, we are actually addressing these very issues because they are strategic for us. When you deskill people, it is cheaper than hiring qualified engineers, and there are significant cost benefits; there is no doubt about that.
One of the ways for driving non-linearity is to establish platforms on which common services could be delivered. Take financial and accounting platform in business process outsourcing, for instance. They deliver these processes to different customers. Around 90% of these services are common for most of their customers. Even SAP solutions and services have almost 70% common services for most customers.

When some large customers do not want their projects to be delivered through a common platform, they have to pay a price, because everything has to be custom-made for them. There are many technology customers today who are not clear about the final architecture of the solutions they want to be delivered. They say that we cannot even do a fixed-price projects with you, and would rather do projects based on the number of hours put in by our professionals. We are not necessarily doing 'donkey-work' in such projects.

As you move beyond serving large customers, such as General Motors Corp, to serving relatively smaller outsourcers looking to leverage offshore advantages, is there a challenge in terms of attuning to the specific needs of these smaller companies?
We have a unique advantage in terms of dealing with such customers, thanks to our product engineering business, which accounts for around one-third of our total revenues. While on the one hand, we deal with 11 of the largest telecom companies in the world, we also deal with companies that are around $500 million in revenues. This experience has helped us in successfully delivering to the smaller companies. We have a qualification system for identifying 'must have' customers. We look at the business we could be building with a customer, in order to avoid a lot of customers who we can keep adding every year without any repeat business! It's very expensive to have such customers in the service business. If a customer does not have what we want in our ‘must have’ list, we say ‘no.’ We have turned down customers in the past.

Sunil Bharti Mittal - The new CII President

Source: Mint

Sunil Bharti Mittal, the chairman of Bharti Airtel Ltd, India’s largest mobile telephony firm with over 40 million customers, is the first representative of the service industry in five years to head industry lobby Confederation of Indian Industry (CII). Mittal, who recently divested operational responsibilities at Bharti Airtel to focus on CII, heads a corporate group with interests in telecom, agriculture and retail. He terms the year ahead that he will spend heading CII as a year in national service. In an interview with Mint, Mittal spoke about the need for inclusive growth, education, and skill development. Edited excerpts:

How have you been preparing yourself for this role during the last year?
We’ve prepared the company for this year—prepared the management board. I clearly knew that this year a lot of (my) time would be spent outside the company, travelling in India and outside. So, that part is done. As vice-president, I have been preparing in my mind to do this as a national service and learn the nuances of the chamber’s working, and its huge reach across the country and the globe. I am leading a delegation next week to Washington, New York and later in the week to London. So, there’s a lot in my cup.

What aspects of your leadership style are you going to bring to CII?
Transparency, I think —transparency of industry in dealing with society at large. Collaborating with the government, that’s my style. Even if we have any disagreements, we’ll try to resolve the disagreements with logic and the conviction that what you are proposing is good for the nation at large. I would equally want the government to be brave and try to overcome critical obstacles.

Do you see any areas of conflict (with the government) that could come up in your tenure?
I think we want deregulation of financial services and retail, and then, there are specific industry issues like 3G (the issue of licences to companies wishing to operate third-generation telecom networks). Those issues will evolve.

Have you identified any issue you will focus on within your tenure?
Education. That’ll be my big drive. Education is very regulated today and there are issues like private participation in the education area, foreign universities, corporate universities, development of faculty and teachers, higher compensation for teachers.

To what extent do you think the government is aware of these issues?
They are aware, very much aware. But there are voices which say that private-sector participation in this sector would drive up the cost of education. We have to work with the government and address these concerns.

What sort of time frame do you have in mind for resolving this issue? And do you have any specific plans?
I’ve got 12 months or 11 months, depending on the next annual session of CII. We would have a major education summit in the next three to four months and before that put out a position paper on what exactly we want.I don’t think that we can solve this problem within this year, but I’ll be glad if I canlay a foundation. CII has traditionally been perceived as a club of manufacturers, in a manner of speaking. But the service industry has played a big role in expanding the economy in recent times.

How do you plan to increase the service industry’s involvement?

Who are the top two people in CII? They are both service (industry) people (Mittal himself, and vice-president of CII, K.V.Kamath, the managing director of ICICI Bank Ltd). There are (also service) people in development councils.

Do you think that you need to tweak your initiative of ‘Building People, Building India’ to include the service industry?
The service industry is a representative part. People skills and development are very much a part of retail, business process outsourcing, software and therefore, very very clearly, it (our initiative) is going to be service-oriented. Equally, skill sets of rust collar workers —carpenters, plumbers, drivers, chefs—all (are important). That’s why I say, traditionally the blue- and white-collar workers were the base of the industry and rust collar the future.

How do you propose to work on the agenda (of building people)? Right now, it is on paper.
Banking. We need people to be able to pick up money and get skills in a particular trade. If someone doesn’t have the money, but good aptitude, banks must be able to back him and an authority (regulatory or supervisory body) to monitor and push skill-development. What we need is a catalyst. We need some key messages and people will start coming. For example, with a higher level of skill, you can earn five times the salary you are earning. (The) Authority looks after putting in place a framework, certification, the adoption of ITI (industrial training institutes) by industry, some by CII, some by Ficci (a rival industry lobby), creation of 50,000 ITIs by private-public partnership, etc. There’s a planning commission task force on skill development which will come out with a report, and CII and its members will pick up (points) from that report.

Is there any sort of measurable target you have set by the end of the year for the skill-development initiative?
The reports should have the targets. The target actually is that 280 million people are coming (into the working or ready-to-work population) in 10 years. A large number of them may create problems if they are not taken care of.

Is there going to be some monetary commitment from CII members towards the skill-development initiative?
CII is well funded and it will be taken care of.

Industry and services have been growing fast, but agriculture has been lagging. According to you, what are the three most critical points that should be there in the country’s agriculture policy?

In my point of view, linkage between farmers, markets and the customer. (You need) cold chains, storage, warehouses, transportation, packaging… you can’t have all these till you have organized retail come into play. You can’t just wish for great growth. You need to carry it, transport it to the customer. That’s the most critical thing. With technology, farmers are in a position to growmore; they can do a good job. Then (we need) corporate farming. We hope to start adebate at the policy level on this issue.

Face to Face with- Mr J.C. Sharma, MD, Sobha Developers

Source: The Hindu Business Line.


Customers should invest 30-40 per cent of their own money into the cost of the home. This way, the impact on EMIs during interest rate increases will not be significant. — MR J.C. SHARMA, MD., SOBHA DEVELOPERS

After an IPO that received stupendous response from both institutional and retail investors, Sobha Developers has identified high-growth cities and lined up projects. Mr J. C. Sharma, Managing Director, Sobha Developers, says one need not be unduly worried about the price correction happening in some pockets. He views this more as a consolidation phase for developers. He also emphasises the need for home buyers to balance between borrowed and own funds when purchasing a house.

Excerpts from the interview:

There has been price correction in some real-estate pockets. What went wrong with the `boom' story?

I do not agree that things have gone wrong. Home loan growth rates are still above 40 per cent. Further, the home loan to GDP ratio in India is still the lowest amongst all the countries. What happened was that banking funds, which are available to every single industry, were being lent to real-estate at a faster pace than what the RBI desired. This was a kind of fuel to the so-called boom, as people were investing more in land by availing such funds. So the RBI started cautioning banks on the money being used by real-estate developers merely for `land buying/selling' transactions. At the same time, there were inflationary pressures in the Indian economy. Bank lending was growing at 30 per cent over the last four years. They (the RBI) thought that this is an industry where there may not be the right pull in giving or getting funds at this point in time. So restrictions were imposed. At the retail level, home loan rates started going up. At the institutional level, it is not only real-estate but every single corporate has been asked to pay a higher cost to avail of funds. We feel that when an economy has been growing at 8.5 per cent, it is only a desirable step to see to it that if there are some aberrations at the micro level, they are corrected.

So what was the aberration in the realty segment?

Wherever you find that there is a demand waiting to happen or is already happening, people would like to take advantage. When this happens, aberrations take place. Some people would have purchased an apartment or an office space with the presumption that there will be a 20 per cent increase. When this 20, or even 10, per cent increase does not take place and they hear that prices are about to crash and corrections are likely to take place, then they may like to sell it. For them it may be a business where they have made money in the past. They are basically traders and not investors. If such people lose, it will give room for the right kind of customers to step in and buy those apartments or commercial space at the right price. It is our opinion that there is nothing to worry about. When employment growth at its highest ever this year, when exports are growing in double digits, when increments in salaries are growing in double digits, how can an industry that is a proxy play to every one of the above not be benefited? Neither have we reduced rates for any of our projects nor do we intend to do. In fact, we are launching new projects in our earlier locations, at higher rates.

Would the correction mean that it is consolidation time for Grade B and C players and they will soon be out of action?

That is the right way of looking at the present scenario. Yes, it is consolidation time. The real-estate industry is fragmented and disorganised. I am told by the Commercial Tax Office of Bangalore that there are 400 developers in Bangalore alone. So if you have so many people coming, you can look at in two ways. There is money to be made in this business, so the new players are flocking. From the industry and customer perspective, one has to be careful since some of them may not have the deliverables — the right processes, right kind of land and execution ability. If such people are weeded out through this consolidation process, it is good for the industry.

Will the North-South divide (in terms of premium paid for land in the North) remain?

The gap will narrow as we move forward. Certain locations have inherent advantages. Such as Mumbai being the financial capital, Delhi the political capital and catering to the whole of the northern market. Pune - because you cannot put up large-scale operations in Mumbai but the Mumbai-Pune highway connects it to a less congested city, there is demand. We cannot wish away the advantages that these cities enjoy. But with the thrust on infrastructure in Chennai, Bangalore or Hyderabad, we feel that the growth that has already taken place in these cities will ensure that once the infrastructure bottlenecks are not talked about as much, there will be less price disparity.

Will the South continue to be your area of focus?

We would like to call Sobha a pan-India company with primary focus on areas that are growing fast. We happen to be in the South fortunately and the South is growing faster than any other part, so the focus will remain on southern cities. Among the southern cities, we have identified Chennai, Coimbatore and Hosur in Tamil Nadu. In Karnataka, we will focus on Banglaore, Mysore and Mangalore. In Kerala, it will be Thrissur and Kochi. Likewise, we have identified eight projects in the South from which we wish to grow. We have already launched projects and a few are coming up this financial year. Apart from this, we feel we must have a presence in NCR (National Capital region) because it is the fastest growing and the largest area in the whole of the North.

Is there a case of excess supply coming up in the real-estate market?

The growth has just begun. If, for a short period of time, developers have some stocks available, no harm done. Manufacturing businesses have one or two months of finished stocks or work-in-progress. Today we are in an industry (real-estate) where there are hardly finished stocks with prominent players. If you wish to buy a Sobha apartment today, I do not have anything on hand to offer. Now, thanks to an increase in supply, maybe some apartments that are to be completed six months from now will be available. In projects, if five out of 100 projects do not get sold, the heavens will not fall. Let there be some stocks available to the customers, always.

But would such a situation lead to panic selling by developers, leading to sharp price corrections?

Many consumer durables have discount sales, nobody questions as to why there is a discount. A finished apartment always get a ready buyer. So out of the 100 apartments in a project, 95 are sold at the developer's price. If the developer needs working capital against a finished project, one can always borrow money. You can securitise or put it on rental basis. These are other options now available but require a newer mindset.

The funding options available to developers appear to be narrowing. What are the options available, in your opinion?

SEBI or RBI norms will ensure that money remains productive and not invested in land which the real-estate company is not capable of developing. Had the norms come three or four years later, the damage to the industry may have been much more. We feel that real estate is a sunrise industry. If a company does not have the right kind of deliverables and cannot be rated appropriately, it does not deserve to either come to the public domain and if it does, it has to come with the right valuations. Some of the companies in India, in my opinion, are being managed professionally, have the right credentials and have every right to access the capital markets by adhering to the compliances required. On the debt part, in our industry, a debt-equity ratio of not over 2:1 is desirable. They should be able to raise money (debt) against the projects on hand. And we feel banks are not refusing money against projects and that is the right way of looking at it. Coming to private equity, PE players will be the biggest beneficiaries of the restrictions as they will be able to invest in the right players who are not ready for public issue, nor comfortable with debt. The company that accepts PE funds will also be sufficiently capitalised, thus improving the debt-equity structure. Of course, the company may have to cede some rights but they will become more professional.

What should home buyers do to lessen the impact of interest rate hikes?

If I am eligible for 100 per cent loans - a customer should not be induced by institutions. We believe that in the interest of the customer, one should have his own savings to pay the developer and take minimum funds from institutions. A customer should invest 30-40 per cent of his own money into the cost of home. This way, the impact on EMI during interest rate hikes will not be significant. A customer should not be induced by institutions into believing that he is eligible for 100 per cent loan.

Have you seen speculative transactions among Sobha's buyers?

In our sales strategy, if you are a speculator, you pay a price to us at least. For example, if booking is done in the name of X and tomorrow he/she wants to sell it to Y, X or Y has to pay Rs 100 per sq.ft as transfer fee. If you go for cancellation, you have to pay 25 per cent as cancellation charges. The process ensures that the speculator pays a price. This is akin to the stock market. You cannot avoid day-traders. They provide liquidity but may not make as much money as long-term investors.

For Tulsi Tanti, it's 17th time lucky

Source: The Hindu Business Line.

The CMD of Suzlon is fourth richest in the country.

If there were to be a brand ambassador for the Never Say Die spirit, it would have to be Tulsi Tanti. The man from Rajkot who tried his hand at several businesses, including the family business of cold storage and construction, jokes that wind energy was his 17th attempt at business. A ready reckoner on the person cannon balled from obscurity to the top of the super entrepreneurs' A-list (all in three years' time) would read something like this: 49-going-on-50, suffused-with-energy, jet-lag defying, alcohol-shunning workaholic whose only high comes from work. An addendum would include: Earthy, unassuming and laconic with a wry sense of humour. Ask him, as someone did, where he lives, and be prepared for "mostly in the aircraft''. And if you really probed his other interests, don't be surprised if you drew a blank.

Fourth richest

Till yesterday, he was said to be worth $3.7 billion and billed the fourth richest man in the country. Today, with the Suzlon share spiralling, he is undoubtedly worth more. The runaway success and his projected bank balance notwithstanding, Tulsibhai (as he generally addressed) and three younger brothers Vinod, Jeetendra and Girish and their respective families live in adjoining rented apartments in one building in one of Pune's up-market localities. They own no aircraft, flaunt no assets and stay quite clear of the glitterati circuit. The families make a ritual of having dinner together every night at one of the brothers' homes, and though Tulsi is an inveterate globetrotter who travels over 200 days a year, he makes it a point to be part of the annual family vacation to an exotic destination.

Suzlon's birth

If the Rajkot-based family came to call Pune `home', it was a case of default more than design. Around 1995 Tulsibhai discovered that his textile business in Surat was not taking off, largely because of the severe shortage of a primary resource - power. That was when the idea of developing wind energy took shape in his mind and Suzlon was born. A couple of years' on, the Maharashtra Government announced what a company insider calls as a "path breaking wind energy policy'' and set the stage for the genesis of a mega-star on the business circuit.

The Tantis moved to Maharashtra, put up a wind farm with a 250-MW potential at Vankusavade in Satara district (three-hours' drive from here), and decided that all-things considered, Pune was the most favourable location for headquarters. They operated out of a modest office at Yerawada, and added space as they added value. Today, though they have a global business centre in Europe, a Suzlon campus at Hadapsar is still in the blueprint stage. Gujarati, the lingua franca at Suzlon, remains the language of comfort for Tulsibhai who holds a commerce degree and a diploma in mechanical engineering from the Rajkot College. In addition to his formal degrees and his business sense, his associates say he has a mind that thinks at least three years ahead. In the Corporate jungle, it is the quality that separates the men from the boys.

Tried, tested and moved

Source: The Economic Times.

Dr. Madhukar Gangadi of MedPlus goes the retail way to sell medicines
It’s 9 am and Dr Madhukar Gangadi, founder & CEO, MedPlus Health Services, already needs to recharge his mobile phone. This is just the start of what will be another 14-hour day. Such is life for the person at the helm of MedPlus, India’s fastest growing chain of full-service pharmacies. In less than two years, Dr Gangadi has taken MedPlus from a concept into a major retail player with over 120 outlets spread across Andhra Pradesh and Karnataka. With a commitment to deliver 250-300 outlets more by the end of June, Dr Gangadi and his team are working overtime these days.

MedPlus as an idea was conceived while he was doing his MBA at the Wharton School of Business. He had been researching healthcare in India as part of a business plan he proposed to write for his class project and that's when Dr Gangadi uncovered an astonishing report by the World Health Organisation (WHO) which suggested that a sizeable percentage of India's medicines may be spurious. A medical man himself, he knew the dangers this posed for the Indian consumer. “This wasn't just a matter of people being cheated out of their hard earned money, the Indian consumer's health was at risk,” he says. That's when he decided that for the sake of his family — Madhukar’s father is a diabetic — and the Indian consumer, something had to be done.

Raising funds proved to be a big challenge. “I first tried doing so in the US, but people were skeptical,” says Dr Gangadi. Then, there was the ethical issue of a medical doctor getting into the pharmacy business which kept many investors away. Finally, he approached his classmates, friends and family members to raise the first $500,000 and MedPlus opened its first store in Hyderabad in February ’06. “Within two weeks more funds poured in and once we touched 100 stores several VCs were willing to invest,” he says.

Fast forward 18 months, and MedPlus has logged close to Rs 50 crore in annual sales. It now has the financial backing of a premier Indian venture capitalist, iLabs, which recently invested Rs 23 crore into MedPlus. Madhukar's infectious enthusiasm for improving access to quality healthcare has not just attracted capital, but people as well. The 900-employee strong company is run by a talented five man management team that's growing stronger by the day.

MedPlus' success in pharma retailing stems not just from its commitment to quality healthcare, but also from its operating model. "I wanted Wal-Mart pricing in a Starbucks like store. This way, we would be able to bring low prices, consistency make healthcare more accessible in India," says Dr Gangadi. In keeping with this philosophy the size of most of the company's stores is between 200-400 sq. ft. This provides MedPlus the flexibility of locating its stores where customers need them the most – near their homes, hospitals, workplaces, or shopping areas. The model also reduces MedPlus' capital requirements, speeds up store rollout and enables the company to react faster to changing market.

Developing a successful business model is only the beginning for Dr Gangadi. He knows that the success or failure of the model would largely be based on the customer’s experience. “We win or lose everyday in the shop, and I hate to lose,” he says. The company has therefore invested heavily in employee training, creating a one of a kind facility in Hyderabad in which all shop employees receive in-depth product knowledge and practical customer service training. "We take accredited pharmacists and experienced shop assistants and give them the tools they need to be part of a modern pharmacy chain,” he says. The result has been a dedicated staff of employees who are not just able to dispense medicines but also provide valuable advice to make customers better informed about their health.

After the first phase, Dr Gangadi is looking at expanding the footprint, and launching the organisation’s integrated health centre concept. Dr Gangadi believes that branding is not just about brand recognition but also about the entire customer experience, the services which MedPlus offers, the partnerships which it explores, and the quality of medicines the company sells. Footprint expansion is also critical, as it means more consumers can enjoy the benefits of high quality medicines at low prices. The company has set aggressive growth goals for itself, and believes it can end 2007 with between 700-800 outlets across India.

What really gets Madhukar excited these days, is the Integrated Health Centre. He believes that the same lack of consistency which governs the pharmacy industry is present in the highly fragmented pathology labs and clinics across the country. As a result, the company has announced its intention to broaden its services to include diagnostic labs and clinics. The company successfully recruited a number of the senior management of a major diagnostic lab chain into MedPlus to lead the pathology lab efforts, and is in discussions with doctors to staff the clinics. All this growth has its challenges, but Dr Gangadi remains confident, “We’re improving the lives of the Indian consumer – when you're motivated by a larger cause, you can achieve amazing things.”

Little wonder then he plans to expand nationally and take on bigger rivals like Apollo Pharmacies as well as emerging retailers such as Fortis Health World and Medicine Shoppe.

Homing in on success

Source: The Economic Times.
It’s hard to imagine a company being rooted in the maxim, ‘There is no such thing as a safe business venture’. But that was exactly what five professionals chose as their guiding principle, when they decided to turn entrepreneur.

With this agenda in mind they decided that they would take the riskier road of setting up an IT products company rather than the safer alternative of venturing into the IT services domain. What perhaps made this decision even more fraught with risk was the fact that they were focusing on an extremely specialised and niche area, that of geographical information systems (GIS). Perhaps, the only advantage they had was that they did not need to start from the scratch. All five founding members at SatNav — managing director Amit Prasad, co-founder A Rajendra Adepu, deputy general manager (corporate group) Arpitha S Rao, associate vice-president (corporate communication & strategy) Pallavi Taori and co-founder & business head (BIM solutions) S Selvamuthiah — were all part of Satyam Navigation, a company incubated by Satyam in 2000 under its technology entrepreneurship programme. And when in 2004, Satyam decided to exit the business the five of them decided to take over the fledgling company and branch out on their own. Says Mr Prasad, “It was our passion and commitment that inspired us to float an independent venture. None of us wanted to abandon the GIS products as we had spent a lot of time and energy conceptualising and developing them.”

Despite operating in what can be called a tricky terrain the company has managed to hold its own and is slowly but surely making a name for itself. In the last three years, the company has successfully developed a slew of products, which have given it both recognition and a strong base. Its flagship product, A-mantra, is a flexible web-based business infrastructure management system. It provides managers with a complete view of the company’s infrastructure, irrespective of its size and can help bring down infrastructure cost by 4% as small teams can manage large facilities with this product. “A-mantra helps integrate data from ERP and other in-house applications to generate a range of customised reports,” Mr Prasad explains.

But the product that the company is really excited about is a navigation device called SatGuide, which is said to be the nation’s first satellite-based navigation device. The device has a mapping software with detailed maps of six cities and an all India road network map. It also has an inbuilt database of 24 categories like hotels, airport and shopping malls. Mr Prasad believes that if all goes well by the end of the year the product will have similar databases for 72 cities. At an organisational level too the company has been making strides. Started with an initial investment of Rs 25 crore and five members, SatNav today has over 75 people working on various products in navigation systems, business infrastructure management system and intelligent transport system. It has also added a new promoter Ajay Prasad, an NRI based in the US. The company though is cautious when it comes to adding to the headcount. For unlike a services company, which can start billing customers from day one it takes product companies much longer to do the same.

So what about the future? SatNav is bullish about the future both because its flagship product SatGuide has been received warmly in the marketplace and the fact that the GIS space is likely to see a lot more action in the coming years. The company also expects that global positioning system (GPS), a network of 24 US military satellites, will penetrate every market. Says Mr Prasad, “Our devices are GPS-enabled so that one can calculate the position dynamically using the radio waves emitted by these satellites. We are also looking at building business models around our directions portal — roadsofindia.com. This will help us tap the potential of the GPS market.”

The company is already looking to capitalise on this trend with work on a vehicle tracking system, which is expected to hit the market next year, already underway. Mr Prasad says the company is not looking for marketing tie-ups, but he says it is open to partnering with leading companies in this space. He says, “Our aim is to join hands with leading players in the GIS segment for technology or equity partnerships, which will help our company grow.”

Given that it is still a growing company, (revenues last year were Rs 3.2 crore) the company has thus far been mainly focusing on India. However, given that this year the company expects a five-fold jump in revenue it is now looking at entering other markets like Singapore and the Middle East as well. So what next, we wonder. Given that the growth plans in the It products space is set are they now back to being professionals rather than entrepreneurs. The founders are quick to dispel any such notion pointing to their latest diversification.

The group has entered into a strategic partnership with the Centre for British Teachers Education Trust of UK for managing its pre-school and daycare chain, Sunshine. Under the new education venture, SatNav Preschool, the group is planning to set up 100 centres at an investment of Rs 25 crore by 2009. Says Mr Prasad, “We have also floated the country’s first maintenance, repair and overhaul (MRO) project, HAMCO, and we are looking at setting up a facility soon. Our aim is to become a billion dollar group by 2012.”

Surviving the dotcom meltdown

Source: The Economic Times.

Nazara walked right through and scripted a success story in the mobile content space
He set out to build an online venture at the worst possible time — right in the middle of the dotcom meltdown. However, his passion for technology and determination to succeed was such that he just soldiered with a firm belief that that his idea was a winner. Nitish Mittersain, 27, CEO and promoter of Nazara Technologies, hasn’t looked back since then. Today, not only is Nazara alive and kicking but it also has a clutch of private equity players jockeying hard to partner the firm in its second round of funding.

The early going was never easy for young Nitish, who was still a student at Sydenham College when he turned entrepreneur. “There was this negative hype about dotcom companies and it was inconceivable to raise funds for the venture,” he recalls. Few believed that his business model was unsustainable and therefore extremely reluctant to partner with him. None of this deterred Nitish, who still managed to raise Rs 20 lakh from a few willing investors, including his father, to incorporate Nazara Technologies.

The first area that the company forayed into was online gaming, through a gaming portal nazara.com. A natural choice given that he was and remains an avid gamer. However, that was just the beginning and Nitish was still on the look out for the big idea which could stand the test of time. He soon spotted one in the form of the wireless space. He made his move quickly and Nazara entered the wireless entertainment sector, which was on an upswing. In the early years Nitish consciously chose to maintain a low profile, both for the company and himself, and focused all his energies on trying to ensure that the company stayed afloat. He recalls that in those times it was all about minimising costs and keeping an eye on the bottomline.

His vision would soon pay off in that both the wireless sector took off and content was fast becoming king. Recalls Nitish, “Fiscal prudence paid off. We spent next three years building relationship with wireless customers while keeping our costs low.” Soon the company could boast of a respectable performance in what was a difficult space. Nazara had made modest profits for five years and simultaneously built up good relations with most of the major telecom operators.

Given the boom in the wireless sector and the company’s unique position in that space investors began to want a piece of the action. The company got its first round of funding of Rs 7 crore from Sequoia Capital in 2005 which picked up 25% equity stake thereby pegging the enterprise value at close to Rs 30 crore. And after that there was no looking back. “We have managed to log 400% growth since the first round of funding and considering that mobile content space is still in its infancy, we see a great potential for years ahead,” says a visibly proud Nitish.

Today, Nazara is a leading mobile content and application developer providing products to mobile operators globally. The company exclusively licenses well known brands like Sachin Tendulkar, Sehwag, Dhoni and Archie Comics among many others, and develops mobile content based on these brands in keeping with their image.

This branded content is then distributed worldwide through mobile operators and aggregators. However, this is just the beginning as far as Nitish is concerned and he is now trying to take the company to the next level and therefore looking at additional funding. Nazara is now close to raising approximately Rs 32 crore in its second round of funding and expects to make an announcement in April. A new model (B2C) is to be launched for direct acquisition of customers by June 2007, which will complement its current on deck business with carriers.

Once the money comes in the aim to more than double the existing revenue. Having logged revenues of Rs 15 crore for the year ended on March 2007, Nazara Technologies is now aiming to close the current fiscal at Rs 35 crore. Accompanying the revenue growth will be a doubling of the employee strength and expansion into new geographies as well. Nitish believes that given the wide penetration of mobile service in the country and the availability of cheap handsets which can support diverse VAS content there will be a greater and greater demand for diversified content with regional focus as there are many vibrant cultures.

'It is easy to achieve success; it is difficult to maintain it'- Kishore Biyani

Source: The Economic Times, Dated 12th April 2007.
Future Group CEO Kishore Biyani shares the logic behind the retail group’s new makeover with ET. Excerpts from the interview:

You seem to have segregated mature and new businesses. Why?

We are immunising mature businesses from the risks we face in new businesses. So we can form a clear P&L account of every retail brand. Today, our formats have become so big, we are competing with ourselves. Earlier, products and operations worked together. I was accountable for everything. But today, growth is so much that somebody else has to concentrate on that growth. Earlier, we were hungry for topline. Now, we are hungry for bottomline growth. Accountability for the profitability of the lines of businesses lies with one individual now. And profitability of a category lies with the individual handling the product in that category. We have to look at the costs of doing a business. The fact that we have been able to cut costs in the last few months has improved margins. We are getting result oriented.

For somebody who did not think much of processes, isn’t a lot of attention suddenly seems to be going into that area?

Every retail data (even Harvard studies show that) has only 70% accuracy. Therefore, a whole lot of decisions have to be based on gut feeling. Processes do not make a retail business. Human emotions make retail. For instance, if there is some bad news in the morning, or on a gloomy day, sales are at rock-bottom. Processes can’t capture all these things. As a group we believe that demand creates supply, supply does not create demand. You have to do retail to do processes. I think processes do not allow you to react to a consumer. Processes work when you think everything is constant. But nothing is constant. Consumers are not constant. At 30 years of age a consumer behaves differently from what he will do at 34, assuming he is married or has a kid. Processes are a way to deliver consistently to the consumer.

How do you decide which businesses will be relevant in the long run?

You need businesses outside retail to support the retail business. The margins aren’t enough to support growth. So, for instance, in our real estate business, we get 20% margins, but we have partnered somebody who knows how to run it. If there is no potential for a business to cross Rs 100 crore in the second year of operations, we are not interested. We developed pharmacy and beauty parlours, but we may not run it ourselves. As a group, fashion will be nearly 40-50% of our businesses and through that we will be able to raise margins by 5-8%.

Looking back, do you think there’s something you would ideally never have taken up, something that didn’t succeed?

I always believe that unless you do it yourself, you will never learn. There are no shortcuts. My biggest mistake was that I made cinemas. Cinema teaches you that although you think you know everything, you really know nothing. Today, all that humility and acceptance come out of doing cinema as a business. It taught me to be dispassionate about what you create. Without the cinema experience, we would never have learnt anything. It is easy to achieve success. It is difficult to maintain it.

Rakesh Biyani has taken over as the retail CEO. Did the group consider getting anybody from outside?

There was an option to bring in an outsider. But even within our organisation, people will move up some day. Bringing in an outsider sometimes does not make sense. We did not want to lose the comfort factor with our senior people. Rakesh has come in through consensus. We are open about everything. The vote went in his favour. Acceptance is important. Continuity is important.

Face to face with Gautam Thapar

Source: The Economic Times, Dated 10th April-2007.
Credited with providing a new dynamism to the LM Thapar Group of companies through drastic decisions, the young Gautam Thapar has come a long way after taking over at BILT, India’s major pulp and paper producer. In an interview, Thapar said he has no great mantra other than identify a business, start at a small level, gain experience and scale up.

After acquiring a major paper facility in Malaysia are there more acquisitions in the pipeline, especially in Indonesia where you source most of your pulp requirement from?

From the shareholders’ viewpoint, three things are vital in any acquisition: political stability of the place, policy in the particular sector and, the availability of local skilled workforce. Though both Indonesia and Malaysia inhabit the same island and the agro-climate, Malaysia is better placed. It meets all the three requirements and is very competitive, possibly because of a better forest policy. Unlike Malaysia, going to Indonesia involves major risks — the currency risk, inflation risk, and the political instability.

What is the future of India’s paper industry? It still relies heavily on imports of raw material!

The demand is growing by 10-15%. When the supermarket business grows, demand will grow even more, especially for packaging grades. With more allocation for education, writing and printing side demand is also on the increase. The thumb rule is that paper demand goes up with the economic activity. Besides, India is becoming a low-cost printing destination. On raw material side, if India’s is heavily dependent on imports, the fault is with the policy. In India land issues are very sensitive yet you could bring about change in afforestation and regeneration by opting for scientific ways. But it is not happening so the imports would continue.

Is the industry fully utilising the agricultural raw material and waste?

We use everything in India, both agricultural residue and waste paper. However, it is better to use agri-waste as fuel rather than use it as raw material for paper as it is neither segregated nor as clean as the processes demand in India. My yield from tree pulp is 48% as compared to waste paper that gives barely 28%.

A few years back BILT was on the brink of disaster. How you did you manage the turnaround?

At the end of the day any company must remain focused on its core business. BILT was paper, not newspaper or chemicals. I brought the focus back to paper. We did away with everything that did not make any sense. A company that would make Rs 200 crore profits in one year plummeted to Rs 83 crore another year. A three-year analysis said the problems were within and not in the market. Entire process — putting suppliers on right track, correcting the MIS took barely three months. At times I had to be harsh. It worked and within a year profits doubled. I believe there is no reward without taking a risk. And there is no such thing as a calculated risk. Have a vision; a strategy, a formulated thesis and then go and make it happen. I tell people there is no rocket science to management. You need to have the right people and give them the mandate. Focus, strategy and an accountable team — that is all.

Retail is emerging as a lucrative sector. Do you have any retail ambitions?

Our FMCG is on track, brands are being built and in future if it makes sense we may think of retail. Right now retail is real estate game not a skills game. We do not want to go supermarket way but specialty retailing is a possibility. We would like to build on the strengths of our existing network. In food processing we are becoming a sizable entity and we can grow with the supermarkets. This year we had Rs 500 crore sales, all of it overseas. That means India is still a virgin market for us. When Bharti and others come up we would talk to them as our ability to supply is much larger than smaller players. In fact, there could be opportunities in some smaller acquisitions to increase the size of our food processing capacity as purely a private label supplier.

BILT Power wants to do power plants in SEZs. What are your views on SEZs? What stops you from bidding for major power projects?

Some, not all SEZs would be successful. And we have to do business where there are serious players. We are looking at all state development corporations, which see SEZs as development and investment. The private players could be seeing these as real estate opportunity and tax heavens. In fact, some state-backed SEZs will come up quicker and faster than many private ones. From risk reward point of view smaller project is easy to do. You can achieve financial closure quickly and, evacuate the power quicker. Selling power from major projects with a couple of customers — some of whom are not good payers — is a problem. Ultimately, we will get to large projects but we want to go in stages. India is an evolving landscape, and for the next 50 years there is requirement for more power.

How would you maintain the edge and the dynamism the group has acquired of late?

The change in strategy that I have brought about is that we need to be compatible and take lessons from changes taking place worldwide. We know India, the landscape, our competitors, and market and we need to protect it. But protection does not come through investment alone; you need to have the cutting edge technology else you are bound to lose market to the better equipped. We adopted this strategy in Crompton & Greaves; we have done Rs 6,400 crore sales that could increase Rs 1,000 crore next year. We will also acquire more. And we would like to have service revenue as a major chunk of our solutions revenues.

Try incubators at IITs to nourish your brainchild

Source: The Economic Times

Despite lack of support from investing community, and a high failure rate, early start- ups are increasingly looking at incubators to support their ideas Every year the quantum of investment by private equity and venture capital firms in new and mature companies in India is making a new high. This trend is likely to continue even in the coming quarters and years as there is no dearth of quality investment offering good returns. But what about ideas that are just blueprints or at the lab stage. While there is no dearth of entrepreneurs who come up with bright ideas that they believe have the potential to become the Big Boys of tomorrow, there are few investors who are willing to lay down their money on the table for such plans.

The reasons are not far to see: worldwide statistics show that early stage entrepreneurial activity has a very low success rate. With almost 85% entrepreneurial ideas failing to stand the test of time it is not surprising that established funds don't come forward to support them. Thankfully such a cold reception from the investing community has not put brakes on entrepreneurial activity. In fact today there are more ideas waiting to take wing than at anytime in the past. And these entrepreneurs have the incubation centres at institutes like the IITs to thank for offering to support ideas that could become big companies of tomorrow.

Sample this: at IIT Delhi the Technology Business Incubation Unit (TBIU), under the Foundation for Innovation and Technology Transfer (FITT) started operations in 2000 and since then it has received over 75 enquiries from entrepreneurs seeking an incubator for their ideas. About 50% of these have been actual proposals for assessment while 11 companies have successfully exited the incubation centre. At present, IIT Delhi has six resident companies and two are about to move in IIT Bombay's incubation unit on the other hand has 18 companies at the present moment. These, are companies that have been vetted by IIT experts and now are trying to develop and grow before they venture out into the market.

Incubators offer valuable services besides just space to the these fledgling companies. The TBIU at IIT Delhi for example in addition to subsidised office space, offers access to IIT library, knowledge resources, faculty and even students, who can be roped in for a project. Says Anil Wali, managing director , FITT, "We look at projects which have synergy with the institute. Incubation exercise should have a mutual benefit to the entrepreneur and the institute. During screening we essentially see whether the idea makes business sense. That is, what's the chance of that idea getting incubated and reaching the market." Poyni Bhatt, chief administrative officer at IIT Bombay's incubation unit, echoes similar sentiments saying, "Being in an incubator does mean that the companies are used to hand holding. But that's not what we do here. For the first couple of years, we provide hand holding for fresh entrepreneurs within the incubator, but once they enter the third year within the incubator, we insist that they go about their own way to proceed in the business."

So how does a budding entrepreneur avail of these incubation facilities? Typically three types of entities can submit applications for incubation. These include the alumni or faculty of IITs, any techno-preneur and lastly R&D units of small and medium enterprises (SMEs). Since such companies or ideas might not get attention from established funds and do not have their own resources to support the ideas in the initial stages the incubation unit is a useful starting point.

Says Shailesh Mehta, CEO, Onyomo, a company currently being incubated at IIT Delhi, "The unit provides good access to top end research. We came here as we wanted to have a good level of credibility as far as technology was concerned. With the IIT name, people don't doubt the soundness of the technology we have to offer. Also, we do not have the big buck to give our company a sustained visibility via advertising. Here again being within the precincts of an IIT has helped." Onyomo is a 10 people company and Mehta himself is from IIT Bombay's 1995 batch. After completing engineering he did an MBA and later took up a job with an investment bank in the UK. "But, I wanted to do something closer to my heart and that's how Onyomo took shape." The company helps users provide search on mobiles or internet. Search relates to various consumer categories - say for instance you are new in Bangalore and are looking for a Cafe Coffee Day outlet closest to where you are; Onyomo (which is derived from the first two letters of 'on your move' ) could help. The company is now awaiting commercial launch.

Another company, Mechartes Researchers has been at the incubation facility since 2005. At present, it has 11 people including three alumni from IIT Delhi, two professors, one engineer from Sweden and others. The team came together and started the company after reading about the potential for outsourced engineering services in the Nasscom-Booz Allen Hamilton report. The report stated the market potential for outsourced engineering was $130 billion and the team thought that there is room to create products catering to this market. Mechartes gives a 3D modelling platform to companies and offers to analyse 3D models for desired requirements. Says Saurabh Rohilla, marketing lead, Mechartes Researchers, "I am from the 2003 mechanical engineering batch of IIT Delhi. I took up a job but it did not meet my expectations. But starting the company from a commercially rented place would have been expensive. the incubation centre has given us the right atmosphere for the venture."

They have access to funds - about Rs 12 lakh a year at very low interest rates, office space for which they would have paid in excess of Rs 1 lakh a month if they were outside the TBIU, access to IIT Delhi professors and knowledge resources including the library. Says Mr Wali, "When this started there was a Rs 80 lakh one time grant from the ministry of IT. We also give a seed capital ranging from Rs 5 lakh to Rs 15 lakh to companies here. Here companies are doing pre-commercial activity in a fairly developed idea that needs to be developed further."

The IIT Bombay incubator gets funding from the Technology Development Board for about Rs 1 crore and from the Ministry of Communication and Information Technology for Rs 80 lakh, which is distributed in its incubated companies. "We only give Rs 10-12 lakh per company at a time," Ms Bhatt explains. So what do companies get from IIT-Bombay? Well, much like in IIT Delhi, in addition to the infrastructure, the incubator also provides them with advice on business plans, even helps you pitch to investors. But most importantly it helps you market your product. "IIT's name has a reputation in the market, when our incubated companies, most of whom are fresh start-ups , go to the market without any previous track record; it is this reputation that helps them get their first clients. Even our mentors (who are mostly faculty) help in this process," says Ms Bhatt.

However, the jury is still out on how well the incubation model works. Industry experts say that although this model is good so far as the economics go, the mentors being essentially academics , are not quite state-of-art in terms of hands-on industry knowledge and experience. They work to a current client's mandate and no further. Moreover, the founders being ( previous / current) students, are often 'controlled' instead of 'mentored' by the faculty with their own opinions towards risk. While this acts as a good filter, many creative young minds get demotivated. And thus many desert their projects halfway and in search of more lucrative jobs.

But Ms Bhatt defends this by pointing out that IIT-Bombay's incubator has nearly 60% success rate for companies successfully making it in the market place. Even at IIT Delhi Mr Wali says the success rate is far above the global averages. "They have initial problems, where we guide them on scaling up the process, but once they get the hand of things, most of them make it big in the industry," he says. Interestingly, IITBombay's incubator also runs a virtual incubator, where it does not provide any physical infrastructure but it guides start-ups on other aspects of business. At present it has two companies in its virtual incubator. The interesting point is that when the incubated companies do make a mark in the market the VCs are willing to invest and help them grow further. Perhaps VCs could look at some good blueprints that promise to be the big companies of tomorrow. They got to learn the age old success formula of catching them young.