SB: Is that necessarily a good thing?
RS: It’s different this time. I don’t think it’s the classic bubble that we saw back in the ’99-2000 timeframe. This time a lot of the companies are real businesses with real revenues and real profits. One could still argue that the valuations are rich, which indeed they are, given the PE ratios on some of these companies that are either public or about to go public. Despite that, this time the companies are real businesses.

SB: While the companies are real businesses, what’s driving the valuations?
RS: The public markets have not seen very many tech IPOs for some years now since the Google IPO in 2004. And Google was all by itself in that timeframe. So, if you go back to the end of the bubble in March 2000, the only real big IPO in tech has been Google in 2004. The new crop of businesses are sort of Web2.0 and social media businesses that are just coming out.
These are the new breed of companies in tech that you’re seeing. So there’s a pent-up demand and a lot of money sitting on the sidelines, waiting to be invested in growing companies.
And there haven’t been very many growth stories, that’s what is causing this sort of ‘new-found euphoria’. Some of this, I would say, is irrational, at least in terms of valuations.

SB: Bordering on irrational exuberance?
RS: Well, in fact, the prices are irrational but on the other hand the businesses are real and over a period of time, perhaps over the next 12 months, this will all come down to a level that is comparable with the four horsemen of technology, which are Apple, Google, Facebook and Amazon.

SB: We’ve seen the big I Cloud unveiling. What are your thoughts on that?
RS: Well, clearly Apple has led with music on iTunes, so essentially they’re allowing their users to take their music and put it in the cloud. It’s evolutionary, not revolutionary.

SB: Enough to take on the competition?
RS: The competition has mostly been in the cloud. If you think about Google, most of its products are designed and conceived of as being in the cloud from day one. This is certainly a new one for Apple but one that would be great for users and one that I welcome.

SB: Many young companies have seen unprecedented growth in their short history, like Twitter. What are the challenges in dealing with this unanticipated growth?
RS: There is a huge shortage of talent at the moment here in Silicon Valley. And it is driven by the fact that there is a shortage of engineers, middle management and a strong lack of experienced people to run companies.

SB: And the government is clamping down on visas…
RS: I’m not sure that visas would help this issue; it may help on other fronts. Certainly in terms of web talent, unfortunately not much is coming from India. It’s either homegrown on which there is a big shortage because there are not enough computer science graduates coming out of the U.S. There are some who have been imported from Europe and some who have come in from Asia, including India. There are probably 3 lakh engineers that these web companies can absorb and most of them are getting a lot of bids from other companies that want to hire them, mostly startups. But the rate of startup formation is as high as it’s ever been. Since 2000, there are a billion and a half users who have come on to the internet. A large number of those users have come from the emerging markets.

SB: How are you reading the 3G story?
RS: That’s a very good question. India needs to do more. I think the 3G story is good but frankly all 400 million or 500 million of the phone sets that exist should be smartphones today and not a combination of the old types of dumb phones plus smartphones. Smartphones are cheap enough for all of India to be using these. What’s preventing that is a lack of bandwidth. And I have two answers for that: One, more spectrum needs to be freed up and be available to the telecom companies, specially to run data applications. There is a shortage of network capacity for data applications in India and even if they were licensed as for data only use, it would benefit India and Indians as a whole. It could have a multiplier effect on GDP growth.

SB: The government is looking at a sort of spectrum allocation. Are you going to hold back investment in this area for India?
RS: Holding back is a strong term, but certainly moderating would be the right answer. Unfortunately, the opportunity potential exists in India but so far it’s been held back by an uneven growth of the internet in India. And that’s largely infrastructure related so I would have to squarely put the blame for that on the government. In addition to spectrum, the one area the government needs to do more on is to come up with a law similar to the U.S. DMCA, the Digital Millennium Copyright Act, which essentially allows for content hosters to not constantly have to look behind their backs as they host content from third parties which would be users, individuals, blogs, news content. I hope that they would look at the best of the DMCA and the best of what some of the European countries have done and pick from among these choices and come up with a good law that actually is pro-business.

SB: One of the areas that you were optimistic about was the online travel market. And we’ve seen a listing take place in a very good one, MakeMyTrip.com. You’re excited about this space and have invested in Cleartrip?
RS: We are very excited about Cleartrip because it is a pure play on the Internet. Since we don’t have any sort of public market to worry about in the short term, we are growing unfettered.

SB: But is there a timeline for going public?
RS: No, it’s probably great for us to be private as the number two player in the business. But we will consider in the future a public offering.

SB: What about cleantech? That’s another space you have been excited about.
RS: In cleantech, we’ve invested in Kotak Urja out of Bengaluru. They are largely dealing in photovoltaic solar and solar thermal. Plus we’re trying to do grid type projects. The challenge in the grid type projects has been trying to get financing. In India, project financing isn’t yet available because for gain it depends on clarity on government public policy. And to some degree the PPS haven’t been very clear as these volume purchase agreements get done between the utilities and the PPA agreements with power producers. It would be easier for us to be able to get financing to do some of the larger projects.

SB: What’s the outlook in terms of the kind of investments we can expect over the next 12 months?
RS: We are looking at a couple of areas, like e-commerce and the whole area of intersection between e-commerce and payments. We are also looking at clean energies some more.

SB: Let me talk to you about the book of mistakes, how many chapters added on?
RS: A couple. One is that it’s important to stay stubborn on the big idea but you must be willing to make course corrections and be flexible about the tactics. So, yes, businesses need to pivot and make changes along the way. The other is beginning to think about ideas that can affect a billion people. Because the risk is the same whether you build a small company or a large company, so why not try to aim for a large idea and take a bigger risk?

SB: Your advice to our readers?
RS: The opportunity on the internet is very real. It’s likely to be larger in India over the next couple of years. You have to be patient because of the infrastructure issues, not because of your ability to build a business. If you take a long-term view in India, in time it will definitely catch up with China.

Shereen Bhan is the Executive Editor, CNBC-TV18.

©Entrepreneur September 2011

Shereen Bhan (SB): Today everybody is talking about creating billion dollar enterprises. Is it easier to create these today as compared to what it was when you started off?
Michael Dell (MD):When I started, the industry was certainly much smaller and the place where we started with the micro-processor based computers was really in its infancy. What you see now is a much larger industry; it’s a Rs.90 trillion industry. Just given the size and the change dynamics; you see a lot more new companies and entrepreneurialism, creativity and innovation. The kind of cycle of new ideas and new companies is as active as ever in our industry.

SB: Do you think these companies will actually survive the highs and lows of the economic cycles?
MD: Markets always tend to get a little too excited, and that happens in any growth market. But if you look back over the last few decades, there are only about five new companies each year that become significant.

Many other important companies get acquired or carve out niches here and there. But I think the turbulence and dynamics is not going to slow down at all. You can argue that it’s accelerating as the ingredients are changing, as we have more globalization, more consumers actively playing with and having information in a much faster way, all the trends around social computing and mobility also add to it. It’s just accelerating.

SB: We’ve seen the LinkedIn IPO, there are a couple of other blockbuster IPOs in the pipeline. What do you feel about the kind of valuations people are talking about?
MD: Valuations can be very disconnected from reality. Certainly, if you look at the fundamental basis, people are pricing in incredible assumptions about future growth. The amount of capital that’s been thrown at these new ideas makes investors very excited.
We at Dell are at a different stage. There are certainly exciting new things that we’re doing. But we are also in the well-established income producing type of business today.

SB: You spoke about valuations being perhaps disconnected from reality. Are you beginning to get worried? Do you see a sort of irrational exuberance building in as far as the technology and internet side of businesses is concerned?
MD: If you look at the valuation differences among the new shiny objects—I refer to the new small startups in certain very attractive categories versus the well-established companies—then you find that the gap is as great as it has ever been and it is probably quite unsustainable too.
It creates all sorts of challenging dynamics and certainly you have different kinds of investors that are attracted to you.

SB: What are the challenges of dealing with unanticipated growth?
MD: As our company grew from millions to hundreds of millions to billions and tens of billion, we outgrew every imaginable system or capability or facility that we could create. We needed to expand our teams and our human resources as the business became more global, and we needed more capital. All sorts of challenges had to be faced at a very accelerated rate. The tools that we have today and things like mobile internet and globalization are enabling companies to grow much faster than was possible a few decades ago.

SB: You’ve often said that you don’t need to be a genius, a visionary or even a college graduate: you just need to have a framework and a dream. As you sit here today and observe the Dell story and its evolution, what do you think has been the single biggest contributor to your success?
MD: Customer-centricity, understanding our customers and where value shifts are taking place, these have contributed to our growth story. We have the flexibility and the agility to adapt and respond to these. Certainly the things that caused Dell to be very successful in its 25 years are a bit different than the things that are causing us to be successful now. Now we’re experiencing record profits and our earnings are quite strong and we’ve taken on a much more solutions-based approach.

SB: How bullish and optimistic are you about India? I know you have a target of achieving about Rs.9,000 crore, do you continue to stick with that or are you perhaps even upping it?
MD: I don’t know that I could be more bullish on India. We are very excited about our business in India. This last quarter, revenues grew about 30 percent, units grew almost 50 percent, our fastest growth is in small-medium business where I believe we grew over 100 percent. We have about 25,000 team members, we’re expanding our manufacturing. We started out with a capacity for 4 lakh, then grew that to a million and now we will take it to two million probably. We have a broad range of activities in India, from research and development to sales and service and call centers. We continue to expand our capacity here and I think the market is growing and we are once again in the number one share position across the entire market, with a commanding lead, selling about a third of all notebooks in India. It’s a fabulous market and we’ve invested very heavily in it.

SB: As you grow, what is the emerging market contribution you are looking at, specifically from markets like India?
MD: We believe that Asia has two-thirds of the world’s population and also that the PC is a kind of the frontline of IT. IT goes well beyond the PC, obviously, but when you have countries like India that are expanding very rapidly, the PC is sort of the first point departure in terms of the journey of IT. We think these markets will continue to grow; we already have substantial portions of our revenue in brick countries and what we consider to be the key strategic fast growing countries, which India is certainly a part of. Last year we acquired eight companies, and we’re finding that many of these companies have operations in India, so those are adding to our capability there. I am very open to acquiring companies in India.

SB: I want to go back in time to your own entrepreneurial journey. You decided to step back in 2004 when things went wrong and decided to come back in 2007?
MD: Our board asked me to come back into the CEO role and having founded the company and being the Chairman I felt a special responsibility to the company. I’ve had a great time. It’s been fun. We’ve had a chance to take a good look at our strategy and what was working and what was not working well; we figured out what Dell needed to do. We are doing some new things, we’re investing a lot more in research and development, a lot more in innovation. This whole acquisition strategy is a completely new approach for us, we’re allocating our capital a little differently now.

SB: No plans to step back anytime soon?
MD: No.

SB: What are the imperatives for young entrepreneurs as they go about building their sustainable businesses? What areas do you think they need to have their fingers on?
MD: You don’t have to be in Silicon Valley to be an entrepreneur. There are certainly many great ones there but there are a lot of great ones all over the world. You must have an acceptance of risk and an ability to take chances. You must accept failure and experiment and be agile to look for new opportunities. Look to creating value where it hasn’t been created before. I love strategies that incumbent competitors will not adopt because it undermines their current positioning, so it’s always fun to think which things are changing. Think how you could create a strategy that is fantastic for customers but that existing competitors wouldn’t want to do because it would alter what they think of currently as good business. We see plenty of opportunities to add and grow organically/inorganically in those kind of businesses.

SB: As you look to the future, what are the cornerstones of growth in terms of the way you look at Dell and the world?
MD: If you think about commercial IT, it’s essentially the business of productivity. Business is good, there is a lot of demand for productivity. There are so many untapped fields within it. If you look at the mid-market, everybody knows about the world’s biggest corporations and they’re pretty good at using IT, so there’s still some opportunities there.

SB: What has been your biggest personal lesson as an entrepreneur? If there is one thing that you could perhaps change, what would it be?
MD: Investing in talent and growing talent. When you grow a business, the real limiter or enabler is how strong the talent is. How you grow and develop your people and give them the opportunities to succeed and investing in that is something we’ve spent quite a bit of time on at Dell in the last few years. Quite frankly, I feel we should have spent more time on this in the first 10-15 years of Dell’s history.

SB: Your message to young entrepreneurs reading this?
MD: Be willing to experiment, be willing to make mistakes, learn from those mistakes, don’t wait for the perfect plan. Go out there and do something new and different.
Copying someone else or trying to do something a little bit better than someone else did (is) probably not going to be a big breakthrough. You’ve got to really innovate and do something new and different.

©Entrepreneur September 2011

It began with the signing up of a MoU with the Defense Research and Development Organization in 2004 to develop indigenous technology for cockpit displays for Sukhoi aircraft. Today, SDS is the only private company in India that manufactures avionics products and equipment for military as well as commercial aircraft.

But what fuelled Kaura’s passion to get into avionics? “I went to an air show when I was very young. When the fighter jets flew over my head, I was so excited. That was the beginning of this passion,” recalls Kaura.

The product portfolio of the business is impressive. Kaura started with manufacturing cockpit displays and is now diversifying into avionic suites. He is also getting into products like electronic warfare suites or certain high-end avionic products that are used by both fighter jets and commercial jets to become a complete avionics company.

Ask him about being the man behind the SDS-HAL joint venture of 2006 (the first public-private partnership in defense avionics) and Kaura says, “This JV was really our first brick into the defense world. Samtel-HAL Display Systems is a company which is required to manufacture cockpit displays for different HAL programs. Our idea is to create a center of excellence in India which would manufacture cockpit displays available for all Indian platforms.”

Kaura further adds that in the defense sector per se, the Indian government is planning to spend about Rs.4.5 lakh crore over the next five years. Another major objective of the Indian government is to create self-reliance in this sector. “That’s where we come in. In some cases, we are partnering with world-class players to bring in the technology, then localize it. In some cases we are doing it ourselves, like we did with the Sukhoi. But as we move forward, there is a lot of potential for growth in the coming years,” says Kaura.

SDS also entered into another JV with Thales Aerospace in 2008. The sixth-largest aerospace and defense company in the world, Thales Aerospace holds a 26 percent stake in the JV. The major focus of this JV lies on developing helmet-mounted displays and other avionic systems for fighter aircraft. “We are venturing into some high-end sensors that the Indian government is looking for. We are also interested in venturing into full cockpit suites and avionic suites.”
He is first focused on the Thales joint venture to sell in India and then exploring opportunities globally. He hopes to start production next year.

SDS currently accounts for about 10 percent of the group’s turnover, and Kaura has ambitious plans to take it to 50 percent in the next five years. But how exactly is he proposing to do this? “The Indian defense market is growing. We have some of the best partners in the world to bring technology into the country. And then there are offsets which will encourage a lot of global players to buy back from India. And when all that is combined, my goal seems very reasonable,” explains the young entrepreneur.

But what about the new defense procurement policy? “In defense, the offset ranges between 30 percent to 50 percent on the deal. It’s known that we are partners with the Mirage 2000 upgrade with Thales, we are partners with many U.S. pursuits like the P8, the Boeing, some programs with Lockheed Martin etc. So, some global majors are already tying up with us for different pursuits and we are now engaged in defining the work scope. As these programs unfold, the work will start. Some of it will kickstart this year and some of it will come in next year,” explains Kaura.

The product lines that this entrepreneur is expecting to work on include displays and some other defense avionic products. The next step for him is to go beyond just LRU’s to do a full system manufacturing.

Through strong partnerships worldwide, SDS has built a robust long-term growth plan. In the pipeline are plans to upgrade displays in Airbus 320, 330 and 340 aircraft and with its recent partnership with SAAB Avitronics, Kaura is also eyeing manufacturing Head Up displays. He hopes to touch the Rs.500 crore mark by 2016.

He has already diversified into military and navy products. Another area he’s interested is certain technologies that he is developing in defense which can be utilized for commercial usage as well.

With the U.S. and the U.K. being the biggest markets for aerospace industries, Kaura is now planning to expand majorly into the U.S. market. “Our idea is to provide some technologies we can manufacture here locally, hopefully more competitively than the global majors that are already supplying them in the U.S. markets,” says Kaura.

There have been a number of challenges that Kaura has faced over the years. “This industry is different in the sense it needs a lot of patience. The turnover took five years to come, it does not happen overnight. It takes time to mature a product, mature processes, mature your project management, to start delivering to the aerospace standards which is really the epitome,” he says.

So, does he aspire to be frontrunners in the aerospace industry? “The aerospace industry is very wide. Avionics is just one part of it. I think anywhere between 25 percent to 35 percent of the value of an aircraft is avionics. And we are really working on that space right now. Engines and mainframe are not what we are interested in. We are expanding the product portfolio. We are expanding the depth of our technology which is the main focus for us. And once we do that, a very large portion of that 35 percent of an aircraft can be captured by us,” signs off Kaura.

©Entrepreneur June 2011

This virtual marketplace is buzzing today, but Agarwal admits that he did not get it right the first time. Originally launched as a price comparison engine for electronic products and gadgets, Agarwal soon realized the big bucks lie not just in telling audiences where to get the best deals but bringing them to the platform and helping them transact online!

“We’ve become what Google is like in the product search area. However, Google has a way to monetize its visitors which is through Ad Words, so we had to discover our own Ad Words, which we realized was via ‘Hot Deals’. We thought that if people are visiting the site, looking for a mobile phone and we have a great deal on a mobile phone which you showcase to them, then there is a reasonable probability that they would buy it. So, that’s how the Hot Deals concept started,” explains Agarwal.

His company was one of the early e-commerce businesses in the country but today the space is quite congested. Agarwal starts off by saying: “I don’t like to use that word e-commerce. We are more of a virtual shopping or a home shopping business. We reach out to consumers on Hot Deals through different mediums like print publications. Today, there are over 50 print publications which we work with. We are there on multiple TV channels, onto their commercial airtimes where we again publicize our Hot Deals. We’re there on the internet; we’re there on our mobile applications.”

As a home shopping venture, Agarwal’s venture has been able to achieve good traction. It consistently does about 5,000 transactions a day, thereby becoming the largest home shopping player in India. Almost 60 percent of his business comes from reaching out to consumers through print ads, 30 percent from TV ads and about 10 percent comes from the digital space.

But how has he been able to convince the Indian consumer to buy right out of home or online? “Virtual shopping today is not only about convenience. It is largely to do with availability. India is a big geography, so as you go beyond tier II and tier III cities, many products are just not available. If you are able to service a customer remotely and he’s able to reach out remotely to you to place and order a product, that is his key demand,” explains Agarwal.

He goes on to add: “There is some apprehension. However, when a consumer calls us up, the agent spends quite a bit of time with that customer to take him through his questions and make sure that we answer all of them for him to be able to take a purchase decision.”

With more than 60 percent e-mail transactions in India done over the phone, Agarwal has set up four call centers with 650 employees to facilitate transactions on the Naaptol platform.Reaching out to more than 3,000 cities across the country, Naaptol today powers over 4,000 sales everyday; grossing revenues of Rs.1.5 crore. But with products on its portal often unbranded, convincing the Indian consumer about value-for-money has not been easy.

While researching for Naaptol, Young Turks found that every fifth link led to an aggrieved customer. “We run a 100-member cell only to make sure that any customer who has a complaint can report it back to us. Our logistics partner can pick up the goods. We have a warehouse only for reverse logistics. We don’t have a warehouse for dispatch, for which we use supply warehouses. So, it comes to our reverse logistics warehouse where we can decide how a refund needs to be given or a replacement needs to be given,” explains Agarwal.

Coming to revenue figures, Agarwal says he moves parcels worth about Rs.1.5 crore everyday. A lot of growth is coming from the TV area. And, depending on the category, the margin on his sector is between 15 percent to 30 percent.
In terms of a ballpark, he is looking at expanding at least three times in the coming 12 months. Agarwal also wants to launch a private sales section on the website and eventually a home shop TV channel.

Raising its first round of funding from Canaan Partners in 2010, Agarwal is looking to consolidate his business and is investing in essential elements like payment gateways, logistics and warehousing.

Along the way, Agarwal has faced and overcome a number of challenges. Does he feel that e-commerce in India has created enough traction to compete with traditional retails or traditional shopping? “Traditional retail is close to Rs.22.5 lakh crore. E-commerce, if you leave the travel apart, is probably less than Rs.4,500 crore. So, the two are a long way apart. E-commerce or virtual commerce have the advantage of being able to go to every corner of the country. So I see traditional retail succeeding in near term in the larger cities. However, as you go to tier II cities and beyond, virtual retail will have an edge,” explains Agarwal.

Talking about future plans, the young entrepreneur says, “Even at our current level we are a small speck in the retail world. So, to grow from here 10 times will not be a challenge at all. I’m looking at doing 50,000 transactions a day in the next couple of years, which will really give traditional retail a run for its money.”

And is he looking at a second round of funding now? “Not actively looking but we have been in discussions with a few players,” he explains.

Agarwal, who has been a serial entrepreneur before, had launched Design Expo in 1998, in 2003 he had launched ANM Soft which was a software company, and in 2008 Naaptol. So, is he again at the cusp of another big opportunity? “No. Many people tell me that you have got lucky the third time. I had not really succeeded in my past two attempts, though the ventures were reasonably successful. But Naaptol is the big idea I’m working on. Everyday when I see what we’re doing and how much we can grow, it actually gives me goosebumps,” he signs off.

©Entrepreneur June 2011

Juggling school and work seems to be child’s play and this Class IX student has already received her first round of funding of Rs.10 lakh from First Planet, an IT firm. But just how did Sindhuja get started?

“Once I completed my Guinness attempt [for creating the fastest 2D animation film], I was asked to meet Anand Kumar at First Planet the very next day. So I came and met him. I also met Kumaran Mani, CEO of Tenth Planet and First Planet, who was very interested in my work. Even so, when he suggested starting a company, I was really surprised. My mother had some initial queries regarding the prospects and forming of the company, which were cleared by First Planet and then, on October 13, we launched Seppan. My sister, a Japanese haiku writer, chose the name for me,” recalls Sindhuja with a smile.

This young CEO seems is in no mood to take it easy! In 2010, Sindhuja was adjudged the fastest 2D and 3D animator in India by NASSCOM at the gaming and animation conclave.

She is also the youngest digital caricaturist certified by Corel, a leading software development company. And she could soon find a place in the Guinness Book of Records for creating the fastest 2D animation film.

The results are not in just yet and this young achiever is waiting with bated breath. So what’s next on the anvil for this talented and young go-getter?

“We are trying to create many different communities for Seppan. We are going to do small projects, each of which will be of less than 5 minutes duration. I will create many ventures in India and provide employment to many people via Seppan. Otherwise, I have seen that many talented Indian animators shift to foreign companies like Walt Disney, and Indian animation companies get left behind,” says Sindhuja.

Sounds like big dreams for someone so young but Sindhuja has her eyes firmly on her goal. “There was a time when I wanted to go to the Monte Walker film school. But now, I learn many things from my father and the Internet. So, I might go to Monte Walker after three years to do my 2D and 3D animation course. I like to create animations, animated short films and short advertisements. That is my dream till now,” signs off this talented young achiever.

So, I might go to Monte Walker after three years to do my 2D and 3D animation course. I like to create animations, animated short films and short advertisements. That is my dream till now,” signs off this talented young achiever.

©Entrepreneur May 2011

“Since the last time we met on CNBC Young Turks, MapmyIndia has grown a lot. In terms of size of business, we have grown over 600 percent. In terms of where we wanted to reach, in the automotive sector we have become a trusted business partner to car companies and even for telecom operators and handset manufacturers, we are the partner of choice. In fact, today we come preloaded in cars like Hyundai and BMW, in phones like the Samsung Galaxy Tab and even part of applications such as the Aircel pocket finder. In terms of maps, we may have released maps for 18 cities at the street level in 2008; now we have released maps for over 1,000 cities at street level,” says Verma.

In the last three years, MapmyIndia has managed to bag over 500 corporate clients across 60 cities. Adding 10,000 customers a month on mobile, Rohan aims to reach out to over 50 million mobile subscribers by 2016.

“For telecom operators and handset manufacturers, our focus has been to come out with more applications which are interesting. We want to add value to the core hardware product that these companies sell or the basic connectivity service that the telecom operators sell by offering more and more navigation applications, even social networking application with location integrated or other kinds of location-based offers and advertising options. Our focus has been to provide more solutions which they can use to enhance their decision-making, be it for retail side selection or sales marketing distribution,” explains Verma.

Undeterred by competition, Verma is looking at expanding to tier II and tier III cities and will invest Rs.9 crore over the next three years.

“I have friends [who I studied with in Stanford in the U.S.] who have randomly called to compliment me on my business. They have also seen my interview on CNBC Young Turks. It was a big achievement for me to be featured on CNBC. I think that CNBC played an important role in our growth over the last three years and for that I must thank CNBC Young Turks. And wish them all the very best for not just the past 10 years but for the coming 10 years as well,” adds Verma.

©Entrepreneur May 2011

Azure Power set up its first solar power grid in Amritsar in 2009 and since then the project has generated 23 lakh KW of clean energy to light up the lives of 20,000 households in rural Punjab. The company is yet to see returns flowing in but Wadhwa is convinced that solar power in India is a long term business.

Solar power is still a complementary source of energy in India, while at Azure he is trying to create solar grids to make it a primary source of energy. How exactly is the entrepreneur planning to do this? “I would still say it is a somewhat complementary source of energy. But there are many primary opportunities like areas where the grid is never going to go or it is much difficult to build a long term grid. Also, look at peak demands like opportunities where energy requirement is during the day, not at night time. The other opportunity lies in diesel gensets. India has almost 50, 000 MW of standby diesel genset capacity. So, where diesel is burnt mostly during the day and where there is power shortage, there is more requirement of energy. So, solar lends itself really well to reduce your cost of energy during peak times,” explains Wadhwa.

His business model is simple. He has a 30-year power purchase agreement with the Punjab state electricity board; his company sells them energy and then from the board’s sub-station they take care of the distribution, payments and collection of those 32 villages. “We don’t get into the end point distribution, we generate the energy and give it to the nearest interconnect point,” adds Wadhwa.

Today, Azure Power has under development 30 MW of solar grid power plants across Rajasthan, Gujarat, Haryana and Karnataka. Seed money came from Foundation Capital and Helion Venture Partners and Azure’s sustainable business model has also attracted investments of close to Rs.225 crore from International Finance Corporation and Overseas Private Investment Corporation. While Wadhwa believes that being an early mover in the renewable energy sector in India has helped, doing business has not been easy.

“We have to spend a lot of time educating people and even our employees who have never seen a 5 MW grid-connected solar power plant in their life,” says Wadhwa.

Wadhwa has plans to set up a manufacturing facility in India, though now he is more focused on creating good assets. Targeting 100 MW capacity, he feels Azure will break even by 2017. His future plans include having a portfolio of 100 MW by 2014. “We are roughly looking to have around 20-30 projects in the country,” adds Wadhwa.

And he hopes that solar power will be at par with other sources of power by 2020.

©Entrepreneur May 2011

But what made Tewari change his business model? “As we entered the SMS search space, we realized that we couldn’t make it big in that specific space, so we moved out,” he says. His InMobi platform is very simple and uncomplicated. “There are many consumers in the world who browse the Internet on their mobiles either through browsers or applications. Now, you must have noticed the ads that appear next to those browsers or in those applications. Those ads are served by us and that’s our business model,” explains Tewari.

But, does he feel ads on mobile are intrusive? “User experience is of paramount importance to us, so we make sure that the ads are non-intrusive, something that the user chooses to engage with and is not forced to deal with,” explains the entrepreneur.

His company is second only to Google in the mobile ad network, but how wide is the gap between the two? “It’s very hard to know how far we are from Google because the numbers are all over the place. But we know that we are seeing quick growth and are very excited about that,” says Tewari.

Though mobile ad is a fairly new segment in the advertising space, Tewari feels that in the next 3-4 years, around 4-5 billion users across the world will be using mobile internet to access information and content. Betting big on the over Rs.90,000 crore mobile advertising market, Tewari and his team of 250 are now looking at entering the mobile commerce space. After building a strong presence in Asia and Africa, InMobi is gunning for the developed markets to get a larger share of the revenue pie but he will have to take on the big boys to make an impression.

And what is his monetization strategy with advertisers and publishers? “We have two sides to our customer profile. On one hand we have the publishers, who are the owners of content; on the other side we have the advertiser. So, we basically sit at the center and connect the two of them,” explains Tewari. He adds that it is a 60:40 split on the revenue share.

Helping advertisers target their ads to the right users, InMobi offers real time reporting on the performance of ad campaigns and even allows advertisers to make changes to give them the best return on their investments. Backed by venture capital firms like Kleiner Perkins, Caufield & Byers and Sherpalo Ventures, Tewari has already received funding of Rs.67.5 crore and is now betting big on the 3G opportunity.

Tewari’s future plans with his venture include looking to enter newer markets like China and Korea very soon. He also plans to do more product development and acquisitions in order to basically expand across the entire value chain and provide more and more value to his customers.

©Entrepreneur May 2011

Shereen Bhan (SB): You have been in the microfinance business in India for almost 12 years. What has this decade-long journey meant to you?
Padmaja Reddy (PR): Initially there was no support when I went to a few bankers and asked them to give me a loan. I would explain that the money would be given to poor households but I would recover the amount and pay them back. And they simply laughed at me. So I was not able to raise loan funds in the initial three years; instead I had to make do with local fund raising. I even collected and sold old newspapers to raise the initial funds.

SB:  Are more and more banks and financial institutions coming your way now?
PR: Oh, yes. Today we are flush with money. In fact, fund raising is the easiest part of my job now. My balance sheet speaks for itself, my borrowers speak for themselves and my track record shows that this is the best portfolio you can show to any bank. I have broken quite a few myths regarding microfinance during my career.

SB: What are some of these myths that you have broken?
PR: Initially there was a myth that it takes five years to break even. See, even if you are charging close to 40 percent effective rate of interest, since the loan size is very small, the operating cost is very high (that time it was 28 percent-29 percent). So people believed it takes five years to break even. But we broke even in six months’ time.

Then there was a myth on scalability which indicated that if you are dependent on grants, you cannot scale up because no investor will come forward. Since we started making profits after six months, we did not face any problems in scaling up.

However, we are an NGO and because there is no regulator, accountability or ownership for NGOs, we decided to get into the NBFC mode. It was not smooth sailing and at one time there were even all kinds of nasty rumors about me.

SB: You fled the country, even went to the extent of saying things like you are no more.
PR: Such rumors/statements about my husband and I did not matter because I still went to the borrowers. People needed to understand that no one borrows from me but from Spandana Sphoorty Financial Ltd.

SB: You have been talking to big players like Temasek. Are you looking at the IPO market and at bringing on other investors?
PR: I have to provide exit opportunities for my investors. I give them enough in terms of returns, they are so happy with me that they call me a rockstar. As far as an IPO is concerned, we’ll take one year to make an IPO and simultaneously I can see how the market really receives microfinance options.

SB: Agencies like CRISIL have rated you.
PR: Last year we were rated P1, which is a rank that no other microfinance organization in India has achieved till date. The ratings and rankings just prove that we are moving on the right path at the moment.

SB: From assets worth Rs.4,000 crore under management you are aiming at Rs.10,000 crore by 2012?
PR: We are aiming for more than Rs.10,000 crore though we are very conservative in terms of what we tell people. I am actually hopeful of achieving Rs.12,000 crore.

SB: What can we actually expect from you as far as microfinance is concerned over the next eight years?
PR: We will become the number one microfinance organization in the world, not only in terms of the number of members but by offering several services apart from just credit-related ones.

SB: You are diversifying and have already got into healthcare. You are also setting up rural hospitals primarily for maternity care?
PR: I got into maternity care especially after hearing the story of a woman who had borrowed Rs.10,000 for her caesarean operation. If you just take the interest she had to cough up while repaying that loan over the years, it amounted to almost Rs.1 lakh, which is ridiculous for a Rs.10,000 loan.

SB: Apart from healthcare, what else are you looking at now?
PR: Today we have a huge network and are looking at becoming a retail channel as well. So we are buying oil, rice and dal for the benefit of our borrowers. Of course, it is not that you can always reduce their expenditure; net impact may remain the same.

SB: On the regulatory front, given the fact that you are seeing such a rush of money in this space, do you think there are any loopholes that need to be plugged?
PR: Not really, like today the RBI is so conscious, they are directly going to our branches and meeting our borrowers. Two years ago they didn’t have any first-hand information about this field. Microfinance organizations are growing at a really fast pace. Every month we add 2 lakh clients.

SHEREEN BHAN is the Executive Editor, CNBC-TV18.

©Entrepreneur July 2010

Shereen Bhan is the Executive Editor, CNBC-TV18