Does your biz plan have sanity?

He thought up an innovative business plan and PE funding came knocking on his doors. R. Subramanian on what it takes to attract the right investors and what budding entrepreneurs should keep in mind...


An IIM Ahmedabad pass-out opening a local retail store was something quite unthinkable in 1997, but not today, when Subhiksha, and its ‘morcha against kharcha’, has become a household name. But to take this morcha to a pan-India level needed deep pockets, which R. Subramanian, MD of Subhiksha did not have at that time. But, impressed by the vision of this man, ICICI Venture Capital decided to back his plan and till date continues to hold a 24% stake in the company. R. Subramanian, in conversation with 4Ps B&M, tells his side of the story.

You started Subhiksha from just one store, with a meagre investment. What set the ball rolling?

We did put in Rs.5 crore before we took in VC/PE funding – it was tough, not so much for the money part of it, but because we were starting a new business line, which was in its infancy those days. More importantly, we were creating a new business model.

When did you decide to approach ICICI Venture Capital?

To be honest, we were lazy (smiles). It was ICICI Venture, which got in touch with us, saying that they wanted to fund us. The first part of outside funding for Subhiksha came in August 2000. By that time we had been in business for about three years. We then had 50 stores, operating only in Chennai. Funding was important because it came at a time when we were ready to grow geographically, as we believed we had a working concept.

How did the funding help Subhiksha beyond fund infusion?

The funding actually also brought credibility for a new business model and helped in getting some external perspective to what was only a management run company till that stage.

What do VCs looks for before granting funds to entrepreneurs?

I think the foremost criteria that they would look into would be whether they will make money. Also commitment of the promoter/entrepreneur and not to forget, the sanity of the business plan.

A word of advice for budding entrepreneurs looking for PE funding?

When you are small, I think the chemistry and shared wavelength with the financing partner is as important as the money itself – be careful about who you raise money from – be sure that there is broad common alignment as far as what you and they are looking for.

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Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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Investee: Lodha Group

Investor: Deutsche Bank

Investment Value: $425 mn

Abhisheck Lodha, Director, Lodha Group, believes, “Under this transaction, the investors have invested $425 million in the Lodha Group’s Special Purpose Vehicle (SPV) for the development of three of our FDI compliant projects, located in and around Mumbai. The investors will receive a stake in these projects.”

A clutch of PE investors led by Deutsche Bank Singapore invested $425 million in the real-estate developer, Lodha Group in September 2007, marking the single largest investment in a city-based developer in India. The demographics of India’s boom in the real estate sector, is extremely compelling for global investors. Established in 1980, Lodha Group is headquartered in Mumbai and is currently developing in excess of 25 million sq. ft. of prime real estate over 27 projects in and around Mumbai. The group has also recently kicked off its geographic expansion by winning 13 acres of premium property in central Hyderabad. The company’s portfolio consists of residences, office spaces, IT campuses, townships, weekend retreats and also the very high potential SEZs. The group professes to abide by quality and timely delivery of projects and currently employs over 500 professionals. The bid is to expand ferociously and boost employee strength to 5,000 over the next few years. Following DLF’s example, the Lodha Group too aspires to come out with a Rs.8,000 crore IPO in the first half of 2008.

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Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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Pioneer

ITC continues to leverage its e-Choupal foray to its advantage, an advantage that, is becoming increasingly tough for competition to beat. Just goes to prove that provided you keep your visionary focus intact, being the first to enter always pays in the long run

We’ve been pioneers in creating fortune “for” the bottom of the pyramid. ITC created e-Choupal by innovatively leveraging ICTs to set up an information & business platform for India’s small and poor farmers, who otherwise continue to operate in ‘unevolved’ markets, where vested interests exploit their disadvantaged position. ITC takes the role of a Network Orchestrator by synergising and unleashing the power of partnerships in public, private and not-for-profit sectors. Seven years since inception, ITC’s e-Choupal is an efficient transaction and low-cost distribution channel focused on needs of small farmers and consumers in rural India. Efficiencies & capacities built by e-Choupal are attracting rural youth to re-consider agriculture & agri-services as a viable occupation to be taken up with confidence.

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Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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What an idea, sirjee

When IIPM comes to education, never compromise

Social messaging in advertising…

"MONOJIT LAHIRI examines this new and exciting genre that’s grabbing eyeballs and attention and challenging the old order that defined advertising solely as a one dimensional, sell-sell-sell game!"

Advertising is the public face of marketing with an uncomplicated, one-point-agenda-to make products disappear from the shelves to the right hands and homes, with consistency and speed. Over time, areas like patriotism and social service have deployed advertising, but, at best, they were cute to watch tickling the feel-good glands… at worst, boring and preachy. Predictably these efforts came from the government quarters. Typically the issues tackled were ‘safe’ ones, never remotely touching sensitive themes like caste, religion or politics. As far as they were considered, these subjects were taboo and totally off-limits.

Much water has flown under the bridge since those politically correct and sanctimonious times with ‘Social Messaging’ coming centre-stage as a powerful, persuasive and significant agent of social change. Ravi Naware (chief executive, food division, ITC) lays it on the line when he says that way beyond the much touted CSR, “consumers today seem to be interested in more than just a great ad or quality product. They are interested in products that echo their own values.” Adds Ajit Varghese (MD, Max India, an ageny that works closely with Britannia), “We are witnessing a strong trend where brands are utilising issues that surrounds the consumer’s immediate environment and addressing them through mainstream ads.” Advertising, from time immemorial, has been consistently bad-mouthed by a section of society labeling them as shameless promoters of excess and useless mass consumerism. This has been fiercely defended by the ad fraternity citing examples where advertising has indeed attempted to be an agent of social change. As this issue goes into print, at least three ads of this ‘genre’ are presently occupying center-stage and inviting both attention and admiration.

The first - an Airtel ad - shows kids on either side of a barbed wire fence, jump the barrier to indulge in a game of football in no-man’s land. In an extraordinarily simple but powerful way, it works as a magnificent metaphor for communication as a solution to end all conflicts, wars and battles. Says Arvind Mohan ( Chief Strategist Officer, Rediff DY&R), “ We wanted to create branding that went way beyond the purchase intent and made people proud to be associated with the brand.” Adds Amatesh Rao (National business head, Rediff DY&R), “Admittedly commercials with social messages don’t immediately bring about change, but they reflect strongly the change that is happening in society… a change that may not be perceptible or articulated but definitely taking shape in collective fashion, in the sensibilities of new age youth in a resurgent India.” The Tata Tea ad comes next. The communication thought is truly clutter-busting, attempting to migrate tea from being a physical and emotional vitaliser to becoming a catalyst for social awakening. Percy Siganporia (MD, Tata Tea Ltd) quite categorically emphasises that the focus is to emotively connect the product with issues that drives the heart, mind and soul of India’s emerging social consciousness. Executive Creative Director Amer Jaleel of Lowe (the agency behind this ad) sensed the restlessness among today’s youth and extended the concept of “waking up with tea” in a stunning communication package that embraced social awakening, giving a whole new dimension to the term ‘Jago re’.

Lowe struck target again (group creative director Nikhil Rao, take a bow) with yet another brilliant, breakthrough concept that redefined the very meaning of Idea. Executive Chairman Balki was clear about the focus – how to position the brand as a better ‘Idea’ than anyone else and elevate it from transactional issues like price and value. Targeting politics as a platform and humorously – yet pointedly- dramatizing the social inadequacies that plague the nation, with a mobile number (not a name) as an identity tag, the Idea Cellular communication truly deserves the fulsome ‘What an Idea, Sirjee’, salute!

Amidst the accolade and approval that has greeted these ads, there have been dissenting voices too. Is this brand of advertising relevant to the basic job it’s meant to do? The popular consensus seems to be a resounding, yes. In today’s environment, marketing and branding are increasingly becoming real, rooted and relatable. Hence they have a legitimate and deserved space. Besides, these ads reflect that magical, seamless embrace with reality. Do today’s ‘I-Me-Myself’ generation really connect with the Jago Re or the Idea Cellular communication-without-barrier stuff, absorbed as they seem to be in living life, king-size?

Of course, they are! It’s a total myth that today’s youth only believes in celebrating life and are totally blind, uncaring and insensitive to the social inadequacies, causes and concerns. Never before has there been such passionate and dramatic demonstrations of rooting for justice (Jessica Lal case) or such immense acceptance for movies like Rang De Basanti. Sure, today’s youth enjoy life, but their hearts continue to be in the right place, solidly re-affirming the validity and relevance of social messaging in advertising! Truly a great idea, sirjee!

MONOJIT LAHIRI

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Preferential Marketing

LVMH stands to serve the taste and preferences of premium brand lovers. And it serves its purpose by catering ‘preferentially’ to these market demands
We at LVMH conduct marketing exercises on the basis of requirement of the target segments and the brand. We are indeed not made for masses and our target audience is the upper segment of the society. But I also believe that this norm is applicable for all luxury brands in the world, which focus only on a certain segments of the market. In India too, this market is growing phenomenally well. This is also tempting luxury brands from all over the world to come into India. However, the true blue luxury labels are yet to enter the Indian retail mart. We’ll also introduce new brands in 2008 and our focus would be on the elite class. They are our preferred customers and I think that apart from low purchase products, everybody has a certain target audience, where they want their product to do well. For example, the elite watches market is growing at an extensive 40% and for a brand like Tag Heur, we target not only the elite class, but generation next who can afford such price levels. So depending on the product & brand, LVMH preferentially adopts a strategy.

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Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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How long will this escalation continue?

How long will this escalation continue? “We believe that, fundamentally, the Sensex should retrace some of its gains and consolidate at lower levels before moving up,” reveals Dipen Shah, Vice President, PCG – Research, Kotak Securities to 4Ps B&M. How will the investors play in a fast moving upward market like this? We searched a solution to the philosophy of ‘trying to ride the moving bus.’ Retail investors should be very careful during these times of high momentum since the market has run up too fast & too soon.

“Moreover, domestic political situation remains in a flux. The trick for retail investors lies in – hitching on to momentum plays i.e. ‘getting into the moving bus’ but at the same time they should also be aware of the inherent risks and be ‘ready to hop out of the moving bus’ i.e. cut loses at first signs of trouble...,” was the sound advice from Shukla. “Investment is not a play, not even trading,” says Swaminathan while he remains positive on scrips from the infrastructure, capital goods, telecom, engineering and banking sectors, adding, “One can also be positive on Power – transmission towers”. Editor, India Infoline ends on a mixed tone – “On the bright side, even a 5% to 10% upside in the month of October could see levels between 18K and 19K, while a fall of 5% to 10% could see the Sensex below the 16K mark.

The Sensex looks at a make or break situation. The brakes could come in when the quarterly numbers flow in. Any negative surprise could see a washout of at least 1,500 to 2,000 points – something we should factor in, given the meteoric rise. What do you expect?

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Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Welcome the kings of bling!

As media houses get set to walk the ramp...
With the king of bling, Vijay Mallya, and the savvy TV star Prannoy Roy shaking hands, it’s time to bid adieu to all those soppy, sobby and oh-so-affected dramas – with saas-bahu and the villainous other – that have been enchanting millions of weepy-eyed couch potatoes for years. Instead the age of the chic and the stylish has been ushered in, with the fast growing breed of channels, with new age living and fast lifestyles as their USP. The coming together of the Good Times (Mallya’s fav tagline) baron and Roy’s NDTV may have given birth to yet another lifestyle TV channel - NDTV Good Times - for the Indian junta, but is by no means the first to capitalise on this latest craze among the affluent Indians. The Times of India group’s Zoom arrived there first, not to mention others (though in a slightly expanded genre) like Star One and UTV’s Bindaas. Other media groups are also planning similar ritzy channels to pull in the aspirational, metro crowds. “The future of new lifestyle channels (like NDTV’s venture with Kingfisher) seems bright, as lifestyle channels are in an evolution mode right now in our country,” comments Anwesh Bose, Brand Director, Denstu Media.

But the question is that in a country where nearly half the population is still struggling to have two square meals a day, is there sufficient market for such channels to ensure adequate Returns on Investment for these players? Aren’t general entertainment channels enough to fill the void with their lifestyle-oriented kaleidoscopic offerings, spiced up in all hues?

“The reach of general entertainment channels (GEC) is higher as they are meant for masses, whereas lifestyle channels are focused toward a niche audience. Though reach is not high as compared to GECs, these channels are meant for a particular class,” explains Anita Nayyar, CEO, MPG India. And this is precisely what is tempting advertisers of ritzy brands (accessory brands or hi-end premium products), to associate themselves with lifestyle channels. There’s more! Most of these channels telecast exclusive programmes highlighting a designer or luxury car, which may become another source of revenue, as the product receives adequate branding in the process. Designer Neeta Lulla, strictly denies this. “Not all channels ask you to pay, but at the same time often it’s a mutual agreement between the brand and the media channel,” she avers. Uh uh!

Suffice is to say that whatever the revenue streams, lifestyle channels, targeted at generation next with swelling pockets, are here to stay. With an increasing number of affluent Indians & aspiration levels pole vaulting every day, this forecast is certainly no exaggeration.

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Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

A Billion-dollar jackpot!

L&T INFOTECH: VIJAY KUMAR MAGAPU

A Billion-dollar jackpot!

How did L&TI grow to become a $320 million enterprise under less than a decade? What did it have that others didn’t? The answer, simply put, is L&T! Surely, when you’re the 100% subsidiary of an already gargantuan $4 billion global Fortune 2000 giant, not many can challenge you competence to deliver on your promises. Today, L&TI leverages the domain expertise of its parent along various industry verticals like Banking, Financial Services & Insurance (BFSI), Manufacturing, Communications and Embedded Systems. Claims A. M. Naik, Chairman & MD, L&T, “By 2008, we aim to reach $400 million and we plan to touch the billion dollar mark by the turn of the decade!”

Having grown annually by 61% during 2006-07, the company plans to increase its headcount by another 9,200 skilled manpower and is looking at 3-4 credible global acquisitions as V. K. Magapu revealed, “L&T Infotech would prefer to acquire a company with revenues of about $50 million. We are looking at niche companies, which will deliver immediate synergies coupled with offshore expertise.”

Surely, while L&TI may take the credit for setting some standards by reporting a 114.29 increase in net profits to touch $37.5 million during FY2006-07, there is no denying that it still has some distance to cover before it occupies a seat close to the nowhere close to the big boys of Indian IT! So what is its immediate agenda? To this Naik responds, “L&T Infotech will continue focusing on BFSI, manufacturing & communication verticals. We believe these will offer marvelous augmentation prospects” Well said!

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist)

Now, get, set and Bingo!

Ravi Naware, the dynamic CEO of ITC foods tells the inside story of how marketing whiz kids at ITC made Bingo a spectacular success in 2007

Whether venturing into new segments like Whether venturing into new segments like snacks through Bingo or revealing innovative products like Aashirvaad Organic Spices, ITC Foods has kept its food kettle boiling this year. This was supported by aggressive ad and marketing campaigns. Little wonder that in such a short span of time ITC’s Bingo has managed to shake market leader PepsiCo out of its slumber by capturing a 16% market share of the organised branded snack food market. In an exclusive interaction with 4Ps B&M, Ravi Naware, CEO, ITC Foods, shares what were Bingo’s initiatives and the company’s plans for 2008.

What was the initiative behind Bingo campaign?
We wanted to launch an innovative product, I mean the snacking segment was growing at a fast pace, but we didn’t want to launch a ‘me-too’ product. Since Bingo was a very innovative product in terms of its flavors & taste, we wanted the ad campaigns also to be very innovative.

And how did you make them different from the others?
The quality of the products was our prime focus, which we wanted to convey but in a very humorous way. The fun factor was there in all the ads and at the same time we wanted to convey that Bingo was for the masses from across the country. So if one ad was targeted towards Leh-Ladakh, then the other was for the Gujjus.

Compared to the other products in the market, how do you think Bingo was positioned?
Before launching Bingo, we researched for a few years. Our primary research helped us to know what consumers exactly want from snacks. We combined wide variety of taste with the chips and we also made them innovative through their layout & packaging. This made Bingo totally different from the products available in the market.

This year, you have also roped in Rakhi Sawant for Mint-O-Fresh. How do you think she matches with other brand ambassadors of ITC Foods like Shahrukh and Sachin?

I think, the job of a brand ambassador is to convince and connect people with the product. And Shahrukh and Sachin having a mass appeal did actually help to uplift our products. But at the same time, we wanted to establish different brands and hence our brand ambassadors remain different. For Mint-O-Fresh, Rakhi was roped in as she has a youthful image that is required to push a mint product.

What’s next for 2008?

In 2008, for sure we will be venturing into some of new segments within the food division itself. We will also be enhancing our existing business portfolio. We will be launching Benevita Flexseed Biscuit & many other innovative products.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist)

The Outsourcing of HR Services

Sai Prasanna, COO, Ma Foi Consulting Solutions

The Outsourcing of HR ServicesThere are several factors that will propel this trend. The first reason is that India has migrated from being a mere cost arbitrage player to one where outsourcing improves process efficiency. This is a logical extension as part of maturity cycle of any business and BPO is no exception. In addition, India has plenty of human resources and, thus, offers itself an ideal platform for leveraging the BPO opportunity. What we have seen is still part of early-adoption in the last couple of years. Experts estimate that there is greater opportunity still to be untapped. But there are several factors that can act as roadblocks. India will face competition from countries such as the Philippines and Thailand. There are no vocational courses to prepare graduates for the new kinds of employment in India. The need of the hour is to create courses for new streams in related BPO segments. This can help in reducing the huge attrition rates.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist)