You've built a very large business, thousands of crores. How do you know if it's a good idea or a bad idea? You will never know in the beginning, but you will know with time. A good idea is one that gets reinforced with every single milestone getting met. A bad idea is one when we are consecutively missing it. I actually have a very simple rule. When I think of an idea, I put very easy milestones in front of it. A day one milestone, a day two or a day three mile. And I believe if I missed two, maybe three, it's a bad idea. Ashish Mohapatra, co-founder and CEO of Off Business and co-founder of Oxizo. If you want to understand what it actually takes to build a multi-billion dollar empire in India's core backbone industries and the exact business models that build multigenerational wealth, this episode is for you. How do you attract capital? I think four things attract the capital. The first is a deep marketer. It means a market that has one of two facets. Either the profit pool is large or second you believe that the pool will become large. The second thing is a great guy. A guy who you think will attract and retain people. The third thing is to say it's cheap. Fourth thing that attracts a capital is a business model that sounds attractive to me because of variety of reasons largely personal. So if I can make my ideas seem personal to the person I'm sitting across the table, he likely get how do I create an environment in the company where everybody is going above and beyond and working. People work for only three things rich, famous and power. So rich is you're making more money than what people of your skill your batch are making. Fame is if you are doing something good, not only does your boss tell you, but it does the whole world. And the third is power. As you are doing something good, you have more people obeying you. Human being is driven by these three choices. Do you think the pain taking capacity of an entrepreneur needs to be very high or else he can't or she can't build a business? I think if there are moments of extreme pain, there are also moments of extreme joy to compensate. I don't think that differentiates an entrepreneur. What differentiates is the fact that can you sacrifice? Not many people can sacrifice willingly without anybody asking is what defines entrepreneurship because entrepreneurship needs sacrifice. I am 20 something year old with 10 lakh rupees today and I want to make 1,000 crores at some point. Where do I start? What's your framework to identify big money in an industry? I have a small favor to ask you. I need you to subscribe to our channel. The more subscribers we have, the better and bigger guests we can bring and provide you more value through these conversations. And the full audio experience of this show is also available on Spotify where you can follow us and listen to the new episodes as well. 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M >> and is a fast scaling startup and is invest and it has like all the best investors in the world. So you have like the full package which is unheard of. >> What do you do? >> It's a good question. >> Explain me the whole business like what is what is generating thousands of crores of revenue and profit at the same time in such a boring industry. >> Yeah. Right. >> You are in a boring business game. >> Very good. Very good. So one of the reasons why we I think why we are what we are is because uh because it's difficult to understand and even more difficult to execute right. So the the the way it started and one thing led to the other Raj >> the way it started is sometime back about 10 years back we just about 10 years old now sometime 10 years back we realized that there are these small and medium enterprises >> okay like a small manufacturer small factory or a small contractor of services a road maker and stuff like that that nobody really cares about them. Everybody builds a product for either a large corporate or for retail people like you and me. Nobody thinks of these actually as the general consumer of what they do. Uh and we knew that because a lot of us used to come from that kind of an environment. You know parental businesses, friends who are in those businesses and all that. And then we realized that this is actually the backbone of the economy. It is responsible for the largest employment. It is responsible for a significant portion of the GDP. So we wanted to build for that. I think that's where the big differentiation was. We wanted to build solve formemes and MSMES. >> Then we realized that if we have to talk about anme then we can't just solve one thing for them and then expect them to become large. >> So MSME in our opinion has three big issues. The one is if you look at a typical financial structure for them to explore and get more sources of revenue. >> The second is to actually make sure that they buy at the right price >> for whatever products or services are important for them. And the third is the capital to actually make sure that the business has uh uh significant resources for growth. >> Okay. So it's like how to grow revenue, how to buy better and cheaper and then how to put the capital that can uh uh grow >> even get more capital and correct because fin getting finances is very difficult. >> Correct. Correct. Correct. Like for example, all these three are actually solved for a large corporate. A corporate large corporate everybody knows typical word of mouth they they'll find it easier to source the revenue right for a for an individual like you and me it's very easy to find a job today but forme to find a source of revenue is tough they are the ignored middle in in that source. So so one thing that is good for us is we we were very clear that we wanted to build formemes and nobody else wanted to do it. It was the unlamorous middle. >> Why people didn't want to build for MSMA? >> Because it's not very it's not very sexy, right? At the end of the day, if my product gets used by five of my friends, I feel very excited about it. And hence, >> is it like 70 80% of the >> 60%ish economy is run by MSME. So >> it is it is but it is it's something that is there in the face, but you don't think intuitively about it. If you pass by a small factory, you will ignore it. If you pass by a large factory, you see a huge chimney, you will see it and think about it. But if there is a small factory with a large tall gate and a wall, you won't think about what is inside. It's not very visible. >> True. >> Right. So uh so one was that want to build for an ignored middle which nobody was looking at. And the second was a design choice to say that the three problems that we spoke about which is revenue, buying right and and the capital for growth we wanted to solve it together. H we knew of people who used to solve one at a time but we knew that at the end of the day if you're solving one at a time you're not solving for your customers eventual growth. So you could be giving him more revenue but at the end of the day if he doesn't have capital he cannot be uh he cannot grow by himself. If your customer doesn't grow you don't grow. >> True. >> Right. So hence a holistic approach of problem solving saying these three problems have to be solved together for the theme is what we wanted to do. So what did we do? We picked out a very simple approach to say hey let's look at theme let's give him raw material that he uses for his business. So if you are a small manufacturer and making auto parts we'll give you steel. >> Okay but more importantly for that particular steel we will also give you the capital to buy steel because you may not may or may not have the capital to buy steel adequately. So hence started financing for that particular steel and in turn we said okay you may be working with Marauti I am somehow going to get you the next Hyundai for your business so that you can actually grow. So that threepronged solution of saying I'll solve for revenue. I'll give you the right material so that you can work on that revenue. I'll give you the capital so that you can buy the material is is what differentiated us. It seemed extremely hard in the beginning because fundamentally even each of these can actually be a standalone opportunity in itself. Right. Exactly. >> And hence Raj to be very honest it was difficult in the beginning because all of these were moving parts and what we did and we were lucky during that point in time is that internet had become very large forme GIO was in play the regulatory practices had unitedmemes like GST had come in and stuff like that. So it was relatively we were in the right place at the right time. >> So we started a business wherein now we had to draw some guardrails right. So okay so we said we will do only steel. M >> we said we will do financing only for steel products >> and we will give you only infrastructure and manufacturing oriented revenue opportunities >> and then we started adding more products and we started adding more geographies but the core of what we do at off business is still the same. We'll give you the right material. We'll give you capital to buy that material and we will give you new revenue opportunities. that new revenue opportunities became a big thing for us because fundamentally what we did is we realized that there are close to about 18 to 20,000 tenders that get released in a single day and theme has to browse through close to about thousand odd websites in a single day to know what tenders are relevant for him. >> We just browsed used uh technology to make sure that those tenders are available to him at a at his doorstep by just at the click of a button. >> Interesting. So he could come to us for revenue. He could come to us for raw material. He could also come to us for capital of buying those raw material. Typically he comes to us for all three. So now let's make let me make it more easier. >> Yeah. Which >> let's say if I'm a small business owner. >> Mhm. >> Okay. I have a detergent business. Do you help in detergent business owners? So then >> uh now we do. Now we do. >> Now you do. Okay. So let's say if I'm I have a small detergent business. I want to grow. >> Yeah. >> I typically come to off business. Okay, you will help me buy, right? You will help me finance it and then you will help me increase my revenue as well. For a detergent business, we haven't solved the revenue part of the puzzle as yet. But the other two we do. So, for example, in a detergent business, what would you buy? You would buy chemicals. >> Or you would buy intermediates. >> Yeah. >> Okay. Some of those chemicals we do today. So, you sell or you actually are the middleman between them. um we started out as a middleman and then we gradually bought and sold and then we realized that hey some of these actually make sense to even manufacture so some of these we manufacture as well that's how the business has grown >> okay >> but we were never a agent for that matter >> okay >> we used to go to a large chemical manufacturer and tell them that hey I have these 50 oddmemes uh who can buy who are soap makers and who can buy this chemical from why don't you give me a good discount and he used to give us one and then uh the discount that was created some of us some of which we used to pocket and some of it we used to pass on >> that's how the business was so fundamentally if you look at us we figured out that a theme does not have the buying power to actually buy and get the right competitive prices of what you would get in bulk true >> and we became the platform to get that bulk margin some of which we kept and some of which we passed on >> but isn't that something like a trader would do. Yes. But a trader is very localized in some sense. Uh in the sense that a trader actually typically operates in his own sphere of influence. A normal trader would operate in his own town in his own city. Some of the guys who have become larger would probably be in three or four cities. >> But technology actually made us operate across a lot of cities. Got it. And the second thing that the trader did not have is access to financing because we said very clearly that I am going to give you capital and I'm not going to hide it in the margin for the product. We started get getting a lot of debt into the company and the debt was much cheaper than what a trader can source for himself >> and some of that benefit also we passed. But then would you solve for so if X company let's say if I want to work with you >> do I have to work with you on all three or I can work on one of >> you can work on one >> oh it's up to me it's not like the entire ecosystem is I can sometimes just take money from you >> and buy from somewhere else or I can just buy from you and get money from somewhere else >> stuff like or I can just use you for expanding my revenue. Yes. Yes. Yes. See Raj, the reality is that the overlap between these businesses as we have scaled has become lesser and lesser. But the fact of the matter is that the core proposition is very attractive to anme because he knows that hey if I go there likely I can get more sources of revenue. I'll get working capital as well and I can buy raw material. So that fundamental port of entry is very lucrative for a typical customer. Once he comes in there, I do not enforce any laws on or rules on him to actually stay. >> Most if you ask me for the very small guys, they typically stay with us for uh working capital needs only because my ability to source large materials or large volumes of material and give it to them and give to them is actually very limited. Whereas the slightly larger guys stay with us because of just the material. M >> whereas a certain section of guys typically stay with us because they want to buy our manufactured product because they are like really cheap and there is a whole host of businesses in fact 90% of our customers do not do any working capital or any uh buying of raw material from us they are purely there because they get those tenders. >> So give me an example of a category where you where you're really good with all three things. See we are not in too many categories Raj. Um we are fundamentally today in four business verticals and within those four business verticals also we do only 30 products. >> Okay. >> So we are not the and within these product also we are not there pan India. >> Okay. >> Right. >> What are the four categories? >> The four categories the first is metals wherein we do steel um we do aluminum we do copper and we do zinc. >> Okay. Um then the second category is industrial chemicals wherein we do polymers three or four products select products out of polymers. We do industrial chemicals which are called solvents which are like phenols uh and large industrial chemicals. Um then we have a category called energy wherein we do bitamin. >> Okay these are very select categories right. Um the third category that we have is appper where we do garments. >> And the fourth category is uh food processing. Today if you remember that cereals example we don't do any cereals but we do niche products like we do some spices, we do some um uh fruits and vegetables extracts and stuff like that. Almonds we used to do we are very small in that one today because almonds we've realized over a period of time actually has a lot of disruptions in the supply chain which we intend to solve but haven't been able to. >> Okay. So the and out of this let's pick up steel as an example that's how you started your site. >> Yes. >> So how an MSME doing what will be your customer who can come to you and you'll help them increase your increase their business. >> Right. So um typically the three largest users of steel is one infrastructure because they buy steel for roads, bridges, buildings and stuff like that. The second largest are um bulk manufacturers. Bulk manufacturers could be for auto components. Um it could be for um heavy machinery and stuff like that. >> Uh the third uh is independent house owners and builders. So we don't do the third category. >> Okay. >> Because of a design choice. We don't want to offer credit to them because working capital solution is what we provide. So we cater to the first two which is manufacturers who use steel >> and the first one is infrastructure guys who used uh who use construction TMD. >> Uh for those guys our simple value proposition is if you are you would typically buy it from a trader who buys from another trader who probably will buy from another trader who int buys it from a manufacturer. >> So there is one buying from the other the other buying from the other. We typically tell them we will buy directly from the manufacturer and give it off to you. So it'll be cheap for you. That's the first. >> The second thing that we tell them is that hey, if I'm giving you the material, you can trust me on what I say. Meaning that if I tell you that the steel will come to you in 2 days, it will come to you in 2 days or I'll tell you in advance that it is coming late. We don't tell them that we'll give you in 30 minutes. They don't need it as well. But it is an assurance that whatever is committed will be delivered. And if in case there is an issue, they will be the first ones to know. That's all we provide. What's your assurance and conversion rate or delivery rate? Oh, it'll be very very high. So, it will be close to about 93%. I mean just to give you a sense Raj uh the substitute uh for a theme will be in the 20s. I mean to give you a sense uh if you have heard of net promoter score, we actively uh track our net promoter scores. Net promoter scores in the 40s are supposed to be great. >> On our platform it'll be close to 85. It's because world is so broken. Nobody wants to build for >> I agree. I have run an MSE I've run an MSME >> soap factory >> small soap factory right and I understand that >> probably out of my 10 vendors one or two would deliver things on time. >> Yes. But not just on time. It is at the right price at the right time and exactly as you need. uh so right time and right price and exactly how I need etc etc that at least in my head I would be like I'm buying at the right price right because I don't have a comparison metric the way we have right but timing and delivery issue is insane >> like they would even the best of the best vendors they would never deliver you on time and they'll always give some random reason and you'll always be so you have to >> play a lot of games to make sure that you are receiving things on certain timeline. So that's one. Second is quality is a big issue >> that apart from one or two vendors, eight will sometime will be 90% pure, sometime 85% pure, sometime 93. It's a big issue. >> It's a big issue. So you pay a large amount in making that independent laboratories pay. Right. So that's the first thing that you solve. >> Yes. >> Okay. So that's steel will go at X quality, at X price and at >> and in the way it will go. If you ask me for a certain >> What do you mean by way? uh like for example if you tell me it has to be on a palleted load >> uh like for example it will be covered so that it is not rusted by rains on the way like for example if it is on a truck keep a 2 m offset I'll do that two uh 20 m offset I'll do that uh if you tell me that it has to be packed in a certain kind of thing I'll do that as long as I offer it I'll give you those choices you can take it >> oh okay >> so these are very basic things actually they don't sound that interesting to a to a large corporate because whatever the corporate demands the supplier will anyways True. MSME they don't get it. Do you get a drum load or a tanker load and stuff like that? >> Correct. Correct. Correct. But it is the guardrail that we offer for ourself is that we give you the options. You will have to choose. You cannot go and customize it as per your own need because then you don't make a business right. >> What we do is we try to figure out what is the uh lowest common denominator and then offer it. And it's a very simple proposition. We tell them that it will only be 5% cheaper. it will not be 1% cheaper because then we don't make money. So point it'll be 0.5% cheaper but that's huge for MSME. We tell them that hey we will give you the material on time or tell you in case there is a delay. You don't have to follow up. >> Anyways there's a live technology uh tracking it right. And the third thing we tell them whatever we say is what you will get. If it's poor quality you will know it's poor quality. If it is great quality and you're paying for it we will assure you that there is great quality. We don't say we are great quality. We just tell you whatever we are giving is the one that you'll receive. >> It's a very simple trustmaking mechanism. >> Transparent. >> Very very transparent. >> And you want a 50% a 50% pure material, we'll give you that. You want 100% pure, we'll give you that. And we'll tell you up front that it's 50% or 100%. >> Correct? So we will not cheat you and you'll only be half percent. It actually goes for a toss 5% cheaper by the way is a huge competitive advantage for us >> because the way the theme buys from us at the end of the day is to take a competitive quotation and see that whether it is.5% cheaper or not because he does that actively right? >> Yeah. >> So this is a business wherein you always have to be price competitive. It is on the back end that you actually have to reduce your cost to make money for yourself. So do you think a lot of traders are buying from you because they would then sell it to even smaller people because you're cheaper? >> The traders can buy from us but they won't get credit from us. The theme who's the end user is the one who gets credit from us. Uh do traders buy from us? The answer is yes but it'll be less than 10% of what we do as a producer. >> Okay. So it's it's the end consumer >> typically the end consumer because then we we would only offer cash and carry terms and then the trader will not buy. >> Okay. So first thing is raw material. So now you have let's say you said infrastructure and you were giving me an example infra automobile >> auto parts people or like manufacturers these are the two or heavy machinery >> or heavy machinery like boilers like capital goods like you know cranes and >> so they bought like steel from you now what now you'll give them money so now let's go to a typical guy a typical guy is an auto parts manufacturer let's say okay he is buying steel from us what we tell him is that if you are buying steel from You also have the option of taking our working capital line >> to buy steel not just from us but from anybody else. >> If you look at this smallme let's say 100 crme who buys uh steel >> for his auto parts business typically you would see that about 20 to 30% of his working capital need is actually funded for by the banks. The rest you would take it from the trader >> and the trader is much more expensive than the bank. So to give you an example, a bank typically charges anywhere between.8 to 1% a month, okay, as a rate of interest. Whereas the trader charges close to between 2 to 2 and 12% a month. So there's a wide chasm, right? And this is monthly. These are not annual interest rates. >> So if you can make a business wherein you're charging between 1.25 to 1.3% a month, there's a business to be made. >> Yeah. So we tell him that hey you can buy our raw material you also have this option of taking the working capital line which is actually cheaper than the trader >> cheaper than the trader don't worry about the bank if you have a bank take it because we will be more expensive than a bank because he takes 80% of his financing needs from a trader there's a huge gap available to us so that's how financing comes into play and the relaxation that we give him is that there is no tightness to say that you can only buy raw material from me if you're taking credit you can buy it from anyone. So that business also operates on its own standalone ground and that business is sizable today as well. It's a 80-year-old business >> but because it has such a such a strong USP forme you will see very uh low operating cost very low um bad debts and stuff like that. >> So you are like more expensive than bank but cheaper than all the other alternative sources that >> cheaper than a trader. M >> so I give you a raw material which is cheaper than a trader which is faster than a trader >> also more trustworthy than a trader but also is finance less than a trader. >> So fundamentally our belief is that the trading economy in India which is very very fragmented has largely come into play because the manufacturer and the end user do not trust each other to offer terms of credit and hence there are many multitude of players who come in between. M >> we believe these are all irrelevant. Our fundamental philosophy is we will solve for trust manufacturer can give me on credit the theme can trust me to uh deliver materials to him. So hence financing and hence commerce. >> Got it. So now let's say this auto parts manufacturer >> he bought x amount of steel from you right >> got it financed now because you were giving lucrative terms and he's like let me buy 20% extra. Okay bought 20% extra. Now he has 20% extra goods to be sold. >> Now you will help them. How will you help that person sell that 20% extra? >> Well, hopefully the reality is that we do not today actually offer to buy those goods from him directly. But the way we indirectly give him a uh advantage towards that is that he can come to our platform and understand where those goods can actually be sold off through a tender today which is largely a government source. >> Okay. So today if he wants if he knows that hey I have a lot of mile steel I make a lot of auto parts he can come to a platform and say I'm an auto parts manufacturer >> I am there in Indor okay I am looking for revenue opportunities for auto parts in and around Indor for this kind of mile we will give him the tenders >> that are live during the course of a day now to give you a sense at any point in time there would be close to about 14 to 15 million tenders that would be live domestic tenders that would be live and would have not gotten bidded for or the bidding would not have closed. So in that part to actually figure out in that particular geography for this particular trader for this particular kind of a raw material for him to find it is going to be difficult. So he can use us for that as well. >> So out of that is where it ends. So let's say out of 15 million >> tenders which are live >> if I am a manufacturer you will tell me these are the 10 where you actually fit in absolutely right and then you apply for these 10 if it works out that's a free service by the way I will also tell you if you pay me some money because it's a more analytical tool if you give me more information about yourself I'll also tell you if you can win that tender or not >> subscription business >> that is a subscription business so hence it works in tandem see the reality is not everybody uses all three but he does see the value right and >> there is a big value if I get it >> and the reality is that the moment you have given more and more information about yourself Raj I actually I have created a mental map technologically of who you are so I start pitching products to you which are relevant for you as long as I make them or I uh finance them >> interesting and then we'll talk about reality of tenders. >> Sure. So to give you a sense of tenders, 18,000 tenders get released in a day which we aggregate today and we don't aggregate the entire universe of domestic tenders in India today. My sense is we aggregate about 90 95%. So about close to 19,000 tenders get released in a day and that's in that includes non-working days. >> There was this one government website no where you get a lot of tenders. >> Huh. But that is for government buying from you. That was called gems. >> Gems. Yes. >> Gems bottle. So this sold on gems once. sold through gems one. >> Correct. Correct. So see there are by the way there are five or six tender aggregation engines in India today as well which are very similar to what we do. The way we are different from them is number one for them uh uh the tender business itself is whole and soul of what they do and they don't use technology. They actually have people who read through tenders type in them data and make the uh information ready. Whereas what we use is very simple natural language processing which will actually digest that information, feed it to technology and then uh then use it and tender per se is not our business. Our business is to sell material but tender is government buying from you right or it could be many things. It could be government buying from you, government directly buying from you. It could be a government body buying from you. >> It could be a government owned company buying from you. All those are tenders. >> So is gems this only right? No, >> this is government buying from you directly. >> Okay. Okay, gems is government buying from you directly. But if government has given >> X contract to build a bridge to X company and they want other tenders to bid but in a transparent manner. So that will be supported by you. So that for small uh tender buying opportunities like selling cups and uh sauces very small. >> Yes. Yes. Yes. Yes. Very very small small things. they haven't really expanded because fundamentally for you to apply a revenue opportunity to go back to the original philosophy you need to offer financing as well. So gems had to have financing partners. Uh James had to also offer some other services through which they could build trust because it works hand in hand. So holistic solution was required to be given >> which is what we did. Interesting. And then so you explained me the tenders, you explained tenders game where you have an edge. You explained me banks versus you and traders versus u tell me the chain you said if somebody's buying from an ex-trader >> right what is what is a chain typical chain explain me from steel or any chemical or any raw material >> typically you would see two >> it can be more but you would definitely see two the reason for that is the following I mean if you go back to how materials were traded ever since the historical past there was always a manufacturer or a source >> m >> and there was a user >> yeah Okay. Uh, it need not always be a manufacturer. It can also be a field. It can also be a rock that was broken in a mountain. Meaning a source. It can be a mine, a mountain, a field or a sea. >> Right? But but that's the source and then there's a user. >> Both of them do not want to engage with each other. The reason for that is the source is at a particular geographical location and the demand is somewhere else. H >> right. Fundamentally every trade involves credit. For example, if I am selling to you even on a retail counter, what happens is you will first come and give me money. So you are now deficient of money and not got the service. Even if it's for an instant of a second, >> right? >> Even if you're standing next to each other, >> if I first give you the material, you could run away with it. Even though you're standing at the counter. So for that microscond I'm exposed. >> True. Now imagine two businesses which are far different in geographies and they don't trust each other >> and inherently in developing economies where judicial systems where traditional systems are not there they don't trust each other. >> True. >> So what happens is one trader will come who's close to the source or the manufacturer >> the mind the mountain the field and the sea he'll come there and one trader will come who's actually close to the user. So typically you will have two >> there could be possibilities because the business is not that large that there is a third guy also in between but you would typically have two zone wise there would be a third person zone wise there would be a third person. Now if this guy is is is doing the selling and this guy is doing the selling both of them tend to be very small >> and hence their operating costs are going to get loaded onto the product and because of a two uh stage intermediary all that has to be boned by theme >> and how much that would be typically what's the percentage >> um typically what I have seen is that for bulk materials it tends to be for any material it tends to be 4 to 5% per uh step. So what have you done essentially and this includes cost of financing as well. Typically it would get added up by 8 to 10%. >> By the time it reaches >> by the time it reaches >> and 10% is a huge competitive >> a huge competitive but the corporate does not get it that way because the corporate is directly buying from the manufacturer. If he's buying from the manufacturer he will typically pocket a 3% or 4% margin and take it. >> So you have this 8 to 10% play. Now the bulkier the raw material that 8 to 10% will probably be at 6%. >> The more smaller the fragment it will likely be 15 20%. >> Fair. So that's the margin that you have at play. >> Mhm. >> Right. That's what we want to solve for. We want to become this one large intermediary which the supplier trusts and the buyer trusts as well. But then talking about trust, you make a lot of small manufacturers. understand what are the tenders available and then bid for it and tenders typically government do they pay and we don't care about that be the point because that's what that's the risk that they are taking we do not guarantee the fact that hey you know what the tenders that we are exhibiting on the platform are actually the ones that will genuinely give you some kind of support what we are doing is we are giving you a service >> that's the risk you have to take >> that's the risk you have to take we will tell you the risk for example if you want to know some analytics around saying that hey there is an Indian oil tender where there complaints around payments around it because we've been in that business for 10 years we can do that analytics for you it's a premium service but that we don't guarantee we guarantee the material that we provide for you we guarantee the financing they provide but that has nothing to do with the tenders but in in reality if you know about the business building reality in India do you typically people get money on time and tenders to be very honest with you um there are two types of businesses there um one is so it depends a lot on who the tender giving entity is and what is his source of financing. So in India there are lots of tenders that come in wherein they are funded by stable bodies by states that have money by bilateral agencies that are donor agencies and are very big. Typically that you don't see an issue there but otherwise it's a risk and the smaller you are the heavier the risk that you take. M >> it is a business where you can lose your pant and shirt if you choose the wrong anchor. So hence to know that particularly the guy who's giving out the uh tender and what is his source of money is an important piece of information that you provide through that we can provide through analytics that it's not a free service per se but you can >> but you can and then do you have to bribe a lot of people in this to attend? um we don't care about that because he's seen the information on our site and then he has to go and build separately on the particular website wherein he has to get the tender individual. So that's his outlook. >> Okay. >> But that we have nothing to do with >> our uh tender tool is a very simple tool. It says you don't have to surf through thousand websites. We will give you on one platform. >> Then how you convince that guy? How do you get it? >> That's up to you. >> Huh. And the smart MSME knows his ways. He knows his ways around. In fact, we have started >> this many many understand. >> You know the way we have got it smarter for him Raj is that we tell him that hey you know what today if you uh if you do not have the capability to win the tender I will give you matchmakers who can actually together bid with you and win that tender. >> That's what we would provide. But we would not help you in winning the tender because that's not our cup of tea. M that's >> but it is a strong enough pool >> for him to actually come in and get information because otherwise he has to have two three people sitting out there and downloading tenders and tenders are very voluminous as well right >> uh each tender document can go to about 100 pages on an average >> so read through them figure that out whether whereas you are getting it simply on a tech tool which is actually customized to you right >> true so see you have gotten you've done something right so I want to understand that something >> I want to go deeper if a young entrepreneur is watching it >> I I want to learn how to make a boring business which is worth billions of dollars and gets me profits as well >> right and I want to decimate that with you going deeper last time when you came to the podcast you talked about four opportunities four big opportunities in India do you remember that >> yeah I remember very well >> yeah so there are only four big opportunities in India which you said that these are the four places where big businesses can be built >> in India >> now tell me today >> where are the what are the three things or three sectors or three opportunities where businesses can be built. So I'll be honest with you Raj two decades back I had thought about that question >> right which is when I first got into my first ever professional vocation I thought about that question >> I did think about it in your last last podcast it's probably 3 years old I'm thinking about it now the answer is still the same >> I believe fundamentally there are four businesses in India there are fads which come in and go but those four businesses are there And those four businesses are the ones which are going to make money at the cost of repetition. I'll give you those four. Uh the first is very large scale manufacturing wherein you have some kind of a regulatory advantage. >> Okay. The second is micro distribution wherein you are reaching the rural pockets. The third is lending and fourth is where you are playing through cost arbitrage meaning you are spending in rupees and earning in a foreign currency hopefully dollars or euros today dollars are more attractive how how does that business look like it's maybe it's a bo business maybe it's a pharma business manufacturing business >> where you're getting dollars in >> where you are earning in dollars because your uh your customer is outside is abroad but the the business cost structure is built in rupees. Um so the so those are the four businesses right. So the examples of those four businesses the first business wherein we spoke about very large manufacturing wherein you have a regulatory angle >> is for example a large semiconductor uh thing that you're putting in today. In the new world, in the old world, it was a very large steel factory wherein you had a subsidy, right? It could be a very large chemical factory which is wherein you are getting an export incentive. But the government, you've actually worked with the government with some local regulatory thing wherein you have an advantage because either you got something that was causing massive employment or you got something which actually was very uh important for that particular region to have as an ecosystem start. So very large manufacturing, small manufacturing in India and hence the theme opportunity, right? >> Uh so very large manufacturing in India. I think if I reflect on the last 3 years, the threshold above which that business actually makes sense has only gone up. So the more larger you are, the relatively easier uh it is for you to make money. I think the second one that we spoke about is micro distribution, right? wherein you reach the last pocket, you make it so cheap that you know the person really doesn't think about it before consuming it. Uh it could be daily wear, it could be a financial product, it could be a logistical thing like a parcel being given out. I think that also has become a lot more I think the threshold there has dropped. >> Okay. >> Because of technology, >> right? Uh and the third thing that we spoke about was um was lending. I think in India uh markets actually um have it is relatively easier to understand credit and uh the ability of a lender today as long as it's disciplined to make money is longer. So I think that also has magnified um and the fourth uh the arbitrage stays the same. So so in my opinion I don't think that answer has changed. So I would push everybody to actually think along those dimensions and see if your passion uh set actually aligns with each other any >> but these are all the things that you said they require large amount of capital. Well, they don't >> they don't they don't >> a regulatory framework may if you want to build a large manufacturing facility obviously it's a very capital intensive business correct correct so so so yes you're right uh that it finally will use a lot of capital see business building is a marathon you don't need to get it right at the first go so supposing I want to build a large factory obviously it will cost a lot of money right >> but as long as I have said okay I will go after that but today I will I don't have the wherewithal but let me figure out a way uh let me take a shortcut so that I can actually start off with something and but finally end up there is also okay which is what first generation entrepreneurs will do then look at us we built a business wherein we were trying to be this large intermediary today we have large factories as well >> I knew that I had to build a large factory because I I'm not a micro distributor I'm not the arbit arbitrage guy, right? So, so what did we do? We took this angle of building a B2B platform, then we built manufacturing. So, you could take a two-step approach, maybe a three-step approach, but finally you have to land up there. So, you have to have the clarity that you're ending in one of those four. You may not start there. >> So, for example, you cannot be a great lender at the beginning. Like, I'll give you a classic example. um AU Finance Bank was a uh was a business correspondent or was an agent for a large bank. I think it was HDFC and then it built the base and became a bank. So you could have a two-step opportunity. >> Taking that example, if I am 20 something year old Indian with 10 lakh rupees today >> and I want to make 1,000 crores at some point >> in your life in >> not now >> maybe 5 years 10 years life now nobody talks. Okay. >> Yeah. So let's say so I am 20 year old 10 lakh rupees capital I have and I want to make 1,000 crores where do I start what is the opportunity where you will start right so can give me a specific business what do you see which can be >> so is it me you or somebody in general >> nice give me all three okay fine okay so uh the reason I asked you this question Raj is because fundamentally opportunities is existing across these four businesses. >> Okay. >> Right. It depends a lot around who you are as an individual as to which I would say finally you have to land up in those four businesses. Let's take that into mind. Any which way. >> Are you sure like anyway if you want to build business in India you have to actually end up building in one of the four categories. >> Yes I'm 100% sure of that. If you want >> only four businesses at large at max will make business. So let's put a few guardrails around it which will make it tighter. If you want to build a business that is of consistent money-making machine let's say over a let's say over a two decade period I think one generation is what we should take as cut off like in my lifetime I should always see making money that's one second is no fat would take it away and third would be that it is a business that can be built off each other meaning that today if I hand it over to the next generation he will build off it as well meaning it can last a 100 years will generate substantial value over 20 years and no fad will take it away. It's only those four business. I'm very sure of it. >> So if you want to build a multigenerational cashm machine kind of business which no fat will take away. >> You have to be in one of the four categories again. >> Okay. Those four you want me to repeat that the four categories are the first one is where you have a regulatory advantage in a large manufacturing facility. That's one. The second is to have a micro distributoring product which actually reaches the reaches rural India. Okay. The third one is where you have a significant cost arbitrage wherein you are earning in a foreign currency but spending or um having your expense base in rupees. And the fourth is to say that um you are lending and you understand where you're lending. So those are the four businesses in my opinion. Okay. Um so I'm that guy again. Um you're in your 20s or 30s. >> I'm in my early 20s. Um 30s may you've missed the bus. You have to start you have to start early. Okay. >> Or at least start thinking early. Okay. >> Right. U better you should start I mean I think the world is getting younger. M >> people live to get older, but the world of business is getting younger, so you should probably start in your late 18s. Anyways, um you should think about what fundamentally defines you. In my opinion, each of these businesses have two maybe three traits. Happy to outline them. Those two or three traits is something that you need to have. >> Okay, what are these traits? >> Okay, let's start with the first one. The first one is regulatory advantage in a large manufacturing facility. >> Okay. I think you will have to be the first trait that you need to have is you need to think operational efficiency, detail orientation, >> operations, detail orientation, you know, bal as they call it, right? You can find a needle in a haststack and stuff like that. That's the first thing that you need to have. Detail orientation. That's a characteristic trait you need to have. >> That a characteristic trait you need to have. Number one. Uh second is extreme commercial orientation. >> What do you mean by that? >> Um at every point in time. So if I'm sitting out here and I think about this cup, I if I'm thinking about it, hey, this cup actually looks pretty expensive to me. In my opinion, it should probably be about 150 bucks to make. Um, and if I actually probably build it in a straight shape, it's going to cost lesser, maybe about 140, 135 bucks or 10% less. Is if you're thinking along those lines, if you're thinking in numbers, you're thinking in cost, you're thinking, okay, if I sell this to Raj, Raj is like a wellto-d do guy. If I find guys like Raj, I'll probably earn more for this car. This is extreme commercial orientation. If you start think if your denominator of thinking around you is in currency that's called extreme commercial orientation. You need to have that. So that's second. And the third is your ability to actually sit in in environments which will be all inspiring to most people but still you can do the talking because you need to have the regulatory advantage. Right. >> Yeah. >> So you may need to sway away regulators. You need to sway regulators, guys who make laws and all that. And you need to put your point of view and sound interesting at it and they'll buy it. >> I would say those three. >> Okay. Sounds like you. >> Yeah. Sounds like sounds like a lot of people in India who who've kind of you know the Adanis, the Amanis, the Biras, I think the early generations of them all used to have these three. I mean look at Dubai Amani story, Aditya Bila story. I think JD Bilah story they were all that right. I think they they can I mean it is at a stage if I sit across a large politician I'm probably going to get inspired I'm going to get over by that situation but if I can still make my stuff and those are the three let's go to the second one which is micro distribution micro distribution you need to have the ability to productize >> meaning that uh you know the world was designed to pack everything in very large buckets >> right whereas the world was designed to consume everything in very small packets. >> All right? A manufacturer would like to give you a 1 kg pack of biscuits, but you'll probably end up only two eating only two biscuits. So, if you can pack in two biscuits pack, your product will sell the most. So, the world was designed to sell in very large packets, but to consume in very small packets. >> Nice. >> Right. So, the ability to productize means can you do it in small packs? >> Yeah. like how how large company got built by just making one rupee shampoo sessions. >> And that is that Calvin Care. >> Calvin Care. >> Calvin Care. Yeah. Uh one rupee shampoo. Uh 15 pesa phone calls cheaper than a postcard phone calls. >> M >> email which is zero cost. So you have to productize to a very low value. So that's one. >> Many people think like that. You know typically the guys who are innovators tend to think of it like that that let me make things smaller. Let me give them in everyday wear use and throw things. So that's one. >> Okay, this is a very tough skill. So that's one. The second is to be a very good marketeteer or a very good salesman because fundamentally if you have to reach the rural guy, the rural guy has to you have to speak in a language that the rural guy understands and you have to also speak in a language the that the city guy understands. So you need to be a very great marketeteer. In the first one, you can get away from it, but here you need to be a great marketeer, a great salesman. You need to be a glip talker. You need to talk in a language that the other person finds interesting, right? I would say these two. The third thing here is you need to be patient. The first one you can get off by being patient. >> See, you'll get immediate >> because the regulatory advantage, right, >> it can actually come in no time. See Bilas were big in in no time. Amanis were big in no time. But Hindustan Uni liver got made in India over 30 years. ITC the company that I worked for got made in India over 50 years. So you need to be patient if you want to reach the village. The village is far away and there are many villages. So you need to be patient because fundamentally here you're building a brand, right? Okay. Let's go to the third. The third is about credit. In credit, the first thing that you need to have is discipline because the same thing you're doing over and over and over and over again. See, in the first one, which is manufacturing, you're meeting different people. You find it interesting. In the second one, you're talking sales, marketing, it's interesting. Credit is boring. >> So, you need to have the ability to put your head down when nobody is watching you. Still end up doing the same thing. and not yearning for more. The best credit guys are the most boring guys in the world and they're okay with it. They like it. There there are a few people right they are the nerds of the uh world. They'll put their head down. They don't want anything interesting. So that's one. The second thing is to not ignore signals. >> You know when we are growing up what happens is there are two kinds of people right? while growing up some signal comes in right and they would ignore it and say ah doesn't matter where there are some people saying okay if something has happened in the world this is how it will affect me and let me think about it so not to ignore anything credit is a business wherein you can't ignore signals in manufacturing you can and what do you mean by signals >> signals could be anything for example I'm just walking down the road and I am actually seeing that there are posters being put up of a political party which is coming into power that may be more socialist, communist and all that and I actually think oh you know what if this party comes into power I may not be able to build a great business I'm going down the road and I'm seeing something being demolished on the side and I think about hey why is this being demolished on the side maybe some things will get affected and let me not put my money behind that demolition so not to ignore signals credit is about reading signals way before a normal human being can >> interesting and the Third is to make sure that you are always tapping the cheapest source of funds because that's how you make money and that's how you grow your wider consumer base. So if you're trapping money from a bank, it is cheaper. >> You go to an external source which is a bilateral donor, it is probably even more cheaper. >> So you are always on the hunt >> for the cheapest source of money. H >> some people are some people have these kind of and let's go to the fourth. >> The fourth one is for arbitrage. >> Cost arbitrage. Yes. >> Cost arbitrage. I think first is that you need to talk in a foreign language. A lot of us don't have it. Now you sit with a foreigner. You need to speak like a foreigner. He doesn't understand you. Our cultures are very different. He has to listen to you and has to make sense of what you're talking. Not many people can. I can't. >> I don't have that skill. Why? >> Uh well, I think why don't I have it or uh >> why can't you? >> Because very early in my uh when I was in my late teens, as you know, >> I figured out that I'm probably the first or the third. I'm probably a large manufacturer or a lender. >> Mhm. >> And then I didn't kind of put All these are acquired skills by the way. You will never be born with each of them. And hence I did not put too much energy, >> capital as well as time behind building that skill because I knew that my dispensation or my you know my passion is probably one of these two. >> But why can't you talk and attract a foreigner in their own foreign language, foreign country accent? >> Can I? Yes. But am I the best at it? The answer is no. >> Got it. >> Can I manage because of pure self-ride and performance? I probably can. >> But will I be the best at it? you said 10 lakhs to uh a,000 crores, right? So, so I need to be the best at what I'm doing. So, I think that that's one I'll have to speak in a language that that that the foreigner finds it easy to understand. A lot of us uh tend to have it, right? And they and they build on it. So, that's one and I think the second one is to make sure that your cost is continuously going down because the arbitrage will always be taken away. Today India is cheaper. Tomorrow Nigeria is going to be cheaper. >> So you have to set up operations in Nigeria. After Nigeria maybe some other uh East African country will be cheaper. >> So you'll have to take your cost of manufacturing or your cost of services down. So you're always on the lookout. So you have to be a lot more global. >> It's a difficult business. All all four businesses are difficult. I think I find this this business to be the toughest >> cost arbitrage business. A lot of people find that the cheap that the easiest. Uh well it depends on what you're looking for because your question was do you want to be the world's largest >> fair see a large business you want to build thousand 2,000 5,000 crores out of >> if you want to do that this is the toughest business because fundamentally it'll get taken away see BPOS were at one point in time very very large businesses but suddenly they got taken away now AI is taken it all >> uh if you look at pharma companies pharma companies that were out of India were pretty much the vogue about 20 years back But now they are probably being built in Africa. >> Yeah. >> So it can get taken away. I think >> farmer companies only are building in Africa now. >> Farmer companies are building in Africa. So you have to do that right. So so fundamentally this is the business which I given my own dispensation of skills I find the toughest. But yeah coming back to your original question. So there are these two or three things in my opinion wherein you need to first make the choice very early in your life that this is what I'm passionate about because I probably am I probably don't have those skills but I am very enthused by those skills and then you start putting time your extra capital that you're earning pocket money to begin with and your energy behind it >> and that's how you start your journey. You don't you think of it first in your head. Hey, I'm going to be a manufacturer. Let me start thinking about it. You will not likely you will not have the capital because you are not probably not born into one of those large conglomerate families any which way. >> If you're thinking then definitely not >> then you're definitely not because otherwise you'll be forced to anyways go there. uh once you've made that choice there will be a time in your head wherein you will wherein you would have figured out that hey I have put in all my resources behind it already and now I'm ready the way you get to know is when the ideas that come up in your head when you see somebody similar who's actually built something actually trump the ideas that he comes up with so you think you're better at it then you know that hey you're Okay, now comes your next step. >> This will take years. This will probably take between 2 to 5 years >> to get there. Once you've done that, you cannot jump into each of these four businesses. You will have to figure out a V media. Like in our case, bid assist was a V media or the trading engine was a V media to becoming a manufacturer. The V media to build lending for us was actually our commerce business. >> Yeah. So you have to figure out a vi media. The reason you have to figure out a vi media is because the cost of entry into each of these businesses is extremely high in each of these four businesses. So first you have to figure out a vime. It's probably a software. It is probably through an association with a friend. It is probably by doing something where by which you can actually understand the risks of what you're doing and then do it better. M >> probably by getting some somebody else's capital like get a private equity player or get a rich man to fund you >> or get your dad's savings down your pocket whatever it is right but you have to get a v media because likely a 25year-old in India does not have capital he has the time he has the energy he has the bandwidth but not the capital so you have to figure out a v media for capital >> that's the second once having taken the v media >> most likely you'll have to spend 2 to 5 is again going to one of those four businesses. So it's probably a journey of 2 to 5 years plus 2 to 5 years after having made the choice. So you start in your late teens by the end of late 20s is when you would have landed up in each of these four business. Sorry for this long theory but that's how I think but if if you have to be specific let's say given your understanding of business >> and the data that you get by working with thousands of businesses in India. >> Right. Right. and knowing hundreds of entrepreneurs, >> right? Give me one specific opportunity or a specific business which you feel today in India nobody's building and nobody had to start you could have built it and probably made some money out of you don't know how big that will become you don't know how that's how small that will be but you feel this is an opportunity where something can be made um I think uh that is somewhere in in the chemicals um cosmetics pharma domain. Uh the reason I say this is because see uh building out something on the chemicals cosmetic pharma domain. It has the largest potential of usage. >> Okay. The world uses it. All the developed countries use it. All the develop developing countries use it. >> But it is manufactured in very few uh locations. Why? because it pollutes the air, the water, the soil, the environment in particular. So I think to build a business around chemicals is high usage. >> M >> but can only be manufactured in pockets. >> In places like India or for that matter any developing countries which are less environment conscious, they're getting more environment conscious. There is a potential to build because actually there's a lot of demand which wants to get centered in a few locations. So if I would be thinking today, I would start thinking chemicals. Chemicals that may or may not pollute an environment but chemicals that actually have wide usage but can be manufactured India. That's what I uh I think give me an example. Any chemicals that goes into cosmetics, a lot of APIs that goes into pharma manufacturing today. I would >> isn't there a lot of competition already like insane amount of competition? uh there is there is there is a lot of competition but uh but the world is moving right because where it is being manufactured where it was being manufactured yesterday is not where it'll be manufactured tomorrow so today is the world in transition so I can give you a stat from what uh what I know industrial chemicals in India today is a 250 to300 billion opportunity if I take a 3 to 5 year lens out today it's it's probably between 150 to 200 it's probably the single largest opportunity in in India today. >> But why a big guy >> and there you can start small. >> But why a big guy who already knows this game and is one of the largest players or large manufacturer of chemicals would not enter all of these opportunities which will come from let's say Europe and US. >> Yes. Yes. Yes. So Europe and uh and the US are fast moving their production destinations out to countries like India, Southeast Asia, LATAM and all that. >> Yeah. >> Are the big guys doing it? 100% they're doing it right. Um >> but the big guys are sluggish. >> They're slow. They are slow. They're slow in selecting. They're slow in starting something from zero. They would rather have somebody having done the grunt work and having taken up to a level to which they can take take it to the next level. The big guys hate 0ero to one because 0 to1 needs passion. >> Yeah. >> 0 to1 needs energy beyond the normal 8 hours a day you would work. It needs you to dream big. The big guys have stopped dreaming. They are they are big because they dreamed about it yesterday. There are very few who are large but yet dream. >> So there's a lot of opportunity available. I would say this is one uh thing that uh that is staring at us in the face. It's actually happening in and around us. There are a lot of chemicals. I mean it's not just um chemicals that pollute but food grade chemicals, pharma chemicals is actually moving to places like India. The second I would say is renewable energy. So to to complete that thread, yeah, you're telling me that if you're young and you want to build a small manufacturing unit or just like you want to make a lot of money, the opportunity will be something to do in chemicals. So you would go look out which are the countries which are hardest and going really hard on environmental concerns. look at the chemicals which they produce and they are really large at it and then try to find out an addition or something like that chemical in India and start making here because you know that they'll be pushed out soon or probably they'll be moving here or they'll the production will be that or the reverse that's one good way of putting it >> right or the reverse of it which is to say that India probably is importing a lot of that chemical today >> and start making it here >> start making it here >> because for that chemical because that's going to recede any which ways >> m and it's going to get more expensive as in their environmental tax goes up. >> Yes. See if you look at how India has started manufacturing. Our first prime minister uh Mr. Javar Alu >> always approached the conglomerate houses and said hey you know what I do not have forex reserves because I don't export today >> but I'm importing a lot of stuff and because I'm importing a lot of stuff my foreign exchange reserves are depleting. So as a large conglomerate houses why don't you build it >> or we'll build it as government >> that's always been the case so I would do it at a small scale as well >> that's how lakme was born that's how the cars were born in India right so I think that also stays so so it depends uh whether you want to do it for the domestic market if there's domestic market I would probably bet it on import substitution >> if it's building out for the global markets building out for the global markets is relatively difficult in the beginning because it requires you an understanding of diversity which you can get away with if you're building for the domestic market. So I would rather go for the just the reverse and having gotten some scale I would resort to what you were saying. But how do you stand out in this market? Because everybody would be making it. There's no competitive advantage. You're just building another chemical which 20 other people are also making. Then how do I get my client? How do I actually start selling it? Correct. See uh because I won't be cheaper because I'll be starting. So by just virtue of it, I can't produce the cheapest. I won't be the most innovative at this point. >> So hence the Y media. So first what I would do is I would uh reduce my risk by actually trying to get into that market by probably getting a few guys together probably doing a chemical which probably is a smaller market and not many people are doing. So hence there has to be a vi media. You can't just see eventually you have to be very very large. You have to achieve the unthinkable. But if you plan to achieve the unthinkable in the beginning when you don't have the resources then you will fall flat on your face. So hence there has to be a buy media to it. Probably you pick up a chemical which today less number of people are excited about because of variety of reasons. Maybe the market is very small. You probably pick out a chemical which you sell in a few areas where not nobody's going and and stuff like that. you need to figure out wide spaces especially as a young entrepreneur right because otherwise I mean as you rightly said you don't have uh you don't have the ability to do it and the second point which you touched upon is the want to stand out I don't think you should uh look at I mean that's not how I made I don't think you need to stand out in the very beginning at the in my opinion the building block of the business is first you need to demonstrate what you are doing is actually fit for the market and USP which is important to have can be built at a slightly later stage. First you need to make money. First you need to get your product sold. You need to you need to make it at a cost. You need to design your services or your manufacturing so that your cost is lesser than what your product sells at. And then think about USB. If you're thinking about USB too much in the beginning, this is probably not the right way to do it. uh probably the second one wherein you are building out a micro distribution business may be the uh may be the right approach for you because you're a great marketeer by the way Raj because that's how you think a USP first business is not going to be a regulatory oriented large manufacturing facility >> true if you're thinking USP first you're probably thinking micro distribution brand patients that's probably more important >> that's my brain works like that >> yeah your brain works like that and hence you are probably the second you will likely make a product that will reach every nook and corner of this country which we probably have. >> Yeah. And I think about micro distribution. How do we distribute a large thing into smaller pieces build a >> ecosystem? >> Fair. So coming back to that point. So if you are a manufacturer in the beginning, you don't need to think about USB. You're telling me? No, you need to think about >> contrary contrarian insight. >> People say that you need to actually have something which nobody else is offering. >> That's how the good businesses get built. >> Yes, great. I I agree with that. But that that is not for a manufacturing business. In my opinion, a manufacturing business is very simple that you need to build a product which sells at more than your cost of manufacturing and you have a channel that can expand. M it may or may not have a USB. >> Got it. So second you were telling me about renewable energy. >> Yeah, renewable energy in my opinion is another sector which uh I think India needs a lot. There are lots of regulatory tailwinds around it to build it out fast and India has certain advantages when it comes to renewable energy like low cost of manufacturing like for example you know uh renewable sources of energy. We have lots of solar, we have lots of wind, we have lots of uh uh um water sources as well. So I think renewable as such is also another sector which I mean you could build anywhere in that chain but that's another thing that I would look closely at. What's your framework to identify big money in an industry? Because you all you talk about large industries and I'm sure you talk about large industries definitely not because you have the capital of let's say the large conglomerates of 50,000 crores but you must be thinking something else. >> Yeah. Yeah. Yeah. Where you are able to spot money. So what is your framework to spot big money in in an industry? >> Yeah. Yeah. Yeah. So first it has to be those four, right? uh but within those four also uh within a particular sliber of those four industries also you need to think about which ones because those are very large ones themselves right >> the way I think about it you know when I was a kid um there was this there was this mythological serial that I saw uh of it was called it was uh I don't remember which one I think it was vishamitra >> okay >> wherein they did something called sagar mantan wherein a large mountain was milked both sides. >> One sides were the uh were the demons and the other sides were the gods, >> right? And uh when they when they did the man um then what happened is um poison came out >> wish >> and uh and nectar came out >> okay that's how I think about businesses that fundamentally you're looking for that nectar right so the business has to go through some kind of an upheaval there is there is some big thing that is happening which actually is causing a tectonic shift If it's more the regular then you will not get the poison. There has to be sagar mantan happening. Now let's go back in chemicals. If you look at it the last 5 10 years actually the last 5 years to be more precise. In fact the last 3 years several governments have come in and said I want zero carbon emission. There are lots of government packs crossover packs have come in. People have said as countries that they want to get to what is called zero carbon deficit, carbon emitting and stuff like that. It has all happened in the last 35 years. All chlorine florine eminating gases have been put to a stop. >> The saga mantan going on. >> There's a big shift. >> There's a big tectonic shift. >> If you go to renewable energy, the same thing is happening. >> But if you go to some of the other se like AI, what's happening? It's a huge shift. So there has to be a huge shift. There has to be extreme volatility for you to actually enter. So now going back to your question of this 10 lakh person who's 20 years old now he's aimed with the 2 to 5 years initial wherein he's done the thinking he's done the 2 to 5 years wherein now he's has probably rounded up the v media but then he should jump when there is massive entropy happening. That's how you pick up one versus the other. If you if things are normal as they are the capital wins. If things are going through massive entropy then entrepreneurship wins. That's how I think I mean frankly if I was a rich guy I wouldn't think like that but but yeah we all ended up uh we all started up as not being rich. What what would be the like what are the industries three or four industries where you see tectonic shift happening which you have not covered till now don't tell me chemicals don't tell me renewable tell me three or four industries where there's big tectonic shift happening and somebody needs to pay attention where don't say yeah where people are being thrown at the problem where meaning where the you know there is the human mind is not being put into action >> that industry is going away for a toss. If you're doing the same thing over and over again, like for example, credit I was talking about, right? And doing the same thing over and over and over again, those kind of industries will go away. AI is taking some of that, the world in general is taking all of that. But if we have to put our mind to taking a decision at every point, that industry is not going away. So, so you know uh one of the things that I have seen in a lot of our manufacturing units, we today have about 40 manufacturing units >> is that there are lots of companies that have cropped up in the US in India that are actually studying the movements of workers to design robotic arms that can replace those workers at at large scale. So I think anything that is mundane in nature whether it is physical or it is uh or it is serviceoriented will will go away. AI being an example of it but uh there are very many examples around it. a tectonic shift happening in India as we speak around how to increase the agree input per or the yield per hectare mechanization in in farming today is a huge shift. It is not mechanization just in terms of machines going in there but just the data availability to the farmers the input availability like good seeds good fertilizers that also is going through a massive uh India has lagged behind the world average yield per hectare for a really long time I think that's getting disrupted right now with the advent of lowcost machines with the advent of you know data being very cheap uh at a cost level with regulatory money being available that it can be pushed through cheaper inputs subsidies and all that. I think that one sector is also going through uh a huge tectonic shift in my opinion. I think we've uh we are seeing the early part of it. Uh but if we have political stability which we have been lucky to have for the last uh I would say close to now the third term. If we have political stability for another 5 years that that industry fundamentally will change. What else? one more where tectonic shifts are happening. I would give you uh another example. I think low-end manufacturing very low-end like garments it's like sewing um stitching very low-end manufacturing is also going through a massive tectonic shift because fundamentally countries that were actually like I think apples is going through that apples and accessories they are all going to move to countries like India Bangladesh they already are it's been there for about the last 2 3 years I think that speed is going to increase um especially with tariffs having played out the way they have the free trade agreements having created corridors wherein it has become even more difficult to manufacture in high cost destinations the I think low-end manufacturing particularly for household items and garments is going to come to India and India fundamentally because they have a lot of people who unemployment is still an issue the low-end manufacturing is actually quite lucrative for governments to invest in. >> So I would say that industry also is going to I mean it's it's in my opinion it's a huge sunrise industry. I also feel the food we are eating that will that is going through a big tectonic shift because if just general awareness of that how you should be eating or >> the movement away from cereals >> the movement of I want to eat clean like I don't want pesticide. I agree with that. >> I don't want rotten I don't like all these examples of an IIA doing his thing or a content creator becoming big or a farmer telling about what he or she is doing like stuff like this information is reaching to every nook and corner that is creating some level of silent public outrage. Yeah. So, so my only point around that is that in my opinion it's not a tectonic shift Raj particularly because the demand is there but the supply is not geared up. Okay. I don't think we actually have the the bodies and I'm happy to tell you a little more. We have the bodies to actually make sure that or rather we have the supply to match that kind of demand. That demand came in and I think co really uh rammed it up. Uh but do we have enough or enough of an organic ecosystem to produce to measure to certify? Uh the answer is no. >> But you're big on organic farming. You talk about it, right? >> Yeah. I used to uh uh I think I kind of got that uh feeling that that's this demand is coming up during the time of co. We invested behind it as well. >> But I figured out that it's a difficult business. It's a difficult business because fundamentally a lot of people cut corners out there and the regulatory mechanism per se which actually is going to create the guardrails for anybody who wants to play it clean has not really come up in place. There has been some talk to actually get them up and running through aa and and other government bodies uh but it has not come in as yet. When it does it will be a huge tectonic shift again. So today the organic game is not as lucrative because particularly for domestic because there's no enough checks and balances where you don't know if X person is selling you like is conning you with a wrong product versus Y who's selling clean. That's one and two also the incentive for the for the grower to actually make it organic itself is not really there because the premium for an organic food is not really well established because the checks are not there >> because you don't know you don't trust the trust mechanism is not there. >> Yeah not so much true for export oriented products but domestically that's an issue and hence the tectonic shift is not really is not really there. Do you also feel where a framework to build a business or find out an idea is look at places and industries where people don't trust and can you bring trust in that market by doing something. Do you think that is a place where businesses can be built? So you need trust across >> see because when you are starting off everybody needs to trust you. M >> uh whether it is your first set of customers even if they've given you money in advance >> your suppliers need to trust you your lenders your investors your employees need to trust you I think that element is true across >> m >> can you build a business purely out of trust in my opinion it can be a via media but it has to land up in one of those four businesses building trust is an important game in itself but it's not the end M people having trust in you is great but then it has to be monetized. It can be only monetized through those four businesses. How do you build trust? How business builds trust? I I can tell you our approach. I'm sure there are others. Um I think it was very fundamental to what we do. Uh so first is to believe in the fact that trust is an important facet of our business >> because it takes years to build it and minutes to lose it. I think to first understand this and put this into everyday action is the most important one. First you need to tell yourselves that it will be slow to build and not fast. If I'm going and telling somebody to believe me, he's not going to believe in the very beginning >> and I'll be okay with it because it takes years >> and having built it to really conserve it at the at your you know close to your heart is very very important because it takes minutes to lose it. So first to understand this and put it into everyday action is the toughest because most guys who are young who will come in and tell you hey you know what I went and told him about the features of our product you didn't take it and they'll be very frustrated with it. >> Yeah. But do put it into that action saying that hey you know what probably will take another meeting maybe two more for him to listen to you maybe three more to buy from you >> is something that you have to do daily because the human mind is actually trained to say hey maybe you didn't say that that's why he didn't buy it from you. The human mind is trained to actually for quicker action. The trust is just the opposite. You need to be slow to build it. First to understand that it's a slow process is the first one. The second is to do things which fundamentally augment trust and I'll tell you what those are to make sure that you are taking the losses on you. >> If there is an issue you actually take the loss on you. I remember this great example. There was this example of Johnson and Johnson that uh it used to make a paracetamol lookalike product called Tylenol in the 80s. Okay. And there was some sabotage likely in the 80s wherein some kind of you know uh unknowingly some kind of uh contaminated product had reached. What Johnson and Johnson did is that it recalled the entire set of Tylenols that were available in the market for the last 3 years and faced a massive loss. I also read this case about American Express once in the early '7s that the way American Express is American Express is because somebody had cheated them. I it's probably WhatsApp factory but I just like this example so much but somebody had cheated them and they owed a lot of money to lenders and one fine day they decided that brand is bigger than the capital in the coffin. So they they paid everything back. So those are the when you actually take start you start taking losses on yourself is when you actually augment trust. That's the second because the human mind is trained to do just the opposite. >> It's to avoid the losses. >> But if you're building for trust, you would take losses upon each other. And the third thing is not speaking about it. So if I go and tell you, hey Raj, you should trust me when I say this. If I'm advocating or I'm being vocal about trust, then it is likely that I shouldn't be trusted. Trust comes in silence. Trust comes from when the other person trusts you, not when you say. I think those are the kind of very simple things. Take the losses on you. Take time, be patient and be silent about it. And be very silent about it. Wait for it to get built. Has someone cheated you? Yeah, many times. Many many times. >> Tell me one exam. Give me one story. >> Uh knowingly unknowing. >> Tell me both. One one now. It's a great facet you have. Whenever I give you options, you take all uh life is not like that. But anyways, uh you always have to choose. But yeah, unknowingly a lot of them. Unknowingly comes because of the fact that you know they believed they were right. In business you actually see that you know there is another person taking a decision with the variables that he had he took a call and it kind of know fell flat on the face that's an unknowing one that you need to ignore. >> Yeah. >> Right. >> Unknowing is still you can give if intention was not there >> you can give some limit to that >> that he did not probably put in that much amount of effort and hence you can think of it as cheating. Yes, that happens and let's >> probably next time when you're giving that person a chance, you'll be very caution like probably you won't even give but you want to hold them accountable for that like maybe hold them accountable not like never be for you can be forgiving about it. >> Yeah. >> If it's unintentional. >> Yeah. Yeah. Yeah. So you want to know an example of when I'll tell you of cheating on a regular basis that happens and it particularly happens when you are in the business of manufacturing or selling manufactured products right particularly in commodities where the prices go up or down. >> A buyer could buy and the prices just suddenly fall and he may back out of the deal. >> It happens very commonly or a supplier because the prices go went up he renegedated out of the deal. um people trusting you uh less if if it's happening regularly with you there's some issue with you happening in business it's a facet of business right um so how do we deal with first the you know the ecosystem which is buyers or suppliers backing out I think it's every day due for course the way I think about it is to say that if somebody's done that to me let me not do do that to him that builds trust. If as a if a customer cheated me because the prices went down and he renegedated out of the deal, let me not renegade from a supplier and that will build trust. >> Mhm. >> So if I am faced with an opportunity like that and I've learned it the hard way initially I did not think like that. If I'm faced with an opportunity like that wherein I can back out of a deal because the bargaining power is with me right now today I likely won't because I know that will create trust and in the long run it will pay off >> in the initial days I did yeah I saw this firsthand with my father this exact thing what you're telling me right now >> I saw that as an example where there was a huge crisis going on with the raw material because of uh some shortage in the global market. So he had to buy it from some manufacturer sitting out of Gujarat Surat I don't know I think I think Udapur or some Gujarat or Rajasthan he he locked the price everything was done and then the prices just went up really went up next next morning and the supplier said that I can't deliver it at this price I thought never told you this price and then but at the same price my father had committed the same amount of he still supplied to other people and then he supplied at the same price and he bought it at a much more expensive price and then he took the losses. >> Yeah. >> And I saw him doing these kind of things multiple times because he's like if I've committed if I've given my word and if someone else has gone back on their word I can't. So I have to probably build the trust. >> Yeah. >> So so my point on that one my point on that one is nobody can do that from the outset. You will start up by being at the wrong end of the stick and you will probably do the wrong end of the stick. It is when you realize it is when you realize is what defines you. >> If you ask me have I renegated out of deals wherein the commercial benefit was for me the answer is yes. >> But after having done business for like 3 4 years I realized oh you know what I'm actually giving away the uh forest for the trees right? So I think that is something which is important. I realized that I I kept the right end of the bargain but I lost the customer and because of that particular customer I lost more customers. >> And then I one day I realized hey you know what it's common sense >> and my father he doesn't even talk about it to other people. Huh? He >> that's the silent rule, right? That he >> to me the fascinating part was he didn't even tell the person that hey the other person is cheating me but I'm going to do it like you usually talk about these kind of things to no he would never some people will get to know eventually and some people would never get to know. >> Yeah. Yeah. The golden rules are the same. Um be patient. >> Um be silent. >> Take the losses. >> And take the losses. That's how >> you said cheating. So give me an example. Give me a story where you got cheated intentionally >> by a a person within or a person outside. You can't take both. Let's start with one. >> Yeah. Let's say cheat. Let's say cheating. And it was within the ambit of saying that it did not tantam out to a legal fraud. Let's put it that way, right? Which is that he was aware that a deal will go ori but that deal actually if portrayed in the right way looked right. M >> like doing an doing an acquisition >> which looked hunky dory >> but if he puts in a little bit of more effort and it was visible to him that you know the deal is not that great. He went ahead with the deal and looked great in the system because we acquired a company and it has happened to me. >> It has happened a few crores a few tens of crores 20 30 crores. Let me put it this way. >> Did you fire that person? >> Uh no. How did you find out? uh it was found out on day one when we started running the company we figured out that hey you know what um doesn't make sense >> and why didn't you fire the person who intentionally did it to you say you can never know whether it is intentioned or or whether it is nonintentional and the way I thought I kind of reasoned out to myself is to not delve deeper into the fact that whether it is intentional or non-intentional because I truly believe that if somebody has actually done it by intention and you kind of overlook it the person's own conscience takes over and the next time he'll get it right by being nasty again nothing but this was again unintentional then >> no it was not unintentional I I have reasons to believe that it could uh he could have known but I didn't put too much of my mind into it >> so you ignored I'm talking about a time where somebody probably had to pay you some money and they didn't well I'm in the financing business that happens quite often is it happens pretty regularly. Yeah, >> it happens pretty regularly. See see our uh um our uh gross NPA as they put put it is 74%. Which means that um 74% of the time I am cheated. It could be because of their willingness to pay or could be because of their ability to pay that doesn't matter but it does happen. How do you do that? You actually factor for it in your business. >> You know that you know some things will go wrong. That's why business has to earn a margin. What happens in India? The practical reality when somebody who owes you money doesn't want to give you money. What can you do? >> Uh can you do anything? A very good question. Uh the first question is you should not land up in such situations and hence >> but how like India works on inherent trust, right? So let's say ex person has bought >> 1 cr worth of goods, >> right? >> Doesn't want to pay in advance. Largely that's the practice. Yeah. >> So the there's a credit term there's a credit term in 45 days I'll pay 1 cr rupees >> this person delivers >> now this person like I've taken the material >> 1 cr I'm not paying you >> because I am somebody sitting in some small village >> do what you can >> and this is a very normal thing which happens in India what can you do >> okay so what can you do should come later first let's understand that you should not land up in that kind of a situation How do you do that? First is the understanding of credit should revolve around what you do as a business and what geographies you are exposed to. So for example, in this particular situation, if you're delivering pan India, you're more exposed to it. >> If you're delivering in only localized kind of geographies, you are less exposed to it. So hence one of the design principles that you should take is when you give out credit you give out in geographies that you really have tight control over meaning that you have substantial businesses there and not really give it off to any geography that you don't have any exposure to. So that's one. The second is when you are giving out that uh particular uh material you should know that the person has something to lose if he doesn't pay you. For example you could have a you could belong to a supplier community. For example, you could be selling a product to him which he probably does not have too many options other than you or maybe too many viable options other than you and then only you should be selling to them. The third thing is that when you are doing that transaction you shorten the duration. For example, 45 days is a long credit. 45 days if you are doing you rather do it through a financial institution. You probably take a bank guarantee through a letter of credit or you do it through a PDC which is less uh you know, you do it through a check, meaning you have something. See, but in in reality, it doesn't work like that. It does. It does. >> A lot of times it doesn't, right? I'm I'm a small guy. I'm desperate to sell my products and I'm also in desperation to actually grow my business. There's a there's a another vendor or a buyer coming from small district wants looks like a decent option. Everything's great. Let's say first time he paid me, second time he paid me, third time he paid me, fourth time he's like, "Now bye-bye. Correct. Correct. So you can land into the situation even after keeping all the checks and balances. >> Absolutely you can see the question is how much of that? See I'll give you some basic rules about what financial trading businesses operate in. >> Trading businesses say 90% of the time you'll get your money. >> Okay. 90% if you want if your business margin is higher than 10%. Let's say your business margin is 20%. And 90% time you getting the money it's okay doesn't matter. So you can now sell because your margin is not uh is is is not wafer thin. It's double the uh 10% rule. >> Yeah. Fair. >> Right. >> Let's say your business is wafer thin. Then what do you do after 90%, if let's say your business margin is only 5%, which is likely going to be the case in trading. Then what you need to do is you need to put in processes that will likely reduce that 10% down to 5%. What are those processes? Those processes are for credit evaluation. It's not rocket science but it requires discipline. It requires people to follow it. After having put in that those processes are for evaluation for actually making sure that you are doing the evaluation right and stuff then you need to have some kind of a financial guarantee that reduces your 5% down to 3%. Like taking a check for example, like doing a signed contract for example, like taking a bank guarantee if it is available, like taking a part advance for example, you probably move the needle from 5 to 3%. From 3% down to 0% is what the difference between an average business to a great businesses. >> Right? In that 3% comes in how you as an entrepreneur or you as a business have solidified more grounds than what is commonly known. I agree with all of these. I'm asking the simple thing that let's say after keeping all of these things still somebody is not willing to pay me 1 cr. What do I do? >> Okay. >> And that person is running the business. >> Yeah. >> Is great. I have the check. I have the blank check PDC whatever whatever security signed contract. I have the bills. I have everything. I've gone to the police. I've gone to the courts put in a case. Nothing's happening. >> Yeah. So what do you do? Yeah. Uh so the first question is you can be one of three. So the first question to ask is is it incrementally more than what your business margin is? Let's say um it's happening to you 2% of the time your business margin is 20%. >> You have the option to ignore. >> M >> okay. The second question to be asked >> that's what most people do. >> Um that's what most people do. Yes. The second question being the more important one that do you want to set an example? Some people massive generally pursue because they want to create a massive example of the fact that hey you know what if you actually trap my money then I'm going to go hammer and tongs at you so that it creates an example for others they may not retrieve the money in the first place any which ways. >> So second is do you have a compulsion other than just the business margin at demonstration. So that question you need to answer for yourself. M and the third question to answer is is it going to cost you more to actually retrieve than what the money out uh at large is for example if I have say a 10,000 rupees sitting out in a remote village wherein my two and fro cost of transportation plus my employee going and sitting out there for 7 days will only give me a part of the money and that will not pay out for the cost that I'm going to incur. I better forget. I think those are the three things. What is the cost of collection? Second is do I want to set an intangible example? And third is what is the money at stake versus margin? I think those are three questions to be answered. And if the answers to all three are affirmative, meaning margin also I'm losing out. Cost of collections is very low. And the third is that you know I want to set an example. Go hammer and tong at it. Don't leave it. Can you go hammer? If you want to set an example, can you go hammer the person who has taken money from you is not deliver is not giving back. It's getting better. It's very difficult in India. It is very difficult but it is getting better. I think um particularly for larger corporates it has become relatively easier than what it was judicially for larger corporates like for example with the insolveny laws in India have gotten tighter with time. uh in 2013 the national company law tribunal came in and hence it's not that easy to cheat anymore and the bells and whistles around the uh judicial >> MSME small business >> small MSMES >> 1 cr 2 cr 5 cr 10 lakh 20 lakh >> it is difficult >> very difficult you can't get money back >> yes it is difficult but what I will tell you Raj is that it is relatively getting easier because for example it is um I mean there the judicial laws around it. For example, you have something called the Negotiable Instruments Act, which is the 138 law for check bounds. The time taken for the verdict to be announced in a court has significantly got shorter. It's still a couple of years. It used to be 20 years. Now it's probably 2 years. But it but I think in general what's changing in India is that people don't want to get into that mess because of the fact that your ability to extract credit out in a information efficient world after having cheated is something which is actually playing out. For example, in the olden in the olden days 5 years back you could cheat and nobody would know. Today everybody gets to know. >> So I think one of the things that we as businessmen kind of resort to is that can we disseminate more of that information when one such >> person has to pay social cost. >> Yes. Yes. Uh but yes uh can you do uh stuff to really get our uh money back once it is lost? Uh we are years away from it. >> Okay. Coming back to the question of building a business and doing things, how do you know if it's a good idea or a bad idea, you will never know in the beginning, but you will know with time um an a bad idea is one missing milestones consecutively. So if I believe something is a good idea, I should know what my next milestone is. For example, if I believe that a good idea uh I have come up with a good idea, I share it with a few five close friends, I think a good idea will be bought in by three of them. That's my first milestone, >> right? My second milestone again with the wise, right? My second milestone is that I actually go and talk it to a person who I think I respect and understands business very well. He will hear me out and build my idea on that's my second milestone. My third idea may be that if I talk about it uh with a few friends, they will want to jump on the idea, want to join me. Uh fourth idea is that once I go and try to sell that idea uh and put it into execution to either customers or suppliers, they will lap on it. So a good idea is one that gets reinforced with every single milestone getting met. A bad idea is one when we are consecutively missing it. I actually have a very simple rule. >> >> When I think of an idea, I put very easy milestones in front of it. Easy are fast milestones. A day one milestone, a day two or a day three milestone at best a week's milestone. And I believe if I missed two, maybe three, it's a bad idea. >> Most people do not have that discipline. A lot do. >> Your idea got rejected by 73 investors. >> Yeah. But the reality is that the I knew for sure that I needed only one investor. Right. So uh but you were not able to hit that milestone theory right? >> Ah correct 73 times you got rejected probably you must have doubted yourself that probably this is >> but I was getting debt >> at the same time these were all investors. Uh what is being lost out in that narrative is that our suppliers were giving us credit >> to run our business. Now think about it if I was rejected 73 times it was over a period of 6 months. That means the business had to shut down. M >> but the reality is during that time we got customer advance our first institutional lender actually came in they gave us money our suppliers gave us credit >> so capital is not dependent on investors so it was getting reinforced by somebody else the discipline to have is to say that hey you know what if it's happening consecutively then there's something wrong now you could be a more patient guy and say that hey I'll take fivem M I may be I am very impatient. I probably take two maybe three. But that rule is important. >> M and that kind of reinforces the fact whether the idea is good or bad. How do you attract capital? >> I think it's for it's a question for me or a question in general. >> Question for you, question for general entrepreneurs as well. So the first thing to think about is what attracts capital. I think four things attract a capital. The first is a deep market. When I say a deep market, it does not mean a large market. It means a market that has one of two facets. Either the profit pool is large because few people are doing it or second you believe that the pool will become large. So one is facet of the market. The second thing is a great guy. A guy you want to listen to. A guy who you think will attract and retain people. A guy you think a good guy. A great guy. A good guy is not enough. It's a great guy. The third thing is to say is cheap. See fundamentally I go to buy a stock if I think this is the value but it's trading at much lesser I'll buy it attracts capital if it's cheap attracts capital overvalued things generally don't attract if I go to a house and think h you know what it's about a cr it's available for it I'll put my capital so it's cheap in my opinion the fourth thing that attracts a capital is a business model that sounds attractive to me because of variety of reasons largely personal So if I can make my ideas seem personal to the person I'm sitting across the table, he likely give me. So four things, a deep market, >> a great guy conceptually feeling that the value at offer is cheap. And the fourth is a business model that he thinks is personal is personal not the business model that will make money. >> A lot of people you know invest in ideas because they think of that idea as their own. How do you make that how do you give that feeling to an investor? How do you make idea personal to an investor? By observing By listening more than saying, by conversing and not talking. The difference being there are two ways to speak. One is you come with an agenda about why your idea is good and give it out verbatim. May not be uh together but in stages. But the second is to listen and customize. Listen and build on what the other person is thinking. It's difficult to cheat. It's at the margin, right? You can't take a zero to 100, but yes, can you take a 40 to a 60? The answer is yes. But in my opinion, those are the four things. And I will go with the with an order wherein say wherein it says guy first. Everybody wants to put money in a guy market second cheap third fourth is business model or personal business model in that order. And when you say a guy how do you become a great guy where everybody wants to put capital on you? >> That will not happen across the table. That will happen because you are a great guy. That will happen because you've put in that amount of thinking as well as action. So um who's a who's a great guy, right? A great guy probably or a great entrepreneur who attracts capital. >> Great entrepreneur. Yeah. Who attracts capital >> is fundamentally is is a guy who can spot opportunities. He's a guy who will spot. He's not a guy who will follow. If you ask him a question, he'll have an answer. If you ask him a question, he will give you a contrarian answer. He will not say I don't know. So, he's a spotter. Second, he builds his own resources. If he doesn't have investors, he will have debt. He will have supplier money. He builds his own resources. Third, he attracts people. People want to be with him, spend time with him, work for him, get work from him. See, for example, I have a personal work. I have to take my father out for a hospital visit, right? Um I don't have the time. I won't go to everyone. I may go to Raj. I trust him. So he's a guy not only who you work for him, but you can you want to work get work done by him. He attracts people. He's a spotter. He's a resource provider. And that you can know and that is easy to find. M >> you can get it in a conversation. >> You can find out. Important is are you looking for it? An investor looks for it. A good investor looks for it. And how do you identify difference between someone who's a great storyteller, spotter, thinker, opportunistic or is it a great executor? Because having a contrarian insight is not equal to building a great business. H not really the great scientists are not great businessmen. Every great scientist has found out something contrary, right? Has invented something contrary. >> And most of them far majority of them had died in poverty. >> Yes. Yes. Yes. Yes. Yes. So your question was how do you find out a great executor? >> Huh? Versus someone who has who had just contrarian insight. So you can't find a great executor. What you can do though is you can find out a poor and beat him out. So if I spoke to you Raj and I believe that you actually believe in my own dream, vision and all that, I will actually have to trust with you for execution. Whatever I ask you, how many hours do you work? Um do you really put your head down? You will give me all the right answers. >> Yeah. So I have to take you in not because of you are a great executor. I have to take in you take you in because you are a great believer in what I do. Execution I'll find out execution you will find out the poor ones. You will never find out the great ones. So you have to go in with believing till he is poor is great at execution. So if I'm sitting with you and you believe you show excitement to what I'm saying I know that hey you know what somewhere the twins are meeting. So you and I are dreaming about the same thing. Okay, let me take a punt on execution. Let me put you to role. You start working and then over a period of time by seeing you by observing you I will know whether you are great or poor you will never be great. You can only be poor. So till you are poor you are great if you see what I mean. I I I didn't explain maybe a better way. So I keep believing in you that you are great at execution till you fail. >> Till you've lost interest, you don't turn up at work. >> Till then I have to keep taking the punt on you because it's a very difficult thing to figure out. >> It's just you transferring your belief in me. As long as you and I are believing in the same thing, I'm happy to take a punt on you that you are a great executor and then I have to fail at it. And if I fail at it, then you'll know and then you'd weed me out. >> Weeding out is very tough. But I have to weed you out there. That's when you actually fail with me are you you are a poor executor but a great is difficult to know in my my opinion till the time I don't fail I'm I'm not great no till the time you do not fail you are great because you don't actually know because I don't know the reason being that execution comes from passion comes from habit comes from a variety of emotions which I may not True. >> Like your mother works for you. She's a great executor in cooking. She she may be passionate about cooking. Some do it purely because of habit because she has to do it. >> Yeah. So you'll not know. Execution has a lot more variables around it. How do you fire people how do I fire people as in how do I tell them the news? I tell them exactly on the face as is. Because my fundamental belief is that if I'm letting somebody go, I am taking one uh I am harming one person but I am actually saving thousands. So let's go through that. I am definitely saving the thousand people around him who could get polluted by him. True. I am definitely saving him because he will not go anywhere. The only person I'm harming is myself because I have trouble in actually saying that in as many. So I as long as I'm of the belief that I'm saving everybody around him, I am saving that person because he'll probably do uh it better elsewhere. I'll take the pain. And when do you fire? Uh the moment I get to know, I I uh give him generally one chance. Never two. >> Do you still not believe in work life balance? Do I believe in work life balance or >> do you still not because last thing you >> So there are two parts to it. So I don't believe in it for myself. I'll be very honest. I think u my biggest differentiator is that I can work really hard, right? >> That's my differentiator as well. >> Yeah. It's a 10,000 hour rule, right? How fast you get >> I'll outwork everyone in my competition. That's that's because that's in your control, right? What has changed though Raj is I'm okay with a lot of others not putting in that much effort. I think >> a couple of years back maybe 5 years back I used to get impatient with others not matching up. I think that has changed. >> You told me this last time >> that that had changed. >> No, that it it bothers you. >> It bothers it is it is it has stopped bothering me now. It was less bothering. Now it stopped because I understand now that you know particularly with the world around us changing some people can do it the smart way and I'm okay with that. Why do you keep why are you wired like this? Why do you want to keep working all the time? More than working it is about doing something or the other. It is not it is not necessarily uh working for the business, right? It is about doing many things. I like doing many things. I think it it develops an individual a lot more. you uh it builds a lot more facets to your personality. You have a lot more things to talk about. You have a lot more things to think about. Uh it just makes you a much more complete man. And I think uh ours is the only thing that the god has gifted you with. He's not made one person materially more intelligent than the other person. And that intelligence is also dependent on the hours that he's put in. So I think yeah, it's just that belief and it's kind of got hardwired. But is it because you also believe in competition that someone else somewhere is working harder so you're going to beat that? Do you have that kind of philosophy? >> Yeah, I have a different philosophy. >> Not that that somebody is working harder. >> What I believe is that everything requires a definitive number of hours. Um, so the more you put, the faster you get there. I think to master every activity requires a certain amount of like the 10,000 hour rule, right? >> Uh, every activity needs a certain amount of time. So, if you can put more time, you get there faster and I'm man in a hurry like most people my age. You're like if building a business is a skilluh or if building a business is an outcome that you're looking for and that requires let's say 10,000 hours you want that 10,000 hours to be fastest. Let's say you're doing 100 hours a week then you do it in 100 weeks there in 2 years versus somebody who's doing 70our weeks you get there in 3 years. So yeah better two years man in a hurry. >> And is it only for business or other other things as well? >> Uh true for other things as well. >> Har you want everything fast. Fast. Yeah. Man in a hurry. >> Why? Why you so like what's the rush? Because you It's time, right? So if you're a man in a hurry, you can do more things. I would love to do more things. I think I do fewer things than I want to even today. So but you give time to your employees. You give time to people there. You're not hurry. What I heard you know thousand employees by their name. >> Yes. Why is it important to know names of your employees of everyone who don't even work with you directly? >> It's a large organization. >> Yeah. Why is it important for me? >> Yeah, you could get away by knowing 50 people's name because those are the people you'll interact with on a daily basis >> probably. Well, to be very honest, I believe that if you have a personal connect with an individual, they will go beyond their call of duty when it comes to matters that are connected to both of you or things that are overlapping to you. If I know Raj personally and there is an activity that is important to me, I know that Raj will likely make more effort than he would if I don't know him. Agreed. And I think great companies, great institutions or for that matter great teams are made when people go beyond their call of duty. So one of the reasons why people go beyond their call of duty is because of personal connect. I would do anything for my parents uh because simply I mean I'm connected to them. >> There are other reasons too why people would go beyond their call of duty. I think the way I think is that you have to find out reasons why people work harder than the rational reason, the transactional reason. One of them is to build a connect. >> What are other reasons why people go beyond above and beyond to work? um because they believe that they are in a place where they can achieve their dream and that is being strengthened with uh things that are happening around them. So if you want to be rich right and you see lot of people getting rich around you, you will work harder than usual. If you want to be famous and you see that you know people around you are getting famous will likely work a little harder. It's when a reinforcement of environment is happening to positively um influence the fact that they can achieve their dream is when people go harder at the problem. How do you do that in your company? How do I create an environment in company where everybody is going above and beyond and working? >> One one is connect. One is connect. Second is money. Uh money not necessarily u it is a combination. So second one is actually quite important. It's probably more important than the connect because connect actually you know um taps out at scale right. The second one is we have a very simple belief that people work for only three things. rich, famous, and power. So rich is you're making more money than what people of your skill, your batch are making. Fame is if you are doing something good, not only does your boss tell you, but it tells the whole world, maybe external to even the company. And the third is power. as you are doing something good you have more people obeying you than the other way around fundamentally those are the three drivers we don't have employee satisfaction in that we don't have work life balance in that we don't have outings in that those are important but not front and center of what we do I believe and have fundamentally always believed that for for like close to two decades that a human being is driven by these three choices some may be more important than the other but it is a combination of those three A ca So having that clarity that people work for only these three things is important not four or five things that outings are important satisfaction is important coming in early is important and those are important but three things rich famous interesting that makes a lot of sense. Do you do town halls? >> Yeah we do we do town halls. And is it you telling them exactly what you want to tell them or is it like ask me anything? Um so we have a very fixed format for a town hall. So we have a five pointer format all our town halls. In fact we've done close to about uh my sense close to about nine or 10 till now. >> Uh we don't didn't do it in the covid years because there was no possibility of it. We tried doing virtual but didn't work. Um they have always had these five format point. So the first is an icebreaker and that icebreaker is not a very um you know um is not a very brainy game. It's people shouting, running around and you know making noises and stuff like that, right? So so one is that then we have a session wherein we talk about and clap for everyone um team by team typically a session taken by a leader of the company. Uh generally used to be me but talking about it and talking about what have we achieved and just clapping. M >> right. So I have a very simple theory. People come to either shout or clap or drink or laugh clap shout drink laugh. Okay. So the first one is to shout icebreaker. The second one is to clap. People love clapping. >> Right. And the third one that we have is typically a session wherein we give awards. Again clapping. >> Okay. Lots of awards. Close to 15 20 awards. The fourth one is fun like we would make some funny award or a funny thing and give somebody >> right laughing and the fifth one is drinking which is the entertainment. So every town hall has these but information vision talking about >> that's the second session that's it the clapping one the clapping one and it's not like you ask see >> you giving them opportunity to ask you questions >> opening the floor teaching them something new >> in general most uh things actually have uh that kind of an environment where people can ask questions >> my personal view of asking a question of giving people the opportunity to ask questions especially in a large company like ours Nobody would really bail the cat. >> It is more on us as the speaker to actually encourage >> address the elephant in the room. >> Address the elephant in the room or cold call somebody in the room to ask a question. I think that's the format that I have seen as being more >> otherwise people ask rehearsed questions. >> Uhhuh. Nobody will ask you actually a painful hard question. >> Uhhuh. So the painful hard question has to come from you or has to be forced out of the other person by actually pointing out saying that why don't you ask what is going on in your head? And once you ask that question, you say, "This can't be going on in your head. Why don't you ask me something around this?" So yeah. So that's the format in which we do a town hall. Interesting. And do you teach something to people in your town hall? >> No. No. Never. Because your founder this is what I've heard like a lot of founders have typical way of typical point of view to see the world and it keeps evolving and changing and the way it your would be changing it's very different than others right and you want out of the 20 things which you are seeing or learning maybe one or two things you want that everybody in the company should at least know and few should follow >> no my fundamental belief in town halls I've always followed that in my life is they should begin by shouting But how? >> Because that gets the energy flowing. >> Then they should >> How do you align then? >> How do I align? Town halls I don't think are an opportunity to align. It's everyday action that has to align. >> If it has to be done periodically, then you're not aligning. If you are being forced to align in a town hall, that means you are misaligned for the rest of the time. I believe or at least everybody in our business oxo believes our simple goal as a company this year is to achieve thousand crores of PAT. Let's say it is it is a goal. We align it with every single action. Every question is addressed towards maximizing PAT for the company. Very simple as that. >> >> The simple goal in a financing business is to reach 15,000 crores of loan book this year. It started with 11. Simple goal. Every time we talk about loan book. So alignment if it is forced in a town hall you are misaligned most of the time. Town hall is an opportunity to do do just four things. Shout, clap, laugh and drink. How do you build right culture income? >> Do you even think about culture? >> No. It's a part of me now. >> Have you ever thought about culture? Because it looks like that you have some standard operating procedure and you're like if I am like that, my core team is like that, automatically it become a thing. Yeah, I do think like that. Uh so what I think is if you are practicing what you're doing will get disseminated and people who don't disagree who don't agree with it uh will likely fold in or fold out anyways guys. >> So yeah so my way of building culture is that you know if you've just read about it somewhere you like it from having heard about it somewhere and to me that's not something that I would even think about. For me, culture is something that I've seen in action and I've seen the benefit of it elsewhere where I was a part of that culture, not the ones setting it up and those are the ones that I've invited. Uh what I've seen in other organizations that I've worked are the ones that we've picked up and it's not just true for me. People around me if they've seen something else um that has worked for them while they were a part of that uh culture building process is what we have embraced. So that's one you should have experienced it. Second is you do it on your own. You do it on your own people will copy. And the third thing is culture is something that if you start thinking about doing it consciously to make people change their behavior, it won't happen. And fourth in my opinion is it should be very simple. You should be able to put it down in half as it is. How do you know who's right in the office, who's wrong in the office, who's doing politics, who's not? How do you know that a new leader or a new uh team leader or a new HR or somebody in the office who you've gotten come from a different background, >> they follow the same principles as you and they are building the organization in the same way as you. Even though you have told them, you know them, they know you, you there align, there's alignment. How do you know it's actually getting translated on ground? >> You'll never know. But there are steps that you can take to increase it. I'll tell you what are what our thinking around that is very simple. We have a very three-step culture. It's called ABC. M >> A for apprenticeship, B for brotherhood, C for camera. >> That's our culture. Okay. How do we practice it? Very simple. Okay, if you go to any of our offices, half the posters that you see on the walls are ABC. It just says apprenticeship brotherhood community. If you stare at the same thing over and over and over over again, like I've seen this thing build don't talk for so long today because I've been staring at it that tomorrow if you ask me what comes after build, I will not say build India DLF. I'll say build don't talk. So just paste it everywhere. Okay. Apologies for that example. But second thing that we say is in our KPIs am I guaranteeing that that part of that culture is being rewarded? For example, for our new joinies, we have a program called 40 under 40 wherein what we say is apprenticeship means you're teaching things. So if you teach for 5 hours recorded and sent to HR wherein minimum five people are attending, >> you get some amount of money. Brotherhood and camaraderie. If you're taking minimum five joinies five times in a year for an outing which is funded for by the company you get some amount of money. So you are forcing it by making people see it by making people do it. But before that you have defined the culture in half a sentence. ABC is very simple. It's one word ABC. So put it simple. Make people see it. Make people do it and be a part of it. And you are part of people. So you have to see it and do it. >> >> That's how I think it's a culture to me. >> But how do you solve let's say the blame game? The I don't want to solve it. It's a it's human. See blame game politics it's human nature. What I want is culture. What I don't want if it's happening I have to be okay with it. So if I want what is apprenticeship? Apprenticeship basically means a for apprenticeship basically means if somebody do is doing it around you you better copy or you believe something is important for the company teach the other person >> teach >> teach and learn teach and learn teach and learn. So it's apprenticeship not through a subject but by doing that's apprenticeship be brotherhood. If he's in trouble go help him whatever be the issue look out for people who are in trouble and help them and see is camera have fun together. If you're going out for a drink take the other person along simple that's our culture fair. Anything other than that should happen should happen. Everybody has a view but it's not important for the company to have it. For the company these three things are important. How do you make sure in large company that the right information is reaching you? >> I don't you care about right information? >> I don't uh because um for me it is not essential to our success. For me there are many things that shouldn't happen in a company. There are many things that should happen in a company but they are not essential to to a company. To be very honest with you, apprenticeship is important within the company. I'll tell you why. Because we are doing something that has not been attempted elsewhere, which is to do those three things together that we were talking about because everybody does one sliver of a business. >> So teaching and learning is very important for us. Brotherhood is very important for us because we are a very people inensive business. We have a lot of people working in the company and lot of people will be in trouble. So helping them out controls attrition in the company. Helping them out gives you a goodwill that the companies out there to help you. That goodwill is important because controls attrition for me. So having figured out what is important is the most critical one. You can't solve for everything. In fact to be very honest with you, A was not a part of our culture. It was only B and C. After 5 years, we realized that A has to be there. In fact, we had some other word for B and C as well. when then somebody some smart allec uh in fact one of our early co-founders came in and said that hey why don't we call it ABC it sounds very interesting so we made that as culture so actually if you go to our offices half the posters say ABC but don't you think that whether people are happy or no whether people are enjoying or no >> no people want to be rich famous powerful the company wants them to have apprentichip brotherhood chemistry period done that's of business and oxies of you. It has 30,000 people. So company has a simple expectation out of you. Demonstrate ABC and you as a uh member of our business need to have three expectations out of the company. Are they making rich, famous, powerful? So if you you think that if anyone who wants to be rich, famous and powerful in a short period of time, you don't care about work life balance, happiness, enjoying, are you doing all of this, passion, all of that, etc., etc., nothing. No. Yeah. Exactly. I don't care about it because I can't offer that. I can't give you joy because your joy may be dependent on a lot of other things which I don't control. But can I make you rich? Yes. Can I make you famous? Yes, if Raj is working with me and I figure out that Raj has done something well, I can go to LinkedIn and say that Raj is the best guy in the world and here are the three reasons why that's in my control. I can make you powerful. I can put three people under you to help you out in stuff that you're doing. Other things I don't control. Then does that mean that you pay the most in your industry or you pay the highest? Uh that won't, right? >> No, no, no. we would be uh end of second quartile somewhere around 50%. Somewhere in the middle maybe maybe slightly lower then you're not making people extremely rich. >> Yeah. But what we do though is that we have we have a equity sharing program the ESOP program which actually if the company does well they'll be the richest guys by a distance >> and we kept up to that promise. See in ESOPS giving out equity is not how people become rich. Liquidating it so that people have money in their hand is how it become how people become rich. I can give you equity worth 10 crores which today is money on paper is not how you uh think you are rich. But if I've given you equity worth 2 crores out of which 1 crores is in your pocket because you liquidated it and the other 1 cr is lying with you. You think you are rich. True. >> So what our emphasis has always been on liquidation. In our 10 years, we have had eight liquidation rounds. The company has raised money six times. >> But it has liquidated ESOPS eight times. >> Nice. >> How do you do that in a bootstrap company? You can buy back. Zeroda does a lot. You give ESOPS and you buy back. You give ESOPS and you buy back. Difficult to do in a bootstrap company. Um and hence I think the option to make ownership liquid is a very important milestone for everyone and hence there are very few bootstrap companies but very very difficult but but coming back to your original question I think the clarity about what culture stands for defining it I used to always say defining it in a sentence now I've reduced it to say defining it in half a sentence to now saying proudly that it can be done in a word. >> One day I'll stand and tell you that it has to be in three letters ABC. Interesting. Talking about entrepreneurs again you know the entrepreneurial journey is not rosy. >> It has its ups and downs. It is filled with extreme pain. Yeah. Sometimes. Do you think the pain taking capacity of an entrepreneur needs to be very high or else he can't or she can't build a business? >> No, it need not be. Um I think if there are moments of extreme pain, >> there are also moments of extreme joy to compensate. >> So um anybody who has extreme moments of joy will also have extreme who will have the ability to take extreme amounts of pain. I don't think that differentiates an entrepreneur. What differentiates though though it's similar and hence I asked you to repeat the question is the fact that can you sacrifice not many people can sacrifice it's very difficult to sacrifice completely willingly like for example are you ready to sacrifice the fact that you have a kid and you will not see him for seven days in a row willingly without anybody around you asking if you've seen that movie durand says balan can you do sacrifice willingly without anybody asking is what defines entrepreneurship because entrepreneurship needs sacrifice. It sacrifices your personal time. It sacrifices it makes you take sacrifices which are against human nature. Like remember those cutting of losses for yourself. It's against human nature. It forces you to be patient when the inside of you is raging in anger. Can you make sacrifice of that emotion? I think entrepreneurship needs sacrifice. And what's the difference between an entrepreneur who can sacrifice versus who can't? The entrepreneur who can't make a sacrifice will become a manager of people because he will make others sacrifice cuz a business building needs sacrifice. So he will make other sacrifice and finally those people will run away because they probably are not gaining too much from that sacrifice. So uh I I think an entrepreneur who can't sacrifice will never build a business in my opinion. That's the single largest determinant between a a average entrepreneur and a a below average entrepreneur and an average one. Are people wired to be of this nature where they are just likely to sacrifice? >> No, they're not. And hence not many are entrepreneurs. >> So then how can you become that person? Does it come to you? Because if you're not inherently a person who's here to sacrifice Yeah. So it doesn't come naturally. What happens is that the first time you start you'll be forced to make a sacrifice. >> Right? And there are some people who just fall off fall off that saying that okay I don't want to make the sacrifice. So you've fallen off. Second time before the sacrifice comes in people around you will kind of without telling you will kind of make that you'll have to sacrifice. It's a given and then you'll have to sacrifice without people asking. M >> and the third time it will come in your nightmares that this tomorrow this is what the sacrifice is going to be and you'll do it and the fourth time you'll just do it yourself. So the level increases every time. So nobody's hardwired to make a sacrifice. Yeah. And see every every great entrepreneur or an athlete or a musician or someone who wants to achieve big things they go through these periods of sacrifice sacrifices and they sacrifice a lot their personal time their party time their entertainment >> friends family you know chilling with just people alone time travel vacation all of that you you sacrifice this you don't even realize like there's a cost of discipline >> and the cost of achieving something Right. You do that like how do you but what excites you then? Like what are you chasing that you're sacrificing almost every little joys of life? No. So, so if you take an athlete like let's say an athlete is athlete typically starts when they're in the late single digits between 7 to 8 years old 6 to 8 years old right >> I think there is that humongous dream somebody dreams of an Olympic gold medal for example right you know it's 20 years out >> and you know it needs 20 years of hard work so there is that belief it's not that difficult though it's not that difficult what do you get excited by The dream. What dream? My dream. My dream is very simple. Um the first time I said it, I got trolled a lot. >> So >> uh I actually said it in Hindi. >> Uh but the person understood something else. So I translated in English. So I'll tell you the Hindi and the English. >> Okay. >> It was very simple. Hindi was to do a raj and the English meant reliance adani bajaj yeah yeah so yeah you want to build that become that conglomerate >> uh I'll try as large conglomerate as they have built it I think to be known for exceptional work in their fields uh is what uh is is an aspiration Yes. Uh but three in one. They were all one in one. So So that's the aspiration. I think that'll need a lot of uh I would say people. >> It can't be just me. It has to be a lot of others. What are the top brands that you manufacture for >> by volume or by reputation? Uh reputation. I think Uniqlo would be one. You manufacture for Unilo? >> Yeah. If you go to Uniqlo and you see their belts, they're all manufactured by us. Um throughout the globe, we probably have a 60% market share. >> Wow. Of their belts. >> Um we do for Zara. Um we do for Michael Kors, Coach, uh Adidas, um Reebok, Nike. You manufacture for all of them. >> Nobody knows you >> and nobody knows this side of you. Yeah. So I think there is some factoid saying that out of the top 100 apparel and accessory brands we probably do 80 but we are small so we are increasing our wallet share. Uh >> you manufacture for top 80 brands out of the top 100 brands but it's not that difficult right the difficulty is in actually increasing your wallet share in those so we probably are not as relevant to any of those as yet. deal soon be >> aspirations there. So today if we talk about it we are close to about 3,000 crores of exports and this is largely to large brands. We were talking about sales last time right? >> Would you consider yourself a good sales person? >> Yes. >> Right. What's what is about human psychology that great sales people understand versus average people don't? >> Oh it's very simple. They listen. They observe. listen. They can figure out. They are not in a hurry to say. They are in they are in a hurry to understand and listen. Great sales guys do it in a matter of seconds. So, it's not obvious that they're listening. Um, the worst ones, they don't do it at all. That's it. Yeah. Because sales is about connecting with the other guy. It's the other guy who's the most important. You have to play the man, not the situation, not yourself. And how do you do that? By just making them talk. >> Well, not really. Um, it's become involuntary with time. But I think the very basic principles are one to figure out a common connection. And the more basic it is like a language or a region or a or an accent or a uh or a common interest area is a is an important one to figure out. That's one. Right. I think the second one to figure out is to say that is is to say that whatever he is saying you build off it um and not build away from it. So if if you say something and I say, "Hey, you know what? Um, what you're saying is right, but you're building away from it." >> I close out with you first logically and then I go to my point. I think very basic things, but yeah, >> not so basic for a lot of people, >> very difficult to practice. >> Because human mind is wired for you to give out your agenda, right? To suspend the agenda is very tough. Great sales guys suspend the agenda. It's not that they are not talking, but they suspend their journey. They would forget about it. If I come into the room and Raj is in trouble because he had a tough day at work, I would rather talk about the tough day at work and not sell what I have to sell you. It's a very difficult thing to do. It's an easy thing to say, but a very difficult thing to practice especially over and over again. True. I have a rule for this is a framework that I've built based on my learning from selling like if you want to close big tickets. I think there's a 991 rule and I mean it like 90% you listen 9% you just reframe their 90% problem in a very short time >> I've not given you solution I've not told you anything whatever you told me in the last 90 minutes >> very simply in one statement or two statement I've reframed your problem with with much more clarity >> and you're listening right >> yeah so listen the whole time and then 1% is where I just give you very pinpointed small solution and then I leave it at it h and do nothing and then in meetings where I've done 100% I'm selling versus in meetings where I've just 90% listened and just reframe problems and then provided solution the conversion difference is this much >> yeah very true I agree with that maximum selling happens when I understand the person very well and they just reframe their problems in much more articulated way than they they have been they would have done it. >> Yeah. True. Very true. Right. See it makes sense. >> Yeah. It does. It does. It does. Listening is more important than talking in general. Whether it's selling, whether it's anything, >> anything but people are in a hurry to say what they have to. So the but in India you know what happens is apart from all of these logics and listening and all of that you have to give a kickback to the purchase manager you have to bribe them does it isn't that a big practice it is >> isn't that the big factor how you close how you will close the guy you still need to do it because because the reality is after listening and all that still need to pay. >> No, no, no. It's other round. If everybody is paying, you need to listen to actually make sure that uh you know uh that uh while he's meeting your card rate still is being heard. >> Meaning that probably everybody pays but the guy who listens wins any which ways. >> Okay. So the standard practice and standard practice >> standard practice whatever is transaction cost you have to do. >> Mhm. >> Right. Yeah, I mean frankly but the good part is that I think as you grow higher in size, larger in size you have to do lesser of it because beyond a point I think sometime the institutional capability takes over. Uh but can you be fully clean in India? It's tough >> particularly for businesses starting off. How do I know that my business needs equity or debt? Explain equity money and debt money by the way. >> Yeah. From whose lens? From the entrepreneurs. >> From the entrepreneurs's lens. Like make an entrepreneur understand what is equity, what is debt, when to take when, when to take what. So let me take this question as saying what form of capital is the right capital? >> And let's make it a little broader. I think um that's where the answer lies. So in my opinion, there are five forms of capital. each in let's take the descending order of which one is the best thing to have. In my opinion, the best thing to have is if you have profits already sitting with you since you earned it, great. Use it. >> Okay, >> no questions asked. >> The second best form of capital in my opinion is customer advance. If the customer is paying you in advance, >> that means he really values your business. >> That means he really trusts you. that means likely he doesn't have options where he can actually get it on credit. So customer advance is my form is my um second best form of capital. You likely don't have to pay an interest on it as well. >> All right. The third form of capital is supplier credit because again the supplier is trusting you. Um likely he's doing it because uh you provide enormous value to him and stuff like that. Likely the interest is there but not that high. >> Yeah. The fourth form of capital in my opinion is debt because you're not losing ownership. It enforces you to have discipline. It uh makes sure that you know um there's a larger pool of debt available in the world. It makes sure that you actually are dipping into a very large pool. So if you've taken debt once, you actually have access to a much larger pool of capital. Equity doesn't guarantee you that. And then last comes equity because it's the most expensive. It causes the maximum amount of burden on you because there's a moral burden too in addition to your ownership going away. >> So if you have the choice, you better go through this cycle. If you have the money earned through profits, better take it. Then go to customer advance, take it. >> Um then supplier credit, then debt and then equity. The problem is that businesses can't do them because they have not fully formed their business model that can actually make them either on profit or get customer advance and stuff like that. So early stage businesses have to go the reverse way. they are forced to >> m so when you're forced to take equity in the beginning because they don't have this >> they don't have debt they don't have supplier credit they don't have customer >> advance customer they don't have market fit they they don't know what's going on right >> so they have to take equity they have to because there's no other option if I had debt available as an option in the beginning I would have taken debt >> to be very honest with you like going back to one of the other points 73 rejections didn't bother us because we had other forms of capital we getting supplier credit and debt. So I think on market is very simple. Um for me the way to think about a market is to say that hey is it a market that is is all pervasive? Meaning how many people use it or will use it? Meaning is it solving a basic need? The basic need is >> is food clothing shelter at the end of the day. >> So is it solving for that? So the moment I think about food clothing shelter I already think okay market exists if it's not food clothing shelter I for me the next masslo hierarchy is to say that hey okay it may not be food clothing shelter it may be entertainment or it may be satisfaction of some kind. So I think about it like that which is to say that hey is it solving a very basic physiological need and then an emotional need and then finally an aspirational need. So I think the investor is trying to on the market side he's trying to pin you down saying that hey if the market exists today great then let me try to project it out for future but if it doesn't exist today is it some is it a need that will either emerge or exist today but unsolved I think that's the categorization that he's doing >> uh investors are of two types some investors believe that market wins over the entrepreneur and some investors an entrepreneur will find a great market. Right? So I think the weightage of whether one or two is always dependent on the investor. The third and the fourth are followers. The price and the business model will it make money because nobody knows. So there are few investors who inherently are like if the guy is great just put in money he'll figure because he'll figure it out. He'll figure it out. He'll probably change markets. M >> but there is this Warren Buffett philosophy wherein he says the entrepreneur howsoever good >> does not win over the market >> that it's it's a very it's a very wellw watched or very viral clip of Charlie Mer when he's been asked about Elon Musk where this is the same conversation which goes on >> yes yes yes I I think also the reality is it also depends on the investor type so fundamentally there are three types of investors. There are angels or VCs who are early. >> They likely will weigh more on the person >> founder. Then there are private equity or late stage investors and then there are public investors. Public investors I don't think will care too much about the founder per se because I think the data is is there and they are not taking a very illquid position. The position is very liquid >> like SpaceX is they're betting on founder. They are it's an exception though but typically if you see public market investors their windows are between 3 to 6 months >> because they are more IR like investors and would exit in and come in and go out very very soon >> okay >> so hence for them it's less relevant is it relevant answer is yes but the weightage differs >> apart from an exception >> apart from an exception the debt though is very very different the debt form of capital the customer advance and all that is is very very different works very differently >> now I was only talking about VC like the VC money. What are VCs optimizing for? What are they looking for in a founder? Just I think depends on VC to VC. But I I'll tell you what is common >> across all VCs. One thing that they're definitely looking for is the ability to build teams and the ability to build teams is attracting talent and retention of talent both. And they are different skills. Okay. The second thing that they're looking for for sure >> meaning again a commonality >> is the ability to sell because when there are no resources only selling counts. The third thing that they're looking for again a commonality is integrity because in India there have been issues with governance u with basic ethics and all that. So I think these three things are common attraction and retention of talent, governance >> and sell selling skills and you have you have soft bank. >> Yes. >> Do you still have them on capital? >> Yeah, very much. >> Right. So you what you convince soft bank to put money in you. >> Mhm. Which soft bank usually is known for putting money in like large some visionary kind of companies and yours is a very different kind of company that they have built. >> They've taken a bet. How did you convince them? How did you convince Soft Bank to put money on you? >> So Soft Bank is looking for extraordinary outcomes, >> right? And to own a um a massive chunk of it, right? Right? And they come in at a stage wherein the business model is typically figured out, right? And it needs capital for scale. Um I think they saw something different in us. Uh I think what they saw in us is a couple of things. One is a relevance of technology in a B2B domain which they had not seen because B2B typically is about discipline, capital allocation, large scale manufacturing and stuff like that. They actually saw the relevance of technology. That's one. I would say the second thing that they saw is a very India centered solution which they thought is actually true for all developing markets. I would say these two are big apart from the usual stuff maybe they like the team are at play and stuff like that but these two >> you reach out to them or they reach out. >> So in my case it was a little unique in the sense that one of the members of sort bank was actually uh a common alma matter for me. So we were in touch as individuals Sartak Mishra by name. He and I were both at matrix um though not uh at the same time. So we had been in touch and obviously after some scale he'd been in touch with me and then after some scale he approached. >> Nice. >> So >> and you pitched to them or you pitched to Masa or like what? >> Everybody has to go through masa. So I had the masa round as well. >> A you had the masa round. What is the masa round? Why is it so famous? famous >> masa round that's the eventual round yes I think masa round is is unique because of two three things three things actually the first reason is that masa lets you talk right he really listens that's one second is um um masa will give you an offer that offer can shake you uh And uh I think Masa is a visionary. Um if you have thought about your business being X, Masa will uh if he likes you, he will think about it 10x. So that's the mass around. >> How was it with you? Explain. Give me >> it had all three elements. >> So Masa lets you lets you talk. So he I think it was 90% us >> versus Masa talking. >> The whole team or just you? >> Um Mhm. >> There were three four of us. >> Okay. >> But it was mostly me talking. Yeah. Because presenting, right? It was it was >> So then you present, he will listen. >> It was right in the middle of co second part of CO. So we didn't have the luxury of meeting him. But we met Masa a few times when he was in India though. But uh but during the investment period, it was >> uh difficult to go back to Japan. >> And then when he you said he gives you an offer >> and what do what do you mean? Every founder who soft bank invested they say that masa will give you an offer. What is that? >> It is a pretty outlandish offer because his view of the business because he's seen so I mean he's seen so many businesses being created to that big a scale. His aspiration is when he likes something it should be of that scale and he and hence he makes an equivalent offer. >> So it's not you asking for money x money. >> Huh? Typically masa makes an offer. A you don't it's just like I mean you put it into the notes but Masa has his own way of thinking he he he does think big he he thinks really big >> so how much were you asking and how much did he put >> I don't remember exactly we we got 150 million in the first round dollars >> I think >> no no it was it was 70 back then so it was cr okay this is 2021 June >> you would have offered like my sense is about 3x of that so Yeah, see he offered 450 he didn't he doesn't offer he the way it transpires with him is he thinks that this much is the money required to get to the scale that he thinks it should and then he offers it to you saying that hey you know why not take it from sort back then that you know so you cut a deal then and then you're like no no we don't want 450 we don't want liquidate this much at this and all of that negotiation will happen >> oh but it is but I must tell you be I mean being in a business conversation with him is is is extraordinary because he does think extremely big one and two he can really spot the mega trend. Give me an example like for example I think the first time I met him >> he talked about how he had cut a deal with Yahoo Japan >> so he' caught on to the trend that you know that mobility will be huge and will just trump everything over. So that's one. I think the second thing is about how he caught on to the mega trend of AI, his deal with open which is widely talked about. Um and he thinks really big and there's this famous story about his interview with David Rubenstein where he claims that he got some a billion dollar a minute, right? So >> that's that's the most famous one. And then there's another famous one that >> he lost the Nvidia thing. >> Ah he lost the Nvidia one very early. Yeah. Yeah. Yeah. He he but he does talk. I mean he he he takes things to a different level. It's >> you spot a mega trend. >> I'm learning. Uh I think I'm good at micro trends. Uh mega trends hence angel. I think I can spot a micro trend particularly in in areas that interest me maybe manufacturing, B2B, um supply chain uh and financing. But uh mega trends uh I think if you can spot a mega trend, you can be like uh you can do extraordinary things. I don't think I'm there yet. >> And then the third thing you said that he will think big and he will he will make you think way beyond. It happened with you. >> Yeah. Yeah, it did. you started thinking 10x of your business after the meeting. Um well not really but I think some of the pointers he made were were crucial to how our next couple of years shaped out for sure. >> Like >> like for example I think um I remember during that time our financing business had a significant overlap with our commerce business meaning that we were financing largely the customers who we were who we were giving materials to. His view was that those two businesses should grow independent of each other. It's something that had not struck us so vividly till then and they did become independent of each other. >> Interesting. >> And to the extent that the financing business raised money after a year. So that's how it shaped from June 2021 to March 2022 in that period of 9 months um the financing business became a truly independent business. So that's one. I remember the second thing that he saying is about the fact that private labels will be a very important part of our business uh because it can make your business extraordinarily sticky uh with customers and it has transpired out that way. One of the biggest things I would say uh which is true for our extraordinarily high NPS is because of the fact that we have our own labels because we control everything there. Whether it's the cost, whether the quality, whether it's the packaging, whether the the branding around that and stuff. >> Give me an example. >> Yeah. Okay. So, um I'll give you a number first then the example. So out of the 20,000 crores of revenue that we do uh 40% is self-manufactured west and it's increasing two 2 to 3% every year and in each of those products wherever we manufacture wherever we have a label thing made by our business the customer stickiness I mean there's hardly any customer attrition practically 0%. the customer just doesn't go away because it's cheaper, right? It's cheaper. It's better quality >> and they know the brand so they can just reorder the same thing again again. Trustworthy. >> Yeah. Yeah. See, because fundamentally, if you're an aggregator, it goes under your name, but but the customer knows that it's it's made by someone else. >> It has the promise of delivery. >> It has the promise of standing true to quality. But what if it's better quality? What if it's cheaper? In India, one thing sells for sure. Cheaper and better quality. Trust may sell, may not sell, but cheaper and better quality is a great 100% and it sells every day. >> Yes. You have built a very large business. >> H thousands of crores, right? >> Scale wise, yes. >> Scale-wise and even profit wise, you're making tons of profits like which is >> at some scale you make money. >> Which is which is very unheard of in the startup world. >> Right. Right? At least with the kind of startups where they grow very fast, profitability is always a question because at some point they'll make profits. Right? And then you are this founder of a large company with large pedigree all who's of the world wants to come to you and you sometime know it gets to your head and it's not a founder's fault in some way because the founder is revolving around this world where everybody wants to actually just uh you know make him the god and then to have a humility to maybe put your thoughts your point of view your perspect perspective aside and be like maybe this new thing which is probably not even worth 10 minutes of my time or can be much more insignificant in my large context of things that I do. Let me give it an hour and let me give it a thought. That is very rare and you have that. Even first time when we were sitting and I was the one asking you 500 questions, you still gave me an eye when small pockets of five six minutes when I was selling you something. >> M No, my strong belief Raj is that you know um at the end of the day knowledge is a function of what all information you consume right and you as an individual will likely consume information for whatever 16 18 hours but people around you let's say you have 100 people around you they're consuming information for 100 times that number >> so it's more important to observe and build off that because what you're consuming you anyways have right so so the I'm a strong believer in the philosophy that the knowledge rests outside you and hence has to be consumed then it rests inside you and hence has to be dissipated. I would dissipate it if you need it. Uh but I definitely need the knowledge. So hence looking out for more uh teachers rather than students. >> But has it gone to your head ever at any point? >> Was there a phase? >> Business- wise it has gone as an individual on the personal side it hasn't. So on the business side what happens is sometimes what happens is that you know you're doing a lot of right things >> and the law of average catches up with you. M >> that has happened to me wherein I have kind of given away uh the first principles nature of evaluating a particular opportunity because I had this big thing in my head that whatever I would touch would turn gold. >> Midas touch >> the midas touch and that fails you and that has happened to me on the personal side rarely. >> Tell give me an example when did it happen? Okay, I will tell you the first one. I uh I remember and we were talking about it uh few minutes back. I think going to uh uh we started building the agri business, the agri products business, right? When we were building the agri products business, I intrinsically knew that going into food products that had a lot of regulatory mechanisms that are relevant for them would actually inhibit or impede the growth of the business. I intrinsically knew >> I knew that you can't make too much margin beyond a point you can't be too large. Um you'll have to be massi oriented and all that. You can't really build a large business out of that. I knew that. But when I touched it, it suddenly became big and I kept building it. I did not build the guardrails around it around which we could have controlled it and it suddenly became very large for me to uh take a call at a very large scale to actually cuttle it down. So, so that's one example I was >> what made you realize that you have to cut it? >> Fundamentals of business. started uh losing money, putting in more capital which was not generating incremental return because see uh business is a very simple principle at least as per what I operate is that if you put in capital you have to make money and if you put in more capital then you have to make more money that one what you are making already. So business has to accelerate. So for example a return on capital in the beginning can be 0%. It's fine but incremental capital that you put has to be 2%. Further what you put has to be 4%. because you are learning. I mean at the end of the day uh that capital has to reflect that learning >> and when it starts going down when the incremental capital is not generating or the diminishing uh margin uh comes in then you should know that it you're making the wrong choice. >> But did you learn this or observe this by yourself or somebody called it out? >> It was very evident. I actually ignored the data for a really long time because I thought I could turn it around. I had the midas stretch if you remember. uh uh it is when it started happening for quarters in a row that I actually started thinking that no there is something wrong. So on a professional side you tend to do a lot more errors. I think personally it is easier to be disciplined >> but maybe someone let's say a CFO >> or your co-founder or somebody did they point it out or you yourself got it >> did they not object or everyone was in together we are in the midas touch it happens it happens so there was a time I would say sometime around 2022 maybe 23 >> uh wherein a lot of decisions that we were taking was actually turning out to be gold so I think collectively we were under that impression it uh so everyone together everyone together. >> How bad is that? If you don't realize for a long time, the entire core team thinks that we are golden which happens I'm sure to a lot of people. >> It it does happen. Um how often is that or how bad is that? >> How bad is that? Um I can tell you purely from experience that uh one it is uh bad. So second thing is that it happens to everyone. And the third thing is um how do you rebuild after you've known it's bad. So first you have to fail extremely fast. So if you realize it's bad, you just have to wind it down. That's one. And second is how do you build off it? Because there is inertia of rest and then there is inertia of motion. So if you've done something wrong, how do you really get out of it is is the one that really damines us. I think for us what we did is when once we understood that it was wrong we actually shut it down very very fast and we forgot very fast that we had shut it down and that actually helped us. >> Tell me what is the scale today where are you now? >> Okay. Uh so so we have you just heard right we have three businesses. So one is a revenue generation tender generation engine. >> We don't make money out of it. >> We say it's a service that we give you for free. >> Okay. >> Because for me it is a acquisition tool. It's a great marketing tool. Fair. I am doing it on a non-commercial side. We have a lot of users there but doesn't make uh uh it makes enough money to cover its cost. So let's forget that uh part for a minute. If we go to commerce business wherein I'm supplying raw material >> that's your bid assist. That is bid assist. That is bid assist. Yeah. And the second business is to supply raw materials. Right. That business today uh is close to about 20,000 crores in terms of revenue. It's a 10 year old business >> and uh yes it is profitable. has been profitable for 8 years out of the 10 that has been in operations. >> See in B2B you should be making money >> and financing >> and financing today is a is a 7 and 1/2 year old business because it started a little late. Um financing today it does not have a revenue number. It is a loan book number. It's asset based number. So asset base wise we are um uh close to about 11,000 crores today. uh and it's been profitable from the right uh first month. >> So overall the group re like you would identify yourself as a group business right or each and every one of us business is a group business. So group business would be at what revenue? >> Uh last year we ended up with about close to 21 and a half thousand crores >> 21,000 cr of revenue and what's the profit? That's the tricky part. Uh the the profit last year was close to about uh a shade about 600 crores of PAT. >> PAT. >> Yeah. >> 600 crores. >> Yeah. >> In a fast growing startup and this year have you grown? um we would grow between I mean uh in the scenario that we are in is very difficult to predict but I think our top line will grow in the late 20s uh somewhere around the 25 to 30% mark and our profit growth will be much higher because business fundamentally has what is called operating leverage right which is the revenue um grows at a pace but the cost doesn't grow at the same pace and hence typically for large-ish businesses which have achieved uh some scale you would typically expect the profit to actually uh outstrip the revenue growth. So you're growing 25 30% year on year >> typically. >> Correct. >> And you're growing your profits as well. >> Yeah. And you're building boring business, hardcore, you know, typical no margin business area where you're operating and you're building high dependency because someone who has tasted blood with you once would typically want to stay with you. If I am as a small manufacturer >> because the substitute is very poor, right? Exactly. He has to go back to the trader. >> Exly. Typically, if I have like I've explored 50 options and then I come to you, >> I buy from you, you finance it and then >> I find a revenue source and in the end I make money. >> If I've done this cycle once, >> then I love you, right? >> Typically because then this is you're my >> you're my everything and I want >> I have given you reason for me to hate you. Like if I >> for you to hate me rather. >> No, but once if I made money with you then I want to squeeze out every penny out of you. >> Yes, that's right. >> Right. So I would do that. So they're high dependency business. Why are you hidden? Like nobody knows about you. >> It's a little bit by choice. It's a little bit by choice. >> But it's such a lucrative business. Every startup makes so much noise even if they're of 110 scale of you. Uh to be very honest with you Raj, it's a little bit by design and a little bit by philosophy. So let me explain both. So by design we are not many products right as you heard we are in four verticals with 30 products the world is like probably a million of products so we are very localized in products that we are >> we are also today 5% pan India India today has close to about 800me clusters we are only in 40 >> and the reason we are there is not because we are some gods but because we need to create that efficiency I have to give it 5% cheap and make money for myself right and hence we are very localized >> so It's we're not all over the place. So that's one. Second design choice is that we are in businesses which you fundamentally don't think about like for example you would think about coffee >> but you would not be thinking about the agrochemical that goes into growing up that coffee. So these are not very intuitive businesses. True. >> Right. Um and hence by design choice we are mostly in in I would say raw materials which actually a normal person like you and me don't think about and the philosophy in addition to that Raj is that the more we are under the radar the better it is for our business. If a if a customer comes to know that I'm making as much money as we probably do, he will likely squeeze me uh out more like you know there is this uh um there's this cast of businessmen in uh in India called the Bunyas. The Bunyas are actually taught right from birth to say that they're losing money irrespective of whatever they're making. Right. So so it's more a philosophy as well. So it's a combination of those three. Yeah. Because so let's say from a business point of view but from a startup point of view right a startup typically makes a lot of noise even though when they don't make profits and it's very unheard of that in India you see a fast growing startup growing at this pace with large revenue and making insane amount of pat is unheard of until they reach public. Yeah, there are a few though. But >> yeah, like until they reach public like for >> for reaching public then they actually align their business interest with the public market interest and then they go profit and then they build it profitably. Right. >> Right. >> So it's in your case it's not like that. You're profitable since very long time. >> Yes. >> Why don't you talk about it and why don't like nobody talks about it a startup making profits? >> No, even we don't talk about it between ourselves. Right. So I think one of the big things that we have kind of believed as individuals um and I'm not talking about myself alone but in general people who are responsible for what we are is to say that your bat should be doing the talking >> uh like in cricket we say like I can see a lot of cricket gear we say that the guys who actually speak the most are the not the ones who score the most right so I think there's a general aversion to be in the public eye. I think it helps our business as well. So that kind of feeling has actually got strengthened with time. So that's one. Two, I think media also picks up a lot of B2C stories >> because if they they are going to talk about a business that sells steel or chemicals or garments, nobody's really interested, right? Uh because you can't relate to it. Uh so I think media also finds it less fascinating to talk about products that are not in everyday use. >> So that's the second reason. And I would say the third reason is we that kind of people uh I mean I think the family values that we got from generations was to say that hey you should be putting your head down and let the world take notice of you rather than the other way around. >> Fair. Fair. But don't you believe that you should be building a brand for yourself, for the company, for for myself? No. >> Doesn't that help in today's world? >> Don't you think that it helps >> um building a company brand, being known, being just understood by a large amount of people? >> Yeah. Yeah. Yeah. Yeah. So I think um and this is my philosophy. I believe that you will have to reach a certain scale before you build a brand because see there are two ways of building the business. You can throw money at the problem. >> Build a brand uh and then expect to make money later whereas the other way to say uh the other way to build is to make sure that you build a business >> and have the money that you can throw at the brand and then get known. I think it's more the latter for us and it's purely because of the industry that we operate in and people who we are right. >> So I think we would rather try to make our own money so that we can spend on the brand and then get known for it. Uh and I don't think we are close. So >> so yeah so fair you know every time I search about you on Google I try to because I know you and I love uh like lot not many people know this. I have picked up so many things from you based on our last podcast and then whenever I speak to you I just pick up and learn 100 things from you. You don't even realize that. So I keep searching, okay? And I keep searching Google. I want to know what the news is, what LinkedIn is talking, what other other world is talking. One thing pops up is you and your wife, you both have built billion dollar companies, which is but it's with the same set of values, I think. >> But this is incredible, right? It's both partners. They both were doing a job. They both leave the job. They both build billion dollar companies. They both are profitable by build after building a billion dollar companies which is it's something to be celebrated. What do you guys have in common which has helped you build this both in boring businesses complicated businesses. Having said that the core philosophy is that it's not just the similarity. The respect comes the love and affection comes from the fact that we both have some things in common >> but the respect comes from the fact that we both are different in a certain way where we believe that what the other person is doing you can't do it yourself so if you see that right so I think there are reasons why we are common and I'll tell you those but there are significant number of reasons why we are different from each other and hence we will believe that oh okay she is doing that and that which I can't do and that's true for every individual right so you need to have the love which binds you together but you need to have the respect and then only you can actually uh >> give me an example of a similarity and difference. >> So similarity is uh we would like to do things on our own rather than delegating too much hands-on is a very core principle of what we do. >> Yeah. >> Right. Um a difference would be in terms of uh me wanting uh of me wanting to first think of the opportunity and not the risk. She thinks more riskier. She runs financial services, right? And her entire team and people who started the business with her are are more risk first. They would first see the risk. Whereas what I would see is is there enough uh opportunity available? Is there enough profit to be made? Can it be a large business? Whereas the first thing that they would think is can we lose money? So the first thing she would think is protecting the downside. You would think is what's the what's the upside? Um do you fight over this? >> Uh yeah. Yeah. >> Or new opportunities. uh very much very much um to be very honest I think the way we have kind of uh and there are it's not uh an individual versus individual it's team versus team we have said that um while we will healthily fight um the teams the team that is responsible for driving that business will have the final call so as long as um let's say I'm fighting with you um but if in your business I can give you an input the decision rest with you is how we have kind of reconciled and to have that discipline to make sure that I'm not imposing myself on you and it's it's just an input into your decision-m is an important element. So it's more the execution. These are very simple things to talk about but very difficult to practice and get it right over and over again. Tell me what are three important metrics that every founder should know about the business about himself? Both book >> you ask I ask you a question you make it better and then you land yourself into it >> throughout the business I think the the first thing the first metric is to say whether he's got to product market fit which means in my opinion that he his revenues are increasing month for maybe 3 to 6 months >> which means getting revenue is not important because you could just do that through relations but revenues are increasing either 3 months 6 months depending on the nature of the business if it's a consumer oriented business it can be 3 months but if it's a B2B business then it should be 6 months so product market fit demonstrated by increasing revenue every for at least a 3 or 6 month period so that's one the second thing that he needs to measure measure himself this is for an early founder Mhm. >> The second is and this is a tough one to get by the way because there will be inherent seasonalities in the business. Something will happen you don't know rights will happen. The second thing is to get profitable product market weight meaning that he is earning enough money to cover its cost doesn't mean that he's just breaking even. It has to be a certain percentage so that the capital employed is more than the cost of debt. M so if the debt is giving him a 6 to 8% return which is what it gives today the revenue minus cost the profit should actually generate a cost of capital of at least 10%. So that the 4% is incremental for you. 4% is incremental for you and demonstrable over maybe one or two quarters depending on the nature of the business. B2C one quarter. Okay. B2B two quarters. The third metric in my opinion that he should put is the scalable product market fit business. Scalable profitable product market business. which means that not only is he profitable right now but he's being able to generate cash flow because that cash flow will be used to actually fund his own expansion and hence he may not need investor capital from outside. So that's the third metric that happens at a later stage like in our 10th year did we generate any free cash flow. M >> we generated profit in our second year of operations but free cash flow meaning enough capital so that I can put for future and still make money. >> So that is the third in my opinion these are very three important parameters. You can have other things in and around it but these are real gateways. But do you track something on a monthly basis which is very very fundamental to business let's say revenue profits I don't know expenditure of some sort or >> that depends business CM2 CM3 I don't know whatever that is. Yeah, in our case, so CMS I don't believe in. I believe that if you track CMS, you'll never get to profit real profit because then you'll adjust, right? CM is an adjustment. It's not an accounting parameter. What whatever shows up on the balance sheet is is what profit is. So, uh we track IBIDA and Pat like every business has right. Um but it depends business to business. Um when I said about profitable for one quarter or two quarters it means pat not eida because depreciation is a real cost so is tax so is interest. >> All right go >> um >> so pat is one. >> So pat for sure. So the first is product market fit which means revenue increasing for 3 or 6 months. That for me is is essential for a that we do even today >> which means that in certain clusters or in certain products if you're not demonstrating that 3 to 6 month cycle over let's say 2 years and all that that means there is an issue. >> Got it? >> So it's a continuous metric. It is not a metric that has to be demonstrated only in the beginning. Similarly for profitability that you have to do it for one to two quarters. If you're not doing it over and over again then there is an issue. >> Got it. >> And the third is also true. How do you attract talent? How do you retain talent? Attract attraction is through selling purely through selling because make it customized to them. You attract the best talent by telling them that what you are building is is very adjacent to what they have. >> That's attraction for me. It's pure selling. It's like a selling to an investor or selling to a customer. >> Okay. uh retention is a difficult job and that is what differentiates the good companies from the average ones. Retention requires you to give them three things which you already know. Rich, >> famous power that okay I have three more questions. Okay, I've just written out of these. What are first tell me about three dying industries? where you wouldn't put money. Yeah. Like >> invest or or in business? >> In business. >> I think the first one is BPOS, KPOS, they're going. That's obvious. They're going. >> I think the second one would be manpower heavy industries which are doing analytics like for example TPAs. um transcription all that is going >> um the third one would be I think very B2G oriented industries >> business to government >> business to government which are fully 100% government they need to have a balance between government and private pure B2G I resist >> like example maybe infrastructure fully government oriented if not doing anything for private large companies is is a little risky business it's not dying but it's risky it's not my cup of tea and where would you not invest three companies which are dying three industries where you would never invest >> the first two would be manpower heavy industries especially the ones where the manpowers are manpower is actually doing a desk job so that's one where I would not invest second is um industries which are actually I mean it's a personal choice they're not dying though uh is industries which actually are extremely serviceoriented um marketing project management very serviceoriented and you know they go through their films >> right uh where one project can define the character of what your business is so that I wouldn't invest Um I would say the third thing that I don't uh wouldn't invest is is where Indian companies were completely dependent on offshore operations because I think familiarity with our domestic way of doing business is important because we don't know what happens elsewhere. So so that's my personal choice again. Give me an example of the last >> like somebody who's gone up and set up a manufacturing operation in making it up in Europe >> or for that matter is doing a you know some some small services or analytics setup or a uh data oriented setup in let's say a developed country that I wouldn't do because I just believe that what we don't know we don't know like other nations it's very difficult >> only other nations I mean having in India and abroad is okay but just abroad is is an issue >> like going out in different country and building it completely from scratch >> that's happening today >> that does happen today >> it's scary >> it is scary cuz we don't know what we don't know >> nuances we don't understand >> we don't understand yeah >> that's fair you you said manpower heavy textile is one of them >> manpower heavy but where uh it's a desk job >> okay >> textile one of the guest on our podcast said that textile industry is dying Yes. The so the textile has three parts. So the first part is basically uh jinning which means taking cotton bales and making it into thread. >> The second is spinning >> which is to take that thread and make them into yarn >> or make them into fabric. And the third is garmenting. I believe garmenting is a very as I said one of the sunrise industries. The textile part which is the two previous ones are tying which is the spinning and the jinning or the weaving. M >> because they are um they are extremely exposed to commodity prices of raw material one and two there is no differentiation that you can bring in one versus the other. So where the textile business is actually looking interesting right now is if you're doing a backward integration from garmenting there it makes sense but otherwise it is a dying industry. how a small manufacturer in anything whether textile or anything at all because you said small manufacturing people should do and you support them how a small manufacturer can compete with a large manufacturer uh today they can't which is why we exist what I was saying is our business has been built for small manufacturers because they just can't compete nobody builds anything for them which is what makes our business stand out >> and how do they win let's say a new customer where locally They're local in >> local if there are two small manufacturers one says that I'm 20% cheaper and the other is not how do you how a customer wins then like how a manufacturer will win a customer then because there's no differentiation there is no differentiation yes I think the small manufacturer has to consistently invest in either innovation or cost cutting that's the only way in which a small manufacturer can win because relationship building is is true and relevant but only for the short term. It'll go away. I know you you give me business may not be true a year later. Um that's a good foot in the door but won't last. So consistently exploring the because he gets to know the customer's ins and outs very quickly. So using that knowledge to actually make innovation happen so that he can make it more customized it for the customer is important and happens in a lot of auto components. For example, they are inside they're a small manufacturer based inside a large factory. They get to know what the design challenges are. They quickly make a product and then give it >> or cutting costs heavily. I think a small manufacturer has a has a lot of degrees of freedom by which he can cut down his operating costs which a bigger manufacturer can't because he's actually made a lot of capital investments. He would be into long-term agreements with union. He would have signed up service agreements with downstream and stuff like that. So I think cost cutting plus innovation >> true apart from tying up with us. >> What are common ways somebody gets screwed as in a business? >> Yeah. An entrepreneur. What are the ways an entrepreneur can get screwed by investor by suppliers? >> First is by co-founders. First is from within. Nobody's out there to really uh >> screw them >> out to screw them from the outset. He has to first do a mistake to get screwed externally. >> But without doing a mistake, he can get screwed internally. So he has to watch out for the right co-founders, a right founding team, then the right employees and all that. So that is necessary. You may not get there if you have a great co-founding team or a great founding team, but that's necessary for the business to take off. >> That is what he has to watch out for. I think implosion is the is the worry. >> And what is what are the ways investors screw a founder? >> You've been on an investor side. You've been on the founder side. Yeah. Yeah. So it's very difficult in the Indian context for an investor to screw a founder. That's that's very that's very >> unlikely >> very very unlikely and second it cannot happen to an intensity. And I think if the investor is screwing a founder, generally the founder is at fault because the investor has already done his part of the bargain, right? He's already invested. >> So he is almost at your own bag to treat him right and deliver the growth that you promised him. So if you are getting screwed by an investor, it's likely your fault. Uh is my opinion. That's one. Um and the second I would say that if an investor is is screwing you badly, he's most investors are typically minority investors to begin with and you are the one in ascendancy and in majority. So you actually have the entire world favoring you and if you're still tomtoming about the fact that you're getting screwed by an investor, it is because even legally you can't be protected. So likely it's your fault. Like in our language in the financial markets we say that the lender is never wrong because he's given you his money. If lenders can't be wrong, investors can seldom be as well because once you've taken money from someone, it's your obligation to make sure that you are close to uh what you've promised. >> True. And if somebody has given money um I would scantily expect them to actually go and play around with it and risking it by trying to be nasty. It's just common sense. So fair fair. Okay. What's last two questions I ask every every guest is what is one advice nobody should follow? What is one advice nobody should follow? Um, don't be yourself. Try to learn. Try to adopt. The best chance you have to win is to by being yourself. If somebody's asking you to change the fundamental core of who you are as a person, just ditch it. The best chance that you have as a professional, as an academician, as an entrepreneur, as anybody is by just being yourself. So if people are teaching you stuff, it's okay. But if people are pushing it down your throat, it's not okay. And we have a wall which is a cost of ambition wall. Okay. So we ask this question like what cost have you paid personally to build a billion dollar boring business? Uh I haven't given enough time to family. I've been at home um very little and whenever I've been I've been uh occupied. So yeah, that's my cost. >> Cost of family time. >> Cost of family time and also being thinking about other stuff while being with family. So it's been that's >> you like that getting better or you still like that? >> Getting worse. and your wife, how's she? >> Yeah, I would say the same for her. >> They both thinking >> nobody's thinking for >> I don't think she's at as big a fault as Yeah, there are I mean the good part about us is that we've had an extended ecosystem. So my in-laws are close by and we've had uh my parents were also there, my mom went away during co but um we were lucky that way. Mhm. or the kids just watch you and be like to be honest new age kids are very very different they are more glued to electronic devices than than >> or maybe they're quoting they're like dad built a unicorn mom built a unicorn >> now it's up to me to build a unicorn I am much more vocal about it I I tell them that you know hey we'll probably hand you over a company of this size you'll have to take it to 10x we did it in so little a time So please be more efficient. So no but jokes aside, I think that's a common thread. Uh can't really escape that. >> Thank you so much. It was pleasure talking to you again. >> Huh. Yeah. Same here. Truly enjoyed the conversation. I think was very very reflective in nature. So seldom get the time to do that. >> Thank you. >> Thank you sir. >> Thanks for having me. >> Hello big man. How are you? >> Big man. How are you? >> I'm doing well. What about you? I was telling you that the principles that there were two three things that just stayed with me forever like you didn't have a cabin. >> Ah okay. So I gave up my desk you saw outside >> uh >> right here that's my desk. >> Okay. >> Is that the one just outside the door? >> Just outside the door. So I gave up the cabin >> after that. After I didn't even have team. >> Okay. >> And then we built podcast and then for >> but nobody else other than you also has a cabin. Nobody else other than you also has a doesn't have a cabin. >> It's very shared cabin like everybody has a like it's like HR has a department but all four or five people will sit there >> or like a guest team will have a but then everybody will sit there. It's not like a dedicated this is you and your no designated question. Fair. So that that you told me and it stayed with me and to me it works a lot because when you're the founder >> a lot of new people old people they don't give a about you. me they they're very friendly there but a lot of new people they're scared to talk to you >> and when they see you all the time here after a week or a month or two months then their fear goes away at the garage is just random dude walking here and there because he's just out there and that has helped me a lot because it increases transparency a lot of people talk to me I understand a lot of people >> the communication level has just gone up so >> very good principle I I've followed this and I've told about this principle to 50 people in my life. It's a good good thing that is. >> Thank you. >> Thank you for watching this episode till the end. We would love to know what you liked or disliked about this episode and which guests you would like to see on the show. Let us know in the comments. Your feedback help us improve and make every episode a little better. I'll see you next time. Until then, keep figuring out.