From INR 7K Cr debt in 2019 to closing FY23 with just INR 1.5K Cr in debt, CCD started last fortnight and FY24 with a 15% stock market bump

Rise And Grind

Veerappa Gangaiah Siddhartha Hegde was born in a family with a 140-year coffee-growing history in Chikkamagaluru, Karnataka.

Initially, he was keen on joining the Indian Army. Over time, he developed an interest in finance and aspired to become an investment banker.

He earned his master’s degree in economics from Mangalore University. At the start of his career, VG Siddhartha invested heavily in the stock market. When he was 24, he was employed by JM Financial and Investment Consultancy in Mumbai. 

He worked there as a Management Trainee/Intern in portfolio management and securities trading on the Indian Stock Market.

After spending two years with JM Financial, Siddhartha returned to Bangalore.

In 1984, he launched his investment and venture capital firm, Sivan Securities, in Bangalore. He began investing the profits from his start-up in buying coffee plantations in Karnataka’s Chikmagalur district.

By 1985, Siddhartha had started investing full-time in stocks and acquired 10,000 acres of coffee farms.

Around this time, he became interested in his family’s coffee business. In 1993, he set up a coffee trading company called Amalgamated Bean Company (ABC) with an annual turnover of over INR 6 Cr, scaling it to INR 2.5K Cr. over the years.

With the aid of ABC, Siddhartha could trade over 20,000 tonnes of coffee from his crops, which were now producing 3,000 tonnes yearly. As a result, the business grew to become the 2nd largest exporter from India in about two years.

Soon, an interaction with the owners of Tchibo, a German coffee chain, helped Siddhartha look for a larger opportunity. He decided to open his cafe chain in a country with no formative cultural grounding in cappuccinos. 

He opened Cafe Coffee Day’s first outlet on Bangalore’s upscale Brigade Road in 1996 with the tagline ‘A lot can happen over a cup of coffee’.

CCD was born.

Brewing a Storm

The business quickly gained significant recognition for its ground-breaking idea, which allowed millennials to converse while enjoying their preferred beverage.

Once the Indian government opened up the economy in the early 1990s, it led to a rapid increase in income for the Indian upper and middle classes.

The IT Industry was growing, and India became the epicentre of this growth. Young Indians started travelling to other countries for business and work. They had disposable income, and their desire to try new things and have conversations over coffee at a cafe grew rapidly.

Siddhartha could see this only growing from here, and the success of Brigade Road Cafe made it clear that India will have hundreds and thousands of such cafes.

CCD did three things to ensure that they stayed ahead of the business.

Knowing the value-conscious Indians, CCD focused on affordability so that everyone, from college students to professionals, could afford a coffee at a CCD.

The chain then focused on accessibility to ensure a cafe in almost every other neighbourhood. Finally, the focus involved building product acceptability by considering the tastes and preferences of Indian consumers. 

Word of mouth did the rest, and people flocked to CCDs. Siddhartha took his time to understand and build this playbook.

From 1996, it grew to only 18 outlets until 2001, as he wanted to ensure they had a solid base before they pressed the accelerator.

The consistency across all cafes, the brand and the top-of-mind awareness ensured that CCD tables were well occupied. 

It was time for them to push the paddle.

A Perfect Blend

By 2004, CCD had opened its 150th cafe, including ten book-and-coffee outlets. 

They had cracked the secret recipe for growth and were onto something extraordinary. To fuel this remarkable growth of retail outlets, Siddhartha needed money.  

That’s when he turned to leverage his existing network of friends and family, who were happy to help him take their 140-year-old coffee business to a new height.

By 2006, CCD was expanding and growing in India and abroad. They needed a strong financial backer with an understanding of international markets to fuel this growth. Siddhartha raised $20 million from the India arm of a leading American VC firm.

The aspiration of becoming a Global brand took CCD from India to Vienna, the world’s coffee capital. By 2008, CCD opened a cafe in Vienna, and now the world was having conversations at a CCD.

CCD was now available in 102 cities with over 620 outlets. It was way ahead of its competitors like Barista regarding network and growth. By the end of the year, CCD planned to cross 900 outlets and clock a revenue of more than INR 700 Cr.

Is India Brewing a Specialty Coffee Revolution?

Investors loved the growth story, and by 2010, KKR, and other leading investors, had pumped $210 million into CDR (Coffee Day Resorts). This relationship was a huge positive, but time would tell how it would eventually play out. 

CCD touched an approximate revenue of $45M in 2010 and generated employment for 5000 employees. It owned 1K+ cafes in 135 cities.

CCD adopted the vertical integration model early on. CCD owns its plantations, produces coffee, prepares espresso machines, and creates furniture for its outlets. This model enabled cost-cutting and quality control at the same time. 

The cafe chain delved into a culture where people could now bond professionally and personally over a classic non-alcoholic beverage, delicious food, and craft fully architected seating spaces. 

It served cult favourite international drinks like cappuccino, latte, and traditional Indian beverages. It marked a successful attempt at building access to homegrown brand spaces, giving a taste of a similar, if not better, experience than other international food labels prevailing at that time.

CCD had the world for the taking. 

Grounds For Celebration

Siddhartha’s next goal was to make CCD the world’s top 3 retail coffee brands.

Purely on coffee number outlets, he aimed to design 2K stores in India and 200 overseas, mostly in Eastern Europe, to compete with Starbucks, Tim Hortons, and other premium coffee brands globally in the next three years. 

The proposition was simple. Step into a CCD outlet for a universal bonding experience over coffee, making work fun and informal. 57% of CCD’s revenue came from the 20-30 age group who preferred the comforts and aesthetics of a cafe to work and socialise.

It became popular for its seasonals and festive food and beverage delicacies. Further, it partnered with complimentary brands like Dunkin Donuts. 

It progressed with the international culture of getting coffee on the go and launched CCD Express. The new service offered a range on the go for customers who preferred quick service and premium tastes, and it was available in airports and movie halls.

By 2011, CCD had expanded its network to more than 1000 bistros across India and was growing fast.

After sailing through for more than a decade without any serious competition, CCD started to feel the heat in 2012 with the arrival of international chains in India, including Starbucks and Costa Coffee. 

In the face of competition, CCD differentiated itself based on affordable coffee, good ambience, and quality service.

Backward integration meant CCD could beat its competition on price and scale to corners of the country where its competitors could only dream of going, like Leh in Kashmir.

A small cappuccino at a CCD outlet in New Delhi cost INR 79, while a Barista offered the same product for INR 90 and Starbucks for INR 120. 

The price was a moat.

While CCD targeted young people who wanted to pay at most $1 to $1.50 for a coffee, it also opened a few lounge-style outlets focused on premium customers, who did not mind spending more money on added services.

The dizzying growth of CCD was unstoppable. 

Bean There, Doin’ That

By 2015 CCD had expanded to 1,513 cafes across 219 cities in India. 

These were all buzzing. The second largest player by store count was Barista Coffee, which had 165 cafes, while Starbucks operated less than 100 outlets nationwide.

With the expansion plans playing out nicely, Siddhartha decided it was time to access the public markets to raise capital and continue the unfettered growth. 

Coffee Day Enterprises Ltd (CDEL), the parent company of the Coffee Day Group, which housed CCD outlets, went public in October 2015.

CCD was the 2^nd homegrown food and beverage company to go public, after restaurateur Speciality Restaurants Ltd in May 2012.

The response to the IPO was tepid. The listing saw the company garner a valuation north of $1B, but on November 2, when its shares debuted on BSE, it ended the day at INR 270.15 apiece, down ~18% from its issue price of INR 328.

The disappointing IPO was attributed to CDEL’s varied business interests, while their existing investors considered them ‘balancers’, which would play out in the long run. CDEL had business interests in real estate (technology parks), logistics, financial services, hospitality, and information technology. 

As of FY14, CDEL’s coffee business—which included CCD, a coffee vending machine business, an export business, and a chain of coffee retail stores, Fresh & Ground—reported INR 1,144 Cr in revenue, accounting for 50% of its total revenue. The group’s logistics business accounted for 36.9% of revenue, followed by financial services (7.53%) and technology parks (3.30%).

The public markets wanted to buy a coffee consumer story. They were interested in something other than logistics, hospitality or financial services. Within a year of CCD’s initial public offering, 2,000 bistros had spread nationwide. CCD also began to take on debt to service all of its expansion. 

However, the company had to slow its expansion because of cutthroat competition. 

Spilling Beans

The 7,000 Cr explosively growing coffee market kept attracting players. 

Although the combination of affordable coffee, free internet, air-conditioned bistros, and many food options made for a killer combination, CCD needed to do more to differentiate itself. New competitors like Chaayos, Chai Point, and Blue Tokai entered and competed across price points.

CCD looked to consolidate its leadership. 

The period of rapid network expansion was followed by a period of purging. The company started to shut down non-profitable stores to trim its losses. They realised that they had to change their strategy to fight competition.

In 2016, CCD started Cafe Concerts, which attracted a younger crowd. The concerts aimed at bringing some of the best young musical talent to perform at their bistros across the major metros. 

The first concerts co-occurred in February across Mumbai, Pune, and Bengaluru.

The same year, CCD partnered with Freecharge, a financial services company, to encourage cashless outlet exchanges.

Their creative marketing and promotional strategies to drive sales were paying off, as CCD grew to INR 60 Cr in FY19 from INR 8 Cr in FY17.

But all was not well. 

Total liabilities and debt had grown from 1,300 Cr in 2011 to 6,574 crore as of March 2019. Between 2014 and 2019, Siddhartha and CDEL promoter group’s four private holding companies pledged shares worth INR 3,522 Cr as security to raise these huge loans. 

There was also an instance wherein the Income Tax department raided CDEL’s offices and uncovered concealed income of INR 650+ Cr.

Siddhartha was looking for ways to pay off some of the debt. He began by selling off 20.41% of his investment in Mindtree, making a profit of INR 2,858 Cr. There were also reports that Siddhartha was in talks with investors including Coca-Cola to sell part of his stake in CCD to bring down the debt. However, the company and Coca-Cola never confirmed those reports.

In January 2018, Café Coffee Day’s share price touched an all-time high, taking the company’s market capitalisation to more than $1Bn. However, the rising debt issue impacted the company’s market valuation. 

It would never touch that height again. 

Pour Decisions

Like most pioneers of his ilk, Siddhartha was a natural risk-taker

Siddhartha was perennially searching for the next big thing. The flip side of this go-getter temperament was a predisposition to spread himself and his sprawling empire too thin.

In the process, Siddhartha racked up personal debt of INR ~1K Cr, over and above the corporate debt of INR 7K+ Cr, to fund the diversification.

To add to the capital-guzzling non-coffee businesses, the flagship cafes were not without their troubles.

7 years after setting foot in India, Starbucks was making its presence felt, having found a balance between its decadent drinks and the Indian palate. With its chic interiors, global appeal, and cultish following, it was priced at a premium of at least 50% to CCD.

On its part, CCD doubled down on affordable positioning, trying to counter Starbucks’ premium play with a volume-first strategy. It followed it up with an expansion spree, taking its store count beyond 1,700.

CCD had already set the base for Starbucks, making the latter’s real estate decisions much easier. 

Many of the outlets were now nearby, cannibalising each other’s business. Critically, with CCDs mushrooming everywhere, the aspirational value took a hit. The cool quotient, so integral to the modern-day café experience, was gone. 

The coffee chain had missed a beat.

The Mindtree stake sale went through, but not without resistance from Mindtree’s promoters and an intervention yet again from tax authorities. The respite offered by the deal was only short-lived.

There was no end to Siddhartha’s battles with liquidity. And the battle scars were now hurting his pride and puncturing his spirit.

In a tragic turn of events, he died by suicide, acknowledging that he had failed to create a profitable business model despite all his efforts.

His demise opened a Pandora’s box for the company, with lenders queuing up to be repaid, investors selling their stakes in CDEL, and market regulator SEBI investigating for suspected fund diversion and lapses in corporate governance.

Covid further ravaged CCD’s cafés, kiosks, and vending machines in one fell swoop. Something had to give.

In December 2020, Malavika Hegde, the founder’s wife, became CEO to steady the ship and salvage the iconic brand.

Dark days had set in for the rising star. 

Better Latte Than Never

The new management began in earnest.

It began by pulling the plug on non-core businesses, shutting down loss-making outlets, and bringing down debt to serviceable levels.

The 90-acre Global Village Tech Park was sold to Blackstone for INR 2,700 Cr. The group then transferred its broking and wealth management business to Shriram Credit for another INR 65 Cr.

Yes, CCD did wealth management and had a tech park. 

The logistics arm was put on sale to cut down debt further. CCD’s store count dropped by more than half in the year ended March 2021.

As the pandemic abated, coffee chains in India found themselves at the intersection of revenge spending and an easy money regime.

Over two decades, CCD and later Starbucks established the archetype of spacious, air-conditioned cafés with elaborate menus, manned by friendly baristas operating exquisite equipment.

Third Wave Coffee and Blue Tokai filled in the void left by CCD’s diminishing presence and the trail left by Starbucks’ increasing footprint, as coffee startups raised $41.4M in 2022 alone.

The new-age coffee chains focused on smaller beverage sizes, localised food menus, and an astute store location strategy to go head-to-head with Starbucks. Multinational chains such as Tim Hortons and Reliance-backed Pret-a-Manger made belated entries into India.

On the other hand, CCD had its hands full managing the debt hangover and insolvency proceedings. 

In January 2023, it came to light that multiple group entities had siphoned ~INR 3,500 Cr to a company fully owned by Siddhartha, unbeknownst to the board and untraced by auditors.

The funds were diverted, ostensibly to help the promoter repay personal debt taken to finance the group businesses. SEBI fined the listed company INR 26 Cr for the serious lapse in corporate governance.

Despite the legal troubles, the group managed to break free of most misfiring legacy businesses, cut the excesses in the café chain, and right-size its kiosk and vending machine footprint.

What remained after the cutting and chopping was still India’s largest café chain, with ~100 more outlets than Starbucks.

While insurgents and late-to-arrive heavyweights plan to expand aggressively, CCD’s unfinished turnaround gives it a massive head start.

Fourth Wave Coffee 

A fourth wave of coffee is underway globally. The first wave was marked by instant, mass-produced coffee.

The second wave, led by Starbucks, was centred on coffee as an experience, making the café the ‘third place’ where people spent time after home and work. 

The subsequent third wave emphasised a deep appreciation of flavors, characterized by coffeehouses brewing their specialty coffees.

The nascent fourth wave focuses on ethical sourcing and sustainability. with brands like Pret-a-Manger, known for 100% organically grown coffee and food prepared at onsite kitchens without additives.

The preference for sustainability challenges the ‘third place’ trope or coffee chains’ expansive use of real estate. It also makes economic sense, given that none of them have a consistent track record of profitability despite achieving critical mass.

Parallelly, small-time players are experimenting with a takeaway-first strategy, wanting to make coffee a grab-and-go experience.

The strategy aims to replicate the success of Indonesia’s Kopi Kenangan, Singapore’s Flash Coffee, and the Philippines’ Pickup Coffee in turning coffee from an indulgent drink into a functional product.

Early adopters include Abcofee, which has 30 cafés in Mumbai and NCR. Some of them lack seating and operate like a reimagined chai tapri, but they offer a cappuccino comparable to that of Starbucks.

CCD could rise like a phoenix as this new wave kicks in. For almost four years, CCD has just been putting out fires, unable to do anything else. 

From this fire, a phoenix could rise. Debt has fallen to 1,000 Cr from 7,000 Cr. The coffee business now drives 90% of the revenue. It is less sagged to move, more nimble, and focused. 

Malavika Hegde had taken CCD alive. 

CCD, by its kiosks and vending machines and its acquired nimbleness post-restructuring, could ride the new wave if it does take off. Similarly, it could pivot to becoming primarily a dispenser provider, taking a leaf from Chai Point. 

Coffee connoisseurs would know that the production process involves grinding the bean before brewing. The grind, more than anything, determines the flavour of the coffee.

CCD has painfully endured the grind of business cycles over the past five years and more. Regardless of what follows, it now appears well-poised to return to full vigour.

Siddhartha’s original idea was to create a coffee culture in our tea-drinking country. His grand vision seems to have finally taken shape for all his flaws as a businessman.

In the almost thirty years of CCD’s existence, India has grown from a coffee backwater to a 30,000 Cr market by 2026. CCD started the revolution, lost its pre-eminence, and is now back in the mix.

Its market cap has crept above 1,000 Cr, and is likely to keep moving northwards. If execution stayed the same way, it will see an expansion of multiple on revenue. It is already at 1,000 Cr, with a 3x multiple with cleaner books already putting it at ~3,000 Cr.

Paring debt and going with the growth of the market could see it climb back upwards of 5,000 Cr in market cap. The resilience of being in the market for three decades will only help.

It still has the largest number of stores, is still the second-largest chain by revenue, and has possibly the widest and deepest brand recall.

True to his tagline, a lot has indeed happened over coffee. As more continues to happen over coffee, CCD may very well remain at the forefront of it all.

Writing: Bhoomika, Abhinay, Anisha, Nikhil, Varun and Aviral Design: Omkar and Stability

Last week, audio entertainment platform Pocket FM announced a $103M fundraising at a $750M valuation. 

Having an ear for content

Rohan Nayak graduated from IIT Kharagpur in 2014 and joined an investment bank.

During the 18-month stint, he realized that his leaning for product craftsmanship outweighed his number-crunching chops.

In November 2015, he moved to Cube26, a tech startup that built operating systems for homegrown mobile handset manufacturers such as Micromax, Karbonn, and Lava.

While commuting from Gurgaon to Cube26’s office in Delhi, he consumed 3-4 hours of audiobooks and podcasts weekly.

Paytm acquired Cube26 in June 2018 to add social engagement features to its product suite.

This allowed Rohan a bigger canvas to operate while shifting his place of work from Delhi to Noida.

The 3-hour daily commute naturally made him look beyond self-help and learning content and search for audio entertainment.

It soon dawned on him that while video entertainment ranged from ephemeral clips on TikTok to long-form options such as Netflix, Amazon Prime Video and Hotstar, audio entertainment as a category barely existed. 

Rohan sensed a vacuum, and he went down the rabbit hole.

Looking up YouTube, he discovered creators with a million-plus views who were compelled to impose a stock image as a thumbnail on a 40-minute sound clip. The hack was done only to meet the platform’s requirements.

These ‘videos’ were, in fact, fictional audio content, albeit forcefully repackaged as audiovisuals. He understood that the supply of audio entertainment existed, just that it was not aggregated.

Further, he came across users in the comments section of these videos asking the creators to share the audio files with them, which could be played even while their phone screens were locked, unlike YouTube.

Some of the creators responded by linking the files in the video description.

Rohan soon discovered that most of these creators ran large WhatsApp groups to make the original audio clips available to patrons.

This validated that demand for audio entertainment also existed, just that it was uncatered.

What needed to be added was distribution via a platform.

Like many other entrepreneurs, Rohan set out to solve his personal needs. Given the size of his ambition, he needed partners.

He teamed up with his IIT Kharagpur batchmate Nishanth Srinivas, who came with hands-on streaming experience at JioSaavn. Nishanth’s former colleague at Flipkart and Grofers, Prateek Dixit,  joined the duo as the head of tech.

Pocket FM was born.

Creating the playlist

The trio launched a minimum viable product on the Play Store.

PocketFM combined Rohan’s early learnings, Nishanth’s savvy with personalisation and Prateek’s tech expertise,

Back then, non-music audio came with limited baggage and thus, minimal reference points. 

Twitter, LinkedIn, and Facebook had made most of the written word, YouTube transcended everything from cat videos to online lectures, and 6-year-old Instagram had taken the world of images by storm.

But no storyteller ever considered audio even as an option, let alone as the preferred medium.

It was clear that Pocket FM’s product could not be scaled further without deeper user insights. The best way to pick up user insights was to build a scaled platform.

It was the classic chicken-and-egg problem.

To get started, the team focused on fundamentally understanding the user from scratch. This zero-based approach would require capital.

The founders’ pedigree, network, and prior startup experience helped them raise a seed round in January 2019. The average user engagement was under 5 minutes daily.

With the fundraise secured, they entered a phase of serial experimentation. The team conducted up to four weekly trials to explore content formats and genres, refine product onboarding processes, and uncover recurring user behaviour patterns.

The emphasis was moving fast and figuring out what works, which could be channelled and built on to grow the user base.

On the supply side, the platform identified aspiring authors and web series scriptwriters with compelling stories looking for a launchpad.

Getting onboarded on Pocket FM came with almost no entry barriers for these creators. This was unlike the hurdles of securing a contract with a publisher or having your screenplay greenlit by a movie production house.

Moreover, the novelty of the platform allowed creators far more control over their product. It enabled them to have a direct interface with their audience, as compared to the rigours of the algorithm on YouTube.

Pocket FM nurtured and expanded its creator community as it transitioned from user-generated content (UGC) to professionally user-generated content (PUGC). The trade-off was sacrificing speed for quality and consistency.

For the creators, the platform served as a training ground where they honed their craft before pursuing bigger opportunities. It was a win-win.

On the demand side, as user cohorts stabilised and the product exhibited initial signs of a market fit by late 2019, the team focused on identifying the optimal growth channel.

The challenge was to gain high-quality users at a sustainable acquisition cost. The absence of legacy in fictional audio content made it even more challenging.

A look at their user activation metrics would throw up answers.

Adding to the queue of listeners

Pocket FM’s fledgling internal MIS reports showed that the 1-hour mark was the inflexion point for user engagement and retention.

Once a user crossed that threshold, there was no looking back. The heat map of daily user activity showed more interesting patterns.

By late 2019, Rohan, Nishanth, and Prateek believed that commutes, morning and evening walks, and household chores were the major pockets of time when users tuned into the shows on Pocket FM.

They were right, albeit partially. The graph showed two more spikes at around 3 PM and the other after 10 PM.

Customer interviews revealed that those peaks were attributable to the post-lunch hour and the time before bed.

Listeners asserted that they used platforms like Netflix or YouTube to actively unwind and relax rather than to kill time during mundane tasks passively.

Encouraged by the feedback, the team doubled its content play by creating playbooks and tutorials for its growing community of creators.

The easier the creators could monetise their content, the better the quality and the higher the likelihood of creating more content on the platform.

To enable monetisation, the team kept its ear to the ground, ran fast iterations, established clear markers for quality and set up short feedback loops.

All the fictional content on the platform was episodic, with every subsequent episode produced only after analysing user traffic data for the previous one.

Audio had a clear advantage over video here. 

The relatively smaller investment and quicker turnaround in audio content further allowed creators to be nimble. Creators could tweak their content almost in real time based on actionable inputs.

Every user comment was turned into a data point, mass user drop-offs were dissected and assimilated with the creators, and every passing trend was codified as organisational learning.

A giant insights machine was being put in place. It took an army to create a category, and Pocket FM mobilized one quickly.

The flywheel had begun to take shape, and platform effects were becoming evident. The core team was getting good at this.

If you are good at something, you do it at scale.

Increasing the tempo

By 2020, India would witness a boom in consumption across all types of audio content.

India was estimated to have more than 150M daily listeners, making it the world’s third-largest podcast market. 

Why this happened seems like a mystery, but the reality was that Indians had grown up heavily exposed to audio content. It was called radio, which PocketFM’s name did a hat tip to. 

The delivery on mobile internet would be novel. 

Increased smartphone penetration across urban and, more importantly, rural India, combined with the affordable mobile data offerings from Jio, enabled providers to offer a wide range of on-demand audio content across genres, languages and moods. 

As the pandemic struck in early March and the ensuing lockdown was imposed, India saw massive shifts in smartphone usage trends. This would be a boon for content platforms, audio and video alike. 

Smartphone usage increased by 11%, from 4.9 hours to 5.5 hours daily, from March 2019 to March 2020. It grew by 25% to almost 7 hours daily in the first month of the pandemic.

Indians were spending more time on their phones for working from home, and OTT platforms such as Netflix and Spotify saw a 55% increase in time spent on their platforms from the months before the pandemic. 

But a few months later, the hype slowly faded as fatigue from consuming large amounts of video content set in, leaving people unprepared for spending such a long time in isolation. 

A huge opportunity for podcast and audio platforms would present itself. At heart, podcasts are non-intrusive and give people company during daily routines. This also made it a more personal experience and created a bubble of privacy for users.  

Pocket FM went from 10,000 downloads in 18 months to 1 crore downloads in just 3 months of the pandemic. It also became the #1 app in the ‘Music & Audio’ category on Google Play Store.

Pocket FM worked on a “wait and listen” subscription model that allowed users to access a few episodes of a title for free before upgrading to view the remaining. 

To increase engagement on the platform, users could also unlock further content by acquiring coins and completing various tasks. These could be as simple as following them on social media, completing a survey, or watching an ad. 

July would see Pocket FM’s monthly active user count cross 10M for the first time since inception. 

While market leader Pratilipi and competitors KuKu and Khabri picked up further funding to continue this unparalleled growth, Pocket FM would also see a 6X increase in its valuation as it raised its Series A of $5M. As 2020 closed, the vernacular audio marketplace had set up shop in India. 

PocketFM was about to take a direction no other consumer tech platform had taken. 

Syncing into newer territory

Pocket FM’s audio series would be its most successful format and pave the way for monetisation as it looked to continue its explosive growth. 

Audio series were fictional stories divided into multiple chapters or episodes like television shows. With only 2-3 free episodes full of cliffhangers and twists, audiences were eager to purchase further episodes to unfold the rest of the story. 

Pocket FM would enable users to purchase more episodes starting as low as INR 9 or accomplish a task from a host of options to earn coins that could be used to unlock episodes. 

The tasks would also allow multiple agencies to partner with one another and advertise to the then large and diverse user base, opening up another avenue of monetisation. 

As mid-2021 approached, Pocket FM was making waves—not just in India but also in regions abroad where it hadn’t even started a team or actively made the app available. 

Pocket FM organically gained traction in parts of South Asia and the Middle East owing to the large Hindi-speaking population there. 

This was a clear sign of early product market fit, and the team decided to take the hint and expand abroad. The US, the second-largest podcast market in the world and boasting a large population of Indian Americans, would be the perfect fit. 

Pocket FM took its audio series to the US, where most Hindi-speaking Indians actively took to the product 

One of the key metrics tracked, time spent listening (TSL) , reached 110 minutes daily in the US, compared to 90 minutes daily in India. 

As more users from different communities frequented the app, Pocket FM expanded its catalogue to include more English titles, such as Rich Dad, Poor Dad, and Atomic Habits. It also made available English translations of its more popular audio series. 

The closest competitor in the US was Audible, which priced its subscriptions at $8/month, something the majority of Indian Americans didn’t consider budget-friendly. This created a clear opening for Pocket FM’s micro-payment approach. 

They priced their cheapest package at only $1.99 for 15 coins, which allowed users to access a couple more locked episodes of their favourite show at a fraction of the price offered on other platforms. 

More importantly, this was still 20X higher than the cheapest package in India, INR 49 or $0.6 for 80 coins. This would lead to a huge revenue boost and pave a clear way to monetise and grow the product abroad.

Pocket FM would report a US ARPU of INR 3500, 3X the figure in India of INR 1000.  

On the heels of its successful international expansion, Pocket FM would raise its Series B round of $22M. As the year ended, it would break milestone after milestone, crossing 40M downloads and 3B monthly listening minutes. 

Just as 2020 ended with a funding round to fuel its growth, 2021 would finish the same way, signalling to India and the world that Pocket FM was here to stay. 

Playing on loop

By 2022, Pocket FM had expanded its reach significantly.

The platform had over 80 million listeners and a large base of 500k creators. With over 100,000 hours of content and a library expanded by over 1500 audio titles, the platform reported an impressive 45 billion minutes of entertainment consumed.

The average listener spent about 110 minutes daily on the platform, while short-video platforms had an average of 45 minutes and video OTTs 70 minutes. The listeners were hooked.

The delta made sense. Audio required just the ear to be engaged, while video required eyes and ears. Audio was truly hands-free. 

In March 2022, just 3 months after its Series B it closed another round of funding, raising $65mn. Pocket FM was not merely building an entertainment platform but carving out a niche as an alternative to traditional music streaming, OTT and social media.

The top 10 audio series garnered over 1.4 billion plays, leading to more than 10 billion minutes of streaming. Shows like ‘Insta Millionaire’, ‘Saving Nora’ and ‘The Return’ were big hits with each earning over INR 100 Cr (~$12mn) revenue, 15 other audio series crossed the $1 million revenue mark.

Insta Millionaire was the platform’s first big success, a gripping narrative spanning over 800 episodes, each 15 minutes long with a suspenseful cliffhanger to end. 800 episodes running 200 hours would be unheard of in video, but it worked on audio. 

The story gained a large following, even in the United States and other countries. Pocket FM now had the perfect playbook to monetise.

Initially, offer few episodes free to the user, after which, to unlock a new episode, you pay using Pocket FM coins or else wait a day to unlock one hour of free daily content. The overwhelming desire to uncover what happens next drove users to use more coins to continue listening.

Micro-transactions could entice users and reduce entry barriers while monetising the freemium users via third-party ads.

With the product and the model scrutinised to the Indian market, growth in the higher ARPU international market came far more efficiently, it had solved for generation at scale.

AI played a pivotal role in facilitating content creation by empowering writers. Through AI-driven voice conversion technology, writers were effortlessly transforming their stories into captivating audio series, choosing from a diverse range of over 50 AI voices. 

This streamlined process revolutionised audio storytelling for them, resulting in a fivefold increase in the monthly publication of PUGC content, totalling an impressive 2000+ AI series per month.

They were growing fast; witnessing a 10X growth in revenue, exceeding $25M in ARR. This surge stemmed primarily from their international expansion efforts, contributing to 70% of the revenue despite comprising only 15% of the user base.

What began as an audio podcasting platform for Bharat had since transcended its initial vision, venturing into new territories that extended far beyond its small beginnings. 

Taking stock of the charts

By 2022, headphones had become ubiquitous

Around a billion people listened to music, 500 million tuned into podcasts, and 250 million enjoyed audiobooks daily.

In India, the scene was even more vibrant. Around 80% of folks found their daily joy in audio entertainment. Music, with its quick and fun nature, was everyone’s go-to.

Yet, the audio landscape was broadening. 

Podcasts and audio stories began capturing hearts. Indian platforms like Kuku FM and Pratilipi FM were attracting a significant following, while Spotify was increasing its podcast offerings by acquiring production companies.

Pocket FM was not behind in India and had nearly 10 million monthly listeners.  

To amplify their revenue, they experimented with in-audio advertisements and brand partnerships. However, this strategy didn’t pan out as lucratively as hoped. Many brands were cautious, finding it difficult to see a direct correlation between the audio content and their target audience. This led to a less-than-stellar performance in direct brand partnerships.

Pocket FM also ventured into the diverse pool of regional languages, launching content in Marathi, Malayalam, Telugu, Kannada, Tamil, and Gujarati. However, the Time Spent Listening (TSL) for these regional offerings was up to 30% lower than for Hindi content, which was the benchmark then.

The primary reason is that Marathi, Gujarati, and Odiya listeners often preferred Hindi series, and the Kannada audience faced content that didn’t quite resonate with their preferences.

Due to this lower engagement, efforts towards regional content were scaled back by early 2022. 2022 was a banner year for Pocket FM regarding revenue, but the journey was challenging. 

Finding the right mix of content to please a diverse audience proved tricky.

Hitting pause, rewind, play

Audio series as a format was the sleeper hit in 2023.

They took off, especially in the US. The market for these stories you listen to grew fast—about 40 times bigger than just two years before.

People got into these audio series, even more than music. They were almost as popular as watching shows and movies online, which is saying something.

In FY 2023, Pocket FM’s revenue reached INR 150 crore, marking a notable improvement in financial performance compared to the previous year. 

The expense-to-revenue ratio improved, dropping from 10.78 in FY22 to 1.58 in FY23, indicating a more efficient allocation of resources and better financial management. 

The revenue generated for every rupee spent on content increased from INR 2 to INR 7. This improvement reflects two key developments: a more strategic utilisation of content and reduced production costs attributed to acquiring expertise over time. 

Notably, with 70% of its revenue originating from the US, Pocket FM stood out as the first Indian consumer platform to achieve considerable scale in the US market.

But even though they were doing well, things in the podcasting universe were shifting.

Spotify implemented a strategy of securing exclusive contracts for certain podcasts to attract a larger audience to its platform. This approach didn’t significantly impact revenue. Despite this, Spotify continues to command a significant portion of the global podcast market, holding approximately one-third of the market share.

Conversely, Google chose to discontinue its dedicated podcast app, noting a shift in user preference towards accessing podcasts on YouTube. The company strategised to streamline podcast consumption through YouTube Music, aligning with user behaviour patterns.

Entering and expanding in a market dominated by such established players presents considerable challenges. Global growth in the competitive audio content industry requires strategic innovation and differentiation.

Pocket FM focused on content production innovation, leveraging artificial intelligence to enhance its content creation processes. 

With AI’s help, they could create new story pilots 10 times faster than before. They also became really good at knowing which stories people would like—three times better.

AI also helped cut down the money they spent making these pilots by half. That means they could try out lots more stories without wasting cash. Because of this, every month, they find out which stories would be big hits 300% more than before. PocketFM had become a supply generation machine.

The company was always ready to tell the story the world wants to tune into next.

Streaming to the world

Pocket FM has a treasure chest of stories, with about 2,000 audio series and over 400,000 episodes. 

They create many of these stories themselves, but they also have a corner where fans can create their own, and they license some stories, too. They’re also not working alone; with a huge freelance team of over 250,000 writers worldwide.

Their audience is huge—130 million listeners across ten countries, with the US being their biggest fan club. They’ve got big dreams: In 2024, they plan to bring their stories to even more people in Europe and Latin America.

In just a year and a half, they have also added $100 million in revenue run rate. 

All this success meant they could get more money to grow—$103 million more, potentially worth over a billion dollars.

Think about how cool it would be if there were a TV show on Netflix based on one of Pocket FM’s hit audio series. It’s like when comic books become blockbuster movies—just look at all the Disney and Marvel films.

This path is not a dream, but a fairly doable reality. The cost of producing audio is low, allowing to test for audience love before converting it into a more expensive format. Gaslit, Dropout and many other shows were first audio. 

Then there’s the new kid on the block, Pocket Novel. 

Just launched in 2024 after a year of testing, it lets writers share their novels and get paid. Readers can buy chapters for as little as ₹9 using the same small payments that made Pocket FM popular.

Pocket Novel gathered 150,000 writers and built a library of 250,000 novels during its test run. People loved it, making over a million transactions to buy their favourite chapters or whole novels.

By 2025, Pocket Novel wants to have a million writers and 2 million novels and aim to make $100 million each year. 

Pocket FM is bullish, having invested $40 million on this new adventure.

When it comes to making money from all these stories, Pocket FM holds the keys to the kingdom—their IPs or story rights. It will be exciting to see how they turn these into more gold.

Micro-transactions, ads and IP would contribute to a strong flywheel of monetization. The goal? 

To make INR 1,000 crore in 2024. The question isn’t if they can do it, but how quickly they can cross that finish line. From a deep insight in 2018, the company had taken a story of its own. From the sleepy towns of India, it had become the first Indian consumer tech platform to scale globally. 

With stories to tell and new worlds to explore, Pocket FM is spinning tales into gold, one chapter at a time from India to the world. 

Writing: Nikhil, Parth, Raghav, Tanish and Aviral Design: Omkar and Chandra

Last fortnight, Narayana set the ambitious aim of dissociating health from wealth, on the tailwinds of a year, it breached ₹27,000 Cr in market cap. 

Big Heart

Dr Christiaan Barnard carried out the first heart transplant surgery in 1967. 

This event inspired a young boy in his fifth grade in Mangalore to know in his heart what he wanted to become. However, to become a heart surgeon, the young Dr. Devi Shetty realised that he needed to become a doctor first. 

He graduated from Kasturba Medical College in Manipal with an MBBS in 1979. At the time, India lacked opportunities to train a heart surgeon. He then went to England to join Guy’s Hospital in London, considered one of Europe’s best cardiac centres. 

He returned from Heathrow to Howrah in 1989 and set up the cardiac surgical unit at BM Birla Hospital in Kolkata. He was the only heart specialist in the city.

In one of those early days of his career, Dr Shetty received a call from a patient who requested a home visit. Although surgeons didn’t do home visits, a reluctant Dr Shetty did the visit. 

His patient was Mother Teresa. 

Once in a while, when Mother Teresa was admitted to the hospital, she would follow Dr. Shetty during his rounds in the pediatric ICU. In her words, when God created these kids with a hole in their hearts, he realized his mistake and sent Dr. Shetty to Earth to fix those mistakes. 

This accolade redefined the way Dr Shetty approached his profession.

Dr Shetty soon realised the stark difference in his practice in India compared to that in the UK. Less than 1% of the patients he attended in India could afford heart surgeries. Most of his patients were so malnourished that their wounds would not heal after the surgery. This was alarming since Indians are three times as likely to suffer from a heart attack as Caucasians. 

The average age of his patients in England was 60, whereas in India, it was 45. 

By the 1990s, instead of a young man bringing his father for treatment, the old father would bring his young son for a heart operation. It was a silent epidemic. India needed two million heart surgeries a year, but less than a hundred thousand surgeries were performed. Dr Shetty would not have a practice unless the patients could afford the surgeries.

Dr Shetty took it upon himself to bring cardiac surgery to everyone. Narayana Hrudayalaya was born in 2000 as a 280-bed hospital in Bangalore. Dr Shetty’s father-in-law provided him with the initial seed capital needed to set up the facilities on the hospital premises. 

His only condition was that he never refuse surgery on any child suffering from heart disease. 

Bypassing Big Costs

By the mid-2000s, it was clear fixed costs formed the lion’s share of any hospital’s expenses. 

Building and maintaining the hospital infrastructure, blood banks, and laboratories with machines for CT scans, MRI, and PET scans were expensive. To provide care at lower costs, building hospitals with 100-200 beds would not do the trick. They needed to be built at scale so that economies of scale could kick in. 

Dr Shetty cracked the code for low-cost, affordable healthcare for the masses similar to Henry Ford scaling his factory to produce automobiles. Narayana would raise its first round of financing of ₹200 Cr at a ₹1,500 Cr valuation to scale. 

A heart surgery that costs $200K in the US would cost only $1400 in India at any of Narayana Hrudayalaya’s hospitals, made possible through Dr Shetty’s “Walmart-isation” of care. Soon after the first 260-bed hospital, Narayana started to build, keeping scale in mind. 

Narayana’s massive hospitals were built on 5-7 acres of land and could house 500+ beds. Advanced machines and equipment are bought in bulk and used 24/7. The hospital should have many outpatients, which is possible only if the surgeries are affordable. 

In addition, doctors and nurses at Narayana worked six days a week, compared to five days a week when healthcare frontline workers work at US hospitals. The average hours that doctors work in India are also almost double those of their US counterparts. 

Skilled labour is much more expensive in the US, where 65% of the hospital’s revenue goes towards salary. In India, the equivalent number is 20%. 

Combined with the money budgeted for litigation spending and that set aside to pay for malpractices, the hospitals in the US need help to innovate within their current system. It eventually became a business with too many people, following many rigid and archaic processes.

By 2010, Narayan Health had reached the scale of almost 4000 beds with more than 12 hospitals. The chain was staring at a massive opportunity. 

Pacemaker for Progress

Treatment of cardiovascular diseases in India was poised to reach $10B in India. 

Surprisingly, at Narayana Hrudayalaya, 30% of the heart surgeries performed were on babies. India produces 20 million babies a year, the largest in the world. 

One out of every 140 babies born in the world is prone to have heart disease at birth. So, there are between 600-1000 babies that are born every day in India with a dysfunctional heart. If these children are operated in the first few days after their birth, they can be cured permanently. 

However, along with constraints of treatment capacity, Indians cannot afford a $200K surgery. 

Dr Shetty realised that if the treatment costs are brought down to <$2000, families could scrape together the fees to save their child, in case it is a male. 

However, that threshold is still not low enough for daughters. That’s why Narayana hospitals fully subsidise the treatment costs for girl children through the aid and donations they receive.

In 2012, Dr Shetty roped in the state-run Insurance Karnataka Milk Federation to sponsor insurance for their network of milk-producing farmers. 

The initiative was called Yashaswini and was one of the earliest micro-insurance programs to run in the country, with premiums as low as 11 cents/month. The idea was to price at the cost of a locally available cigarette. The goal was to drive awareness amongst the villagers to quit smoking and reinvest that money into buying health insurance for their families.

Narayana’s decade of existence had become transformational for Indians, especially those at the lower income spectrum. In the same year, Devi Shetty would be awarded the Padma Bhushan for bringing low-cost healthcare to India.

Narayana’s healthcare business for everyone was also beginning to reach real scale. 

Pumping Up Globally

By 2013, Narayana Health was operating 18 hospitals spread across 14 cities in India. 

Revenues touched a whopping Rs. 827 Cr, with a growth of 200 % over the past five years, and EBITDA margins reached a healthy 13%. 

Narayana Health followed a multi-pronged strategy to fuel its fast growth, aiming to maximise the efficiency and returns on capital employed. 

Narayana would initially own and operate hospitals outright. However, establishing a 300-bed speciality hospital in major cities costs anywhere between Rs. 150 – 200 Cr. This would not be the most feasible option to achieve high-scale growth. 

It adopted a second model to scale – revenue sharing. 

Through an ‘asset light’ approach, Narayana Health found the right partners who would invest in and own capital-heavy fixed assets, including land and buildings. This freed up Narayana Health’s capital and administrative bandwidth for owning and maintaining medical equipment. 

Instead of their investments, partners would have a claim on the hospitals’ revenue. 

The third model was also collaborative – this time, with governments. Its first low-cost hospital in Mysore was constructed in 2013 with the Government of Karnataka having a 26% equity share, and the model was repeated with the government of Assam to build a hospital in Guwahati in 2015. 

The fourth model involves operating third–party–owned hospitals and cardiac centres attached to third-party hospitals on a management fee and/or a lease basis. These efforts were supplemented occasionally by acquisitions. 

Narayana’s Health ambitions were not just limited to India. It wanted to leverage its healthcare expertise, strong focus on quality, and cost-efficient operating model to target new markets. 

In 2014, it invested $100 million in establishing a 104-bed hospital in the Cayman Islands, a short flight from Miami. The Cayman Health City aimed to be a disruptor, pushing the expensive US system to innovate.

On average, Narayana Health cardiac centres performed 40 heart surgeries for less than $1600 each, less than 2% of the cost of a similar operation in the U.S. 

The American healthcare market was ripe for disruption, and Narayan Health was ready to jump in. It created a joint venture with an American not-for-profit healthcare group, Ascension Health Alliance, to execute its vision.

Narayana Health raised Rs. 300 Cr in 2015 to fuel its domestic and international ambitions, valuing the company at around INR 3,000 crore. 

Backed by solid ambition, multi-pronged growth models and international funding, Narayana Health grew to a network of 23 hospitals in 2016, with 5,600 operational beds. It enjoyed considerable domination and brand presence in two geographical clusters – Karnataka, which had 2,344 beds, and East India, which had 2,270 beds.  

But Narayana Health was just getting started. Its target? 30,000 beds. 

Racing to Capture India

Having firmly established a presence in the South and East, Narayana Health set its sight on the North and the West. 

But growth was not being chased for growth’s sake. Scale was Dr. Shetty’s next step towards solving the problem he had founded Narayana Health for—providing accessible, affordable quality healthcare for the masses. 

Or, as the founder put it in an interview – size for social impact; size for social sustainability­.  

Economies of scale, centralised supply purchases, and high utilisation rates for medical equipment allowed Narayana Health to provide lost-cost treatments yet be profitable. 

But for Narayana Health to chase more growth, it needed more money. 

To achieve 30,000 beds, Narayan Health turned to the public markets and launched an offering, raising INR ~600 Cr and providing its investors an opportunity to exit. The issue was oversubscribed eight times, with its shares debuting with a healthy premium of 30 per cent.

Flush with funds, it forayed into the North in 2016 by commissioning a super speciality in Jammu, acquiring an under-development multi-speciality hospital in Gurugram, and managing the operations of a third-party multi-speciality hospital in Delhi.

In parallel, it made inroads in the West by commissioning a pediatric hospital in Mumbai. Its long-term plan was to make Delhi and Mumbai the primary hubs for its north and west clusters.

By 2018, Narayana Health had 51 facilities, with a cumulative capacity of 7,181 beds, and an increase of ~30 per cent in just two years.          

And its numbers reflected a similar growth. Revenue grew from ~INR 1,600 Cr. to ~INR 2,300 Cr.– a growth of a ~40 per cent – in this period. EBITDA margins fluctuated between 10-13 per cent, growing similarly. ~40 per cent of its revenues were sourced through cardiac science services, indicating improved diversification of specialities          

The Cayman facility’s operating leverage came into play due to a 79% CAGR between FY15-18, yielding EBITDA margins of 13.5% and first-ever profits of USD 1.2 million in FY 2018.

Narayana had scaled to global markets and had a heavy presence in all corners of India. To understand how it was growing rapidly, one needed to know how it kept costs low. 

Bottomline of the Business

Narayana’s model is built with a laser focus on optimising costs and improving efficiency.

Unlike many hospitals that run top-down, surgeons are treated as business owners. The impact is economics improves bottom up. 

Surgeons at Narayana Health receive a daily profit and loss (P&L) statement detailing the costs and revenues for each surgery performed. This granular financial data allows surgeons to identify areas for cost optimisation. 

For example, they may find opportunities to reduce the cost of surgical supplies or shorten the length of hospital stays. The P&L statements create cost consciousness and accountability among the surgical teams.

Narayana Health also cross-subsidises to make care more affordable by charging higher prices to wealthier patients and medical tourists. Foreigners coming to Narayana Health for treatment pay more than local patients

This enables the hospital to offer discounted rates to lower-income patients while remaining profitable. About half the patients pay full price, while the other half receive subsidised care.

As part of the cost consciousness, efficiency is paramount at Narayana Health’s hospitals. 

The average Narayana cardiac hospital performs 40 heart surgeries daily at less than $1,600 per case, just 2% of the U.S. average.

All this is enabled by the way Narayana Health reduces costs is through economies of scale. 

The health system performs an extremely high volume of procedures—around 40 daily cardiac surgeries. Specialist surgeons perform 400-600 procedures annually, compared to 100-200 in the U.S., enabling them to hone their skills. 

High patient volumes allow Narayana to negotiate better prices with suppliers and spread fixed costs over more patients.

Narayana utilised a “production line” approach where surgeons focused solely on surgery while other clinicians handled pre-op, post-op and non-surgical tasks.

Importantly, Narayana’s low costs do not come at the expense of quality. Mortality rates within 30 days of cardiac surgery are 1.4% at Narayana compared to 1.9% for the U.S. average. 

Infection rates are also lower than international benchmarks, which are enabled by experienced surgeons performing high volumes of standardised procedures.

As Narayana Health expands with new hospitals across India and internationally, it aims to increase access to affordable, high-quality tertiary care. Its model of combining innovative cost optimisation, cross-subsidization, and efficiency could provide valuable lessons for hospitals globally.

Narayana had made rapid strides as a business as it closed the decade. 

Missing a Beat in COVID

In the run-up to 2019, Narayana Health grew rapidly.

It scaled its hospital network, increased its focus on tier 1 cities, grew its international presence, undertaken sustainability initiatives, launched innovative healthcare access programs, and refreshed its brand identity. Narayana saw instability in profits due to higher depreciation and amortisation expenses and finance costs related to new hospitals and expansion.

Narayana Health saw strong revenue growth of 25.4% in FY19 and a 14.2% profit increase. EBITDA margins were healthy at 11-12% in FY19, as the operating revenues increased, driven by volume growth across the network hospitals.

Nearly 60% of revenues were spent on operating and direct expenses; employee costs accounted for 26%. Depreciation and finance costs also impacted 8.1% and 3.7% of revenues, respectively.

Growth looked unbeatable. But then came 2020.

The 2020 COVID pandemic affected every sector of the economy, and Narayana Health was not spared either. 

In the first quarter of FY2020-21, it posted a net loss of ₹31 crore ($4.2 million) due to the impact of the pandemic-induced lockdowns and travel restrictions, which affected the main revenue source of elective surgeries and medical tourists. 

Profit after tax was Rs. 119.5 crore, compared to Rs. 124.1 crore in FY19. The reason for flat profits was that the loss from the impact of COVID-19 in March 2020 offset the revenue and profit growth seen in the first three quarters.

It got even harder in FY21. 

The consolidated total operating income declined by 8.3% YoY to Rs. 2,904.7 crore. Loss after tax was Rs. 81.7 crore compared to a profit of Rs. 119.5 crore in FY20. 

To address healthcare needs during the pandemic, Narayana Health launched dedicated COVID-19 treatment facilities: a 100-bed COVID quarantine facility in Bengaluru in partnership with Infosys Foundation and a 100-bed COVID ICU facility at Narayana Health City in Bengaluru with Goldman Sachs. 

Dr. Devi Shetty was appointed to the National Task Force to facilitate India’s public health response to COVID-19. Narayana released advisories for the public on staying healthy during lockdowns and managing post-COVID complications

As a result of the losses, Narayana Health had to temporarily pause some of its expansion and investment plans during the peak pandemic years. However, as healthcare awareness grew post-pandemic, the company restarted pursuing an ambitious expansion strategy, especially in the Caribbean region.

This is reflected in the fact that in FY22, the Profit after tax was Rs. 273.4 crore compared to a loss of Rs. 81.7 crore in FY21. A strong recovery post-COVID-19 impact, higher occupancy, increased elective procedures, and international patients drove this.

As Narayana recovered, its competitors did, too.

Temperature Check

Narayana Health faced intense competition as it entered the new decade.

Competition came from large hospitals like Apollo Hospitals, Fortis Healthcare, Max Healthcare, AIIMS, Aster DM Healthcare, and diagnostic chains like Dr Lal Pathlabs. 

Cost in each hospital was a big differentiating factor for Narayana, but it went a few steps further on this playbook to scale.

Narayana Health followed a hub-and-spoke model. It established a network of spoke hospitals in tier 2-3 cities that feed into its hub hospitals in major metros. This allowed Narayana to expand its reach while keeping costs low. The spoke hospitals handled more routine procedures, while complex cases were referred to the hubs.

In addition, Narayana had one of the world’s largest telemedicine networks, connecting 800 centres globally, including 53 locations in Africa. Narayana can each patients in remote areas by not investing in physical infrastructure.

Narayana Health announced plans to expand its footprint and cater to the underserved Eastern India market in 2020-2022 by setting up a 1,000-bed advanced speciality hospital in Kolkata. This will be one of the region’s largest hospitals and offer advanced tertiary care services. The Kolkata hospital will serve as a hub for Narayana’s network of spoke hospitals in Eastern India.

Narayana Health also designed micro-insurance programs to improve healthcare affordability and access. In partnership with the government of Karnataka, Narayana piloted a micro-insurance scheme in which a large group of people paid small regular premiums to cover a set of procedures. 

Narayana Health launched its health insurance subsidiary based on what was learned from this pilot.

As it entered 2023, since its first healthcare service in Bangalore, which had 225 operational beds, it reached had a chain of 24 primary hospitals. 

It caters to major Indian cities such as Bangalore, Delhi, Gurugram, Kolkata, Ahmedabad, Raipur, Jaipur, Mumbai, and Mysore, with an international subsidiary in the Cayman Islands. Focused on seven heart centres and multiple primary care facilities across India, it serves 7,000 beds. 

During Narayana Health’s inception, approximately 2.4 million Indians required heart surgery annually. Nevertheless, only 60,000 could be treated because of high costs and limited providers. 

That gap looks much smaller, and everyone wants it to reduce further. 

Shot in the Arm

The government’s latest effort is to reduce healthcare costs in 2024 

An action taken via a PIL requires a regulatory fee structure at hospitals. Regulations are now being implemented to standardise rates across hospitals. 

Narayana will continue establishing its low-cost and quality healthcare philosophy from its combination of healthcare and tech. It is moving towards an omnichannel presence, allocating a budget of total capex spend of Rs 2,000 Cr for FY23 and FY24.

With the simple insight that doctors use their phone up to 200 times daily, they have built out the Narayana Health App. Doctors can now monitor patients’ conditions through smartphones and collaborate with their nurses and team. 

The impact is already seen and compounded as their discharge turnaround time has reduced by over 52 per cent. Another area of impact is outpatient consultations. Delays in outpatient care have dropped by 32 per cent, and waiting times have been reduced by 14 per cent. Online appointments have seen an increase of up to 3.5 times. It has also introduced its homegrown records management system, Athma. 

Narayana reported a 34.3 per cent y-o-y increase in net profit to ₹226 crores in Q2 FY24, with a consolidated revenue surge of 14.3 per cent to ₹1,305 crore. Higher patient volumes across units and overall growth are leading to good numbers in both India and Cayman Island.

Narayana Health is also foraying into health insurance and has acquired the necessary licenses from the Insurance Regulatory and Development Authority of India (IRDAI). The idea is to tap into customer demand in the health insurance sector while solving for lack of expertise and penetration of health insurance in India by innovating customer-centric products. 

The health insurance business is the largest segment in the non-life insurance industry, contributing 38% in FY23. 

In January 2024, Narayana Health received final approval from the Insurance Regulatory and Development Authority of India (IRDAI) to launch a health insurance business. Narayana Health aims to provide patient-centric insurance plans in three categories – entry-level, mid-level and comprehensive coverage.

By combining its prowess as a low-cost, high-quality healthcare provider with an integrated insurance offering, Narayana Health aims to further its mission of accessible healthcare.

20 years of building a huge healthcare brand is now beginning to pay off. Narayana has built both distribution and trust in an increasingly large market. Up-selling and cross-selling healthcare-related products is now going to be a lot easier. 

A dream to fix hearts in 2000 is now ready to scale, as Narayana aims to expand its low-cost approach to quality care in India and worldwide.

Writing: Keshav, Anisha, Chandra, Raj, Shreyas and Aviral Design: Abhinav and Stability

Last Quarter, Travel Boutique Online (TBO) filed a DRHP to go public after registering an impressive 2X growth, touching INR 1051 crore in revenue with INR 137 crore in profit, and expanding globally 

Setting An Itinerary

TBO was co-founded by Ankush Nijhawan and Gaurav Bhatnagar.

In 2006, travel grew and changed both in India and abroad. From flight bookings to hotels, many players entered the space. OTAs backed by VCs, like Makemytrip, were quickly expanding.

As they continued building relationships in the ecosystem, they were advised to steer away from the B2C side. The guidance was that it was cluttered and were asked to look at the white space in the online B2B space.

TBO’s founders could see why this was a better strategy. Overnight, they became an online B2B travel platform. 

By 2007, the first ticket was booked on TBO’s platform.

TBO acted as a platform that brought travel suppliers like airlines and hotels together to sell their seat or room inventory to travel buyers.

Travel buyers were small brick-and-mortar agents or corporate agencies who placed orders on behalf of end customers or travellers.

Spoilt for choice between more than 700 airlines and over a million hotels, travel suppliers needed a way to distribute their inventory efficiently and increase revenues. 

In contrast, travel buyers required access to all this inventory per their customers’ travel plans. It was almost impossible for these travel buyers to connect and partner directly with many hotels and airlines.

As an aggregator between the travel supplier and buyer, TBO stepped in to solve this problem.

Speed Of Type

Being B2B-focused, TBO had the early mover advantage.

The company had the trust of their suppliers and buyers who understood their position as a partner and not a competitor.

What started as a 130-employee company serving 180 partners in 2005 over time grew to over 300 employees and included an overseas office in Dubai by 2012

Slowly and steadily, TBO created a niche for itself in the highly competitive space by focusing on its customers’ problems. 

Investors could see the TBO rocket was about to take off, and they wanted a seat. 

In April 2012, TBO raised its first round of funding to fuel its plans for global expansion.

Naspers picked up a 52% stake in the 6-year-old company, heralding a new era as a venture-funded startup. TBO was now a formidable player in the airline business, with an appetite for more.

The quest for growth and higher profitability led to 2 new focus areas – hotels and the overseas travel market.

Frequent Buyers

Air travel was a low-margin volume play for TBO.

It pocketed an average of ~2% on every transaction. On the other hand, given the scattered market, the hotel business promised a handsome return while being more challenging to scale.

Looking for a head start, TBO entered an exclusive tie-up with Amadeus, a Spanish multinational travel major. TBO would host its hotel inventory in the MENA region, a relatively untapped B2B market.

The partnership marked a tipping point for its fledgling international presence. TBO then replicated the model in every market where the latter had a presence.

Ankush and Gaurav deliberately positioned TBO as a synergistic enabler, rather than a disruptor, for both travel suppliers and buyers.

Airlines treated them as their extended distribution arm, enhancing their penetration in fast-growing, albeit smaller, markets. Similarly, hotels viewed them as natural collaborators in growing the size of the pie, and not as competition.

On the other hand, TBO’s offering allowed agents to digitise their operations, facilitating visibility to inventory and helping them unlock deals at par with larger players. The tech stack was critical in reducing information asymmetry and democratising access in the relationship-driven travel market.

Every successful association on the supply or demand side translated into disproportionate network effects for TBO as the intermediary platform.

Alongside the calibrated bets overseas, TBO’s domestic business was ripening. India’s young, aspirational, upwardly mobile population travelled often and farther, representing a progressively expanding market.

In less than five years since the inception of the hotel business, TBO became the Indian market leader for hotel inventory.

Beyond India, TBO now had a noticeable presence in Dubai, Saudi Arabia, Brazil, Eastern Europe and pockets in North America. The overall hotel business had grown to ~40% of the topline.

In 2018, TBO crossed the psychological mark of $1B in gross annual transaction value for the first time. The resounding success of the hotel business had validated the playbook of expanding the breadth of TBO’s services while consciously deepening the market for individual offerings.

Evidently, products centred on providing an experience were more valuable than ones built on utility. With renewed commitment and a hard-earned war chest, TBO diversified into sightseeing, car rentals and cruises.

New Arrivals

The Indian travel buyer market stood at $35.4B in 2019.

Travel management companies or travel agents accounted for 43% of the demand. Agents were expected to sustain their market share based on their ability to customise packages, service first-time travellers and cater to demand from tier 2 and 3 cities.

Taking stock of the market composition, TBO announced an industry-first B2A strategy at the Arabian Travel Mart. B2A stood for ‘Back 2 Agents’ or ‘Business 2 Agents’, acknowledging the trend of travellers going ‘back’ to agents for bookings and recognising agents as the most effective distribution and marketing channel for ‘business’.

Floated as a third alternative to B2C and B2B, B2A attributed travellers’ preference for agents to the cognitive overload associated with browsing travel websites, the residual trust deficit with online avenues and the absence of personal touch required for evolved travel needs. 

The latter part of the strategy viewed agents not just as a link between suppliers and end consumers but as solicitors of, and sounding boards for, all matters of travel and leisure.

TBO empowered its network of 47K agents by rolling out the Roamer App to facilitate communication between agents and their patrons even after the booking transaction. 

Imagine the friendly neighbouring travel agent fully in sync with your daily schedule, forewarning you of follies to avoid in a foreign land. and helping you make ad hoc changes to your itinerary, all on a WhatsApp-like interface.

It was intended to make the traveller-agent equation less sporadic and event-based and more amenable to repeat purchases.

On its part, TBO would help agents cross-sell and maintain stickiness across multi-year customer relationships, translating into sustained demand for the platform.

Similarly, TBO recognised that standalone agents often lost out to bigger peers in bagging corporate deals for want of proprietary tech infrastructure. To solve this pain point, it introduced Paxes, a self-booking corporate tool, enabling its loyal base to make a stronger base while bidding for RFPs.

Roamer and Paxes were free of cost for the agents, with no direct interaction between TBO and the end customers. The unwritten expectation was that agents would consolidate demand acquired from the platforms to purchase TBO’s inventory.

TBO thus created a symbiotic relationship with its agents, while leveraging them as the top of its  funnel.

TBO wanted to go even deeper in its relationships with travel agents.

Suite Deals

TBO rolled out Academy, a virtual learning platform with 100+ short courses. 

It was targeted at making the staff at travel agencies better informed, most of whom had never traveled abroad but were the closest to the travelers while they made their purchase decisions.

While operationally behind the scenes, TBO was one of the official partners of the 2019 ICC Cricket World Cup in England, making a mark at the global stage.

TBO was now active in 100 countries, employing people of 42 nationalities across offices in 26 countries, dealing in 22 currencies and offering services in 9 languages.

TBO was on a roll, and it did not go without notice.

Standard Chartered Private Equity, the PE arm of Standard Chartered Bank, acquired Naspers’ stake in TBO at an enterprise valuation of INR 300 Cr.

With a new investor, TBO focused on pilgrim tourism and honeymoon destinations for growth.

Given its dominant footprint in the Middle East, the Umrah market represented an ideal avenue for recurring demand. TBO then took the inorganic route to expedite the latter.

It acquired Island Hopper and Clickitbookit, two of the largest companies serving travelers to Mauritius, Maldives, Seychelles and Greek Isles, for INR 19 Cr.

TBO had perfected the template of learning what to build from the market and then using technology to enable its network of agents to evangelise and scale it quickly to spur repeat behavior.

 As long as there was travel, TBO could preempt, capture and monetise it sustainably, or so it seemed. Its plans appeared foolproof, its execution flawless.

A virus from China was about to change everything for TBO, travel and travellers worldwide.

The Covid pandemic upended human lives, forced nations into consecutive lockdowns, grounded aeroplanes and turned luxury hotels into zombie structures.

After a purple patch of a decade and a half, the law of averages finally seemed to catch up with TBO.

With the genesis of all its demand brought down to zilch, TBO’s operations were squarely hit, with revenue for the fiscal collapsing by ~75%.

Fight Or Flight

The travel sector was made irrelevant for more than a year during the pandemic. 

As with any industry – only the fittest seemed to survive and witnessed a massive rebound in growth once restrictions eased due to the reduction in the spread of the virus. 

TBO, having ridden out the pandemic, saw 2021 as one of its biggest years since its inception. 

TBO launched two new services at SATTE (South Asia’s Travel and Tourism Exchange) early in the year. Held after two years, the event largely focused on reviving India’s domestic and travel sector. 

TBO Cargo was launched as a facilitator for agents to negotiate the best prices to ship cargo via air and water. TBO Marine would cater to the niche market of the marine industry, enabling customers to swiftly and painlessly get access to global seaman fares. 

Both were meant to provide an all-around immaculate travel management service.  TBO would then strengthen its position as a market leader by acquiring Bengaluru-based Gemini Tours & Travels to function under its Island Hopper brand. 

Island Hopper was already seeing 100% year-over-year growth for the islands it served and had been the top supplier for resorts across the Maldives. Gemini would expand and cement TBO’s presence in the South India market while opening up new luxury hotel avenues in the Maldives. 

TBO would also enter a MoU with the Saudi Tourism Authority via its subsidiary Zamzam.com. This is a means to develop and promote Saudi Arabia as a tourist destination for religious and leisure travellers alike. 

The partnership would be key to fulfilling the Saudi Vision 2030 of 30M Umrah pilgrims and 100M visitors. As part of the deal, TBO would also leverage their e-learning platform, TBO Academy, to promote and raise awareness of Saudi Arabia as a luxury tourist destination. 

The following year would see a major TBO rebrand, as it crossed over 1M hotels and 100K buyers on its platform. A new brand name, TBO.COM, logo, and tagline – “Travel Simplified” would reflect the brand’s transition to a global travel distribution platform

The new identity would mark a significant moment in its journey as it aimed to further simplify the complex travel business and bring its extensive suite of services and products onto a single platform. 

TBO would also complete the acquisition of UK and Ireland-based Bookabed. 

The acquisition would provide a platform for TBO to enter the Irish market and double down on its UK presence. Bookabed, on the other hand, would be able to leverage TBO’s global API business to significantly scale up operations and take advantage of TBO academy to train and educate its agents and partners. 

Late 2022 would launch Paxes, a SaaS-based platform for travel management companies and corporations in India to upgrade their business travel experience. 

Paxes’ mobile-first corporate travel and self-booking solution would take advantage of the rapid, widespread digitisation during the pandemic to tap into the legacy business travel segment. 

Employees could manage their bookings, approvals, and support through the app, while corporates could leverage the inbuilt billing and invoicing services to simplify their operations greatly. 

As the world recovered from the global pandemic and countries opened their gates to travel and tourism again, TBO took essential steps in every direction to cement its position as the industry leader.

Feeling Continental

2023 would be no different.  

TBO strengthened on all fronts, following a technology-first approach to invest in innovations and offerings to simplify travel. 

In anticipation of the upcoming European travel season, TBO strengthened its European product offerings, adding more excursions and support for the extensive rail network. It would also optimise its inventory management and pricing tools to give travel partners across India the best possible options to attract customers

It would also complete the acquisition of Jumbonline, an online distribution subsidiary of Alpitour World, one of Europe’s largest tourism companies. 

Jumboline, an API distributor of products for wholesalers and tour operators, would give TBO access to over 120,000 hotels in Europe, the Caribbean and Africa.

The year would also see TBO enter more strategic partnerships, albeit serving different purposes. 

The first would be with the Attraction World Group (AWG). Through this, TBO would enter the theme park and attractions space and offer customers access to world-famous brands such as Disney, Universal, SeaWorld, etc. 

The next would be with WebEngage, one of the leaders in marketing automation. 

The partnership would reinforce TBO’s technology-first approach. They would leverage WebEngage’s personalised engines and artificial intelligence capabilities to tailor services to agents in their B2A model and serve a more diverse range of travelers worldwide. 

As the year ended, TBO would cross INR 1,050Cr in operating revenue, a 118% increase from the previous year. Profits would register a 306% increase in the same period. 

On the back of this formidable growth, TBO would file for an IPO for the second time, determined to go through, having early withdrawn in 2021 due to the weak market conditions post the pandemic.

Future Voyage 

During a bull market, it’s common for promoters to take advantage of high tides by initiating an Initial Public Offering (IPO) through an offer-for-sale, aiming to capitalise on their investment. 

But that is not the case with TBO.

TBO aims to use the market upswing to generate fresh capital and direct it towards substantive growth. 

This strategy indicates the promoters’ confidence in the company’s prospects and their intention to scale up operations before considering selling a stake.

TBO has outlined a two-pronged strategy for expansion.

The first is to leverage data analytics. By analysing user searches and transactional data on their platform, TBO gains valuable insights into traveler behaviour, preferences, and trends. This intelligence enables suppliers to fine-tune their offerings, ensuring that they cater precisely to the needs of travellers with tailor-made promotions and services. 

The targeted application of data boosts customer satisfaction and enhances revenue efficiency, as evidenced by the revenue per supplier surge from INR 4.4 lakh in Fiscal 2021 to INR 13.66 lakh in 2023.

Growth of 44% on a per supplier basis, incredible by any stretch.

Moreover, TBO’s network is expanding, with monthly transacting buyers exceeding 25,000—a figure projected to surpass 30,000 within the next 12 to 15 months. 

This growth trajectory speaks volumes about the company’s market penetration and the robustness of its business model. The second strategy is to focus on inorganic growth.

This encompasses promotional activities and advertising, both domestically and internationally. 

Historically, the company allocated INR 30 crore over three years for such initiatives. With IPO proceeds, there’s a plan to increase the investment to ₹100 crore substantially. 

This significant boost in marketing expenditure is expected to yield a commensurate increase in visibility and market share. Acquisitions were also central to TBO’s growth blueprint. 

The company is eyeing acquisitions that strengthen its supply chain, geographical reach, and service spectrum. 

Potential targets include entities excelling in supplier aggregation, content creation, and advanced technologies like AI and ML. 

The aim is to construct an ecosystem that complements TBO’s current platform, thereby delivering enhanced value to buyers and suppliers.

Redefining Travel 

As the world witnesses a robust recovery in travel and tourism, TBO stands at the helm, driving innovation in a market poised to grow to an estimated $2.6T by 2027. 

This growth trajectory is underpinned by the changing travel habits of Gen Z, who are exploring beyond traditional destinations to seek ‘insta-worthy’ experiences, thus expanding the market opportunity for both suppliers and buyers within the travel sector​​.

As the travel landscape sees an influx of first-time travellers exploring novel destinations, TBO anticipates a surge in demand for its services. 

The company is strategically positioned to bridge the gap in a fragmented market, where a mere 1.2% of hotels globally are affiliated with top chains and ancillary segments like car rentals and sightseeing are predominantly populated by individual suppliers​​.

TBO’s strategic initiatives are geared towards capitalising on these growth trends by amplifying its platform’s value, developing targeted solutions, and leveraging data as a corporate currency.

Continuing to explore attractive inorganic growth opportunities, 

TBO is likely to invest in ancillary services and acquire businesses that complement and expand its current portfolio to strengthen its market position, offering a competitive edge in a fast-paced, innovation-driven industry​

The future of the travel sector, as envisioned by TBO, is one where technology and personalised experiences reign supreme. With a forward-looking strategy, TBO is positioning itself not just to adapt to the changing landscape of travel but to actively shape it, ensuring that both the company and its customers are at the forefront of the next era of global tourism.

Few may have heard of TBO, yet it has been resilient and kicking for almost 16 years. It is also a tech company, unlike expectations people have from legacy businesses. To build a B2B travel software company is something, to make it go global is another achievement altogether. 

As it heads into the horizon with an IPO looming, things could not be better looking for India’s potentially newest unicorn. 

Writing: Bhoomika, Abhinay, Nikhil, Parth, Raghav and Aviral Design: Omkar and Stability

Last fortnight, India successfully launched UPI in Mauritius and Sri Lanka, hot on the heels of ONDC completing 5.5M+ monthly transactions and Paytm’s regulatory intervention.

Identity to a Billion

Following 1999’s Kargil war, the Review Committee 2000 identified the need for ID cards.

The project was for India’s border areas to enhance national security, leading to the Multi-purpose National Identity Cards (MNIC) proposal. 

By 2003, under the Vajpayee administration, amendments to the Citizenship Act introduced the MNIC. However, the UPA government’s takeover in 2004 shifted the project’s focus towards aiding the impoverished, culminating in the distribution of the first MNICs by 2007. 

The project became the National Authority for Unique Identity (NAUID) under the Planning Commission.

During the same period, India’s GDP grew at an average of 7.5%, becoming one of the fastest-growing economies globally. Yet, it lagged in internet usage and banking, with less than 10% and 15% of the population engaged, respectively, compared to 30%-50% in other major developing economies. 

The problem needed to be solved, the fastest way was to go digital. But to make things digital, identity was required to be established. 

The erstwhile NAUID was transformed into UIDAI in 2009.

Establishing the UIDAI marked a pivotal move towards digital identity verification to facilitate direct and secure delivery of government services and subsidies, aiming to mitigate past inefficiencies and fraud.

It took off.

By 2014, over 50 cr enrolled for Aadhaar, significantly improving financial inclusion through the Pradhan Mantri Jan Dhan Yojana, which leveraged Aadhaar for bank account openings, increasing account penetration to over 50%. 

Aadhaar-linked Direct Benefit Transfer (DBT) minimized welfare fraud, with cash transfers increasing 20-fold and beneficiary numbers doubling by 2015.

Services started using Aadhaar for identity checks. This included mobile connections and banking services. Aadhaar Enabled Payment Systems (AEPS) were introduced, allowing transactions with Aadhaar authentication.

Acknowledging the transformative power of technology to vault into a technologically advanced future, the Indian government rolled out an Open API policy.

This strategy aimed to make government data and services widely accessible to everyone. 

It would hardly be an exaggeration to say the government was ahead of its time.However, certain sections of society were sceptical about privacy.

The Supreme Court of India directed the government to promote that enrolment in Aadhar was not mandatory. 

The ads did exactly the opposite. More enrolled for Aadhar.

By 2015, over 900 million individuals had obtained digital identities via Aadhaar.

This marked a significant milestone, as it demonstrated widespread trust in India’s digital infrastructure, positioning it for future success.

A revolutionary digital identity was born, setting the foundation for a new infrastructure.

Flirting with Cashless

India’s payment ecosystem was already robust with systems like IMPS, NEFT, and RTGS.

Despite the strength, it was not commonly used for everyday transactions due to the cumbersome process of adding beneficiaries. 

The average transaction sizes, INR 8,000 for IMPS, INR 70,000 for NEFT, and INR 9 lakh for RTGS, highlighted their use for larger transactions rather than daily commerce. Despite IMPS offering real-time transactions, its usage remained limited for smaller, more frequent transactions.

Between 2015 and 2017, the Reserve Bank of India (RBI) made strategic decisions that significantly advanced India’s digital payments landscape to increase financial inclusion and push for a cashless economy.

It began by issuing licenses to fintech companies to operate digital wallets, with Paytm emerging as a front-runner. However, the limitation was that these wallets required pre-loading of funds. A good solution but still sub-optimal.

Will India Stack Enable a Global Fintech Superpower?

In 2016, Regulatory authorities innovated by integrating a new component into the retail payment ecosystem, the Unified Payments Interface (UPI).

This innovation enabled banks to interact and exchange payment instructions with non-banking entities in real-time, positioning UPI as a crucial layer of the India Stack. 

UPI’s key feature was interoperability, allowing transactions across the financial spectrum, regardless of the institution’s size or sector. This level of accessibility encouraged even startups to engage provided they partnered with a bank or acquired a special license.  

This ensured that all players remained under regulatory scrutiny to promote financial inclusion and stability.

With the new system, street vendors and small traders without a bank account could receive payments for goods or services through a digital wallet. They could instantly transfer funds to someone else, such as a struggling relative in a remote village, so long as the recipient had a digital wallet. 

The same year, Jio’s entry into the market disrupted telecommunications, making data affordable and accessible to millions. 

This had a cascading effect, empowering the average Indian with internet connectivity essential for digital payments to take root.

The demonetisation move in 2016 accelerated the adoption of digital payments, and by 2017, transactions via UPI neared the volume seen with IMPS, crossing the Rs. 50,000 crore mark.

People adopted the new in just a year.

India Stack’s launch was the spark that lit the fintech fireworks, with regulators fanning the flames. India was all set to surf the giant wave of digital payments. 

One QR Code to Rule

By July 2018, the NPCI reported a staggering 236M transactions in total. 

PhonePe would become the fastest Indian digital payments company to cross the 100M mark and would boast a market share of 40%. 

UPI was slowly becoming mainstream. But much of the credit belonged to Paytm, who had been steadily setting up the infrastructure since demonetisation hit the country. 

Over two years, Paytm partnered with over 14M merchants and expanded its reach to over 2M retail outlets. 

All this is done through their “scan any QR code to pay using Paytm” campaign, which is focused purely on the flexibility and ease of payments. 

The QR or Quick Response code was pioneered by Paytm, who hired over 10,000 agents to promote and expand their network, aiming to make “Paytm Karo” the slogan for all payments. 

People across the country, from auto rickshaw drivers and Kirana store owners to fast food joints and top-end restaurants, adopted the Paytm QR. 

PhonePe and Google Pay (or Tez) would quickly follow suit, using the Paytm playbook to ship their QR codes to merchants and outlets. 

The QR code would become the standard method for any UPI payment. Scan the code, enter the amount, and tap pay to complete the payment. 

Each player, though, was pushing for a closed ecosystem as a means to gain loyal customers. This meant that users could only make payments to users on the same app,  

The RBI felt otherwise and came out with a masterstroke in the form of the interoperability mandate. 

The mandate allowed customers to make and accept payments from users of different payment apps. Users did not have to choose one app or any particular provider to send money to friends, store owners or to pay their bills. 

This would set the UPI to become a national payment system. 

As the fight for supremacy in the UPI space continued, 3 founders saw what no one else saw—the hassle of maintaining multiple QR codes for merchants whose customers each had their preferred platform. 

Enter BharatPe. 

The idea was as simple as it could be. A standardised, interoperable QR code containing all the merchant’s information is encoded. 

Multiple UPI apps could be condensed into a single sticker, and the payment system would be simplified ten-fold. 

The numbers spoke for themselves, as the BharatPe QR codes would be adopted by over 1M merchants in less than a year. 

With payments as seamless as possible, October 2019 saw UPI cross 1B transactions and over 100M users in a mere 3 years after its launch. Over half of all digital payments made in India came via UPI. 

This also led to the creation of an interesting market of small P2P (Person-to-person) transactions. 

The ease of sending money to friends and family and the numerous cashback, referral and discounts offered on P2P transactions saw this segment account for over 90% in 2018. 

This would change by 2019, as the commerce adoption on UPI would explode. It would also set the stage for a new commerce network.

The P2M (Person to Merchant) segment would grow to 34% of all UPI transactions, on the tails of all the impressive work done by the payment providers in India. 

The success of UPI would not go unnoticed, as neighbours Singapore and UAE, both lush with Indian expatriate populations, began exploring the international feasibility of UPI. 

Google, having seen immense success on their Google Pay platform thanks to UPI – onboarding 67M monthly active users, would recommend India’s UPI system to the US Federal Reserve as a model to follow for real-time payments. 

India was genuinely harnessing local innovation to replicate for the world. But a century event was about to unfold, truly testing the efficacy of the India Stack system. 

Nobody knew if it was it ready to deliver or crumble in the madness.

Starting Phase 2.0 

When the pandemic hit and the world stopped – millions were left without any support. 

At that point, the Aadhar-based Direct Bank Transfer was rescued. An incredible $24B were distributed to 800M people DBT was built for scale, and COVID proved that it could be relied on to deliver in times of crisis

DBT was triggered by the expensive way of delivering these schemes. 20 years ago, India spent INR 3.65 in delivery to provide one rupee of development. 

DBT delivered these cash benefits much more efficiently, thanks to the JAM trinity – a Jan Dhan bank account, Aadhaar as the verification tool, and mobile phone as the personal operating system.

It was time to elevate the digital experience to the next level. 

On India’s road to building the Digital Public Infrastructure, it was time for Phase 2, starting with Account Aggregation. 

Phase 1 gave everyone a digital identity with Aadhar and electronic transactions via UPI. Phase 2 would harness the power of decentralised financial data, enable commerce, credit and investments. 

First conceptualised 5 years before the pandemic. Account Aggregators had a simple function. AA’s had to securely and efficiently transfer financial data from where it is stored to another place where it is needed, with explicit user consent. 

Imagine you are applying for a personal loan, manually uploading all your financial proof documents to the lender’s website. Instead, you consent to the lending platform to fetch all your financial data from recognised AAs that can be shared in a single click.              

They worked with 5 steps across 6 entities. 

The opportunities seem immense, just for lending, 4% of credit loss comes from doctored financial documents –  AA solves this with a transparent flow of data, The cost of processing a loan application via AA has been reduced to INR 100 from INR 440, offering significant cost efficiencies to lenders.

The use case lies in something other than lending, such as income verification, wealth management, and insurance. 

The utility of AA was to imagine a future where your income verification can be done by your dating/matrimony app –  to create a more trustworthy solution. Although only a data provider can be a data user, Sahamati planned to roll it out for everyone in the future.

Account Aggregator system was imagined to be a standardised, private and fully user-controlled consensual sharing platform, and the ecosystem is fast evolving with over 22 financial instruments connected, including current accounts, equities and PPF. 

Aadhar databased personal essentials for a billion-plus Indians. GSTN managed the same with business information. AAs could now house financial information and enable individual users to validate who had access to it.

As the world struggled, India was determined to digitise its way to progress.

Wide OCEN

At India’s population scale, too much of a good thing is great. 

The blazing success of UPI begot more success. iSPIRT, the Bengaluru think-tank behind UPI, AA and the larger India Stack, including e-KYC and DigiLocker, was not one to rest on its laurels.

It launched the Open Credit Enablement Network (OCEN) in mid 2020 to create a ‘UPI for credit’ for micro, small and medium enterprises (MSMEs). MSMEs in the country were typically cash-strapped as they would buy with cash and sell on credit.

They were deprived of access to formal credit as risk-averse banks shied away from lending, resulting in a credit gap estimated at $300B or INR 25 lakh cr. OCEN intended to bridge this through digital lending.

It collaborated with Government E-Marketplace (GeM), the platform for procuring goods and services for government departments and organisations, to launch the Sahay app in 2021.

The app put in APIs to facilitate collateral-free loans to MSMEs based on their unpaid invoices. The credit-protocol framework was designed to democratise access to credit by replacing the need for asset collateral with reliable business data and informed decision-making by lenders.

OCEN boldly chose to be borrower-first in its construct. Lenders on the platform could price their loans based on borrower information. Borrowers then had the discretion to select the best offer.

Lenders could achieve sizable savings in costs associated with distribution, customer acquisition, loan processing and collection. Likewise, they did not have to maintain customer-facing infrastructure after the initial integration.

The platform had a set of loan service providers to streamline the demand. Lenders could focus purely on underwriting, turning credit into a mere commodity.

For all these promises to come true and for OCEN to bring about a payments-like revolution to credit, it had to assemble an array of market participants onto a single network. 

As UPI showed, nothing succeeded like network effects.

OCEN had its task cut out, given the complexities of an interlinked origination-to-repayment cycle of a credit relationship compared to the autonomous nature of a solo payment transaction. A credit product naturally called for more trust-building and checks against adverse selection.

The building blocks of previous digital payment systems also supported UPI. On the other hand, OCEN was the first attempt at creating an interoperable digital lending infrastructure. Besides, its B2B utility naturally translated into less visibility and potentially slower user adoption.

OCEN would prove to be one of many repeat acts.

Creating Commerce

By 2021, India had a proven model.

India could execute collaborative innovation, seamless integration, and cohesive implementation by the government and private firms to create scalable digital public goods for daily use.

The time was ripe to replicate the playbook and enable technology for commerce. 

In December of that year, the government’s Department for Promotion of Industry and Internal Trade set up a non-profit organisation named Open Network for Digital Commerce (ONDC).

ONDC intended to promote an open network based on an open source methodology, using open specifications and network protocols independent of any specific platform. It could digitise the entire value chain, standardise operations, promote inclusion of small suppliers and drive efficiencies in logistics. 

A horses-for-courses approach to commerce, across food & beverage, grocery, electronics, fashion, beauty & personal care, was to drive tangible value for all parties involved, including the end user.

ONDC was launched in September 2022, with confirmed investment worth INR 250+ cr. from more than 20 domestic heavyweights. Unlike iSPIRT, which took a volunteer-based approach to OCEN, ONDC owned the data and could regulate the ecosystem, much like NPCI for UPI.

In parallel, the pandemic and its unique challenges presented India Stack with its final frontier – welfare at the population scale, beyond just direct benefit transfers.

The promised land for a welfare state was that its measures be pervasive, that the benefits be ubiquitous, and that state’s overall role be transformational. It was time for the rails of India’s Digital Public Infrastructure (DPI) to be used to serve the public itself.

As consecutive lockdowns upended lives and young children were confined to online classes, 5.3M learning sessions were enabled by 12B QR codes of textbooks under the Digital Infrastructure for Knowledge Sharing (DIKSHA).

Even as the pandemic abated, DPI’s ideology could be seen in AI applications such as Assisted Language Learning (ALL), piloted in 500 schools for over 45K hours. Teachers were also beneficiaries of DPI’s prowess under Project Saral, which digitised handwritten notes of 17M students across 130K schools.

Beyond schooling, the Ayushman Bharat Health Account (ABHA) or Health ID was floated as an initiative under the Ayushman Bharat Digital Mission (ABDM) for Indian citizens to establish a centralised database of all their health-related data.

In perhaps the most ambitious exercise at institutionalising community knowledge, Kisan eMitra was piloted to store and share farming insights with more than 10 lakh users.

It was only fitting that DPI’s architecture and ambition were heavily shaped by India’s unofficial CTO, Nandan Nilekani, who was as much a philanthropist as a tech whiz and policy expert.

As India entered the end of the pandemic, India’s Stack had evolved to much beyond UPI and Aadhar.

It was beginning to permeate commerce and credit. 

False Starts

By late 2022, the Government was leading innovation, access and ease of business from the front. 

The Central Bank took a leaf out of the former’s book by allowing RuPay credit cards linked to UPI accounts.

In April 2023, it introduced a direct, collateral-free, pre-sanctioned credit line on UPI to make formal credit convenient, real-time, affordable and ubiquitous. Four months later, ONDC added financial services to its offerings, laying the foundation for an alternative to OCEN, which had scaled up to loans worth INR 21 cr, by then. 

ONDC and OCEN had similar end goals but technicalities and use cases differed. For example, both networks adopted cash flow financing – through a buyer app on ONDC and a loan service provider on OCEN.

A layman’s view suggested that ONDC could solve the problem faster and more holistically, This was given its potential to attract more players and diverse utilities within just financial services, such as insurance and mutual fund offerings. 

On the other hand, OCEN could be held back by its reliance on the GeM platform, which had only 45K MSMEs on board. However, a mature view can foresee the likelihood of each spurring the other to strengthen the value chain, unbundle products and manage risks.

India’s 64M MSMEs could do with more than one public lending platform. 

It was difficult to fathom but even UPI took a couple of years to show early signs of turning into the beast it was destined to become. Announced in February 2015 and launched in August 2016, it was only in 2017 that there was a noticeable uptick for the first time.

ONDC and OCEN would possibly go through their respective cycles. While ONDC started with hype, it struggled to live upto it. A 3 sided marketplace with customer, vendor and provider was hard to balance, along with high costs. 

Given UPI’s precedent, people naturally expected any similar concept to take off quickly. However, the reality was that the population scale could not be hacked or engineered.

Critically, as the world absorbed the disruption caused by ChatGPT, India’s DPI served as a good example of what generative artificial intelligence should aspire to be. Use-case driven, outside-in rather than inside-out, razor-focused on making people’s lives better than blindly pursuing razzmatazz technology for the sake of it.

Beyond the end utility, DPI’s technical architecture principles of interoperability, minimalist technology, reusable building blocks and broad-based, inclusive innovation also offered a template for governments and corporations worldwide.

As India entered 2023, the ambitions of DPI were no longer limited to India’s borders.

Investing Stack

2023 was a ripe time in India. 

The G20 Presidency was an opportunity to push the agenda of all the good work done earlier and for future products.

As India showcased itself in February, UPI was enabled in UAE, Singapore, Mauritius, Nepal, and Bhutan. The headline act had set the stage for even more innovation.

As the idea of DPI spread to more categories, it looked at making investing easier. It would own Mutual Fund Central, enabling retail investors to own and control their data. 

India’s capital markets were booming due to the mass transition from physical and other asset classes like fixed deposits and gold to mutual funds.

Along with the transition, all asset classes grew, new capital was infused into the capital markets, and SEBI set the regulations of the assets.

With 50 lakh crores in Assets under management for mutual funds, India had witnessed a sixfold increase over the last 10 years. The institutions in charge were AMFI, RTA, and the regulators, pushing the agenda.

Two private for-profit institutions, Kfintech and Computer Age Management Systems, collaborating meant DPI India’s agenda was purposeful for the end customer and financial institutions.

With more NRIs looking back at India to Invest, the time is ripe to take off. 

The UPI wave was the ability for other regulated institutions to come together and solve the agenda for interoperability when all the banking institutions came together.

With investments picking up, other asset classes will also offer combined solutions that may make it seamless for any actions credit and investment solutions provided to investors.
 
Depositaries like CDSL may also have to build an architecture to make it seamless for the financial assets to come under a similar umbrella architecture.

With real estate being fragmented, the ability to digitise it may well propel India to be one of the top digitised nations on the Digital Public infrastructure.

This data, in turn, would be used to build Digital Public Intelligence for consumers to transact with their assets and liabilities and fuse with commerce and trade across countries.  

Powering all this would be the germ of the idea that was becoming a formidable force. 

Like UPI’s slow start followed by exponential growth, the account aggregator ecosystem had begun to take off. By the end of 2023, almost 46M accounts had been linked with AA. 

The ecosystem developed into over 500 entities in various stages of the onboarding process. India’s DPI was not limited to UPI as its one trick pony.

An idea that started almost 15 years ago was now taking shape as a global leader.

DPI from India to the World

When the Internet was invented, it was formed by the US Defence’s Advanced Research Projects Agency Network.

This public organisation was run like a private organisation back in 1969. The DPIs — identity, payments, and data governance layers that pioneered the network effects- are run by the National Payments Corporation Of India (NPCI). 

It drives Open Finance with Account Aggregator, which started the AA framework. Now, AAs are regulated by RBI to protect privacy and data. It includes inclusive commerce with Open Network Digital commerce and more.

India’s strength to build IT services, software for all, good governance, and inclusivity ideology had taken a front seat.

Swift, Visa, and Mastercard have succeeded due to the ability to be decentralised across all countries in a highly secured and privacy-first approach.

Countries that governed the ability to settle and transfer funds had provided better to the world and became global leaders.

In India, UPI has shown us how to export to over 10 countries; now, it’s the opportunity for the other part of the DPI – identity, data governance, and intelligence.

The next opportunity lies in building data stacks. Countries like Singapore have already been using it with SGFinDex. An architecture similar to the Indian Account aggregator system will ensure that data across countries and continents can be passed with customer consent.

Amongst all countries, developing and developed, India is probably the farthest ahead in digital public infrastructure. It is no wonder that countries worldwide want to adopt India’s solutions.

India’s bigger opportunity thus potentially lies with DPI as a packaged Solution” (DaaS). 

This could be an approach India will provide the whole DPI stack for countries to use as a software service with controlled privacy with the country’s own localised mechanisms and governance structures.

The Internet took off due to secularity, affordability, and interoperability across all geographies; India’s opportunity to provide to the world lies here.

Like China is building the Belt and Road initiative and the physical Infrastructure, India will continue to build the world’s digital public infrastructure. 

India’s first big push started with the Aadhar in 2009 and ended with the launch of UPI in 2017. India Stack 2.0 has been built on this formidable foundation, with AA, OCEN, ONDC and MF Central. As we have seen over the last 6 years, the open stack provides an incredible unlock to economic activity.

India Stack’s 2.0 could take India’s $100Bn fintech ecosystem truly global

Writing: Keshav, Nikhil, Raghav, Parth, Shreyans, Tanish and Aviral Design: Omkar and Chandra

Last fortnight, Indian manufacturing reached a 4-month PMI high, as it completed a strong year of manufacturing resurgence across industries

Igniting Innovation

Manufacturing in India has a long and diverse history that dates back to ancient times. 

The country has been known for its craftsmanship and industrial activities for centuries. The pre-British period of the Indian economy was primarily agrarian. 

A vast part of the subcontinent had self-sufficient villages. Village-level artisans were able to provide for local needs. However, due to geographic factors during that period, they had limited market access. 

However urban centres (places of pilgrimage, administrative places, and trade towns) had high levels of economic activity. While these centres primarily met the local market’s needs, a significant portion of this production was exported. 

Local producers produced textiles and utility-oriented handicrafts. In addition, Indian ornaments, jewellery, brass works, ivory work, and several other notable products gained prominence and achieved significant admiration worldwide.

As the Mughal Empire started declining, the political prominence of the East India Company grew. British rule of India coincided with the Industrial Revolution, which brought about new manufacturing processes and mass production of goods. 

Raw materials were required in bulk, and market access for the finished produce had to be enabled. The British thus exploited the Indian subcontinent for raw materials while dumping finished goods on India’s shores. Locally produced goods and their manufacturers started to lose their business. 

India’s manufacturing capabilities were waning, the first significant secular decline in Indian production capabilities. 

The British monarchy also brought mass production units into the country, further aggravating local manufacturers’ situation. This period was not suitable for local industries as they became victims of unfair market situations, destroying any future growth or evolutionary prospects of these industries.

Despite these challenges, green shoots in manufacturing were led mainly by ambitious people fighting for Indian pride. 

C. N. Devan pioneered this effort in Bombay when he developed the first cotton mill in 1854. Subsequently, new mills were opened all over India. 

In other sectors, successful attempts were made by Prince Dwarka Nath Tagore, Sir J. R. Tata, R. N. Mookherjee, L. R. Kirloskar, and Chettiars of Madras in manufactur­ing industries.

Notably, 1907 saw the Tata Iron and Steel Company (TISCO) incorporation.

Basic industries such as textile, jute, iron & steel, cement, paper, leather, and light chemicals made considerable progress, partly boosted by the exigencies of the Second World War.

The nation keenly awaited its tryst with destiny. 

To redeem its pledge and fulfil the aspirations of 34 crore Indians, manufacturing had to play a substantial role.

Red Tape Roadblocks

At midnight on August 15, 1947, as the world slept, India awoke to life and freedom.

Realising that a strong manufacturing sector was indispensable for economic progress and national security, Independent India chose the path of planned self-reliant development with manufacturing as the main growth engine. 

It had a long way to go, given that large-scale industry accounted for only 7% of the national income.

In line with its socialist ideals, the Central Government ensured that state-owned enterprises took a pivotal role. 

This was primarily in core sectors like iron & steel, various non-ferrous metals, coal and petroleum-based industries, fertiliser and heavy engineering industries. Industries producing basic and heavy goods were chosen for investment over consumer goods to reduce the country’s reliance on imports of basic and heavy industrial goods. 

“To import from abroad is to be slaves of foreign countries,” the first Prime Minister, Jawaharlal Nehru, once declared.

The production of consumer goods such as clothing, furniture, personal care products, and similar goods was left to small, privately run cottage industry firms. These firms had the added advantage of being labour-intensive and, therefore, a potential generator of mass employment.

The 10-year period from 1950-51 to 1960-61 witnessed considerable growth in manufacturing. Several measures were taken for the development of existing units and the opening up of new ones, which included an increase in efficiency, the removal of obstacles to growth and the initiation of fair competition.

Development was spectacular in the iron and steel industry among the different sectors. Apart from thoroughly overhauling and modernising three pre-existing steel plants, three more steel plants under the public sector were added to the fray.

During 11 years from 1950-51, industrial production increased at a rate of 7 per cent per annum and an enhanced rate of 9 per cent in successive 4 years from 1961.

The domestic manufacturing sector evolved from an industrial base in the 1950s and early 1960s to a licensing Raj between 1965 and 1980. 

With License Raj came crony capitalism, and this put the brakes on India’s manufacturing ambitions. Growth became sluggish, reducing to 5.3% in 1965-66. Coupled with License Raj, it forced several large multinationals to leave the country, further hampered India’s technological growth in manufacturing.

The 1960s were the real test for a young India, a period of slowness after an exceptional golden run. 

After independence, wars, poverty, illiteracy, and other serious problems were ailing the country. In 1965, the Green Revolution was initiated to combat India’s food crisis, and farmers were given high yielding seeds to produce wheat and essential crops for the masses.

Wielding immense power due to the license raj system, inefficient and ill-equipped government bureaucrats ensured domestic manufacturing suffered through the 70s. 

The scale of their inefficiency was amply evident, with two huge examples

Built in the 1970s, the Haldia Fertilizer Plant was a white elephant: employing 1,500 people for 21 years without producing fertilizer, while scooters, the middle-class dream, had an 8-year waiting list.

Our manufacturing sector was hurting and in urgent need of change.

The 1980s marked the shift towards liberalisation, and the 1991 reforms dismantled barriers like industrial licensing and reduced import tariffs.  

Industry opened up following economic liberalisation in the 1990s which brought international competition to the country.

Barrier Breakdown

1991 was a pivotal moment for India. 

A spate of adverse events had been triggered, starting with the Gulf War-induced inflation of oil prices and India’s import bill, culminating into a balance of payment crisis. 

Foreign exchange reserves, at ~$600mn, were barely enough to cover three weeks of essential imports. The current account deficit had reached a peak of 3% of GDP, and short-term external borrowing accounted for an astronomical 380%.

But something good was to come out of this mess. 

The situation spurred a series of reforms, broadly along the themes of de-regulating the industry, opening up the economy to external investments and doing away with restrictions 

After the decades of License Raj, It seemed like the manufacturing sector’s time had finally come. 

Till the 1990s, manufacturing had been overshadowed by services and agriculture in terms of its contribution to the GDP. This was an anomaly. 

Traditional economic development models posited a transition from agriculture to manufacturing, and finally the services sector as the dominant drivers of economic growth. 

China, with manufacturing accounting for more than 40% of its GDP, was a textbook case.

Immediately after the reforms, the manufacturing sector, growing at its highest-ever annual growth rate of almost 8% from 1992 to 1997, with its gross fixed capital development (an indicator of investments in fixed assets like factories etc.) increasing by almost 1.5x in this time frame.

However, the upward trend was short-lived. After 1997, growth stalled and fell below 5% due to a mix of external and internal factors.

External factors included the Asian crisis of 1997-98, the economic sanctions imposed following the 1998 nuclear test, the rising dominance of Chinese exports, and the global economic slowdown of 2000.

Internally, the boom of the previous years had built up a significant overcapacity, which faced falling inflation, an indicator of falling demand, and a rise in real interest rates, which made investments more expensive.

Moreover, the impetus of the reforms had faded considerably. 

This was perhaps most reflected in the fact that despite rampant de-regularization, restrictive labour laws were never loosened – which perhaps became one of the biggest roadblocks towards fully realizing India’s advantage of a massive, low-cost labour force for the manufacturing sector in India.

But where manufacturing failed to fulfil its potential, the services sector shone, led by the booming IT and software industries. 

A large English-speaking, technically skilled talent pool and an opening economy encouraged MNCs such as IBM, General Electric and Nortel to set up offshore development centres.

Homegrown firms like Infosys, TCS and Wipro were already testing global waters. And then came the Y2K crisis – a litmus test for India’s ability to export IT solutions – which the country passed with flying colours. 

By 2000, the Indian industry had grown 50x in 10 years to reach USD 5 billion in revenue. IT was living the dream that manufacturing could have. 

As Indian IT grew, a once-in-a-epoch giant took shape on India’s borders. 

World Made in China

China took up the spot as the manufacturing hub of the world.

Chinese manufacturing grew so fast that it went from $360B in 1990 to an astonishing $1.2T in 2000, setting it up for new vertical growth. Chinese manufacturing as a share of global exports grew from 3% to almost 10%.

As China appeared to suck all economic oxygen, Indian manufacturing still had a strong role to play. 

Driven by sectors like metals, petroleum, electrical machinery, automotive and pharmaceutical, manufacturing was back to enjoying over 7% annual growth rate during this decade.

Metals and petroleum products had long enjoyed strong government support through multiple PSUs and significant private sector interest. 

Giants like Reliance and Tata dominated. Infact, the acquisitions of international metal companies, like UK-based Corus by Tata Steel in 2007 and US-based Novelis in 2008 by Hindalco Industries, were representative of the surge of these sectors in India.

In parallel, Reliance had marked the beginning of this decade by commissioning the world’s largest petrochemicals refinery in Jamnagar, entering the recently liberalised telecommunications space and becoming the first Indian private company listed on the Fortune Global 500 list.

However, the automotive and pharmaceutical sectors boomed during this decade.

The automotive sector had transformed, from the days of the License Raj. 

There was a long wait list for consumers to get their hands on the few models that roamed Indian streets. At the turn of the century, 12 automotive companies had already established a manufacturing base in India.

Several pivotal moments marked this journey. 

Tata Motors launched the first indigenously developed Indica car in 1998. This was followed by M&M launching Scorpio as India’s first indigenously designed SUV. The Auto Policy 2002 allowed foreign companies to set up fully owned subsidiaries in India, further propelling the sector’s growth.  

The luxury market too opened up soon after, with Tata Motors signing a joint venture agreement with Daimler-Benz to manufacture the coveted Mercedes-Benz cars in India.

Global automakers such as Volkswagen, Nissan, Hyundai, and Toyota started using their manufacturing setups in India to serve global markets, establishing the country’s presence in global value chains and significantly contributing ~$4.5Bn to its export base.

Passenger vehicle sales grew almost double the GDP growth rate at over 15% during this decade. Global acquisitions were not limited to metal, with Tata Motors acquiring Jaguar-Land Rover in 2008.

As auto boomed, the big surprise was the pharmaceutical industry. 

Between 2000 and 2005, the sector experienced an annual growth rate of 9%, which made it the fourth-largest pharmaceutical industry in the world by volume, accounting for 13% of the global market by volume. Exports grew by a staggering 30 per cent during this period.

The sector has strong price competitiveness, given the low labour and manufacturing cost. Expertise in developing high-quality generic drugs by ‘reverse-engineering’ patented drugs exacerbated the sector’s price competitiveness and yielded strong formulation capabilities.

The next five years saw the pharmaceutical market’s growth rates take off to ~13 per cent per annum, setting the stage for the coming decade.  

But the boom times, fueled by easy access to capital, were about to end.

Recession Rebound

The 2008 global recession significantly impacted India’s manufacturing sector

Exports immediately declined, and credit conditions tightened. The Indian government promptly responded by reducing central excise duty and ramping up public expenditure, injecting a stimulus worth 2.4% of GDP. 

This decisive action helped mitigate the economic slump, propelling the manufacturing sector towards recovery and contributing to a Gross Value Added (GVA) growth from 6.7% in 2008-09 to 8.9% by 2010-11.

Emphasising fiscal responsibility, underscored by enacting the Fiscal Responsibility and Budget Management (FRBM) Act, the manufacturing sector’s resurgence was buoyed by strong domestic demand. 

The automotive industry, in particular, saw an opportunity to expand globally. Tata Motors’ strategic acquisition of Jaguar Land Rover for $2.3 billion was aimed at capturing the high-end segments of the global automotive market, leveraging JLR’s prestigious brand and economies of scale. 

Similarly, Maruti Suzuki and Bajaj Auto tailored their production for South American and African markets, contributing to India’s growing automotive exports. 

The Automotive Mission Plan and the National Electric Mobility Mission Plan further accelerated the sector’s growth, with vehicle production increasing from 15.9 million units in 2010-11 to over 24 million by 2015-16 and exports growing from 2.33 million units to approximately 3.5 million units in the same period.

The pharmaceutical industry also witnessed substantial growth. India became a leading exporter of generic drugs, accounting for 20% of the global volume. The industry’s value expanded from $10 billion in 2008 to over $30 billion by 2015. 

The government’s Startup India initiative 2016 spurred technology startups and innovation, expanding the focus beyond outsourcing to product development, e-commerce, and digital services. 

The Make in India initiative launched in 2014 aimed to transform India into a global manufacturing hub. It significantly increased electronics production, including a leap from 2 to 120 mobile phone manufacturing units by 2016.

These strategic interventions and initiatives laid the groundwork for India’s manufacturing sector’s recovery and growth post-2008, marking a shift towards diversification and technological integration. 

This era set the stage for a new upcycle in Indian manufacturing

Bricks to Bits

Targeted policy initiatives significantly shaped India’s economic landscape. 

The “Make in India” campaign stood out for its pivotal role in fostering manufacturing and attracting foreign direct investment (FDI), with inflows growing at a healthy 15% year over year since its launch. 

Jio was launched in 2016.

Reliance Jio revolutionized the telecom sector, dramatically increasing the number of internet users—from 350 million in 2015 to over 600 million by 2020. Jio’s aggressive pricing strategy made internet services more affordable, spurring digital transformation across industries.

Similarly, renewable energy underscored the increasing shift towards sustainable development, responding to the growing demand for clean energy sources and contributing significantly to revenue generation and building environmental sustainability.

India’s renewable energy capacity saw an impressive surge, growing from 42.85 GW in March 2016 to approximately 87.26 GW by March 2020. Capacity doubled the capacity in just four years and positioning India as a global leader in renewable energy adoption.

The manufacturing sector that witnessed a big boost was chemicals. 

This could be attributed to a combination of domestic growth, international demand, and government strategic policy support. 

Speciality chemicals led to higher profitability, with companies capitalising on the “China Plus One” strategy and enhanced R&D, driving robust export growth.

The period also saw a surge in technology startups, with India becoming the third-largest startup ecosystem globally. Investments in startups increased, with many beginning to attack the manufacturing potential of the country

OfBusiness is one such story that launched in 2016.

OfBusiness streamlined procurement processes and fostered the growth of SMEs. It made supply chains and raw materials more efficient. With investors sensing the idea’s potential, OfBusiness raised $50 million in three years from launch. 

The government continued building better infrastructure and policies to improve 

India made substantial progress in improving its Ease of Doing Business ranking, from 130 in 2016 to 63 in 2019. FDI to India increased from $55B in FY16 to $74B in FY20. India’s exports grew from USD 262B in FY17 to USD 313B in FY20.

By 2020, India solidified its position on the global stage as an emerging leader in manufacturing, ready to leverage its newfound capabilities for future economic prosperity.

But a storm was coming, about to batter anything physical. 

Becoming a Plus One

The COVID-19 pandemic swept through India, causing disruptions in almost every industry. 

At first, it appeared the COVID pandemic would shock the economy into submission. The economy appeared to be grinding to a halt that wasn’t seen before. 

Yet, Indian businesses quickly adapted to the changing landscape, revealing their resilience and capacity for innovation.

India’s pharmaceutical manufacturing dominance would shine through. 

Giants like Dr Reddy’s, Cipla, Serum Institute and Sun Pharma significantly expanded their production capacities for COVID-19-related medications and vaccines. 

This move was essential in addressing domestic and global demand for critical drugs. India’s contribution to vaccine manufacturing, including Covaxin and Covishield, played a pivotal role in global vaccination efforts, with millions of doses exported to various countries.

Companies like Maruti Suzuki, Mahindra & Mahindra, and Tata Motors shifted their focus to produce ventilators and personal protective equipment (PPE). Tech companies, such as Bharat Electronics Limited (BEL) and Larsen & Toubro (L&T), ventured into producing critical medical devices like oxygen concentrators. 

This showed the world that India was as good as anyone. The manufacturing disruptions and impact on supply chains in China made India even more attractive. 

Post-COVID, the world realized that moving away from China was imperative. The biggest China bull, Apple, began rapidly ramping up iPhone production in India. 

The “China + 1” policy, aimed at diversifying supply chains away from over-reliance on China, saw India emerge as a favourable destination for manufacturing and investment. 

2020, 2021 and 2022 marked the best three years of FDI inflows.

Zetwerk capitalised on this rapid, once-in-a-lifetime shift. The budding startup provided manufacturing services that helped firms transition to new suppliers almost overnight. The upstart would hit an astonishing 4,900 Crore of revenue in 2022, growing almost 2x every year.

Startups like Ather Energy in electric vehicles and Boat in consumer electronics demonstrated remarkable adaptability, as manufacturing moved home. In space and satellite manufacturing, startups like Agnikul Cosmos and Pixxel showed innovation.

All the growth was supported by deep investment in infrastructure. 

India’s national highway network expanded significantly, with a 59% increase in the total length of national highways in the 10 years leading up to 2022. The expansion positioned India as the world’s second-largest road network after the USA. 

The introduction of FASTag has notably improved toll collection efficiencies, reducing waiting times at toll plazas from 734 seconds in 2014 to 47 seconds in 2023. 

These infrastructure improvements proved to be further unlocks for manufacturing. 

The cargo handling capacity of India’s significant ports substantially increased, reaching 1617.39 Million Tonnes Per Annum (MTPA) as of March 2023. India was targeting a nearly 300% increase in port handling capacity by 2047, aiming to raise the country’s total port capacity from 2,600 MTPA to more than 10,000 MTPA. 

India’s manufacturing focus, infrastructure boost, and tech surge positioned it to become a global export giant, reshaping the international trade landscape.

India was finally getting an opportunity to wrest the initiative from China. 

Power Play

By 2022, India was emerging as a potential manufacturing powerhouse.

With strength established in chemicals, pharmaceuticals, automotive and textiles, India had reasons to succeed. 

India possessed inherent strengths in these sectors over its US and European peers. A sizable, trainable workforce, mineral and raw material availability, and proximity to key markets, including the domestic market, helped. 

A new shoot of growth that built on these capabilities was electronics. 

Manufacturers like Samsung, Wistron, and Foxconn shifted production to India because of strong manufacturing and R&D capabilities, a growing supplier base, and strong policy support. 

India soon became the 3rd largest exporter and 2nd largest manufacturer of mobile devices, having ~10% market share behind Vietnam and China.

The country moved beyond assembling and is into precision manufacturing in categories like mobile camera lens case making, and prefab units, among others. 

Due to these developments, manufacturing exports have seen tremendous growth of 15% CAGR over 2022 and 2023. They were growing between 5% and 10% during pre-COVID and reached $418B in FY22.

In addition to key manufacturing sectors, new-age sectors such as renewable energy, drone manufacturing, defence, and space tech are also propelling India’s manufacturing sector growth. 

India has been the 4th largest country worldwide to add renewable capacity over the past decade. India aspires to become the global hub for drone technology by 2030

In spacetech, the successful landing of the indigenously manufactured Chandrayan, achieved at a frugal cost, stands as a testament to India’s prowess on the global stage, particularly in emerging sectors.

Yet India is at a sub-optimal scale in many sectors compared to giants like China and Taiwan. 

For example, in solar module manufacturing, India would have an installed capacity of 65-70 GW by 2027. In contrast, Longi Solar, one of China’s leading players, has an installed capacity of 85 GW in 2022, higher than India’s by 2027. The situation is similar in semiconductors and lithium-ion batteries.

Besides scale, India’s domestic manufacturing costs, such as power and logistics, are also higher. Notwithstanding power reforms, India’s industrial power cost is almost 2x of China’s power cost and logistic cost at 14% is significantly higher than its peers.

To make India globally competitive, the government has taken a variety of initiatives such as Make in India, Bharatmala Project, Start-up India, Faster Adoption & Manufacturing of Electric Vehicles (FAME), Atmanirbhar Bharat, Free Trade Agreements, etc., to address the barriers that hamper India.

PLI schemes were another effort in this direction. The Indian government developed a scheme with an outlay of 47B to attract large investments across 15 sectors, driving domestic growth and manufacturing-led exports. 

India’s capex cycle is expected to fast-track after post-pandemic economic growth and high-capacity utilisation, which will help cater to the increased demand. The Indian government had budgeted a 35% year-over-year (YOY) increase in capex for FY23 to ~ $100 billion. 

As it entered 2023, it looked like the manufacturing rollercoaster was looking up. 

Forging a Trillion Dollar Future

India aims to increase the manufacturing sector’s share of GDP to 25% by 2030 from its current base of 17%.  

From Make in India 2.0’s focus on 24 key sub-sectors to dedicated textile hubs like Telangana’s Mega Textile Park, India’s government is creating a fertile ground for manufacturing. 

Public-private partnerships like the Chennai-Singapore Industrial Park are streamlining processes, while skilling initiatives like Pradhan Mantri Kaushal Vikas Yojana are training millions in areas like robotics and additive manufacturing, ensuring a future-ready workforce. 

With a large Rs. 9,000 crore Polycarbonate plant in Gujarat to Apple’s growing iPhone production, India’s manufacturing muscles are now flexing. The giant plant promises to solidify India’s position on the global chemical map, while Apple’s 25% iPhone production target by 2025 attracts investments and boosts exports. 

India is also taking a crucial step towards self-reliance in semiconductors with its first indigenously built fabrication unit.

These giants aren’t standing alone. 

Mega infrastructure projects like Bharatmala and Gati Shakti are bridging the gap with seamless connectivity, while dedicated industrial corridors like Delhi-Mumbai and Amritsar-Kolkata nurture specific industries like automobiles and textiles. Skill India Mission 2.0 equips millions with industry-relevant skills to fuel this ambitious engine, and Startup India Vision 2024 fosters homegrown manufacturing solutions.

India also plans to become a net exporter of solar panels by 2025.

This multi-pronged approach aims to propel India onto the global manufacturing map, making it a go-to destination for high-quality, competitively-priced goods.

Samsung recently announced that it will manufacture laptops in India. It already manufactures feature phones, smartphones, wearables, and tablets in India, and with the laptops, it will complete its entire range of products.

Under the modified production-linked incentive scheme for IT hardware, the government has already approved the applications of 27 companies (like Dell, HP, Lenovo, and Foxconn) who will manufacture laptops, servers, and personal computers and collectively invest Rs 3,000 crore.

To become globally competitive, India needs also to trade freely. 

The Indian government has been proactive in its trade relations engagement with important trading partners globally and is currently negotiating a Free Trade Agreement (FTA) with 16 foreign entities.

This is the highest number of negotiations compared with the alternative manufacturing destinations. When these negotiations are closed and FTA is signed, India will likely be the second most connected trade partner globally, after Singapore, among comparable countries

The government of India has set a goal of becoming a ‘developed country’ by 2047- an ambitious goal by all measures. By this point, India will also be the third-largest economy in the world. 

Glancing at all the large economies globally, manufacturing has been a key driver of their growth. In India, the manufacturing sector’s contribution to the country’s GDP has remained relatively low for an extended period, hovering around 15-16%. 

The significant push and focus on all fronts is pushing the Indian manufacturing opportunity. From ~$600B today, if it goes to even 20% by 2030 when India is expected to reach $7Tn, it is nearly doubling to $1.2T. 

From decades in wilderness and false starts, India’s 70 year manufacturing struggle could finally yield a huge win.

Writing: Ajeet, Parth, Ritika, Shreyas, Varun and Aviral Design: Omkar, Abhinav and Stability

Last fortnight, Country Delight raised $20 million at a valuation of $820 million to knock on the doors of India’s unicorn club.

Milking First-Hand Experience 

Chakradhar Gade and Nitin Kaushal met at an IIM and completed their MBA by 2007. 

They took the path that most people take after an MBA, a job in finance or other fields where they can apply their business acumen to grow businesses. They were data-focused and knew the concepts of depreciation too well not to see a key insight. 

If one buys a car, it depreciates over time, but if you buy cattle, it multiplies over time!

It may sound naive. Most of us may dismiss the idea of cattle farming and selling milk as it involves complicated operational challenges of managing cattle, milk perishability, and a complex supply chain.

Chakradhar and Nitin had different ideas.

They did not have any background in cattle farming, so in 2011, they decided to take it up as a part-time business in Delhi, bootstraped with INR 1 crore as capital. As they say, outsiders to a business sometimes become the best disruptors.

They started the business by buying 50 cows which they hoped would become 500 in two years based on the Excel sheet they had prepared.

That Excel had more rows and columns that projected the daily milk supply would increase from 200 litres a day to 5,000 litres within 2 years. Around 70 lakh litres of milk was sold daily in Delhi and they aspired to sell 1 lakh litres per day eventually.

However, as with most Excel models, reaching 5,000 litres daily would be a 3x longer journey. 

The path from air-conditioned rooms to cattle farming was full of surprises. First, they had just a couple of weeks to find land where they would keep these 50 cows and soon the additional cost of buying two bulls they needed if these 50 cows had to become 500.

Being a bootstrapped business, the founders were patient and resourceful enough to learn the most important customer insight they got during these initial years of business.

Customers want fresh and unadulterated milk for their families at an affordable cost. By 2015, Chakradhar and Nitin were ready to solve this problem for customers. 

4 years later, Country Delight was born.

$26B Dairy Gaps 

Country Delight started with milk as its core product. 

There were sizeable organised players like Amul and Mother’s Dairy. Upstart peers like MilkyMist, AkshayKalpa, Sid’s Farm and many unorganised players or small cattle farmers also operated in this space.

The problem with organised players was it often took up to 2 weeks to deliver milk to end customers through a cold supply chain network. Milk travelled 500-1,000 km. This meant customers were not getting fresh milk, which may be checked for quality. Moreover, many big players also had to use milk powder in the milk packets, which meant the milk was unnatural. 

As per an FSSAI study, 68% of the milk sold in India was adulterated

Conversely, unorganised players in customers’ neighbourhoods delivered fast, but customers did not know about the milk’s purity. We will all recall childhood stories of your friendly neighborhood dairyman mixing mik with water. 

This is where Country Delight’s founders found a wedge to enter this large but traditional market. 

They wanted to eliminate prevalent unscientific practices like testing milk by tasting it. This initiative was as much about educating consumers on the importance of pure, unadulterated dairy as it was about product assurance.

They could also understand that customers can pay more for a pure and fresh product. If Country Delight can innovate on the supply chain and build a trustworthy product,, they will be rewarded with good margins and an opportunity to cross-sell to this captive customer base.

The problem statement was clear, and Country Delight built the entire supply chain with innovative solutions and listened to how customers reacted to it.

By 2016, the biggest challenge in creating a new milk brand was trust.

Testing kits and subscriptions were added to show how they were unadulterated. Country Delight added “founded by IIM alumnus” on the packaging to add trust. It also offered traceability to the source, which inspired confidence in users.

The proven promise of purity was also delivered through an FSSAI-accredited lab report on 75 parameters every 15 days.

But the most important difference customers could notice is the difference in milk taste. 

They could soon trust Country Delight as a brand that provides fresh, unadulterated milk at a slight 20-30% premium cost compared to the other organised players like Amul.

Country Delight was transforming into a fresh-to-home brand in which freshness and purity could be differentiated with taste.

Building this at scale was not going to be easy. 

Fluid Quality Control 

Country Delight had to build its supply chain to deliver on the promise of fresh milk in 36 hours.

This was an unexpected operational huddle for the bootstrapped company. Founders had to figure out the milk procurement, fix last-mile delivery, work on the arithmetic of customer acquisition, integrate the supply chain with technology, and build scalability.

Each of these was a large problem to solve.

Operational complexity would eventually become the moat giving them control over procurement, building loyal relations with farmers, using tech to reduce storage and logistic costs and offering trust and quality promise through last-mile traceability to consumers.

They burnt 70% of the initial capital, and to remain in the game with their dream of reaching 5,000 litres a day, they needed more. 

After 6 years of bootstrapping, Country Delight finally raised its seed round in 2016 by securing INR 3 Crore for a 10% stake valuing it over INR 30 crore. 

This helped the company to expand to more cities and adopt technology to scale its business, and by FY18, it clocked close to INR 19 Cr in revenue with a loss of around INR 2.5 crore.

By this time, Country Delight was present in three cities- Delhi NCR, Mumbai and Pune with a supply of 15000 litres daily.

But they were just getting started and had bigger ambitions.

They already had a foot in the door of Indian customers with a sticky category of unadulterated fresh milk. They had established trust amongst customers and a solid supply chain that connected them directly to customers. 

You can even sell a refrigerator if you are trusted to sell milk. 

It was time to expand from milk to dairy products like curd and paneer. The next categories it could explore were fresh vegetables and fruits, making Country Delight more than a milk company. 

The direct-to-consumer brand was ready to go beyond milk and deliver freshness.

Juicing an Urban Phenomenon

As Chadrakhar and Nitin looked to the future, they recognised the immense potential in the urban dairy market. 

This was more than just a business; it was a movement to redefine the dairy industry in India. Echoes of Amul’s transformation of India’s milk landscape came through. 

They would take on giants by focusing on a niche. In 2018 and 2019, they began meticulously building a mass premium brand, focusing on tier 1 and metro cities.

The idea was straightforward yet ambitious. 

The dairy market in India was estimated at approximately USD 18 billion and experiencing growth of about 7-8%. This robust growth reflected the increasing demand for dairy products in a country with a strong cultural connection to dairy consumption.

In the urban landscape, supermarkets were the primary choice for consumers seeking dairy products, followed by other retail formats like convenience stores and online platforms. 

However, these traditional retail channels often faced challenges such as inconsistencies in product freshness, limited variety, and concerns over adulteration and quality.

Urban consumers, growing more health-conscious, were increasingly dissatisfied with these limitations. 

Country Delight went deep here. 

Unlike large dairy conglomerates like Amul, which operate on a mass production scale and distribute through traditional retail channels, Country Delight chose a direct-to-consumer model.

Amul, one of India’s largest dairy brands with a 26% market share in the packaged milk market, had a vast distribution network. Amul catered to a wide range of consumers with a diverse product portfolio.

While Amul has a significant presence in urban and rural markets, its scale often means less control over the freshness of the product by the time it reaches the consumer.

Country Delight disrupted the urban market by focusing on a niche yet growing segment of consumers who prioritised product freshness and quality over a wide product range.

The urban market, with 35% of the population but higher disposable incomes, account for an estimated 50% of the $18B milk market. The urban market’s density meant that Country Delight only needed to capture a small slice of this dense user base to build a large business. 

Their model of sourcing milk from local farms and delivering it directly to consumers’ doorsteps ensured that they could maintain the freshness and purity of the product. By leveraging technology for operations and customer engagement, they positioned themselves as a premium brand in the urban dairy market.

By building relationships with loyal customers they added other cities. Country Delight expanded across 15 cities such as Delhi, Gurugram, Noida, Bengaluru, Pune, Mumbai, Hyderabad and Chennai. 

Country Delight built on its FY18 revenue to remarkably grew to 65 crore INR in FY19.The upstart was off to the races, expanding into more cities beyond its first 3 of NCR, Mumbai and Pune.

Fruits of Tech 

By 2019, the founder had fine-tuned a farm-to-doorstep model that distinguished itself in efficiency and effectiveness. 

The full-stack approach, taking control of the entire supply chain, was key in ensuring quality while reducing waste. Beyond efficiency, their model significantly uplifted the lives of partner farmers. 

By eliminating middlemen, they saved about 15-20% in distributor margins — a substantial saving in a sector shared with farmer partners.

Their subscription-based service was another masterstroke, cultivating customer loyalty and enabling a negative working capital model, a rare feat in the FMCG sector. The brand’s packaging went beyond mere functionality. It was a statement of the brand’s dedication to quality and innovation.

This meticulous attention to detail allowed them to command a premium price. Country Delight’s cow milk, priced at around INR 85-100 per liter, more than 50% of Amul’s pricing of INR 50 to 60 per liter.

However, Country Delight wasn’t just delivering milk. 

It offered trust, quality, and wellness straight from the farm. Their control over the supply chain laid the groundwork for expanding into fresh produce and milk products.

The commitment to high-quality milk led to higher procurement costs of about 45-55%, in contrast to the 40-50% typically spent by traditional distributors. This was a testament to their dedication to sourcing premium milk from local farms, even at the expense of larger-scale economies. The company realised that with scale, network density would allow the procurement costs to come down.

Country Delight also made significant investments in packaging and marketing. 

Their packaging, tailored for direct delivery, and marketing strategies to build a premium brand resulted in marginally higher expenses in these areas, 5-10%,  than what traditional players typically incur, around 3-5%.

Distribution and logistics costs ranging from 5-10%, were substantially lower than the 20-30% spent by traditional players. 

This was possible because competitors dealt with multiple intermediaries before reaching supermarkets and convenience stores. Country Delight harnessed technology to streamline and scale its logistics, enabling it to market directly to consumers.

Processing and operational overheads remained consistent, around 10-15% for Country Delight and other players, reflecting the standard industry costs unaffected by the scale of operations or market strategy.

Creating the first full-stack model for milk was hard to set up and slow to scale due to the logistics and the intense competition from large traditional players. 

With the foundation laid, Country Delight’s approach would give them a competitive edge in the form of loyal recurring customers, positive cash flows and healthy margins. 

It would end FY20 at 175 Cr of revenue, 3x of the prior year. A disruptive storm was coming. 

Pandemic Punch 

COVID was a big boost to Country Delight as the whole world went direct. 

The pandemic provided avenues for Country Delight to grow from an SKU standpoint and improve efficiency and tech back end.

The company received a $44 million Series C investment in April 2020, just as the pandemic hit.

This boost provided crucial ammunition for navigating turbulence. While many businesses floundered, Country Delight saw a surge in demand for online delivery of fresh dairy and produce. 

Health had become paramount, with the upstart well positioned to capitalise.

Focusing on quality, freshness, and convenience, they were perfectly positioned to capitalise on this shift in consumer behaviour.

The milk brand successfully built a business model with trackable data from the farms. It was able to scale this effort during the uncertainties of COVID-19.

It used 17 apps integrating AI and automation to solve supply chain issues and ensure quality. The brand developed an in-house application called ‘Nectar’ for tracking milk temperature at each stage of its supply chain.

On top of it, the new-age milk brand monitors its processes with loT devices.

It helped the upstart deal efficiently with value-added products with a short shelf-life by ensuring that every deviation got flagged.

In an era of evolving customer needs, Country Delight looked to maintain the quality and efficiency of its products backed by its intensive technology and data while also expanding its product offerings to the entire kitchen essentials and staples segment.

By 2021, the brand will deliver customers fresh milk, fruits, vegetables, bread, and eggs within 24-36 hours. Once the channel of trust was built, it could sell multiple products. 

To cover how the supply chain remained resilient even during COVID delivering on time and efficiently, which further won consumer trust

As the company expanded, competition was getting closer across categories and regions

Fighting Big Bulls 

India’s dairy market was highly unorganised, primarily due to the perishable nature of the products.

2 major players ruled, Amul and Mother Dairy. The duo controlled over 30% of the dairy segment across all product categories. Technology was missing in the traditional model of delivering milk to consumers. 

Will Amul’s Milk Run Win India’s Consumption Marathon?

Country Delight took it up as a challenge.

The competitive landscape includes a large variety of firms. Country Delight competes with brands such as Akshayaklapa, Milkmantra, Milky Mist, and Parag Diary in the core dairy segment. 

In broader food and grocery delivery, it competes with other brands and platforms like Otipy. The market size and competition make margin expansion and profitability a complex target. 

While these challenges look tough to overcome for any other company, Country Delight is built differently by doing things uniquely. 

Country Delight’s brand promise and value proposition is “fundamentally better and natural products”. This is backed up by its lock on distribution that it own end to end, allowing it to deliver timely and fresh products without intermediaries or trade channels. This builds consumer loyalty and trust. 

Next, the delivery capabilities that they have built allow them to scale new products faster and price them more competitively since the larger milk business pays for delivery and distribution anyway, uniquely leveraging the tech that they’ve built to run supply chains across 11 states in a very capital-efficient and distribution-efficient manner. 

From customer insights, they realised that convenience in customer shopping would allow them to charge a premium for their products. Country Delight remained narrow in its focus to a few cities, targeting the premium segment of the population, and built on a seamless customer experience that allowed them flexibility in ordering, receiving delivery, and scheduling orders.

While Country Delight products are 15-20% higher than their competitors, Country Delight benefitted from this unorthodox strategy through a proprietary supply chain. Through this, they could introduce other grocery items and reduce customers’ average turnaround time with other platforms.

As it entered 2022, it had breached an impressive 300 Cr. 

Fresh Food Flood

Country Delight emerged as a key player in India’s dairy and fresh food essentials sector. 

While it started focusing on dairy, it has significantly expanded its reach and product line. The business model emphasises quick delivery, with a fully integrated supply chain ensuring deliveries within 36-48 hours, facilitating a vast scale.

In August 2023, it served over 1.5 million customers in 18 cities across 11 states in India. It made almost 10 Mn monthly deliveries to more than 5 Lakh subscribers across all the cities it operated in 

As it entered 2023, Country Delight reported a revenue of Rs 543 crore in FY22. 

The same period saw a substantial expense increase, leading to a loss of Rs 186 crore. The cost of procurement was a significant factor, accounting for 49.3% of total spending and reaching Rs 362 crore. Advertisement and promotion costs soared to Rs 125 crore, with employee benefits and contract labour charges rising steeply. 

This increase in expenditure reflected the company’s aggressive expansion and marketing strategies.

The company’s product range now goes beyond milk to include items like ghee, paneer, pulses, oils, yogurt, and healthy smoothies, catering to a broader consumer base. 

Country Delight’s strategic expansion into various food staples categories such as rice, wheat, pulses, grains, jams, and pickles, as well as health-focused offerings such as probiotic yogurt, lactose free milk highlights its ambition to become a comprehensive D2C food and grocery provider.

As Country Delight gears up for its next journey stage, it’s building a substantial war chest. 

It raised a $108 million Series D funding round in May 2022, and a further $20 million in 2024 for a total of a total of $300 million in funding

The next phase of growth is both exciting and challenging.  

Delicious Future

Country Delight’s core offering milk segment operates on relatively thin and hard to improve margins

The conventional wisdom is that expanding market share in this segment against established mass-market brands requires strategic investments in marketing and promotions. 

The company is continuously evolving, with new product launches and category evaluation as a key area of focus. 

Looking towards the future, Country Delight plans to diversify its product offerings further, exploring options in sustainable packaging and plant-based, health-focused alternatives. This aligns with global trends towards environmental sustainability and health consciousness.

Strategic partnerships, particularly in the health and wellness sector, are in the pipeline, aiming to provide personalised nutrition solutions. The company’s foray into kitchen essentials like pulses, cookies, oils, and wheat flour is set to broaden its market reach.

Today, roughly 40% of the business comes from non-milk product revenue, which Country Delight aims to grow to 60-70% over the next few years. This will happen if the company keeps increasing the number of households transacting. 

It also plans to reach a 10-15% market share over the next three years across markets in North India. 

Country Delight aims to continue improving product quality in the supply chain and further engage with its network of farmers.

All of these initiatives end up with a flywheel effect. 

The more milk Country Delight sells, the more subscriptions it manages to get, the more it gets customers to engage with the rest of its SKUs and offerings, and since it has the distribution infrastructure to get it to them quickly and fresh at a competitive price, it creates a virtuous flywheel effect for rapid growth. 

Country Delight claims to have crossed the Rs 1,000 crore revenue mark in FY23 and is targeting profitability by FY24.

With its plans to go public by FY25, along with a lofty target of one million paying subscribers across India, Country Delight is positioning itself for long-term growth and market dominance, with the ambition to be a vertically integrated D2H private label company and expanding into all categories of food essentials.  

Country Delight could delight customers, investors and team members if it executes as advertised. 

Knocking on the doors of being a unicorn, it is a fresh story that shows you can build a massive business in India despite intense competition. The upstart will necessarily inspire many new founders to start fresh. 

All you need is a dream, an Excel model and a few cows.

Writing: Keshav, Abhinay, Chandra, Samarth, Vishal and Aviral Design: Abhinav, Blair and Omkar

Last fortnight, bootstrapped electronics startup Noise announced its maiden ever $10M fundraise from iconic electronics maker Bose at a $450M valuation.

Startup Whispers

Gaurav Khatri and Amit Khatri are cousins, born ten years apart in the land of bhujia, Bikaner.

Gaurav’s father was a doctor, and his mother was the Principal at a local government school. Amit’s father worked at State Bank of Bikaner in Jaipur.

The typical middle-class Khatri family, however, consisted mainly of doctors. No wonder the parents wanted both the cousins to become doctors.

Amit, the eldest kid in the family, started preparing diligently for medical exams. Amit was a smart kid at school, but not exactly a topper. He passed Class X board exams with 1st Division, but was also keen to bunk school to watch “Rangeela” in the theatres. 

Amit did not enjoy medical entrance exam prep all. After his class XIIth, Amit was sent to Kota to prepare more diligently. Success, however, kept evading him.

In the meantime, Amit’s father got transferred to Kanpur. After two attempts, Amit moved to Kanpur along with his father. He realised that medicine was not the only career option in his life. 

Amit started preparing for MBA admissions exams.

His target schools weren’t exactly the Tier I IIMs. He would have been pleased if he had gotten to Symbiosis in Pune or Narsee Monjee in Mumbai. At the urge of his friends, he filled up the application form for NIFT too. 

Unfortunately, he couldn’t attend any B-school except NIFT’s Hyderabad campus. He packed his bags, and moved to Hyderabad in 2002. 

At B-school, Amit’s pocket money from his father was INR 3000/- per month. To supplement his earnings, Amit picked up side projects while in college. He would design and source merchandise for colleges and large companies like Satyam and Microsoft, in HiTec City.

He soon discovered that he enjoyed such gigs, and was good at it. In line with his gigs, he secured a summer internship at one of Gurgaon’s leading manufacturing export houses. He landed a PPO a week into his internship, offering him a princely INR 10K/month salary. He took that offer up, thinking that was the best he could get.

He worked hard at the job, often staying late into the night. He was insecure about his career, and reality quickly caught up. His peers, even the ones from Tier 2 colleges, would make between INR 30K-50K / month. 

The comparison was getting on him, and he wanted to prove himself.

Amit was working for brands such as Zara, H&M etc – typically large brands sitting overseas who would send him garment design sketches with specifications, and he would manufacture them and send back actuals. Even though Amit loved his job, he got bored soon.

Recognising the hard work that Amit had put in, his employer wanted him to build out the company’s supply chain out of south-east Asia. He was sent to Hong Kong in 2006. 

At the time, he was given $75/day for his accommodation in Hong Kong. Amit would stay in the nondescript Chongqing mansion at $15/day, saving the difference. 

Amit brought back home a Blackberry after one such Hong Kong trip. Blackberries were a status symbol back then. Everyone around him was in awe and couldn’t believe that the phone price was a fifth of that in India. 

Amit was flooded with requests to bring Blackberrys from HK. He happily obliged, pocketing a hefty margin for every phone sold. 

His self-belief was soaring. He got a lot of appreciation for his work and finally discovered what he enjoyed doing. 

With this self-belief, Amit started his first company, Transcend, in 2007.

Sound of Money 

Amit ploughed in his INR 60K savings and rented a small basement in Gurgaon. 

Transcend merchandised garment accessories, such as buttons and cuff-links, for large multinational brands such as Zara across Hong Kong, China and India. 

At Transcend, Amit got a flavour of what startup life was like. 

There would be days when he would not have the time to have a proper meal nor change clothes. As part of getting order consignments shipped out, he’d spend nights at the factory, dealing with constant fires. Sometimes, he wouldn’t have enough working capital to accept an order, sometimes, the colour of the accessories would start coming off, and sometimes consignments would be stuck. 

The risk of losing an order always loomed large. 

This experience would prove useful when he built Noise— blending his experience dealing with lifestyle-oriented products and good design with the hustle necessary to build a company from scratch.

In India, the buzz for phones was brewing. Consumers were eager and giants like Nokia reign. Amit, with no marketing muscle, sought a niche. People flaunted phones, and craved stylish covers. With no organised Indian brand, cousin Gaurav begged for a Hong Kong import. 

An opportunity beckoned.

Young Gaurav, barely 17, soared from Bikaner to pilot school in Philippines, an aviation ace by 19. But 2009’s industry turbulence grounded him. Undeterred, he took to business school, tech-savvy and confident in India’s gadget boom. He knew the skies would wait.

That’s when he connected with his brother Amit.

Amit had already identified a gap in the smartphone covers market. The duo decided to take the plunge. Noise v1.0 was born in 2014, selling mobile phone cases and covers. 

Will boAt Ride the D2C Wave to Unicorndom?

To their surprise, the first 50 covers sold out within 2 minutes on e-commerce marketplaces. 

The duo was onto something. They were on top of the latest consumer tastes. Their products were loved by their customers. Noise v1.0 had found a way to get into people’s household, through an avenue no one was looking at.

They had set up a factory in India to manufacture the cases and covers locally. By the end of their first year of business, they had clocked ~INR 7-8 Cr of sales. 

By 2015, they were the undisputed market leaders, clocking in a turnover of INR 24 Cr. But that market was stagnating. The Noise had no differentiation. 

Cases and covers had very low barriers to entry. With the rise of e-commerce platforms such as Flipkart and Snapdeal, no real moats existed in the business. Even though it was a cash cow for Noise, the duo wanted to move away from their sole dependence on this product.

Amit and Gaurav were inclined towards smart devices, but none were formally trained.

They decided to enter the smartwatches category in 2016. At the time, smartwatches were tough. One had to figure out an operating system, put algorithms and sensors into it, manufacture the hardware and sell it to consumers who hadn’t used such wearables before.

They enlisted much help from their technology partners in Taiwan and China, who sourced the sensors and design. With time, the duo picked up the ropes. 

Noise invested heavily in R&D to eventually develop the design and technology in-house. The product assembly, UI, and UX development were already happening in India. The idea was to shift the entire supply chain to India eventually.

By 2017, Noise had fully jumped into smartwatches

Creating A Commotion

Noise’s audacious pivot from utilitarian accessories to comparatively high-tech smartwatches had paid off. 

ColorFit and NoiseFit, among other product lines, had picked up. The brand had found its early adopters.

Noise’s positioning of offering aspirational, high-engagement utilities at competitive prices could be simplistic. Failure to strike a delicate balance had been the undoing of many brands, in electronics and otherwise.

Gaurav and Amit were clear that for Noise to take off, they had to remain loyal to their intention of shipping wonderful products at reasonable prices and not just reasonable prices at wonderful prices. New-age Indian buyers were discerning and no longer craved price as much as they respected value.

In September 2016, Apple announced the 1^st-gen Airpods, giving its stamp of approval to a nascent category. Indians had begun transitioning from wired headphones to neckbands and craved wireless stereo (TWS).

Noise had consciously avoided wired earphones due to the commoditised and highly competitive market, dominated by global players such as Sony, JBL and Philips. But TWS fit its positioning. It was yet another opportunity for Noise to create and shape a new user behaviour.

The first Noise TWS buds were launched in 2018. It borrowed from its proven playbook and introduced a limited range of buds with specific use cases.

There were earbuds designed for the immersive experience that gamers looked for. Similarly, heavy callers could have more intuitive controls based on smart gestures.

The market was changing quickly, and prices were correcting even quicker. Within a year, the average price had dropped steeply from around INR 5,000 to just a third of that.

By 2019, Noise stayed ahead of the competition by maintaining high trend responsiveness and agility. About 30% of Noise’s sales happened through its website, a direct source of valuable insights.

The company acted upon them to fix teething issues in a newly introduced product range and to predict the next bestseller. The journey was not without hiccups.

A smartwatch range named Ignite had serious flaws and experienced very high returns. Based on customer feedback, the team stopped shipments and corrected the underlying issue before resuming sales.

The close control was instrumental in the brand’s gradual decline in average returns to below 5% – an appreciable level by industry standards.

Despite ebbs and flows, by early 2020, Noise seemed to be riding the wave and appeared destined to cruise into the future. Unbeknownst to anyone, the tide was about to change abruptly.

The agent of change was an unusual import from one of Noise’s preferred procurement sources – China. 

Make Some Noise For The Desi Boys

COVID-19 upended lives, made people reevaluate their choices, and induced new habits – some irreversible, most others transient.

Health became a priority, and self-care was no longer an afterthought. Measuring heart rates and blood oxygen, regulating stress levels and monitoring sleep quality became all the rage.

Noise’s assiduous groundwork over the previous three years to master design, software, performance, accuracy and application had found its match in the craze to track vitals.

Smartwatch sales saw a sudden uptick. 

The lockdown led to enhanced word of mouth as youngsters took charge of their elders’ health, resulting in multiple Noise users in the same household.

Moreover, as remote work and classes became the default, the lines between home and elsewhere blurred. The creeping fatigue saw people consciously cut down screen time without necessarily reducing tech dependence.

Electronic engagement gradually shifted from the palm to the wrist – more intimate, less intrusive.

Students and professionals also earnestly invested in audio products, driven by the heightened usage, often supported by allowances from their institutes and employers. Noise and its local peers – boAt, UBON and pTron, among others, grew exponentially.

Political developments were yet another benefactor. 

A prolonged skirmish between Indian and Chinese forces at the national borders led to strong anti-China sentiments. What followed was a backlash against Chinese brands such as Realme and Huami, clearing the deck for Indian upstarts.

Noise leveraged the favourable externalities with astute marketing and promotion practices. Brand association with influencers such as Tech Burner, a popular YouTuber with a young, tech-savvy following, built further credibility and accelerated adoption.

By the end of 2020, Noise had amassed an active customer base of 1 million.

Amit’s experience with global fast fashion brands could be seen in how Noise managed its inventory. SKU count was deliberately maintained at around 30, relatively lower than the industry norm.

The emphasis was on achieving quick stock turnarounds, clearing an existing product line before it went out of trend, and having a new line waiting to take over from the old one.

The well-oiled machinery operating behind the scenes was crucial in Noise being able to service 4 orders per minute, and clocking a topline of INR 350 Cr. for FY21. 

What was an annus horribilis for much of the world turned out to be an annus mirabilis for Noise. The company was ready for this. 

Some serendipity, much rigour.

March Of Rebellion

As much as Noise made its mark by all it did in 2020, it stood out by what it chose not to do in 2021 and 2022 – raise venture capital.

The near-zero interest rates maintained by central banks around the globe to help the world cope with the pandemic led to a funding spree. Noise, however, was a notable absence in the party. Put it on Gaurav and Amit not fitting the typical tech founder profile, Noise’s relatively short track record, or just plain business nous of the Khatri brothers.

Staying bootstrapped allowed Noise to avoid the expectations of exponential growth, maintain focus, and operate within its circle of competence. 

Despite the encouraging success, the company did not display any taste for theatrics – no foolhardy urge to sell high-end electronics, no overzealous urge to unduly premium-ize the current offerings, and so on.

Critically, it created a culture of frugality and enterprise within Noise, with every major business decision being painstakingly thought out and executed instead of a spray-and-pray approach. 

More of a sniper than a machine gun

For a brand that built its distribution on Amazon, its customer obsession could make the corner office holders at the Everything Store nod in approval. It was common for Gaurav to switch on the Bluetooth on his phone while travelling by air and get a count of Noise products against peers.

It enabled him to understand Noise’s market standing in real time. He would then get talking to fellow fliers and gain valuable insights to pass on to his teams.

Similarly, Noise had an unconventional approach to business partnerships. It joined hands with Bragi to launch an intelligent range of audio devices powered by the latter’s proprietary OS in India.

Noise also introduced a range of fitness trackers in association with HRX. It then partnered with SBI Card to launch SBI Card PULSE. Cardholders won a Noise ColorFit Pulse Smartwatch as a welcome gift on paying the enrollment fee. Small budget, big impact!

The commitment to low price points, an emphasis on community building, and product design backed and validated by a strong customer database and new alliances and partnerships helped Noise become the leading smartwatch brand in 2021.

Noise led India’s smartwatch market with a 27% share, ahead of boAt, Fire-Boltt, Realme and Amazfit.

Noise had developed a habit of grooming and betting on the winning horse. Four out of the top 10 selling smartwatch models in India in 2021 came from its stable.

Incredible for a company that had no technical background. 

Amplifier 

Having secured pole position in India, Noise set sight on the world stage in 2022.

Smartwatch volumes in India have grown from 2.5 million units in 2020 to around 12 million units in 2022, making it the fastest-growing market in the world.

Noise’s share in the global smartwatch market had grown from under 3% to about 10% during this time, riding exclusively on its Indian business.

It broke into the top 5 smartwatch-selling brands in the world, entering a rarefied set alongside Apple, Samsung, Huawei and Garmin. In the APAC region, it stood third behind Apple and Samsung.

Alongside smartwatches, which accounted for ~70% of the top line, the wireless segment grew at 100% annually, albeit on a smaller base.

It closed FY22 with a revenue of INR 850 Cr, having multiplied 17x over the previous 30 months, dating back to pre-Covid times. Profits stood at INR 36 Cr after absorbing a fall in average selling price across the product range.

As the pandemic receded, Noise mirrored other new-age D2C brands in building an offline presence to buttress online distribution.

In June, it debuted its i1 smart eyewear, boldly stating that it was ready to channel cash flows from smartwatch sales to build for the future. 

The glasses were loaded with motion estimation, motion compensation, a microphone for calls, magnetic charging and hands-free voice control. They were launched at INR 5,999, a significant premium to Noises’s average ticket size.

The new approach could be seen in marketing as well. After years of offbeat methods and frugal brand integrations, Noise roped actress Taapsee Pannu and cricketer Rishabh Pant as ambassadors for a catchy ad campaign.

Something even bigger was on the way.

Towards the end of 2022, the company onboarded Virat Kohli as its face, yet another signal that Noise was now keen to be heard beyond Indian borders. It was a coup, with Noise poaching Kohli from Fire-Boltt in a surprising move.

To put the bowtie on a remarkable year, the company was awarded the Bootstrap Champ award at the Economic Times Startup Awards 2022.

Noise was playing to win. More importantly, it was playing a winning game.

Loud And Clear

In 2023, India emerged as a wearable powerhouse. 

India accounted for 26% of the total units sold worldwide,  surpassing the likes of even the U.S. and China as the largest wearables market in the world by volume.

While the classic forces of rising disposable incomes and exploding internet and smartphone penetration rates played their part in this monumental rise, simple affordability is one of the key drivers behind the industry’s growth.

There were 80+ brands of smartwatches, accounting for ~35% of the market and propelling a remarkable  ~40 percent YoY growth in units sold. A fiercely competitive landscape with brands vying for market share has seen prices drop by half within a year, with average selling prices dropping below INR 2,000.

Likewise, earwear, commanding a significant ~65 per cent of the market, has not remained untouched by competitive pressure, albeit having seen a lower price decline of around ~20 percent.   

Despite the large number of players in the arena, just five companies have captured ~65 percent of the market, with BoAt enjoying considerable dominance over its competitors and Noise as a contender, albeit a distant one, at the second place.

However, a deeper look at the numbers shows that BoAt’s dominance primarily stems from its relatively strong position in the earwear segment.

On the other hand, within the much faster-growing smartwatches segment, Noise and Fire-Boltt are neck-in-neck for the top spot, with both having a 20%+ market share.

Even more noteworthy is that these startups are making their mark even on the global level. With a global market share of around 10 per cent each, they are competing with industry giants like Samsung to become the second largest seller of smartwatches, right below Apple.  

That can play in Noise’s favor. 

Low penetration rates, coupled with the ever-increasing number of features that are being packed in smart watches, is expected to continue fueling the wearables market globally.

Continuous technical developments in this space, especially for health, wellness, and fitness and disease management, will likely open up new growth frontiers for smartwatches.

Apple’s fall detection feature has been widely hailed as a game changer for the aged. Startups worldwide are working on a slew of features that could further enhance the health benefits smartwatches could bring, from fertility and menstruation tracking to diabetic disease management.

Smartwatches are evolving from mere fads for the technically oriented consumer to essential utilities that could improve the lives of the masses.

However, breakneck growth always comes at a cost. Pushing feature-rich, low-price products into the heavily competitive market has severely eaten sellers’ margins. 

Noise was no exception.  

Sound Advice 

Despite a healthy gross margin of ~30 percent (Apple watches have a gross margin of ~35-40 percent), Noise had profit margins of just ~0.07% in 2023.

But it takes less than 10 percent of revenues to run the company. 

With a lean workforce 400, employee costs account for just 4 per cent of revenues. 80 per cent of sales are online, which helps limit operational costs further. 

The bulk of the Noise’s gross margins are going towards advertisement and marketing, which has doubled in the last three years, a testament to the ongoing competitive frenzy in the smart watches pace.

EBITDA margins have also suffered due to the rising cost of procurement, which can also be explained by a competitive frenzy caused by inflation

With 80 per cent of their revenues dependent on smartwatches, it makes sense to go all out to win the war for this market. But this may not be the only play up Noise’s sleeve.

Noise’s ‘champ’ range opens up the underserved market of children’s wearables, allowing parents to monitor various health metrics.

Noise has also launched a smart ring, offering a myriad of health and fitness-related features minus the distracting screen and cellular connectivity of a smartwatch.  

The biggest ace up Noise’s sleeve would be its newest partnership in a space where it trailed market leaders. 

Noise has sold a 2.4 % stake to the global audio giant Bose in a deal that valued it at USD 420 million or 4,000 Cr. With expectations that the two companies will work together on the audio space, Noise’s play in the earwear category may be up for a drastic upheaval – hitherto an under-focused area, given that it accounts for only 20% of its revenue distribution.  

On the cost side, Noise increased its reliance on local manufacturing, with 25% of its products being manufactured in India, and is expected to continue expanding the same. 

Shifting to local manufacturing and increasing economies of scale could improve Noise’s gross margins. 

Swadeshi Beats

Noise announced a JV with ILJIN Electronics, to bolster domestic manufacturing capabilities, 

Noise currently manufactures over 95 per cent of its products in India. Traditionally, this involved the final assembling being done locally and relying on the primary product components of manufacturers from Taiwan and China. 

With this JV, they wants to leverage the expertise of its partner to localise the component manufacturing it currently have to import, fuel category expansion, and stimulate ecosystem-wide growth.

With the ability to internalise manufacturing and lessen reliance on OEMs, Noise has successfully reduced the prices of its products. 

This strategic move has been particularly advantageous amidst the intense price competition in the lower market segment, where many brands are vying for consumer attention with diverse product offerings. 

Lower production costs have enabled Noise to cement its position as the third-largest player in the wearable sector. However, this strategy led to slimmer margins in a business dominated by high volumes, especially in a wearable market home to over 80 smartwatch brands.

It’s little wonder that 98% of Noise’s products were sold at a price point below the 4000 rupee mark.

The recent launch of their highly awaited Smart Luna Ring marks a shift from Noise’s traditional focus on affordability, indicating a fresh strategic path for the brand. 

They have dedicated over a year to the Smart Ring project, tapping into a trend that has already seen rising popularity in Western markets. They also launched their first 4 G-powered smartwatch, Noise Voyage.

With new product launches to expand revenue and cost optimization, Noise’s topline exploded. 

Noise ended FY23 at staggering 1,426 Cr, 10x that of FY20. It was estimated to end FY24 at 2,400 Cr. An incredible journey from just selling mobile covers. 

Profitability is still to be discovered, as competitiveness is eating away at margins. As the market scales and consolidates, winners will see outsized returns. 

India’s consumer market is expected to be one of the largest in the world by 2030, reaching $4Tn. A tech savvy, young population has a hunger for electronics, which itself will be worth $150Bn.

Whereas phones and laptops have had global leaders due to their early advantages, wearables is a segment for Indian players to shine. A massive, world-beating wearables market is spurring fierce competition and innovation. 

Noise could be in pole position to capitalize on this secular macro trend. A unique company that had bootstrapped its way to 4,000 Cr, it looks set to build multiples on top of it.

Writing: Bhoomika, Nikhil, Raj, Shreyas, Tanish, and Aviral Design: Omkar and Chandra

Does it feel like a year has passed?

The 2020s decade has been crazy since it began. A pandemic was followed by a war and another war this year. As interest rates rose this year, assets got pulverised everywhere. 

Crypto saw its two big stars fall as swiftly as they rose. Indian equity markets rallied like there was no tomorrow. Confusing behaviour. Then there was that confusing World Cup we want to forget. This is just the first year where we have officially been pandemic free.

With travel and normalcy coming back, it feels like more than a year passed since we did our last predictions.

Like a judge giving a verdict on a personal case, here we are scoring ourselves 

India SaaS will be among the top 2 funded sectors, with the lowest mortality rates: After finishing second* after Fintech despite seeing only about $1.56Bn in funding in 2023 (down by 78% compared to 2022), India SaaS remains an investor favourite. SaaS will be the all weather sector, which sees consistent growth. It is the “risk-free” sector in the risky business of investing. [While retail appears to be second it includes B2B commerce and D2C brands, which are separate categories] (9/10)

Five or more unicorns will be repriced: 7 unicorns faced public valuation markdowns this year, including BYJU’s, Swiggy, PharmEasy, PineLabs, OLA, Eruditus, and GupShup. Many others have privately been repriced. As capital has become expensive, investors have doubled down on reevaluating their portfolios and many from the list have seen massive (50-75%) devaluations. Gupshup has also lost its unicorn status. It has been a tough year (10/10)

Funding will be higher than 2019 but lower than 2022, with less than five tech IPOs: 2023 was a crash for the Indian ecosystem of unheard proportions. Funding fell ~75%, a collapse not seen in the country’s history. 2023 was lower than the now highs of 2022. But it collapsed so badly, it could barely cross 2016. We went back about 7 years, not 5 that we had expected. 3 startups went public, Mamearth, Zaggle and ideaForge. 2 of these were tech IPOs. We predicted 2 of 3 in this prediction. (6/10)

Climate tech will emerge as a strong theme with $100M+ VC funding: Excluding electric vehicles, which we didn’t include in our definition of climate tech, the category received $200M of funding across multiple new themes. Marketplaces, energy efficiency solutions, storage and testing saw multiple startups being started. The overall environment tech category pulled in $1B+, a strong performance in an otherwise weak year. (10/10)

Fintech will mature, remaining the highest VC funded sector in 2023: Fintech did remain the highest funded sector this year despite capital ingestion dropping to about a third of the 2022 levels. It pulled in $2B+, being the most funded sector yet again. The beginning of the year for the sector was slow, but it caught pace in the 2nd half with big first rounds (10/10)

Two or more D2C roll ups will consolidate in the sector’s moment of reckoning: 2023 was the year of reckoning for the sector, with the original creator of D2C roll ups Thrasio filing for bankruptcy. While we expected the sector to struggle this year, we did not expect it to be so swift with the pioneer. Mensa acquired Times Internet’s house of brands ILN, reorganizing post that. This was perhaps our most prescient prediction (10/10)

In a year that was incredibly hard to predict, we scored a 9.5/10. It is now time to predict 2024. 

#1 At least 3 new VC funds will start with $10M+ fund size, while larger funds will downscale

2023 was the worst year in startup investing since 2016.

It is least expected that new funds will start as there seems to be little activity. The speed of investing slowing is unlikely to pick up in 2024. But this is an excellent time to be investing.

Founders, teams and investors who are serious will remain in the market. As round sizes and valuations rationalize, the market will become attractive for new players with new strategies to enter. 

Has $20Bn Indian VC Reached its 20-Year Peak?

This is likely to catalyse the creation of new small funds with new managers entering the mix. Most or all of these will likely be part of the startup ecosystem. 

At the same time, as the number of opportunities to deploy in startups reduces, funds raised in the peak of 2021/22 are likely to downscale. Some of these funds will likely see team members leave while also reducing the size of deployments. 

Reduction in competition will also make it attractive for newer players to come into the mix. India will likely behave like the early 2000s in the US, post the dot com collapse. It began one of the longest bull runs in startup history, with startups and funds starting then benefiting the most. 

2024 will be the birth and consolidation of funds in India. 

#2 OpenSource AI startups will breakout from India, helping AI raise $300M+ and making it the fastest growing VC segment

2024 is predicted to be the Year of AI, and we agree.

For long, AI was a buzzword decorating startup pitch decks or treated as a side-project in enterprises with 5-6 folks working on it. However, ChatGPT’s success and the plethora of innovations since its launch in late 2022 depict that the hype is real now. 

Many in the ecosystem feel the ecosystem is hyped, but India could have a big play next year onwards. We expect many IT services companies to invest deeper in AI capabilities. 

A Primer on AI

Globally, AI startups have defied the funding winter and raised a record $10b in 2023. Funding will continue to grow 85-100% CAGR in 2024 with ‘Fast & Furious’ filing of patents and aggressive hiring of GenAI talent across sectors. 

AI’s use across industries, workflows, and functions will transform existing ways of work fundamentally. This will vastly improve productivity, reduce the time to launch new products, and reduce costs of R&D and innovation.

In India, the GenAI market was valued at $1.1b in 2023 and is expected to grow at a CAGR of 48% to $17b by 2030

Q3/Q4 of 2023 has already started seeing AI startups from India emerging from stealth and raising big rounds. We have seen Sarvam AI raising a big $41m Series A round to build Gen AI solutions for India’s many languages. Ola founder’s third startup- Krutrim SI Design raising a $24m debt round. There is also Bharat GPT by Corover.ai, Pragna by Soket Labs, Tech Mahindra-backed Project Indus to promote ample competition in the space. 

We are also seeing VC funds being launched to back Indian AI startups.

We are already seeing companies like Sarvam AI work with Indian enterprises to co-build domain-specific AI models on their data. Open-source LLM stacks will promote collaboration in India, allowing enterprises across sectors such as healthcare, autonomous vehicles, manufacturing, and financial services to embed AI into their offerings. 

It will be time to Build for AI Startups in India in 2024.

#3 Bharat startups will breakout to scale, with at least one being valued >$500M

Bharat startups were a ray of hope in a dramatically slow year for the entire ecosystem. 

PocketFM was in the process of closing a $80M round, bootstrapped Astrotalk closed in 300 Cr, while KukuFM and SriMandir had good years. While Sharechat has struggled to grow into its valuation, the newer breed has figured new ways to make money.

Startups like Pocket have expanded globally, while AstroTalk and SriMandir have gone deeper into the Indian market. As the Indian economy has scaled, the Indian consumer market has also deepened to become one of the largest in the world.

Can 2,000 Cr Astrotalk Manifest a Spiritual Unicorn?

As more Indian users new to the internet learn to navigate it, consumer apps focused on this base will tap into newer revenue pools. With this group realising the value of paying for services, the Bharat story will start to pick up.

Expect this to help get at least one company beyond the $500M valuation in 2024

#4 5+ Consumer Brands will cross $100m in annual revenue with positive CM3

When the tide turns, the most resilient and capital-efficient sectors shine through. We saw this in 2023 with the SaaS/ Enterprise tech segment and consumer brands.

The consumer brand opportunity stays strong in India. D2C market is expected to cross $100b by 2025. Fashion and clothing is expected to grow to $43b by 2025 with the highest potential.

In H1CY23, consumer brands saw 3x funding with companies raising $981m vs. $333m in H2CY22. Of these though, Lenskart and FreshToHome accounted for lion’s share with 72% of funding received. We also saw the first D2C brand to IPO- Mamaearth receiving a positive reception.

Liquidity for building patiently was rewarded phenomenally when Titan acquired the remaining shares in Caratlane, giving a bumper exit to its founder Mithun Sacheti. The exit will encourage other consumer brands to learn from CaratLane’s playbook to focus on fundamentals, build sustainably and accelerate the pedal as you become CM2/ CM3 +ve

Is 20,000Cr CaratLane India’s Biggest Startup Turnaround?

Given the flavour of the season, most consumer brands have also focused on turning profitable and grow sustainably than engage in a CAC war to capture market share. Post COVID, some have also started setting up offline stores to build an omni-channel play, strengthen brand recall, and increase market visibility.

Further the first wave of consumer brands which have grown profitably like Lenskart, Boat, Mamaearth, and Noise have helped the next ones learn from their 10-100 journey. The established playbook on GTM, which channel to target for which segment, branding and marketing and building a cost-efficient distribution has helped the emerging ones learn from the virtuous cycle. 

As the market matures, consumer brand investors are also learning from the first cycle of startups that grew big and guiding the next ones under their wing on the potential challenges and fail points in advance to be able to counter it. 

All these learnings will compound to improve the overall profitability index for consumer brands in 2024.  Q3/Q4 has seen funding uptick in consumer brands with companies like Pilgrim, Nathabit, Atomberg raising VC funding and we expect it to stay strong in 2024. 

Can Atomberg Spin a Unicorn in Indian Smart Appliances?

We expect a lot of consumer brands in the $50-99m ARR range to be able to cross the $100m ARR benchmark, and that too with positive CM3. We will be keenly watching companies like CountryDelight, Licious, Sugar Cosmetics, CureFoods, iDFresh, Atomberg, Melorra, Wakefit, and Wooden Street, among others, to hit these milestones in 2024

Consumer brand critics have long scoffed at the size of India’s opportunity and its concentration at the top. Consumer brands in 2024 will show who has the last laugh as they amaze and delight the market.

#5 >50% of tech unicorns that IPO will be profitable

The unraveling of Tech IPO’s listed in 2021/22 in India and their carnage in the public markets made IPO eager tech startups go in deep freeze on their listing plans.

PharmEasy, Mobikwik, Boat deferred their listing plans, Ecom Express stalled it due to market volatility. Still others who were awaiting SEBI approval like Oyo, Snapdeal, Droom, Yatra are re evaluating their listing plans.

While there have been glimmers of success like Tracxn or Droneacharya’s performance post listing, most biggies saw an initial sizzle and eventual fizzle. In the gold rush, investors valued the companies based on the market opportunity or digital GDP growth rather than on their business model or unit economics. Most companies also got listed at expensive valuation with public investors seeing no further upside, leading to some stocks cratering.

As the bubble burst these publicly listed tech companies sharpened their focus on moving to profitability and growing sustainably. Their eventual resilience and recovery started getting rewarded by retail investors. Sample this that, Zomato is up +112% YTD, Paytm at +20% (after a 30% fall last month), Policybazaar at +70%. 

Can Mamaearth be the Mother of Indian Beauty Brands?

Tech pessimists 0, startup optimists 1

This painful lesson has been a blessing in disguise for the next breed of tech startups waiting for IPO. It was as if the older siblings had gone through fire, faced the ultimate test to crawl, and now, walk eventually. This has helped their younger siblings, waiting on the sidelines, to focus on what matters the most to public investors before listing.

India Public Tech

The startups waiting to list have attempted to put their house in order in 2023, vastly improving unit economics and moving to profitability. They have listened to what public investors want and how they will value their stocks.

Tech IPOs that were listed in 2023 have had a relatively smoother reception. Mamaearth is up +25% since listing. Firstcry which plans to list soon is expected to have a profitable FY23.

The next set of tech IPOs will position profitability, free cashflows or margin improvements much more prominently than how aggressively they are or can grow their toplines which is a ‘coming of age’ moment for these companies. We expect 50%+ tech unicorns that IPO in 2024 to be profitable.

#6 Semiconductor startups will raise >$50M to scale

60 companies focusing on semiconductors have been founded in the last 3 years. But just 1 raised 2 million in the same time frame. 

We expect the next year to be different as many of these companies will start seeing early signs of uptick in product and customers. Many of them will get enabled by the deepening focus of India on its semiconductor industry.

Will India’s 60 Year Semiconductor Struggle Finally Yield Chips?

India got over $50B of semiconductor commitments in the last few years. The government has become a huge enabler of the semiconductor industry with PLIs and more support. Western economies increasingly consider India for setting up as China becomes more unpredictable.

Dixon Tech is leading India’s semiconductor push, with expectations of revenue reaching $10Bn+. The DLI scheme that is expected to help 20+ domestic companies will help create an ecosystem.

India’s renewed hardware and manufacturing focus will give these companies a new boost, helping India regain a position of strength in the semiconductor market. 

As the ecosystem deepens next year, younger firms will see revenue and customers come their way. This will lead to attractiveness as an investment opportunity, which they have not been for a long time.

Writing: Bhoomika, Keshav and Aviral Design: Saumya

Last fortnight, PhysicsWallah reported clocking 780 Cr of revenue while winning a disruptors award for reimagining EdTech. 

Uncertainty Principle

1991 was a tough year for India as it plunged into an economic crisis. 

In the same year, Alakh Pandey was born in Prayagraj, erstwhile Allahabad. His father was a contractor involved in construction activities such as building roads. Alakh’s mother, an asthma patient, was a teacher who had quit her job to raise Alakh and his sister.

When Alakh was in the third standard, his father lost his job, plunging his family into financial hardships. To meet household expenses, the father decided to sell half of the house they were in. Within three years, the entire house was sold. The family of four moved to a single-room dwelling in a slum. 

It was 2004. Alakh was in the sixth standard. 

Despite the troubles, Alakh was never forced to compromise on his education. Loans from friends and extended family kept his studies afloat. Financial constraints notwithstanding, Alakh’s father ensured that his upbringing never lacked a healthy dose of ethics. That set the moral foundation in Alakh, which got engrained as he started and scaled PhysicsWallah.

Expectedly, the founder had a rough upbringing devoid of comfort and middle-class luxury. Such an arduous childhood taught Alakh the importance of money and being frugal, a quality he again carried with him as he built PW. 

He realised quickly that he needed to step up to earn and support his family. Out of desperation, he became a private tutor in the 8th standard. 

Till then, Alakh was an average student with a weakness in Maths. The economic jolt made him sit upright and take his education seriously. He scored 93% in his Class 10th exams. 

He decided to pursue teaching in Class 11. His youthful passion was channelled into his love for this profession. The love and appreciation from his students gave him so much fulfilment that in 2006, he vowed in his diary that he would be the biggest physics teacher in India by 2016.

Alakh joined the same coaching institute as a teacher for 9th grade, where he was taking tuition for 11th grade. As his parents got to know about it, his nascent career at the coaching institute came to an abrupt end. 

But Alakh was not perturbed. He continued his coaching classes elsewhere. He wanted to get into the IITs since education in India remains a ladder for upward mobility. 

He could not crack it, so he joined Harcourt Butler to pursue engineering. 

Hello Baccho!

Three years into his undergraduate studies, Alakh decided to drop out of college. 

The state of education completely disillusioned him. In 2014, he returned to Prayagraj and took up a teaching role at one of the coaching institutes. 

Soon, his zeal to become the best teacher in the country made him a highly sought-after educator at the coaching institute. He saved almost 70% of the INR 1 lakh monthly salary that he drew. 

In parallel, he started a YouTube channel where he would upload videos of the lectures that he would prepare for the day at his offline coaching. YouTube wasn’t a big deal then, a nascent platform that had started growing in India. 

The videos were recorded at night, at the same one-room dwelling. That room had no fans nor proper lights and housed his family. 

The lectures were recorded on a smartphone, kept balanced precariously on a pile of books.

Alakh looked at YouTube as his full-time teaching medium in 2016. BYJU’s had been around for five years and had become sizeable by then. It was selling tablets loaded with content to K12 students. India had yet to see YouTube as a medium of education. Unacademy and Vedantu had just started. 

To stand apart in the crowd, Alakh decided to work hard on average students and turn them into toppers, a feat that was much harder to achieve. Finding good teachers in Tier II and Tier III cities was difficult. He decided to bring himself down to the level of the students and elevate them to greater heights.

His YouTube videos started gaining momentum. All this engagement on his channel came organically, from word of mouth, with zero marketing dollars spent. 

As he kept touching higher peaks, his lifestyle did not change. He started upgrading his teaching equipment so that his created content would be higher quality. That’s all where he splurged.

A new edtech was shaping up. 

YouTube Sonic Boom

Alakh’s early days on YouTube were a classic case of entrepreneurial pluck and perseverance, aided by lucky breaks.

His business references and inspiration sources remained unknown. However, the budding showman’s commitment to doing things that could not scale would have made Paul Graham nod in admiration. 

He went to great lengths to delight his users and create an experience that made them return.

In 2015, YouTube had few content creators. While Unacademy and Vedantu were trying to break new ground, online tutors leveraging the platform to reach a young audience was a far thought.

Alakh was confident that despite the limitations, he could teach as well as anyone. He would prepare meticulously for each session, barely able to contain his excitement till the lecture started. His setup was a mobile phone hoisted on soap bars and its lens trained on the now-legendary whiteboard.

Deliberately or unwittingly, Alakh turned frugality into a differentiating factor, which allowed him to teach without an agenda to sell. It enabled him to earn unconditional trust that could be monetised credibly years later.

He tried a different voice and accent in every video to hold students’ attention. He tried combining his earnestness and forthcoming demeanour with ample folksy humour to keep the proceedings memorable.

But the algorithm then was as uncompromising as it is today. Alakh’s initial videos flopped, and only a while later, his channel bore even a distant semblance of the well-oiled machinery it was to become.

He then started running advertisements on his YouTube videos, much to his students’ resistance. Needing it to support himself, with his love for logic and reasoning, Alakh was swift in making them realise the merit of his decision.

The Jio revolution took everyone by storm in September 2016 and irreversibly changed how Indians consumed data.

For Alakh, who had started with a kitty of INR 10 lakh from his previous teaching stints, earning INR 8,000 monthly from ad revenue was encouraging. A year later, the amount jumped to INR 14,000 per month.

He diligently used the proceeds to enhance production value and platform features and expanded his team of educators.

The broader landscape was about to change forever. Coaching and tuition were to leave people’s lexicon. Edtech was to become the new buzzword.

The time was ripe for the industry to graduate to the next level and catch the attention of VCs.

EdTech Electromagnetism

2016 was characterised by robust edtech growth. 

Unacademy, BYJUs, Vedantu, Toppr all broke into the scene at different speeds and stages. Some were starting, some scaling. 

The competitive entrance test prep market was at the core of this educational uprising. Many exams like IAS, IIT JEE, NEET, MBA, and Law entrance tests form the battlegrounds for students. 

More than 30 million students appear for these competitive exams each year. Their single-minded focus is to conquer the tests and claim their place in the academic halls of excellence.

The primary challenge faced by learners, even when educators like Alakh were actively utilising platforms like YouTube to run their channels, was the limited access to high-speed internet. Many learners found it difficult to afford the necessary internet speed on their phones, hindering their ability to benefit from these online educational resources fully.

With Jio, high-speed data was slowly permeating to every nook and cranny of the country. The once-barren digital landscape bloomed into fertile ground for the edtech sector to flourish with rising smartphone penetration, internet access, and students’ ambitions to win big.

The market was a staggering US $2 billion (Rs. 15,000 cr). The segment catering to K12 and test preparation commanded a lion’s 50-60% share.

In 2017, the edtech sector experienced significant funding, with an average annual increase of 49% in the number of deals and a remarkable 149% surge in total funding, marking it as one of the most booming industries of the year.

PW positioned itself within the edtech landscape as a specialised platform designed to cater to the educational needs of students. 

Serving an age group from Grade 8 through college, PW zeroed in on a pivotal juncture in the academic journey, offering targeted assistance in preparing for entrance examinations.

The core service provided by PW was curricular learning with a particular emphasis on test preparation, honing in on the “Getting into college” phase. 

However, PW zeroed in on providing tailored physics education for competitive exams. As astute readers would know, playing in a niche and winning it is better than going after everything.

PW tapped into this digital explosion, offering a cost-effective and flexible alternative to traditional coaching.

The channel’s strategy was about education and making it accessible, engaging, and effective for every aspirant. 

That was the PW mission, a response to the current demand in the Indian educational landscape. Many EdTechs were scaling, but also burning money. 

By 2018, what had to be cracked was if it could ever be profitable. 

Conservation of CAC

Scaling the test prep education profitably was difficult in India.

Price sensitivity is a key factor in the test prep market. Despite the high perceived value of these services, there is a limit to what most Indian families are willing to spend. The cost of enrolling in coaching centers or subscribing to online test prep platforms was a substantial financial burden.

In response to this price sensitivity, the competition was intense, with many online and offline test prep providers aggressively marketing their services to differentiate themselves and justify their costs. 

The rise of online education platforms intensified this trend, as digital marketing became a crucial tool to reach potential students. Providers invested heavily in social media advertising, influencer partnerships, and content marketing to attract students. 

In 2019, Unacademy allocated over INR 400 crore to marketing efforts. BYJUs spent an astonishing 2,000 Cr on marketing. 

Riding on Alakh’s visibility, PW achieved its growth organically without significant investment in marketing.

Performance outcomes of institutes played a vital role. Those with a high exam success rate were more attractive to new students. Newer institutes with less proven success spent more on marketing, leading to a higher customer acquisition cost and potential financial strain.

This is exactly what was happening in the online edtech space. 

Companies in the test-prep space, such as Unacademy, Vedantu and Toppr, were losing money north of Rs. 100 cr. per month. PW chalked up a formula that balanced the books and led to profit. 

The secret was a freemium model that turned free YouTube content into a gateway for premium courses.

Free lessons on YouTube acted as the ‘hook’. Eager learners got a taste of PW’s teaching style. High-quality content kept them coming back for more. The real magic, however, was in the transition, moving from free viewers to paid subscribers.

PW’s offerings were attractive to students. They balanced affordability with quality, making top-notch education accessible to all. 

Course prices were just a fraction of what peers charged. This allowed PW to go after a larger audience. Some courses were offered for as low as 10,000 INR, while more structured programs were 40,000. While these were higher tickets for the average Indian consumer, they were substantially lower than other edtechs.

The large variable cost in selling a course was marketing spend. Thanks to organic growth fueled by stellar content and word-of-mouth praise, CAC was 0. 

PW became the only profitable edtech player in India in 2020. 

It could do something special by sticking to the fundamentals—maximising value, minimising cost, and prioritising learning outcomes. They proved that the best price was not always the highest in the education market.

Pandemic Potential

In 2020, when the world hit pause, education didn’t. 

The pandemic, while a global challenge, unexpectedly catalysed the edtech industry. The digital classroom became the new norm during this period, marking a monumental shift in how we perceive learning.

In the same year, the meeting between Alakh and Prateek Maheshwari was more than just a collaboration. It was a strategic alignment when offline education systems were faltering. 

Unlike its competitors, PW continued to go down the path of affordability, ensuring quality education remained within reach for all.

Capitalising on its YouTube channel’s success, PW launched its app, offering courses at astonishingly low rates. 

The prices ranged from INR 500 to INR 4,500, with an average cost of INR 3,500. This pricing strategy undercut the fees of counterparts like Unacademy and Vedantu and traditional offline coaching classes with an average course price of INR 15,000, making quality education more accessible.

The validation also came in the same year.

By 2021, over 10,000 PW students cracked prestigious exams like NEET and JEE, despite the pandemic’s disruptions. 

As a result, PW recorded a fourteen-fold increase in net profit in FY22, reaching Rs 98 crore, up from Rs 7 crore in the previous financial year. Operating revenue also saw a nine-fold rise, reaching Rs 234 crore in FY22, compared to Rs 25 crore in FY21. This growth trajectory was not just a fluke but a result of strategic decisions and a focus on innovation.

Understanding the diverse needs of students, PW also introduced features such as a doubt-solving engine, mentorship from industry professionals, scheduled learning, and student polls. Despite the industry’s focus towards live learning, PW continued to offer offline recorded classes, aligning better with its target audience’s needs.

These features made learning more interactive and helped retain users by providing a more hands-on learning experience.

By 2022, the company had 4 million users on the app and over 10 million subscribers across its YouTube channels. 

PW partnered with schools and institutes, leveraging these collaborations for broader access. PW’s strategy focused on brand-driven engagement, unlike its peers’ field-sales-heavy tactics. This approach emphasised building lasting relationships over aggressive sales tactics.

Alakh’s brand was a cornerstone of PW’s strategy. His name resonated with trust and quality education. This brand recall was instrumental. It wasn’t just about ads, it was about building a relationship based on trust.

PW’s journey through these pivotal years wasn’t just about weathering a storm but charting a new course in unexplored skies. 

PW was poised to enter a different orbit, setting new standards in the edtech sector.

Cosmic Competition

By early 2022, with the pandemic subsiding, and offline classes restarting, the edtech sector was unravelling. 

Two major categories shaped this dynamic edtech landscape: new-age tech startups and established offline coaching institutes. 

While startups like Unacademy, Vedantu, BYJUs, OnlineTyari,Toppr capitalised on their tech prowess to capture market share and drive down prices in the pandemic, they now had to deal with the resurgence of the offline coaching institutes. Legacy brands like Aakash, FIITJEE, Vidyamandir, and Allen posed formidable competition. 

In navigating this tumultuous field, PW had to chart its trajectory like an electron in an electromagnetic field.

Major edtech unicorns, including Unacademy, Vedantu, and BYJUs, struggled to maintain valuations, crumbled under losses, and had to resort to layoffs to stay afloat. Rounds that had valued many as unicorns just a year ago were starting to look on thin ground.

But PW had always been different. It had not raised a single penny. 

Surprising everyone, PW raised a maiden institutional round of $100M to emerge as India’s 101st unicorn. Being the country’s only profitable edtech unicorn was the icing on the cake. 

While rival edtech startups went for the tier-1 market of English-speaking students from well-off families, PW targeted an audience that valued robust learning over high-end features. 

Unlike the hierarchical batch system and a rushed approach to cover the vast portion, PW followed an equally paced course that helped students from even government schools get quality education. 

The results spoke for themselves. While PW had a relatively modest daily active user count of 5.5 lakh students, the average session time of 1.5 hours was miles ahead of the competition.

Picking up from Alakh’s early days of personally replying to students’ doubts in YouTube comments, PW’s app stayed user-first. While competitors were in the race to gain market share and sell courses by putting pressure on parents and unscrupulously, PW simply followed their student’s orders.

While competitors boasted of teachers from IITs, PW instead focused on their teaching problem and hired the best person to solve it. Feedback collected in-app and through an unconventional system of QR codes in offline classes allowed PW to hold their teachers accountable and improve their standards. 

Alakh announced plans to expand content offerings, open more learning centres, and launch content in 9 languages. 

As edtechs laid off employees impacted by the funding winter, PW planned to add up to 150 employees each month. Staying student first and super affordable, PW challenged new-age startups and traditional giants in reach, revenues, and respect with zero marketing costs and in half the time it took others.

Its fundraising came after most of the EdTech ecosystem, but it was now positioned to capitalise. 

Destroying Dark Energy

By mid-2022, while students adjusted to the new normal post-Covid lockdowns, Indian edtech faced its moment of truth. 

Had it managed to make learning truly remote, or was it just a stopgap necessitated by the pandemic

PW and its peers could not teach students a new habit for all the lessons imparted in the previous three years. The most tangible sign was these upstarts entering the offline business, a space they had originally planned to disrupt.

The first PW Vidyapeeth center opened in Kota in June 2022. As the team soon learned, running a physical classroom was a different ball game involving production hell.

Space constraints meant that the low-price and high-volume online playbook would no longer work. Sessions could not be run as simultaneously as earlier, needing a larger base of trained teachers.

Logistics, technology, ground coverage and unit economics had to function in sync. Add the flavour of Kota’s intense competition and the perennial threat of poaching teachers, and you get a heady mix.

PW went through a trial by fire, at times, visibly so. 

A video of a scuffle between its management and students went viral on social media, inviting worry over the brand’s dilution. That was not to be the only distraction.

Three of seven academic directors quit and set up Sankalp Bharat, citing PW’s growth-at-all-costs mindset as the culprit. PW accused them of colluding with rival platform Adda247 in a public spat. A fourth director joined the rival faction later.

The senior functionaries were not just PW’s oldest employees but were also handling its new offline centres.

Bad blood had to be dealt with young blood. Alakh & co. readied a $40M purse for inorganic expansion, planning for diversification and new growth levers.

Over the next 15 months, PW acquired and bought stakes in nine players. Each was profitable and aimed at building optionality for the business’s future.

Despite its travails, the offline operations secured 27,000 admissions in its first year after processing refunds for 5,000. This was driven by a scale of up to 67 centers across 38 cities.

Students and parents were vocal in their preference for offline over online, leaving no doubt about how PW had to deploy its funding proceeds. 

The new way of business had contrasting impacts on the top and bottom lines.

PW’s core operations recorded a 3x jump in revenue to close at INR 751 Cr. in FY23. On the other hand, profitability margins were hit as expected, given the teething troubles associated with expanding the offline footprint.

PW had yet again displayed an uncanny knack for survival, much like its talisman. 

But in its rapid pursuit to cater everything to everyone, was it committing the same mistakes that the once blue-eyed boy in edtech had done?

Building Business Superconductivity

PW has come a long way. The fact that it has remained in the black for 3 consecutive years is no meant feat, especially in the bloodbath that edtech has been!

PW’s strongest moat continues to be Alakh and his thumbnail-dominating face. The 32-year-old’s messianic persona and cultish following have been built on street-smart tricks, life lessons and witty one-liners mastered over two decades.

His rustic charm and earthy teaching style resulted in free, word-of-mouth publicity for the firm since its early days, saving precious millions in marketing outlay. In hindsight, PW’s low customer acquisition costs make its 0 to 1 journey appear serendipitous and opportunistic.

The journey of 1 to 10 and beyond would be saddled with expectations of exponential growth and mandates a deliberate effort to hedge keyman risk. Alakh, the teacher on a YouTube channel to Alakh, the founder of a large business, is a big risk.

Early efforts in this direction indicate that the firm has learnt from the tale of Byju Raveendran and his eponymous venture.

Prateek Maheshwari, the other co-founder, recently assumed co-chairmanship of the India Edtech Consortium, signalling as much a rise in his stature as PW’s coming-of-age. Recent business moves and new focus areas also exhibit a conscious pattern of stepping out of Alakh’s shadow.

PW has invested INR 120 Cr. into PW Skills, the re-branded iNeuron and has hired former LinkedIn executive Vishwa Mohan to lead its efforts to build job-ready skills. It recently opened the doors to its Institute of Innovation in Bengaluru, offering four-year residential programmes in business management and technology, with placement opportunities.

It has also announced plans to invest INR 500 Cr. in Kerala-based Xylem Learning. While South India is a geography with as much emphasis on higher education as any other, PW cannot rely on Alakh’s inimical appeal to establish its presence there. 

Likewise, the acquisition of K-12 edtech Knowledge Planet marks its first international move, which has been the Achilles heel for BYJU and Unacademy, among others.

The flipside of shifting away from Alakh as the centre of gravity is maintaining the company’s soul. Educational firms that move away from the teacher-founder must be sensitive to maintaining the firm’s deep connections with its students. 

PW enters an interesting situation for an edtech firm. 

The next phase of PW’s growth will be determined by how seamlessly it can integrate acquisitions into its fold, whether it can retain agility while scaling in size, and how it maintains profitability while pursuing growth.

Coaching centres in India have struggled to scale pan-India. When an institute achieves significance, it becomes prone to fragmentation as teachers branch out or are poached and competition increases. 

It is natural selection in its rawest form, perhaps teaching Darwin to students by example rather than the book.

Growing into the 9,000 Cr valuation will need tremendous scale and growth. As edtech remains battered, revenue multiples of 3-5x are par for course. 

With an FY24 target of INR 1,900 Cr from core operations and an additional INR 600 Cr. from acquisitions, PW is setting a difficult yet necessary target. Whether it realises its aspirations depends on whether it can master time or as physics defines it, master change.

Starting from a tiny YouTube studio in a small home, the journey of PW has been one that has defied set rules. PW looks set to capitalise on its unique situation to build for the next decade.

Writing: Keshav, Nikhil, Parth, Raj, Sahil and Aviral Design: Chandra and Omkar

Zudio, the Tata Group’s value fashion chain, recently launched its biggest store in Jaipur, after an incredible year of surging revenue. 

Making A Statement 

The Tata group has for long been India Inc.’s bellwether. 

With its deep history, the group has created startups inside its wings from day one. Before starting up was even a thing, the Tata group bred entrepreneurs across verticals.  

With its expanse ranging from salt to sea and from coffee to cars, it is symbolic of the Indian consumption story. The business group’s appetite mirrors the ambition of the populace and its big moves are a marker for people’s preferences.

Can Tata’s 20-Year Tech Pivot Spin Up a SuperApp?

Yet fashion retail was a relatively late priority for the Mumbai-based conglomerate, 130 years after its storied origins in 1868.

In 1998, the Mumbai-based conglomerate sold its 50% stake in Lakme to Hindustan Unilever for INR 200 Cr. The group foresaw a much bigger opportunity in multi-format retail than in scaling a cosmetics brand in India.

The sale proceeds from Lakme were quickly deployed to set up Trent, Tata’s retail arm.

It opened the first Westside store in Bangalore. It offered branded fashion apparel, home furnishings and decor.

In 2004, Trent entered a joint venture with the UK retail giant, Tesco, to set up Star Bazaar. The hypermarket chain dealt in staples, beverages, and daily supplies among various products.

Later in 2010, it partnered with Spanish fashion major Inditex to open the first Zara store in India.

By 2016, Westside had scaled up to around 100 stores, under the watchful stewardship of Noel Tata. It seemed imperative to take the brand beyond tier-I cities

Much to the senior management’s surprise, Westside’s aspirational positioning found few takers even in tier-II cities, let alone tier-III and tier-IV India. The brand struggled to take off in small towns like Salem in Tamil Nadu.

The entrenched problem called for original thinking and a stroke of luck. Fashion at Star prices was floated as an idea. It soon became a mandate and an internal tagline for a new offering. 

Zudio was born.

It was designed as a fast fashion brand, offering trendy apparel styles at affordable prices. The plan was to utilise Trent’s vast distribution network and partnerships to quickly scale up and establish a popular footprint.

Retailing The Story

The first Zudio store was opened in 2016.

Coincidentally it was at the same location as the first Westside outlet. The differentiated positioning allowed Trent to apply a calibrated one-two play. 

Westside would consolidate its two-decade-old presence and increase the share of wallet. Zudio, on the other hand, would tap on newer, smaller wallets.

Zudio’s operations were EBITDA-positive from the first month itself. To validate the concept, the team undertook six more trials in smaller cities, such as Nashik and Vadodara.

The brand’s promise of everything under INR 1,000 garnered quick appeal and mass adoption. It also sold bed linen and toiletries in the first nine months. Doubling down on its frugal perception, it did away with the slightest excess and stuck to what worked.

Zudio’s styles were selling like hotcakes. The new recipe had worked wonders.

To its credit, Zudio had cracked the most discerning and fickle-minded segment. Late teens and early 20-somethings thronged its stores.

Almost three-quarters of its men’s and women’s collection was priced at under INR 600. An even bigger chunk of children’s wear retailed at below INR 300.

On the surface, Zudio appeared like a sleeper hit. Random to some while inevitable to others in hindsight.

Given that the pitch was to make high-street style accessible to a broad demographic at prices starting as low as INR 29 in a young, price-sensitive market, success seemed obvious.

But Zudio’s secret sauce was how it made the business model feasible and value accretive. To understand that, one had to look into what it did differently and what it chose not to do.

Most Zudio outlets were located next to a Star Bazaar, not by coincidence but by design. It allowed Trent higher bargaining power as it negotiated with lessors and sellers for more space, becoming an anchor tenant in most cases.

Source: The Morning Context

Further, the line between a Zudio store and an adjacent Star Bazaar would blur, quite literally, on entering the store. This gave buyers a seamless experience while maintaining two distinct storefronts.

It was a ploy to offer everything under one roof, letting the footfalls at one store benefit the other. At the same time, no Zudio shopper left the showroom thinking they had bought their apparel at a hypermarket selling groceries and vegetables.

Zudio was growing inside Star physically and on Trent’s balance sheet like a weed. 

Racking Appeal

Zudio deliberately did not let its outlets resemble a makeshift warehouse. 

It was imperative to keep the stores breathable to induce upwardly mobile purchase decisions. Zudio boldly took an active call to declutter its stores and replenish the stock every eight weeks instead of twelve, which was the industry norm.

World over, fashion retail was notorious for an average discount of 36 to 38% over time, no matter the price point. Despite being a value fashion player, Zudio was conscious of not over-indexing on ‘sale’ to clear its stocks and avoid undue erosion of its margins.

Likewise, despite all the buzz around e-commerce, Zudio shied away from it, much like the UK fast-fashion chain Primark, on which it was modelled. The delivery costs, including reverse logistics, and the deep discounting prevalent at that time made the shiny new thing prohibitively expensive for Zudio.

Zudio owed much of its success to Westside, its spiritual elder sibling. 

Trent’s cautious, profitability-first journey with its flagship mid-range brand gave Zudio a template to follow, the freedom to innovate, and a strong foundation to take off.

By 2017, Trent conspicuously located Zudio stores far from its Westside outlets. To the uninitiated shopper, there was very little in common between the two brands, be it the look and feel of the showrooms or the apparel style they walked out with.

But a closer look at Zudio’s fast-churning merchandise revealed a signature Westside playbook – private labels.

Westside had always maintained a heavy reliance on its brands. Particularly, since 2013, there has been a marked increase in their revenue share from 80% to nearly 100%, translating into healthier margins.

Zudio followed Westside’s trail, a rare feat in an industry where seasoned players such as Aditya Birla Fashion and Retail and Reliance Trends achieved 60% to 75%.

Looking closer would reveal how Zudio mimicked and deviated from Westside’s strategy in equal measure.

You Walked So I Could Run

There was a method to the madness.

While Westside’s store increase was gradual and calculative, Zudio’s expansion appeared to be frenetic on the outside. 

Zudio’s store size averaged 7,000 sq. ft., almost a third of Westside’s. At the latter’s price point, its footprint was unlikely to extend beyond 200 cities. On the other hand, Zudio had a long tail of cities and towns to enter.

Besides, its exclusively offline presence meant that its early promise could be unlocked only by rapidly scaling up its store count.

Zudio’s average selling price was around INR 500, a third of Westside’s. This translated into gross margins of ~40% against Westside, which pushed 60%. For the upstart to match the heavyweight in terms of profits, Zudio had to one-up Westside on revenue by a distance.

Westside continued to account for a majority of Trent’s consolidated revenue. But Zudio had become the growth engine and the centre of gravity for business.

This was in line with a broader shift in Indian fashion retail. Lifestyle International, one of Trent’s rivals, had witnessed something similar. It operated Lifestyle, a Westside peer, and Max Fashion, which competed with Zudio.

Max Fashion, the nimble mass player, had overtaken Lifestyle’s mainstay brand. It offered a window into the mind of the Indian shopper – discerning but fiercely money-minded.

Zooming out, while Zudio was trying to disrupt India’s apparel market, India was disrupting the world. 

The 2010s marked the first decade since the 1960s when India displaced China to become the fastest-growing economy in the world. The world’s largest population and an increasingly aspirational and sophisticated middle class propelled this growth.

Throw the above ingredients together, and you have an apparel market growing nearly threefold in 8 years, reaching a market size comparable to the likes of Germany and the United Kingdom.

But India was destined to overtake them, for it had a unique trump card – its demographic dividend with around half the population under 25.

Out of this demographic emerged a youthful consumer base, with marked differences in requirements and changes vis-à-vis the older generations.

Everyone was following the world’s largest millennial population of 440M

Who Wears The Pants In The House?

Contributing almost 40% of the overall apparel market, women’s wear remained dominated by ethnic wear. 

But by 2019, denim emerged as its fastest-growing segment. This was attributable to the rise in college-going and working women.

Exploding internet and smartphone penetration rates exacerbated the changes in consumer preferences, providing tech-savvy youth with easy access to the latest fashion trends around the globe. 

Social media amplified their reach.

Global brands like H&M, Zara, and Forever 21 moved in to capitalize on these changing tastes through the 2010s. Parfait, Under Armor, and Uniqlo entered the country in 2019.

Alongside these changes, the barriers between the metros and tier II/III cities were also being broken with rise of e-commerce companies like Amazon and Myntra. For the Indian youth, the role of apparel was slowly evolving from mere utility to true fashion.

However, the apparel space retained several of its traditional characteristics.

Almost ~70% of apparel sales happened through unorganised retail channels, dominating tier II/III cities and small towns.

Rising demand for trendy fashion induced by demographic change, the indomitable price-conscious consumer mindset, and the limited presence of organised apparel chains in tier II/III cities and towns – Zudio had found its whitespace.

The behind-the-scenes strategy to operate at such low margins is a case study in business strategy.    

Manufacturing was outsourced, and research and development costs were kept low – Zudio’s designs were trendy but plain and simple to manufacture in bulk. Focusing only on casual wear and lacking product lines like formals also helped reduce costs. 

Finally, Zudio’s clothes were manufactured with a higher blend ratio of poly-viscose to cotton, vis-à-vis Westside.  

Transport and distribution enjoyed significant synergies with the existing supply chain for Westside, with the latter being established over two and a half decades. Trent’s fine-tuned supply chain allowed Zudio to take a product from the design stage to being sold in its stores, within just 12 days.

For the stores, Trent opted for a franchisee-owned-company-operated model. Trent franchised Zudio’s brand, with franchisees taking care of the capital expenditure in setting up a store and bearing rent and electricity costs.

As the franchisor, Trent covered the operating costs of employees, inventory management, transportation, etc. In return, Trent received a neat franchise fee, a 22% share of the gross margins (out of a total gross margin of 38%), and quality control over their stores.

The formula for blitzcaling was ready, for the upstart brand.

Healthy Margins

Zudio leveraged its large umbrella, while learning what would work for it

Zudio’s stores were smaller – around 6,000 to 8,000 sq. ft – almost half as compared to Westside. Locations were picked strategically. 

By 2020, Zudio had 10 stores in Mumbai, and Westside had 13. Most of Westside’s stores were in southern or central Mumbai, the relatively more expensive parts of town. None of Zudio’s were.

For marketing, the answer is simple – nobody seems to have seen a big bang Zudio ad. 

No advertisements, no celebrity endorsements. Limited promotions, no season sales and no discounts.

Just plain, simple, word-of-mouth.

Their strategy worked – besides high footfalls, they enjoy a customer conversion rate twice that of industry margins.

Having crafted a business model that solved for the trendy yet value-conscious Indian consumer, Zudio went all-in on its store expansion program, growing from 7 stores to 80 in three years.

Fast but carefully strategised.

Zudio placed stores in the biggest and most expensive cities like Delhi and Mumbai, seeking to target wallet-light college students and young professionals, but not too many – often just shy of the number of Westside stores in these cities.

On the other hand, relatively less expensive cities, including the likes of Pune, Thane, and Ahmedabad, saw Zudio overtaking Westside stores by a factor of 2-3x.

However, Zudio hardly opened any stores in North India. This was done to avoid stocking winter clothing and reduce inventory risk and costs owing to their limited shelf life.

Zudio meticulously avoided incurring costs wherever it could and instead maximised its efforts and resources that would maximise customer footfalls and conversions.

A minimalist black-and-white aesthetic for its store ambience appealed to the youth and its target customer base and reduced overhead costs. Zudio also organised its racks by price ranges, as opposed to by style or size.

New styles, sourced from social media trends, were added regularly and quickly, given Trent’s fast design-to-store cycle.

They even launched a website – which, fascinatingly, does not sell online. Again, this aligned with their strategy of adding unnecessary cost elements to their value chain. Given Zudio’s low price point and slim profit margins, delivery costs would force Trent to increase product prices.

Instead, their website showcased their fast-changing product lines, acting as a low-cost customer acquisition funnel for their stores. Consequently, average revenue/sq.ft. reached INR 14,000, versus an industry average of INR 8,000-10,000.

The explosive success of these stores attracted even more franchisors keen on setting up Zudio stores.

Buckling Up

The capital expenditure required to set up a Zudio store ranged from INR 1.2 to 1.8 Cr

This was less than half of what is required to set up a Westside store, given the former’s lower size and inexpensive locations.

In exchange, the franchisee would get a 16% share of the gross margins, of the total gross margins of 38%. After accounting for rent and electricity costs, the franchisee would be left with a net margin of 5%. 

Stores can earn anywhere between INR 70 lakh to INR 1 Crore in monthly revenue, yielding a monthly profit range of INR 3.5 – 5 lakh.

The math worked out for Trent too.

For every unit sold, Trent made 5% as its margin. While that may not sound spectacular, Trent’s capital investment was limited to its inventory since the franchisee manages the store investment. The 5% margin translated to a whopping ~60% return on capital

Fuelled by a fast-growing brand presence, customer loyalty, strategic product placement, and a franchisee model, Zudio reached an inflection point just three years after its launch. 

Programs like ‘Zudio Zenn’ turned shopping into a rewards game for millennials with points, badges, referrals and birthday/anniversary bonuses driving engagement.

User-generated campaigns like ZudioStyle and reposting customer-style photos fostered user participation and a sense of community. 

Zudio set up sampling shops and kiosks at major universities to interact with students on-site and acquire new customers. It recruited campus student brand ambassadors and built organic evangelism and micro-influencer networks.

Organising fan meetups in different cities fostered local communities and personal connections with the brand. Specialised festival collections and style tips timed around occasions like Navratri and Diwali connected to cultural moments relevant for youth.

All this led to explosive growth, reflecting heavily in their metrics wherever one chose to look.

170x increase in organic site traffic over 2 years attributed to content and SEO optimization, 43% lift in overall conversion rate from localizing UX and checkout, 2.6x more engagement generated by micro-influencer posts compared to branded content, and 20% higher average order value for customers acquired via influencer collaborations.

It was an incredibly explosive story about to enter a world-shaking disruption. 

Belting The Competition

In the face of a pandemic, Zudio defied odds, opening 50+ outlets in FY21, signaling untapped market potential

Once it figured out the store economics, Trent put Zudio on gasoline and increased its store count by 6X (40 to 233) between March 2019 and 2022, helping it surpass Westside for the first time.

In September 2023, Zudio was present in 120+ cities and boasted a store count of 413 outlets. 

Backed by strong store addition, Zudio’s revenue grew at a staggering growth rate of 94% between FY20-23 from INR 478 crore to INR 3,537 crore, and its revenue share in Trent’s overall revenue increased to 37% in FY23

In FY23, its sales per store jumped ~2x YoY to INR 12 crore with sales/sqft of ~INR17,300, the best in the fashion industry and almost 1.7x of the industry’s average. Improved sales productivity had a rub-off effect on gross margins and EBITDA.

Higher sales/sqft assisted Zudio in offsetting the low gross margin and generating ~INR6,000/sqft gross profit, similar to Westside’s gross profit/sqft despite being one-third of Westside’s average selling price.

Its EBITDA margin also improved by 100 bps in FY23 vs FY22. The asset turnover of 5X and a pay-back period of 1.5 years has made Zudio a preferred bet for franchise partners. 

With a run rate of selling 2 million garments per week in FY 2023 has propelled Tata to shift gears and accelerate the brand’s expansion even further.

Timeless Fashion

Zudio’s achieved almost 4,000 crore in revenue in just 7 years, an astonishing feat for any unit.

Zudio has been able to successfully ride on the wave of fast fashion and bring the ‘fashion street’ affordability & trendiness to the consumer in its vibrant stores in a more convenient way, mainly led by word-of-mouth marketing

The Indian fashion market, the fourth largest in the world with a market size of USD ~69 Bn in 2023, will continue to evolve, and its consumers will continue to upgrade from the large unorganised segment to the organised segment.

Retailer-owned brands will play a pivotal role as they offer shoppers value for money while earning higher margins for retailers, with the potential to develop into autonomous propositions.

There is massive headroom for Zudio to grow, and it also plans to add ~200 stores in FY24 and 125 stores in FY25 and FY26 each.

These could double its already burgeoning revenue. 

In addition to footprint expansion, innovation in the product portfolio, scaling up of the supply chain, 100 per cent contribution from own brands and leveraging digital presence will be key growth drivers.

One of the key challenges for Zudio, in addition to competing with mammoth retailers like Reliance Trends, ABFRL etc., would be its ability to drive premiumisation and do price hikes to counter inflation.

Given its easy-to-recall price ceiling, price hikes would be hard to navigate as a value fashion brand, even to counter inflation. Till now, Zudio has been able to counter the pressure by positioning itself as an aspirational brand.

Despite these challenges, Zudio will remain the most visible retail brand within Tata’s stable. The asset-light model allows it to grow rapidly like a tech company. Despite not being a founder-led firm, it’s a remarkable story of entrepreneurship in a large conglomerate with an insane revenue growth 

The diamond in the rough looks on track to achieve its monumental revenue target of INR 10,000 crore in the next three years. Zudio could be the dream fashion company that nobody thought would succeed.

Writing: Bhoomika, Ajeet, Nikhil, Jayanth, Shreyas and Aviral Design: Abhinav and Stable Diffusion

Last fortnight, largely bootstrapped Astrotalk clocked its highest-ever daily revenue of INR 1.8 crores, inching closer to its FY24 target of INR 600 crores. 

Puneet’s Test of Faith

Puneet Gupta came from a middle-class family in Punjab. 

A shopkeeper’s son, Puneet, was average at studies and had few friends. However, he could see patterns which others often missed.

After completing his B. Tech from Chandigarh, in 2011, he joined Nomura in Mumbai.

Puneet was happy to have a job that paid him a salary of INR 37K and made him financially independent. He was content with his earnings and his life.

As he began his career, the stars aligned and he found love. Everything was going well except for one problem.

Puneet’s girlfriend came from a wealthy family with a very different outlook. It soon led to a life-changing incident. 

In 2013, Puneet made her ride a pillion on his bike instead of hailing a cab as she had suggested. She furiously remarked that her family cruised in a Mercedes while Puneet’s had yet to see a car. 

It broke the young man’s heart.

The incident made Puneet introspect on his life. He decided to resign from Nomura. He returned to his hometown to rebuild and work with his grandfather in the field of Ayurveda.

It turned out to be a false start. He slipped into depression shortly after that. A friend supported him, helping him figure his way back and find a job in Mumbai.

After an initial struggle to survive in the maximum city, Puneet secured a job with BNP Paribas at a pay cut.

By 2015, Puneet was in touch with an old school friend who had studied at IIT Delhi. They contemplated starting an IT services company. It was time for Puneet to put down his papers again.

The baggage of his failed venture, the travails he experienced after that and the crippling doubts ahead of a major life decision made him visibly anxious. 

While drafting his resignation letter, a colleague noticed Puneet’s restlessness and checked on him. He shared his plans, hopes and fears with her. 

Puneet could do with guidance, and his colleague seemed to have all the answers. She knew something about astrology while she was an SQL developer.

Even though his parents were firm believers in astrology, Puneet never took it seriously, let alone be guided by it. He was amused that someone as educated as his colleague suggested astrology to address his troubles. 

Nevertheless, he let her make a few bold predictions based on his birth chart. According to her, Puneet would start an IT company. It would shut down two years later as his partner would leave the business.

Buoyed more by his colleague’s persistence than her predictions, Puneet rolled the dice, resigned from his job and moved to Noida.

From Agnostic to Faithful

In April of that year, Puneet started an IT services company named CodeYeti. 

He managed to scale it up quickly to 45 employees, serving about 15 to 20 clients and booked revenue of $500K in the first year. CodeYeti counted big enterprises such as Yamaha and GreenPly, along with startups in its clientele

Things were going well until his partner told him he wanted to switch from their services business to a tech product. They spent the next six months developing two such products. 

The whimsical experiment turned out to be a failure and burnt precious capital. 

CodeYeti’s operations now seemed doomed. After his partner exited, Puneet shut down the venture for good in March 2017

The turn of events reminded Puneet of his former colleague who had predicted his short-lived success accurately. 

He called her up, no longer as a sceptic. This time, Puneet sought genuine answers and not just friendly advice. He explained how things had unfolded and wanted to know the ideal course of action.

As she proposed looking up his birth chart again, Puneet had a Eureka moment. Astrology was not just a means to the answer anymore, but the answer itself. 

Astrotalk was born.

Fresh out of CodeYeti, Puneet had a ready team to build a competent tech product quickly. They shipped the first version of the app within a few days.

Puneet sought to understand the market better. A quick scan of his competitors’ regulatory filings left him underwhelmed. Most of them were generating just a few crores in revenue.

He went deeper to understand the fragmented market beyond the organised players. As he spoke to more astrologers and customers, he gleaned that the market was much bigger than his initial estimates.

It also helped him discover the three key problems in this market.

First, there were many fake astrologers. Customers found it difficult to separate the genuine ones from the pretenders. Second, offline players did not have the tech expertise to increase their reach or scale their business efficiently.

Finally, the Indian consumer was moving online with the adoption of mobile phones and rising internet penetration. 

Puneet foresaw an ecosystem where seekers could search for a reliable astrologer and obtain guidance online. This was while making it all convenient and private. 

A minimum viable product was launched in 2017. It helped the team to gain insights and learn from the feedback to improve the product.

In Cheap Data We Trust

Astrotalk started as a video call platform for astrologers to chat with customers. 

Early adopters of the platform voiced their preference for an audio call over video to speak to the astrologer. Astrotalk quickly adjusted to their users’ need for physical privacy while feeling heard, much like a confessional at a church.

The introduction of the audio calling feature had an immediate effect. User engagement took off. Similarly, users exhibited a general inhibition on being seen consulting an astrologer. Customer privacy was given top priority. 

They put a strict onboarding process in place to tackle the menace of fake astrologers. It involved a four-level check, over five to seven interviews, to validate the skill set of an incoming astrologer. 

The shortlisted ones were also provided with soft skill training to handle tough questions or predictions difficult to convey to the customers.

Further, an in-house team monitored newly onboarded astrologers for the first thirty days, and skill gaps were again plugged in.

Backend tools and specialised software checks ranked all profiles, serving as a natural filter. Puneet was helped in no small measure by his former colleague, who had accurately predicted his business journey.

Heena Gokhru was now a sought-after astrologer on the platform herself.

Astrotalk also built a frictionless payment method. They offered an e-wallet that customers could recharge before speaking to an astrologer on the platform. 

The charge was based on session length. Customers could end the session at any time or continue it until their wallet balances were exhausted. 

Another UX innovation they did was offer a five-minute free consultation with an astrologer to all new users. This unlocked an aha moment for most users, conveying the app’s value proposition much faster and making them more willing to pay. 

They also diversified and looked at multiple monetisation models, such as offering a detailed report from the astrologer for a charge. Users could get an online puja (offering) performed, buy a gemstone, Rudraksha or a Yantra on the platform.

Astrotalk had a quiet start till about August of 2018. 

The adoption was pushed up by the rising penetration of smartphones, subsidised mobile internet in the post-Jio era and the fast adoption of UPI. Astrotalk had now achieved product market fit.

By 2019 they had scaled from one to 125 astrologers, their app had more than 1 Million downloads and was growing at 25% month on month. 

All this without any marketing, a team size of 20, and no external funding.

A Divine Intervention

By 2020, the bootstrapped rocket ship was clocking INR 8 crores in annual profit by building a product that customers loved.

Things came to a sudden halt with the onset of the pandemic. As the world locked down, like many other businesses, Astrotalk also saw a slump in revenues.

Within two weeks of the lockdown, their customers started reaching out again. This time, as opposed to the typical questions on romance and marriage, the new questions were driven by the anxiety around COVID-19: layoffs, the shrinking economy, and a desperate need for hope that things would get better soon. 

By the first week of April 2020, Astrotalk had recovered and was logging business worth INR 25 lakhs a day as compared to INR 10 lakhs a day before COVID-19. 

They also noticed that users often asked the same questions repeatedly, stretching a potential five-minute session into thrice as long, indicating the need for a counsellor. 

In a country with limited mental health services and even more limited awareness, the founders realised that their users were treating astrology services as therapy. 

Astrotalk introduced new features like free birth charts, live sessions and astrology lessons on the platform to fill the void, albeit partially.

AstroTalk’s revenue surged to INR 10 crores each month by August 2021. Despite its scale, the company then raised just INR 6 crores. Clearly, few investors had faith in astrology.

Using this capital, AstroTalk expanded its team size from 50 to 180 members by 2022, driving its ongoing growth. This development occurred in the backdrop of the COVID-19 pandemic, which prompted a significant shift from offline to online practices.

During this period, Puneet roped in Anmol Jain to join the upstart as the Chief Business Officer and eventually, as Co-Founder. 

Astrotalk was taking off. 

Building the Universe on Numbers

Astrotalk’s user interface could be strictly utilitarian for a discerning user. However, it did not take away from its credentials as a tech-enabled business.

For all the crystal gazing that its trusted astrologers perform, Astrotalk’s financial performance left little room for uncertainty.

The top line had grown at 100% over the last three years, closing at INR 282 crores for FY23. Profit after tax for the period stood at INR 27 crores.

The sustainability of the scale-up could be assessed by the steady, ascending trend in revenue per employee, the litmus test for a tech startup.

Astrotalk had more than 15,500 astrologers listed on its platform, with around half of the base active.

Beyond the first five free minutes, sessions could be booked at anywhere between INR 10 to 250 per minute. Users also had the option to purchase a membership pass, which covers a daily session for 10 days, priced at INR 99 per day. 

Astrotalk’s freemium model made it easier to upsell low-paying customers to premium options than to convince free users to start paying.

Consultation calls and chats with astrologers generated 90% of the revenue, with e-commerce and live streams accounting for the rest. Astrologer charges, marketing and employee salaries were the biggest expense heads, cumulating to INR 230 crores in FY23.

Astrotalk kept up a high-decibel marketing strategy, with a new celebrity endorsing the platform monthly to attract users. Ranbir Kapoor, Bipasha Basu, Shraddha Kapoor, Mouni Roy, Virender Sehwag, Shweta Tiwari and Vaani Kapoor are among the 40 celebrities that it has partnered with, apart from sponsoring a reality show featuring singer Mika Singh.

Astrotalk could give the illusion of a simple business model, which harnesses the easy appeal of astrology and is fueled by heavy advertising spending. 

But a closer look reveals its secret sauce – a stringent vetting process for its astrologer network, with an acceptance rate of just 5%.

It wasn’t as easy as it looked.

Blessed be the User Base

Like any platform business, Astrotalk’s key challenge was simultaneously scaling up both ends – charging astrologers and paying users.

Given the level of intimacy, astrology involved higher stickiness as compared to say, food delivery, ride-hailing hailing or real money gaming. However, the frequency of use tends to be event-based, sporadic and hence, significantly lower than comparable behaviours.

The Astrotalk team painstakingly engaged a large transacting base and kept their ears to the ground to develop a meaningful core set.

By mid-2023, Astrotalk had close to 3 crores registered users. 50 lakhs use the app monthly. The daily active base stands at just over 4 lakhs, indicating the wide funnel typical to this business.

New users spent, on average, INR 200 to 500 in a month on the platform, while a repeat customer spent up to thrice of that amount.

Users between the age of 18 and 35 flock to the platform, implying that while the elderly in India prayed openly, the youth was prone to worries and prefer to find solutions privately. 

Astrotalk and the wider industry’s big opportunity was to help them address the same. This was minus the perceived stigma of visiting a shrink but with the virtue signalling associated with divine planetary bodies.

Women generated 57% of the business, mainly seeking advice on relationships and marriage which, in turn, accounted for 60% of all the consultations. Career, business and finances contributed another 30%.

Astrotalk’s focused marketing had resulted in 85% of revenue originating in metros, tier-I cities and abroad. 17% of the total came from NRIs in the USA, Canada, UK and Australia.

As such, astrology continued to divide opinions on whether it was a nuanced celestial science or a pseudo-domain masquerading as something more. But then again, spirituality is extremely personal, as Prashant Sachan, the founder of AppsForBharat, told us.

His pithy advice of serving customers without judging them is key. Astrotalk appears to have done well in a relatively crowded market, with hardly any entry barrier.

Many in India are Called, but Few are Chosen

The Indian Faith Tech industry can be classified into two categories

The likes of Astrotalk limit themselves mainly to fortune-telling, in the form of astrology. A host of players also offer services like e-pujas and devotional content.

A broader set of offerings is amenable to higher differentiation and faster monetization.

The Indian spirituality, religion and devotion market is estimated at $58.56B in 2023, with astrology contributing over $10B. The overall market is estimated to grow at a CAGR of 10% from 2024 to 2032.

Despite this large size, tech companies have struggled to scale. 

The pandemic marked a watershed moment for India’s Faith Tech, with 18 companies launched in 2021 alone. The sudden interest was attributed to awareness and willingness among millennials to experiment, apart from heightened anxiety.

Startups, on their part, were using tech to make predictions.

Faith Tech has its share of risks and scepticism. Long-term value creation, consistent monetisation and urban youth’s fidelity towards the sector remain unproven. 

Premiumisation and the feasibility of a subscription model continue to be challenging. Sustaining the growth would mean keeping up with the marketing treadmill while balancing a relatively small average transaction value.

As advertising budgets rationalise over time, the industry could witness a wave of consolidation.

There has been cheating and unethical behaviour, which could mar user sentiment. Despite the sector’s drawbacks, investors began to spot opportunities in a conventionally unsexy industry. 

2021 witnessed a record funding of over $15M, marking a sharp increase from $1.8M in the previous year. Astrology alone attracted $5.5M in 15 funding rounds over 4 years.

Beyond India, the annual revenue of the top 10 astrology platforms in USA grew by nearly 65% in 2020.

Astrotalk had a large but enormously difficult market to take. 

Crystal Gazing into Fund Raising

Amidst the funding frenzy, AstroTalk’s ambitious climb could have gone unnoticed with just one angel on their cap table.

But Rahu-Ketu seems to be aligned for them now.

Astrotalk is courting various funds to raise $40 million valuing the company at $220 million. The company claims to have a market share of 80% in the astrology tech space and is experiencing rapid growth. 

What separates it from the competition is a set of nuances and finer details.

The initial pricing for each astrologer is determined at the onset, which is then dynamically adjusted based on factors like customer demand, reviews, and other quality metrics. 

AstroTalk diverges from its peers by not imposing platform fees for astrologers to join their marketplace. Instead, it earns commissions on transactions between customers and astrologers, charging a commission of ~20% on each transaction. 

The entire onboarding and training process for astrologers is also free. They have been adding around 200 astrologers every week, given the growing demand they are witnessing.

These astrologers actively promote themselves by enhancing their visibility on the platform and leveraging their personal social media channels and affiliate networks to attract customers.

About half of the monthly transacting customers come from paid marketing campaigns, making it the biggest expense after the astrologer charges, which leads to a high acquisition cost. It takes 8 months for them to recover the acquisition cost basis the contribution margin, possibly the only mangal dosh.

For the user experience side, they were able to nail one key thing. When you enter the product, it is built like a WhatsApp chat experience. This requires no habit change from the user’s point of view.

Witnessing various startups solving different problems in the space, AstroTalk has tried experimenting with multiple other services.

E-puja has been one of the segments growing rapidly, allowing devotees to request specific pujas on their behalf. The landscape suggests this is a natural extension of Astrotalk. 

Even though the astrology business of AstroTalk does not see a major uptick during festivals, its recently launched e-puja service is expected to drive traffic.

Creating the Future of Spirituality

AstroTalk’s daily earnings from consultations reaching nearly INR 1.8 crores has charted an auspicious financial horoscope for FY23, totaling INR 282 crores. 

The company is poised to conclude the fiscal year with a robust topline of about INR 600 crores, with an EBITDA of around INR 100 crores, growing 100% year-on-year. 

In India, faith has always been a profitable line of work.

The company targets a revenue of INR 2,000 Cr before aligning its stars with the public market by FY26 with a one-of-its-kind IPO. The numbers are ambitious, as it could also be signalling for the impending fundraise. 

AstroTalk has simultaneously targeted India 2 – through sachetization, and the wealthy Indian diaspora abroad – with premiumisation. 

Users can pay as little as INR 20 per minute to solve their biggest problems. They plan to expand deeper into the Indian market by producing more localised vernacular content and advertising problems that the tier 2 population could relate to, given that most of their existing user base is from metros and tier 1.

Astrotalk now wants to expand in South India by partnering with local superstars and launching ads in regional languages.

The platform has also broken into the NRI audience abroad and is expected to contribute to a remarkable revenue of INR 100 crores in FY 24, ~15% of the total revenue. 

The company aims to penetrate this lucrative NRI market, which currently generates 50% of their online traffic. This expansion plan involves increased marketing efforts and diversifying into mental wellness, tarot cards, and psychic readings.

The mental wellness and psychic readings sectors have been gaining traction recently, with several psychic readings like Kasamba and Purple Garden successfully raising funds and thriving in the European and North American markets. 

AstroTalk’s foray into these areas represents a strategic move to tap into this growing global interest.

Astrotalk’s journey has unlocked the fortunes of the oft-overlooked Indian spirituality market, awakening the giant and making astrology a sleeper hit category. It will still have to go through the challenges associated with space.

In hindsight, Puneet and the team were lucky to be at the right place and time. However, their success has resulted from customer obsession, putting a premium on the user experience while keeping their core offering simple.

Astrotalk proves that the best way to predict the future is to create it.

Writing: Nikhil, Abhinay, Abhinav, Chandra, Tanish and Aviral Design: Chandra and Omkar

Last fortnight, India began a clean sweep while hosting the 2023 Cricket World Cup, hot on the heels of a record-breaking Asian Games performance 

English Opening

In the 1700s, the simple yet engaging games of Kho-Kho, Kabaddi, and Gilli-Danda were local favourites. 

These games were more than just pastimes. They were life lessons in strategy, teamwork, and resilience, played without fancy gear or structured rules.

By the 1800s came the British

The British brought with them colonialism. But they also brought hierarchy via sports, reflected in the introduction of Cricket, Football, and Tennis. 

Cricket wasn’t just a game. It was a theatre of societal status where your social rank could score you a place in the team, sometimes more than your ability with the bat. The cricket clubs became arenas of power play, where the elite showcased their status as much as their sports skills.

Football, too, rolled into the Indian sports scene with a classist spin. The Durand Cup of 1888 and the establishment of the Calcutta Football Club in 1872 were landmark events, albeit mirroring the existing social hierarchies by initially barring non-European members.

Then there was tennis, served into the Indian milieu, finding favour among high society.

The British not only brought new games but also introduced clubs and gymkhanas, albeit with exclusivity. These institutions, despite their highbrow air, played a pivotal role in structuring sports, organising tournaments, and laying a foundation for a systematic sporting infrastructure.

Parallel to these new sports entrants, India sprinted onto the global sports stage with its Olympic debut in 1900. Norman Pritchard’s dual silver wins weren’t just medals. 

They were the first sparks igniting India’s international sports ambitions.

In the early 1900s, the traditional Kabaddi and Kho-Kho raced from local grounds to international arenas, getting formalisation at Pune’s Deccan Gymkhana club.

These sports weren’t content with domestic applause. They leapt onto the global stage during the 1936 Berlin Olympics, flaunting India’s indigenous sports flair.

Around the same time, Indian field hockey surged from modest roots to international acclaim. 

Initiated into the sport by British regiments and formalised with the Indian Hockey Federation’s inception in 1925, India’s journey took a historic leap in the 1928 Amsterdam Olympics. 

The national team, graced by legends like Dhyan Chand, showcased unprecedented skill and teamwork, bagging the gold without letting in a single goal. This feat kickstarted an era of dominance with successive victories in the 1932 and 1936 Olympics. The era before 1947 wasn’t just a historical period. 

it was the sporting prelude that set the stage for a post-independence India. 

Independence Innings

Indian sport broke free from colonial chains in 1947.

It was to be a ride of victories, tests, and pivotal twists, reshaping Indian sports forever. 

The tale kicked off with Indian hockey’s golden days. A sport that saw India bagging Olympic golds from 1948 to 1956 was more than just wins. It was India flexing its newfound freedom on the global stage. 

Legends like Dhyan Chand and Balbir Singh Sr. danced on the field, their stick work captivating the world. 

Their gameplay was a spicy mix of raw talent, seamless teamwork, and a relentless spirit. It was a mirroring a nation carving its own fate.

Seeing the oneness, India began to recognise sports as a tool for nation-building. The next 30 years would be the zero to one for many Indian sports. 

A big stride was the founding of the National Institute of Sports in Patiala in 1961, aimed at nurturing athletic sparks. Around this this period the All India Chess Federation (AICF) was established, marking a pivotal moment in structuring the chess framework in India.

Indian hockey continued to dominate globally, including a gold medal in the 1964 Tokyo Olympics. In boxing, Padam Bahadur Mall emerged as the first Indian boxer to clinch a gold medal at the Asian Games held in Jakarta, paving the way for other prominent winners like Hawa Singh in 1966 and 1970.

Billiards, too, saw a significant milestone in 1978 when Michael Ferreira surpassed the 1000-point barrier in the National Billiards Championships, setting a new benchmark in the sport.

In badminton, 1980 became a hallmark year with Prakash Padukone’s triumph at the All England Open Badminton Championships, showcasing India’s budding prowess in the sport on a global stage. The same year, India won the last Olympic Gold in field hockey.

The golf course witnessed a moment of glory in 1982 as India secured a gold medal at the Asian Games, marking a significant achievement in the sport.

Then, it was time for the game of all games – cricket

The 1983 Cricket World Cup win was more than just a trophy. It was a cricket crescendo with Kapil Dev leading the orchestra. This win didn’t just make headlines; it turned cricket from a colonial hangover to a national brew.

This win sparked a multi-decade revolution that would change Indian sport.

This cricket craze baited investments and eyes towards sports infrastructure. A giant leap was the birth of the Ministry of Youth Affairs & Sports (MYAS), tasked with building sports infrastructures and fostering athletic talents.

It was with good reason that Ashis Nandy would quip “”Cricket is an Indian game, accidentally discovered by the English”

India continued to find its feet, with new heros in new sports

1984 spotlighted India’s athletic potential when PT Usha narrowly missed out on an Olympic bronze by 0.01 seconds. Vishy Anand became the first Grandmaster from India in 1988, brought a sea of change in the perception and popularity of chess in India. 

These achievements, spread across different sports, indicated a slowly diversifying sports culture in India, laying a modest foundation for the multi-sport nation India was to evolve into in the subsequent decades.

Indian were beginning to win games, but the road to robust sports infrastructure was more a crawl than a sprint. 

Early on, India’s gaze was fixed on critical areas like health, education, and industrialisation, nudging sports to the backseat. Sports was a government show, with private sectors barely pitching in. 

Resource allocation was a tough nut to crack, with most being funnelled to pressing needs amidst a booming populace. Cricket hogged the limelight, casting shadows on other sports, and stifling a diverse sports culture.

Technological leaps, essential for modern sports infra, were scarce then. This tech drought reflected in India’s modest show on global sports stages, barring cricket. Despite our size, we struggled at the Olympics and Asian Games.

1999 came badly, with India crashing out in the Super Six of the World Cup. But as sporting performances seemed to be at a low, a new transformation was beginning. 

Commercial Hit

Money started flowing into sports and greed first followed.

In 2000, Indian cricket team captain Azharuddin, Ajay Jadeja and Manoj Prabhakar were convicted of match-fixing and received a life ban from the Board of Control for Cricket in India (BCCI)​​.

The dark cloud of match-fixing loomed over Indian cricket during that period, raising questions about the integrity of the sport and the players involved.

Hockey was not spared either.

Shortly before the Hockey World Cup in the early 2000s, Indian hockey players revolted against their federation due to non-payment of dues and demands for salary hikes, highlighting the administrative and financial issues plaguing the sports sector​​.

Despite these hurdles, bigger things were about to happen.

The 2003 Cricket World Cup was a real spectacle, glueing eyes to screens. Although India stumbled at the last hurdle, the event marked the onset of a commercial bonanza in cricket. 

Stars like Sachin Tendulkar and Rahul Dravid became ad poster boys, making every boundary hit and wicket a magnet for advertisers.

India had begun to flex its muscles with something new. Bringing the flavour of EPL, BCCI conceptualized an entirely new cricket league. 

The league would be called the Indian Premier League, or IPL. Another ICL league would start but flame out as the IPL consumed all the oxygen. 

In 2008, the Indian Premier League transformed cricket into a commercial carnival. 

With its city-based franchise model and player auctions, cricket morphed from a game into a thrilling business venture. Initially, teams were snagged for a few hundred crores, like Rajasthan Royals at Rs. 273 crore. 

Advertising was the cherry on this lucrative cake. Each IPL match came with 2,300 seconds of ad spots, raking in a fortune for broadcasters season after season.

As cricket commercialized spectacularly, performances in other sports improved.

This period saw Viswanathan Anand clinching the World Chess Championship title in 2007, a monumental feat that resonated with the ambitions of countless Indian chess aspirants.

The country began to witness a wave of young and talented chess prodigies making their mark in international chess. Figures like Harika Dronavalli, Pentala Harikrishna, and Koneru Humpy became synonymous with Indian chess’s rising prowess.

The 2008 Beijing Olympics saw Abhinav Bindra bagging gold, drawing a fresh global spotlight on Indian sports. This glory rippled across other sports too. Badminton, tennis, and boxing started enjoying a slice of the sponsorship pie, with stars like Saina Nehwal, Leander Paes, and Mary Kom inspiring a new athlete brigade.

The establishment of the Pullela Gopichand Badminton Academy was a leap towards nurturing badminton talents, although the sport’s cost was a hefty serve to handle for many.

Boxing punched above its weight too. Thanks to earlier groundwork by the Sports Authority of India, Vijender Singh’s bronze in the 2008 Olympics marked a knockout moment for Indian boxing.

However, cricket’s vertical commercial ascent came with a price. 

Tennis, on the other hand, faced a sponsorship squeeze post-2008, as the IPL’s dazzle diverted funds. 

A sport India prided itself in, hockey faced a significant setback in 2008 when the national team failed to qualify for the Olympics for the first time since 1928. 

The failure was a mirror to the administrative issues, political tangles, and infrastructural inadequacies that plagued not just hockey but many other sports. Money was needed. 

The superstar called cricket was cutting oxygen to the other erstwhile stars. But what had become amply clear was sports had become economic engines.

A new stage for India’s ascent was set. 

Playbook for New Sports Raiders

IPL sowed the seeds of a long-standing marriage between sports and entertainment in India. 

IPL became a second home for India’s entertainment and business elite. Bollywood personalities and business tycoons invested heavily in franchises. 

But beyond entertainment, the IPL would also prove to be a money-making machine for all involved. Sony and World Sport Group spent a whopping $1B for the broadcasting rights in a ten-year contract, signalling their strong belief in the sport and format for years to come. 

DLF shelled out $50M for the title sponsorship, while Hero Honda Motors paid $23M, and PepsiCo India paid $13M for the co-sponsorship and beverage partnership, respectively. 

IPL would also open newer creative avenues for sponsorship, as Kingfisher bid $27M to become the official umpire partner. This would see their brand on all the umpire uniforms and the TV screens for the third umpire decisions. 

From 2009 to 2012, the IPL’s viewership soared from 100M to 160M, a testament to the growing interest in the sport and the glamour that accompanied it.  

By 2010, Sony would be charging Rs 4.5L for a 10 second ad-spot, a 200% increase from 2 years ago. Their advertising revenue grew from Rs 450 Cr to Rs 700 Cr in the same year. 

This growing popularity was also reflected in the sponsorship revenues of the teams, who reported their revenue double Y-o-Y.  

2011 saw Hero Honda sign a Rs 75Cr deal with the Mumbai Indians, and Aircel sign the most expensive deal yet with the Chennai Super Kings at Rs 85Cr. 

While the IPL was bringing the country together with its promise of sports and entertainment packaged into one, another mammoth event was on the horizon. 

The first half of 2011 would see India host 13 other nations for the ICC Cricket World Cup.  

28 years after the last major win, a team of would-be legends and young IPL talent led by MS Dhoni would lift the cherished trophy in front of a packed Wankhede Stadium in Mumbai.

Indian cricket’s success, coupled with the rise of the IPL, would provide the playbook for other fledgling sports.

Badminton would be the first with the inception of the Indian Badminton League (IBL) in 2013. 

The promotional advertisement featured Saina Nehwal, dressed up in cricket pads, walking to the court, asking the audience if the image was enough to think about badminton. 

Indian badminton players broke barriers, entering the top twenty across categories. Star Sports, the master enabler of almost every sport in India, broadcasted IBL live.

The IBL internationalized the sport. Through its prize fund of One Million Dollars, youngsters were suddenly earning lakhs of rupees. Badminton was closely following in cricket’s footsteps to become another sporting industry. 

India’s national sport wasn’t to be left far behind. 

The Hockey India League, in 2013, would sign a two-year title sponsorship deal with Hero Motocorp, a long-time backer of the sport, to bring Hockey back to its old glory. 

Star Sports, to create a multi-sport culture in India and inspired by the increasing popularity of international football in India, aimed to revive hockey’s appeal in the country. 

It set aside a budget of Rs 100Cr for the production and marketing of the Hockey India League, an amount that far exceeded anything ever seen by the sport.

The vision entailed an EPL-like experience for the sport, starting with the pre-show, the analysis, the stats and the match itself. IMG, the production company responsible for the EPL, was brought in to handle the production. 

While the IBL attracted ~20MM viewers for the 18-day tournament, the HIL attracted double that at just over 41MM viewers. The two together accounted for only a third of the IPL’s viewership at 190MM. 

It was a clear indication of the direction the sports were heading in. 

Smashing into Big Fields

As badminton and hockey began to gain popularity, another sport rose from the shadows.

An increasingly affluent middle class, combined with the regular broadcasting of football leagues from England, Spain and Italy, led India’s administrators to believe the door was finally opening. 

Former Indian Captain Sourav Ganguly said that in a cricketing nation of 1.25B people, he saw football as the next biggest sport. This motivated him, as he invested in his hometown Kolkata club for the newly formed Indian Super League in 2014. 

He would not be the only one, as `Little Master` Sachin Tendulkar would invest in the Kerala Blasters team.

The potential of the Indian Super League would culminate in it being a joint venture between Reliance Industries Ltd and IMG, a global sports, fashion and media business. 

It saw some of the biggest, but ageing, names from Europe, such as David James, Robert Pires, Alessandro del Piero, Freddie Ljungberg, Nicolas Anelka, and David Trezeguet.

As with the IPL, ISL started with a glorious opening ceremony at the Salt Lake Stadium, selling 70,000 tickets for the same. 

It featured Atletico Kolkata, owned by Sourav Ganguly and partly by Spain’s Atletico Madrid, against the Kerala Blasters, owned by Sachin Tendulkar. 

A cricketing start for the new football league

Ironically, the final game of the season was also between the same two teams, as Atletico edged Kerala Blasters to take the championship with a late win. The final recorded a viewership of 57M, around 1/3rd the viewership of the IPL final in the same year. 

More surprising, though, was that of the 429M viewers throughout the season, women and children accounted for 57%, a growing testament to the diverse fan base the sport was forming. 

2014 also saw the unexpected rise of Kabaddi from a rural sport to a televised sensation with the birth of the Pro Kabaddi League. 

The league consisted of 8 teams and a total of 56 matches in the league format, followed by the semis and final, mimicking IPL’s format. 

Just like it did with badminton and hockey, and IPL before them, Star Sports played a key role in the Pro Kabaddi League’s popularity.

Similar to the strategy it employed with Hockey, Star Sports employed IMG and Prometheus to build the best production for the ancient sport. It also set up a dedicated budget for social media marketing.

While the rural population flocked towards the sport, Star had its work cut out getting the urban viewers to show interest. 

It began on-ground promotions, obstacle courses at popular shopping venues and multiplexes, aiming to test people’s strength, speed and agility, all qualities that make a good Kabaddi player. 

The Star Sports Pro Kabaddi League in 2014, in its first season, was watched by an incredible 435 million viewers, second only to the Indian Premier League’s 552 million.

The final between the Jaipur Pink Panthers and U-Mumba attracted 86.4 million viewers, which was approximately one out of every four viewers in India.

The event also gained 2.3 billion-plus impressions on social media, with the PKL’s Twitter witnessing more than 25,000 tweets coming daily for the knockouts. 

By 2015, IPL’s flywheel had given birth to badminton, kabaddi, hockey and football. A new disruption was about to create an entirely different sport. 

Noobs to Digital Pros

In 2016, Ajey Nagar, a young 17-year-old in Faridabad, made a bold decision that would alter the course of his life. 

Dropping out of school, he would focus on his Youtube channel. Having started his channel by posting short clips of the cult classic Counter-Strike. His content quickly grew traction as he started live-streaming his games, attracting a dedicated base of 150,000 subscribers.

Little did Ajey know that his channel, ‘CarryisLive’, was destined to become one of India’s biggest gaming channels. Ajey was to ride the wave propelling the gaming subculture.

Helping this subculture was the perfect storm. Exploding internet penetration rates, the proliferation of smartphones – complemented by a large, young population ready for sustained dopamine spikes.

Jio’s launch would propel this into an entirely new orbit. 

As huge swathes of the population experimented with their first smartphone, puzzle and arcade games like Candy Crush and Subway Surfers acted as the perfect hook. By 2016, casual gamers, or those spending less than 30 minutes, numbered 12 crore in India.  

Despite the large base, monetisation was tricky. The average Indian casual gamer was used budget phones priced below INR 20,000 and unwilling to spend money for buying gaming subscriptions or in-app purchases. 

Consequently, monetisation models in India were limited mostly to advertisement-based revenues.

This yielded a market size pegged at INR ~2,000 crore, indicating a small ARPU of ~INR 160 per annum. Strategy-based Freemium games like Clash of Clans, enjoying high user retention and engagement metrics, dominated the revenue scoreboard.

Casual gaming was expected to grow at a CAGR of ~28 percent to reach a size of INR 8,300 crore by 2021. Market forces responded, with Indian game developers rising from 5 in the early 2000s to 250.

Out of this large segment of casual gamers emerged a small set of professional gamers, spending 8+ hours a day playing games like FIFA, DOTA 2 and Counterstrike with the hopes of making it big in e-sport tournaments.

By mid-2016, over 2,000 online gaming teams were being sponsored by brands and high-net-worth individuals. Pro gamers established India’s first domestic gaming league. 

Startups signed exclusive contracts to hold national qualifiers for international tournaments.Big brands like Mountain Dew and Flipkart organized e-sporting tournaments. 

DSPORT, a sports TV channel, became the first in the country to telecast an e-sport tournament – ESL India Premiership’s counter-strike competition, with over 10,000 South Asian teams.

Meanwhile, traditional sports were also getting a digital makeover, with the IPL attracting an online viewer base of 100 million in 2016, through Star India’s digital platform, Hotstar. 

Taking note, Star India’s competitor, Sony Pictures, put its bets on the rising football fan base in India and purchased broadcasting rights for the UEFA Euro 2016 for its digital platform, Sony Liv. Organizations like ChessBase India, dedicated to promoting chess, orchestrate events and foster a chess community, contributing further.

India’s sporting ecosystem was growing hand in hand with India’s digital revolution. As India’s hinterlands got connected, desi sports would make an astonishing arrival on the scene.

Scoring Desi Goal

Riding the digital wave with a vengeance were some traditional desi sports. 

Once relegated to the streets of small cities, villages and school playgrounds, they were winning huge in the digital arena. 

By 2019, Pro Kabaddi became the second most searched sporting event on Google, just four years after its inception as a league. Enjoying cumulative viewer growth of 51 percent over four seasons, Pro Kabaddi had emerged as the second most watched league after the IPL. 

By 2020, consumption was boosted by effective marketin. This included endorsements by the who’s who of Bollywood – Amitabh Bachhan, Shah Rukh Khan and Aamir Khan. Short, intense 40 minutes matches spread across month long seasons kept the sport engaging for viewers. 

2021 propelled the league’s reach into new heights, as Disney Star acquired online streaming rights for the league for a 5 year period, for INR 900 crore. 

Embarking upon a similar trajectory, the Ultimate Kho-Kho league’s highly successful debut in 2022 clocked cumulative viewership of ~40 million, making it the fourth most league in India. Around INR 200 crore was to be invested by the league’s promoters to develop and market the league over the next five years. 

Backed by Dabur’s Amit Burman, the league has signed a multi-year broadcasting deal with Sony Pictures Network, with team owners including Adani, ArcelorMittal Nippon and GMR.

Strikingly, ~40 per cent of the viewers were women, given its unique position as a mixed-gender sport in Indian schools. A women-only league was already in the pipeline.

2022 saw the debut of another league – the Pro Panja league – with ‘Panja’ being the traditional Indian take on arm-wrestling. Broadcasted by Sony Pictures Network, the league attracted 32 million viewers.

Even the more obscure and lost sports like ‘Gili-Danda’ and ‘Langadi’ are finding their place in various state and international tournaments. League format franchisees seem to be an unlikely development, but the sports wave was real.  

Even in e-sports, traditional Indian card games like Teen Patti have gained immense popularity.

While commercialisation is doing its part in popularising these sports in a hitherto cricket-dominated country, glamourisation for the screen often needs more authenticity.

In Ultimate Kho-Kho, for example, the sport has been considerably altered from its grassroots version to make it more palatable for the drama-loving Indian audience. The size of the field was reduced to make the play quicker and more agile. A new type of player – the ‘Wazir’ – was introduced in the attacking team, who can move in both directions, whereas the attacking team can traditionally move only in one direction

Sporting enthusiasts could draw parallels between the revamp of Kho-Kho, and the introduction of the T20 two decades ago, with its format of shorter timeframes and faster pace. Despite facing heavy criticism by cricket purists during its debut, T20 reinvigorated cricket’s popularity across the world.

As India became the de-facto cricketing superpower, urban India began to again import new sports from the West as full circle.  

Skating Fast with Pickles

India simultaneously saw a rise in urban focused sports in India.

Most of these were hybrid sports, a mixture of traditional sports. Two hybrid sports that began to creep up in India were Pickleball and Lawnball. Almost like cricket and football, with origins far from the subcontinent, they began a sojourn to Indian Metros

In the bustling streets of Mumbai and the tech hubs of Bangalore, a quiet revolution had picked up in 2022. Two sports, Lawn ball, or bocce as it’s known in its birthplace, Italy, is a game of strategy and precision. 

The goal is to get your balls as close as possible to the ‘jack’ or ‘pallino’. Historically a favourite pastime of the older generation, something shifted. The serene parks of India’s metros began to echo with the clinks of lawn balls. 

Clubs dedicated to this age-old sport began to emerge, hosting tournaments with participants from every age bracket.

The U.S. witnessed the birth of Pickleball – a delightful concoction of badminton, tennis, and table tennis. In the 2000s, Maharashtra echoed with paddles striking perforated balls. The post-2020 era marked a significant uptick in its popularity. 

With the All India Pickleball Association (AIPA) taking the reins, by 2022, India boasted over 5,000 registered Pickleball aficionados.

In the heart of this sporting renaissance, a few key elements have been silently at play. The minimalist nature of both sports, in terms of equipment and infrastructure, has democratised their access, making them affordable and accessible to all. This was great for urban India.

There would also be institutional support. 

Bodies like AIPA have not just been silent spectators but active participants, nurturing, standardising, and promoting the sports, ensuring they grow from strength to strength. India’s team would win silver at the Bainbridge Pickleball cup in 2022, which would be hosted in India.   

As urban focused sports picked up, it is not just pickleball and lawnball.

The Indian sports goods market was expected to reach ₹25,000 crore (US$3.3 billion) by 2025. Niche urban-focused sports good was also increasing.

The sales of skateboards in India would increase by 20% in 2022. The sales of surfboards have also increased significantly, with some retailers reporting sales growth of over 50%.

The popularity of MMA was also increasing in India. The number of MMA gyms in the country doubled in the past two years. The Indian MMA Federation has over 10,000 members.

The growing popularity of niche sports in India also leads to increased investment in these sports. For example, the Indian government has announced plans to invest ₹10,000 crore in the development of sports infrastructure over the next five years. This investment is expected to benefit niche and more popular sports.

Driven by these new sports, 4 women would become mini-stars bowling in lawns

The India team of  Nayanmoni Saikia, Rupa Rani Tirkey, Lovely Choubey, and Pinki, won the gold medal at the Asian Championship Games in Lawnball. 

As India entered 2023, the next stage of India’s sporting revolution was set. 

Throw for New Gold

A historic ~87.5m long javelin throw made Neeraj Chopra the first Asian athlete to win an Olympic gold in the sport and the recipient of India’s first athletic medal in 100 years. 

Hailed as the ‘Golden Boy of India’, his win galvanized the entire nation in an unprecedented wave of sporting (non-cricket) revelry.  

In 2023, Neeraj broke his Olympic record with a throw of 88.88m at the Asian Games, which saw India winning 107 medals – an increase of almost two-fold over the last 10 years. 

India has now firmly established itself as cricket’s big daddy, kabaddi’s champion, chess’ grandmaster, emerging power in badminton and athletics. Its performances at global stages are only signal.

The current decade marks a new era of sporting culture in the country, as evidenced by the government’s bid for to host the 2036 Olympics. Supporting this are government initiatives like Khelo India, aiming to address the historically underdeveloped sporting ethos at the grassroots. 

This would be done through better scouting, talent and infrastructure development, and organizing structured competitions.

Meanwhile, the private sector is betting on India’s growing fondness for sports, beyond cricket. 

Decades later, after being starved in the 1980s, money flows into sport. Successful commercialisation of non-cricketing sports would boost the sporting economy through multiple first-order and second-order effects.

On the cutting edge of these developments is the developing, albeit promising, sporting startup ecosystem in India. Given cricket’s staggering dominance in India’s sporting culture, several startups seek to disrupt the game with innovative offerings. 

Anil Kumble-backed Spektacom, Shikhar Dhawan-endorsed StanceBeam, str8bat, and Smart Cricket are taking sports analytics to the next level by offering IoT sensors, which capture various data points during a batting shot to analyse its efficacy.

On the other hand, Z-Bat seeks to change the way cricket bats are bought – by using an algorithm-based approach to recommend customized cricket bats specifically tailored to different body types and playing styles.

Recognising a general scarcity of sports infrastructure, a long-standing pain point for young enthusiasts, the Playo application facilitates the online booking of sport venues, as well as connecting players.  

As a nation just emerging from the shackles of colonialism, India defied the odds to not only possess the ambition to host the 1951 Asian Games but also the raw talent to win 51 medals across 57 events. 

From dominating in sports introduced by colonial powers to successfully breathing new lives into hitherto fading desi sports, India’s sporting heritage is a story of winning against the odds.

Today, complementing India’s diverse sporting heritage is the world’s largest millennial population, the world’s largest population and one of the best connected digital ecosystems. The size would expand its sporting economy to a USD 100 billion market by the end of this decade.

India’s 50-year revolution in the 1980s is beginning to create a sporting superpower. 

Writing: Parth, Raghav, Samarth, Shreyas, and Aviral Design: Abhinav and Chandra

Last fortnight reported an explosion in consumer loans, hot on the heels of the massive Global Fintech Fest where $2Bn worth of deals were signed

Putting Loans on The Scoreboard

The origins of lending in India trace back to the 5th century B.C when loans were extended in cash and kind. 

Over the past many centuries, financial transactions evolved from simple barter systems to complex digital ecosystems. As systems evolved, lending became a timeless catalyst for progress and stood for economic growth and empowerment. 

As civilisations expanded and economies became more complex, lending institutions gained prominence. 

The first Indian texts talked about usury or the practice of charging unreasonably high interest or making immoral monetary loans.

Eventually, lending became acceptable, and ancient texts such as the Manumriti recognised it as a way to acquire wealth. 

Early mentions of a systemised lending structure trace back to the Maurayan age around 321 BCE. Kautilya’s texts during this time also mention different forms of loan deeds – the lender’s legal right to the borrower’s property should the borrower default on their loan. 

The Mauryan period also had an instrument called adesha, akin to the modern bill of exchange, that directed a banker to pay the sum on a note to a third person. Merchants also gave letters of credit to one another. 

Ancient Sanskrit texts on law and conduct, or the Dharmashastras, speak about extending business loans. However, these only permitted the Vaisya caste, mainly merchants and farmers, to become money lenders. 

Class structures determined who had access to capital and who they could lend it to.  

Loan deeds continued under the Mughal era and were popularly known as Dastawez. These got further classified into loans ‘payable on demand’ or ‘payable after a defined period.’ 

In Medieval India, from the 12th century AD, a financial instrument called Hundi was developed for use in trade and credit transactions – a couple of centuries before bankers in Western Europe issued bills of exchange. 

Hundis were used to transfer money from one place to another, as a bill of exchange in trade transactions or as a credit instrument to borrow money. 

As commerce picked up in society and people began to trade with each other, the growth of credit followed. 

While people called it different names, the underlying principle of lending a sum of money and earning interest was beginning to grow in relevance. 

Banking Opens Credit for Independence

The Industrial Revolution introduced manufacturing and industrial processes to the world. 

This expanded the lending systems to serve the increasing demand for capital required to fund industries. 

In the 1700s, entrepreneurs in India received loans from merchants and aristocrats and used the money to expand their workforce, buy machinery or build inventory. ‘Seths’ and ‘Shroffs’ extended small business loans and enabled merchants to fund their trade. 

However, this came at rates well above the formal channels and often at unfavourable terms. Another common practice was ‘indentured loans’ where borrowers would repay the debt by working on the lender’s estate. 

While India had developed credit instruments and money lending systems, the British brought a structured and anglicised form of lending and banking. 

The western type of joint stock banking – banks owned and controlled by shareholders – was brought to India by the English Agency house of Calcutta and Bombay. 

In 1770, the Bank of Hindoostan started operations in Calcutta to provide business loans for foreign trade. Some banks like the Bank of Calcutta in 1806, were established to fund wars against the Marathas and Tipu Sultan. 

The Allahabad bank, still functioning today, was set up in 1865. The first entirely Indian joint stock bank was the Oudh Commercial Bank, followed by Punjab National Bank in 1894.

With the establishment of these banks, the 20th century in India saw relative financial stability. Several smaller banks, for example, the Catholic Syrian bank, also cropped up to serve particular ethnic and religious communities. 

Two broad sets of institutions emerged – exchange banks, owned by Europeans and focused on funding foreign trade, and Indian joint stock banks that catered to local businesses. The latter were undercapitalised and needed more seasoned to compete with the exchange banks. 

Many collapsed in the 1900s. 

Inspired by the Swadeshi movement, many Indian banks sprung up post 1906 and have survived until today. Some prominent names include Bank of Baroda, Corporation Bank and Bank of India. The movement’s zeal spread to the South’s Dakshina Kannada and Udupi districts and saw the emergence of many private and national banks, including Canara Bank.  

In 1935, the Reserve Bank of India was established with a paid-up capital of fifty million rupees to support the economy post the economic challenges of the First World War. It sought to supervise financial institutions, control the currency and manage government credit. 

The banking institutions of pre-independence India laid early foundations of lending that would help move the wheels of the economy post-independence. 

Lending as we know it today, was beginning to take shape. 

Credit Hits the Economy Out of the Park

Significant milestones mark the evolution of India’s banking system, the most pivotal being the 1969 nationalisation of banks. 

This move democratised credit, transforming a predominantly urban-centric landscape—where 83% of 14,000 bank branches were in cities—into a more inclusive one, with total branches reaching 58,000 by 1980 and 40% in rural areas. 

Such changes propelled sectors like agriculture, with its credit share jumping from 2% in 1969 to over 13% by the late 1970s.

Nationalisation increased India’s GDP from 3-4% in the late 1960s to 5% in the following decade. Around this period, in 1961, Kali Mody introduced the Diners Club Credit Card, anticipating India’s transition to digital banking and cashless transactions. 

However, credit cards became mainstream only in the 1990s.

The 90s started with the economic earth-shifting 1991 economic liberalisation. The unlocking of India aimed at reducing trade barriers and state intervention. 

This move increased foreign direct investments from $132 million annually from 1985-1991 to $5.3 billion between 1992 and 2000. Concurrently, the credit growth rate increased from 15% to 18%, and GDP growth averaged 6.7% between 1992-1997.

Along with nationalisation and liberalisation, the genesis of ICICI Bank, HDFC Bank, and IndusInd marked crucial moments in India’s financial sector.

The Industrial Credit and Investment Corporation of India (ICICI), had been founded in 1955. The credit corporation was structured as a pioneering joint venture encompassing the World Bank, India’s public-sector banks, and insurance companies to deliver project financing to the burgeoning Indian industry.

Identifying the gap in specialized housing finance, HDFC, or Housing Development Finance Corporation, was conceived in 1977 as India’s maiden specialized mortgage company.

In 1994, recognizing the potential to expand its footprint, ICICI transformed its legacy by inaugurating ICICI Bank as its wholly-owned subsidiary. The success and need for inclusive banking paved the way for HDFC Bank’s incorporation.

By the 1990s, the credit card industry in India burgeoned, growing 35-40% annually with a volume of over Rs 2,000 crore.

As technology became a thing, the banks were the first to adopt them. 

With Internet, banking transactions, once languorous, became as swift as trading shares in a bull market. Automation reduced the ‘loanly’ wait times for borrowers and brought banking to their fingertips, anytime and anywhere.

ECS, or Electronic Clearing Service, was one of the early entrants, debuting in the 1990s. This system automated bulk money transfers, like salary disbursements or dividend distributions, and gave a new meaning to “money at the speed of thought.” 

With ECS, the volume and speed of transactions experienced a significant uptick.

India’s banking evolution post-independence was akin to a meticulously planned portfolio, balancing risk with innovation and tradition with technology.

The 2000s were going to become even more attractive for lending

Cautiously Running Credit Books

The early 2000s marked transformative periods for India’s banking ecosystem. 

The 2004 introduction of RTGS made high-value transactions real-time, eliminating tedious waits. It was akin to switching from a bicycle to a sports car on the financial expressway. 

The subsequent launch of NEFT in 2005 catered to both large and small transfers, making funds movement faster and more efficient than ever.

While payment systems were upgraded to lightning, India’s lending ecosystem would seem almost primitive by today’s standards. Traditional banking practices reigned supreme, and credit penetration was relatively low.

In the early 2000s, India’s credit relative to its GDP lagged behind some of its peers. For example, while China was robustly advancing its credit infrastructure, reaching a credit-to-GDP ratio of 90%, India was nascent, with its credit penetration only around 50% of GDP.

However, as with any great financial tale, India was one of promise and progress. 

The first signs of change were the rise of Microfinance Institutions (MFIs). These institutions recognised that empowering women, especially through cooperatives, was the key to grassroots financial growth. By lending small amounts to women-led cooperatives, MFIs provided capital to those who needed it the most and instilled a credit culture in rural and semi-urban areas. 

Democratization of credit was the result, where a lady in a remote village was as empowered to seek credit as her urban counterpart.

Microfinance Institutions (MFIs), which emerged strongly during this period, started lending amounts, sometimes as small as INR 5,000 ($70), to women-led cooperatives. 

Yet, while the landscape was promising, it was challenging. 

The rise of Microfinance Institutions (MFIs) in India was not without its share of turbulence. In 2010, the southern state of Andhra Pradesh, which accounted for nearly a third of the country’s microfinance activity, witnessed a major MFI crisis. 

Reports of aggressive recovery practices, over-lending, and multiple lending instances led to defaults. 

The crisis was so severe that the state’s microfinance portfolio at risk, a key measure of loan performance, soared to over 40% from a usual average of 2%. It was a classic case of too much money chasing too few genuine borrowers, leading to a dangerous bubble.

The MFI crisis 2010 wasn’t just a blip on India’s lending radar, but a lesson in the importance of sustainable and responsible financial growth.

It was time for a change. Enter fintech startups. 

Filling the gap left by conventional institutions, these agile entities offered modern solutions in sync with India’s evolving financial aspirations. 

Early innovations like the banking correspondent (BC) model, pioneered by FinoPayTech and Eko India, brought financial services to the rural masses, minimising the reliance on traditional bank branches. Furthermore, by 2010, fintech ventures such as Oxigen, MobiKwik, Paytm, and Freecharge began shaping India’s digital finance future, emphasising mobile payments and e-billing.

From the early 2000s to 2010, this era underscored India’s transformative trajectory in finance. 

The substantial progress during these years and the subsequent momentum hinted at India’s potential to become a major global financial contender.

Loan Distribution is the Score, Collection Wins Games

As India entered 2015, it still was a capital-constrained country with a low per-capita GDP. 

In addition, a large part of the population has very low income. This population segment is one unfortunate event away from drowning in debt. This made the opportunity for lending huge and diverse. 

Fintech lending replaced asset collateral with information collateral.

This substitution was possible due to the Jio effect in 2016. With the digital revolution brought about by Reliance Jio, India saw an unparalleled surge in internet users. The vast unbanked and underbanked population now had a digital window to the world.

Reliance Jio’s introduction led to a spike in internet users, from 200 million in 2015 to 500 million by the end of 2018. This massive inclusion indirectly spurred digital financial services.

Between 2000 and 2018, the number of credit cards in circulation in India jumped from 6 million to over 24 million. Furthermore, the total transaction value of credit cards grew from INR 39,000 crore ($5.4 billion) in 2000 to an impressive INR 2.4 lakh crore ($35 billion) by 2015.

More importantly, the rise in digital transactions allowed businesses to have a digital footprint which could be shared with lenders as as proof of their repaying capacity. The introduction of GST in 2018 allowed lending companies to verify the GST invoices with the tax authorities.

These twin structural changes allowed companies to offer information collateral-based cashflow lending to businesses.

Lending could be very profitable, provided the collection system remains robust. As a business model, lending seems like an insanely profitable business, which it is. 

Any startup in this space can easily make an NIM or the difference between their lending and deposit rates of around 4% on their invested capital. If they can increase the capital deployed in a year (higher demand), then their revenues increase without any other costs.

However, the key in this business is collections. It is very easy to lend, given that the latent demand in India is very high. 

However, one shouldn’t look at just good demand but look at the collection system. 

The strength of the lender is evaluated by its NPAs. For example, an NPA of less than 5% for unsecured lending is considered acceptable and good in the ecosystem. The key to maintaining a low NPA is having a great credit underwriting method.

Cash flow lending allowed a low-touch lending business model to take shape. Unlike Of-Business, which integrated business relationships with its lending product, this newer generation of cash flow lenders could work and lend profitably by working in a little more hands-off manner.

Due to these structural reforms, the market began to emerge in consumer and business lending. 

On the consumer side, use case-based lending began to emerge. We have gold loan financing, vehicle financing, home loans and education. 

This focus on narrow segments helps these firms improve their collection capabilities.

On the business lending side, there was an explosion in the kinds and types of lending institutions. The MSME lending opportunity in India is very large, while most had low collateral. 

Interestingly, the approaches to business lending were mostly horizontal. 

We saw early starters such as LendingKart, who offered invoice-based lending and then the arrival of similar companies such as Indifi and Aye Finance. 

Supply chain financing was the other large emerging model. 

Although the credit is being disbursed to the MSME, the quality of the underlying asset is the risk associated with the larger and well-established companies. Supply chain financing allows easier credit opportunities for MSMEs that supply to reputed businesses. Prominent supply chain lenders include Prograp, Mintifi, Rupifi and Viviriti Capital.

True to the diversity of India, lending models in India were also diverse to cater to different segments and needs

Fintech Opens Its Account

By 2018, the regulator’s role became a key driver of the growth in the overall lending ecosystem, unlocking fintech.

The central bank introduced the co-origination framework in 2018, allowing banks and NBFCs to co-originate loans. 

This model was designed to enhance the flow of credit to the priority sector, which includes sectors such as agriculture, micro, small, and medium enterprises (MSMEs), housing for economically weaker sections, education, and other sectors considered vital for the economic development of India.

The framework allowed banks to take a share of the loan and a share of the risk associated with the loan. India had begun to leapfrog the traditional credit development path.

This regulation was subsequently upgraded to the co-lending model in 2020, allowing 80 % of the loan with the lender and 20 % minimum with the originator. This collaboration sowed the first partnership between NBFCs/fintechs and traditional banks to serve the market. 

Co-origination/co-lending loans were originally designed to overcome the NBFC sector liquidity crisis brought about by the DHFL crisis.

Reeling under the impact of NPAs and the pending cleanup, the central bank looked to reduce the lending exposure of the financial system aggressively. In small-scale lending, the overall lending book shrank for a few quarters.

The co-origination and co-lending model opened up the growth in the credit space and underscored the importance of software to manage the lending book split across multiple organisations. 

Several fintech infra SaaS players developed products which improved banks’ LoS, LMS collection systems. 

They made it faster, intuitive and up-to-date with the latest changes in the IndiaStack. 

Firms like Lentra, Perfios, M2P, Zeta, Kiya.ai created LMS, LoS and even cloud-based Core banking systems to cater to the need of the new fintechs and NBFCs. This was a far different type of software as compared to the exisiting software products in the banking industry.

This new generation software allowed banks/NBFCs to cross-sell, and launch newer products quicker and faster. The system’s building blocks were well established for an unexpected event and an even more unexpected outcome. 

The COVID-19 shock and the hard lockdown meant that most of the country was left without a source of income and in dire need of funds. This meant that digital loans were the only source for anyone needing one.

Lending would be the saviour to revive the economy and give hope to millions to restart their businesses and livelihoods

Lending Explodes Off the Bat

The essence of an NBFC lies in the fact that they do not have banking license and that paradoxically gives them a unique edge.

NBFCs couldn’t receive demand deposits, meaning funds costs are significantly higher than traditional banks. Tech companies that could understand their users and iterate to build incredible products, could win. 

Many would jump into the gold rush. 

One such example was Slice. Founded in 2016, they were a B2B buy-now-pay-later service for the first few years. In May 2019, Rajan and the team pivoted to cards for consumers.

Growth was explosive. Slice partnered with the Bank of Mauritius India to offer loans through prepaid cards (PPIs). Working with merchants to cover the costs, they could offer 4 interest-free purchase instalments. 

By doing so they could tap into India’s large, underserved credit market offering loans to people who were not eligible for a credit.

Tech companies were able to innovate on business models and come up with creative ways to underwrite their loans, often at the cost of operating in a regulatory ‘gray zone’.

As competition intensified and new business models like Slice’s gained mainstream popularity, more startups pivoted to retail lending.

Jupiter, Paytm, BharatPe, Cred and several other fintechs would see the popularity of the consumer lending/ BNPL model and quickly launch competing products.

FinTech startups could focus on niches to start but as they grew more of them had to foray into lending to generate sustainable meaningful revenue. Competition for lending was intense by the time Covid hit.

With people at home and the economy at a standstill due to Covid, the government had to act.

Banks’ non- performing assets (NPAs) were already up almost 50% at 8.5%, and RBI expected NPAs to rise to 12.5% by 2022.

In March of 2020, amidst the pandemic, the RBI offered relief measures to borrowers in the form of EMI moratorium on all term loans. Later in the year, the RBI permitted a one-time restructuring of small business loans and a 50,000 Crore Covid shield for private banks.

As the country emerged from the pandemic, the government took a closer look at PPIs and the BNPL model.

In July 2022 a Central bank directive barring prepaid instruments from being loaded with credit would send many FinTech firms into a tizzy and bust their business models.

While fintechs wanted to grow wildly like the Wild Wild West, RBI wished to ensure the economy was not under undue stress. The regulator’s goal was to ensure lending remained fair, collections remained non-predatory, and access to credit was not on a free flow tap that increased indebtedness in the economy.

The tension would keep bubbling with innovation. 

Credit on UPI Finds the Gaps

Where one door closes, another must open with a QR Code. 

Formal credit in India aspired to be convenient, real-time, affordable, and above all, ubiquitous. UPI has been all of these and much more, to amass 300 million retail users and 500 million merchants in just seven years. 

The interface was India’s proud export to France, Australia, Singapore, and the Middle East.

The mandarins at the RBI duly recognized the potential of adding formal credit on top of the platform, taking a leaf out of India Stack’s structure of interoperable layers. 

The Central Bank began to operate in a one-two-punch model. It would be steadfast in accelerating innovation and ruthless in doing away with models that err on the wrong side.

In June 2022, it first allowed RuPay credit cards to linked to UPI accounts. By August, Slice, Uni and PayU’s Lazy pay had to stop onboarding new customers. Their card partner, the State Bank of Mauritius India awaited clarity on the regulator’s views on the model.

In April 2023, it took a decisive step, introducing a direct, collateral-free, pre-sanctioned credit line on UPI. 

But then in June, it issued a directive to crack down on FinTech, severely impacting at least fifteen players. The message was loud and clear – innovate, but in the consumer’s best interests.

UPI’s distribution could act as wings for access to credit to take off.  It is still early days for the union, with concerns around UPI ceasing to be accessible to accommodate a merchant discount rate. Will UPI on credit kill credit cards after giving a sucker punch to wallet system remains an open question.

But reckon this, it took 70 years for India to install 6 million POS machines. UPI was able to clock 60 million merchants in just over three years. The platform’s bid to boost the volume, velocity, and variety of credit appears redoubtable.

UPI’s digital footprint could eliminate knowledge asymmetry in the domestic credit space. Or as Nandan Nilekani puts it, replace asset collateral with information collateral, spurring the next generation of digital lenders, a wave of business partnerships and new business models.

Kiwi became the first to launch credit on UPI as a service, just a month after RBI’s big move, before tying up with Axis Bank.

Dedicated offerings targeted at niche users and specific use cases – Paycrunch (college students), FamApp (teens, students, GenZ and millennials), tvam (health and wellness), Scapia (travellers) – seems to be a trend waiting to pick up.

Lending to sunrise sectors such as electric vehicles and solar rooftops would rise. Add corporate loan-like models viz. loan against mutual funds and collateralization of assets, and you had a heady credit environment.

The flipside is that the fast access to credit, supported by UPI’s ease of use, does carry the risk of luring New-to-Credit (NTC) borrowers into a vicious debt trap – one they will not be able to do with, or without. Indian fintechs already have an outsized share in personal loans and exposure to NTC consumers, thanks to their digital distribution channels.

The regulator was visionary and proactive in warning lenders about their rising unsecured loans portfolios. As the scale of the disruption plays, regulatory guardrails are expected to follow.

Unbridled optimism and euphoria have to be mixed with caution and patience.

Winning the Credit Game at Lightning Speed

UPI has blazed from 100K monthly transactions in October 2016 to 10 Bn by August 2023.

NPCI recently set itself an audacious goal of 2Bn daily transactions by 2030. The path could be the ramp on which the next lending phase builds.

Sachetization of credit is imperative for India’s micro-transaction market at the bottom of the pyramid. UPI 123PAY – vernacular and voice-enabled for feature phones – and UPI Lite – for offline, small-value transactions up to Rs. 200 would take credit deeper and wider into Bharat.

To the deserving user in the appropriate form, credit begets commerce, which over time begets more credit, leading to more commerce and so on. Imagine the small farmer, the daily wage worker and the humble cart puller eased out of their hand-to-mouth existence, empowered with bite-sized loans.

On the national scale, the fledgling ONDC, with its promise of democratizing participation in commerce, is expected to give a fillip to credit offerings tailored to hyperlocal businesses. 

The regulators prefer to create the playground and define the rules for the players to take over. Or, at times, allowing the players to set them, acknowledging the strategic importance and the common interests. Like the UPI and the ONDC, the Open Credit Enablement Network (OCEN) and the Unified Health Interface (UHI) follow this proven template.

As players explore, pivot, compete and thrive, the game gets much richer. Lending, as it turns out, is the game’s cup of glory. We seldom come across “cutting-edge” business models which are profitable from the get-go, where a 12% return does not sound incredulous, and demand is not a constraint.

At the recently-held Global Fintech Fest, which saw ~300 investors initiate deals worth over $2 billion, nine of every ten pitches had a thesis built around lending.

In line with the early growth of UPI, accounts linked to the new revolutionary Account Aggregator framework have quietly exploded. This growth augurs well for the credit ecosystem, bringing more data and information into the mix.

An enormous digital revolution is underway in credit. 

Over millennia, lending has fundamentally remained the same at the core. An entity gives money to another. In return, it gets interest. 

But what has evolved dramatically is the speed, cost, information, size and access. India is beginning to be at the forefront of this multi-pronged push. 

Imagine getting a 100 Rupees loan for a few weeks with a push of a button. That is the hallmark of incredible speed, low cost, full information, bite-size and widespread access. 

The framework of credit on UPI, account aggregators and OCEN will combine to make this possible. With a benevolent regulator that is tech-savvy, India looks poised to lend. As fintechs move fast, big entities are becoming more technical to win. 

The fast-growing $1Tn lending goldmine is there for the winners. 

Writing: Keshav, Mazin, Nilesh, Nikhil, Parth, Rajiv and Aviral Design: Ponsang and Stable Diffusion

Perfios raised $229M at a valuation of $900M, deepening its expansion in North America and Europe. 

Street Cred(it)

V. R. Govindrajan was part of India’s first wave of tech entrepreneurs.

Born to a schoolteacher father and a homemaker mother, he completed his engineering and landed in the USA to pursue an MS in Computer Science.

He then spent nearly a decade rising the corporate ladder at behemoths such as Digital Equipment Corporation (DEC) and IBM.

By then, America’s IT industry had become a global economic order’s mainstay. However, an era-defining movement was brewing in India’s nascent tech ecosystem.

Infosys’ story and Wipro’s shift from edible oils to computing had spurred many young Indian professionals to abandon the comforts of their jobs—most dove headfirst into entrepreneurship.

Govindrajan was among those to be bitten by the bug. He moved to India and teamed up with S Parthasarathy to set up Aztec Software in June 1996.

Debasish Chakraborty was among the company’s earliest hires, joining the company in April 1997 as a General Manager in the R&D department.

An alumnus of IIT Kanpur and Kharagpur, he had spent the previous ten years at Wipro and IBM, alternating between Bangalore and the USA.

In its early days, Aztec followed the proven template of building in India to sell in America. The model brought with it challenges involving scale and intense competition.

Despite early promise, India and its fledgling computing talent were yet to earn their storied reputation. Client pitches often began with helping them locate India on the global map, literally and figuratively.

Aztec adjusted to market realities and soon switched to serving as an extension of its customers’ in-house teams. In the process, it created an Outsourced Product Development (OPD) category.

In October 2000, just as the dot com bubble was nearing its imminent burst, the company listed on the bourses with a Rs. 52 crore public offering.

By early 2008, Aztec had grown to over 2,200 employees and had a clientele spread across North America, Europe, India and Australia. 

Govindrajan’s story, however, had only just begun.

Stressed Credit

Come the Global Financial Crisis, a wave of consolidation had begun in the mid-tier IT space in India. 

The effects were immediate – a rising rupee, a slowdown in the US, and a dip in global IT spending. The time was ripe for Aztec to find a partner on the services front to complement its product-side capabilities.

MindTree came in calling for an acquisition, having spotted the natural synergies and driven by its billion-dollar ambitions, valuing Aztec at $90M.

Govindrajan and Chakraborty, also a part of the senior leadership, sold their stakes and exited MindTree. 12 years later, they experienced what today’s savvy entrepreneurs would call a ‘liquidity event’.

The hard-earned riches demanded elaborate upkeep, conscious decision-making, and proactive management.

Like anyone who has ever managed anything more than loose change, the duo sought a tool that provided a single dashboard of their finances. 

An ‘aggregator’, you said?

This was when internet access in India was predominantly through a dial-up connection. Nandan Nilekani was still at his corner office at Infosys; the Aadhar revolution was yet to be conceptualised, and interoperable interfaces meant little more than alliteration.

The only way for Govindrajan and Chakraborty to fix the gap back then was to create the solution they sought. While they were far removed from the world of finance, they were proven masters at product development, offering a starting point.

In a tale reminiscent of many a startup journey, they set out to solve the problem they had faced – using technology at scale.

The company’s objective was to enable retail individuals to consolidate and manage their portfolios and debt in an automated manner.

Govindrajan and Chakraborty chose to stick to their strengths and build a minimum viable product instead of raising capital immediately. A working prototype was ready to be taken to the market in under four months.

Personal Finance One Stop (Perfios) v1.0 was born.

On Borrowed Time

Perfios soon scaled its MVP and launched MyFinance, a cloud-based Personal Finance Management solution, in 2008.  

It aggregated financial data from disparate sources – bank accounts, credit and debit cards, mutual funds, insurers, lenders, and so on – to create a 360-degree view of a user’s financial standing.

In an unassuming effort to create an ‘ecosystem’, Perfios added an accompanying product for Wealth Managers called MyClients in 2009.

A first-of-its-kind product serving a genuine need should have found takers by the dozen. This, unfortunately, wasn’t the case.

All the co-founders’ nous acquired while scaling Aztec was built on working with corporates in India and abroad. They had underestimated the fickle, discerning, passionately tight-fisted Indian retail customer.

Perfios had followed a freemium model with MyFinance. A base version was offered for free to enable potential users to try the platform before inducing them to pay between Rs. 500 and 5,000 for worthwhile add-ons.

However, like the bane of curated research and other boutique services in India, Perfios’ biggest competition was not a similar or an adjacent offering. Instead, the prevalent mindset was that a webpage should load free of cost, the code and the output notwithstanding.

Govindrajan and Chakraborty realised that if to build was human, to monetize was divine, particularly on the Indian internet, with just 93 million users.

By 2011, MyFinance reached a conversion rate of 4 percent. Of every 100 free users, four signed up for the paid features. The number did appear paltry. But it was also the global benchmark for comparable services.

The 4 per cent standard was far from the scale required for Perfios to thrive. The only viable way to grow the business was to acquire a continuous flow of new users, only to see an overwhelming majority always keep their purse strings.

(Under)Writing On The Wall

Govindrajan and Chakraborty could not have been blamed for empathising with Sisyphus.

The Greek mythological character was eternally condemned to repeatedly roll a heavy rock up a hill, only to have it roll down again as it neared the top. Perfios felt a lot like it. 

Perfios learnt that in a freemium business model, you must spend billions in customer acquisition if you want to make billions in premiums. 

What do you make in the end? Zilch.

‘Growth at all costs’ and ‘scale before generating revenue’ were yet to gain widespread acceptance as business methods. Perfios had neither the appetite nor the inclination for an unending pursuit with an unpredictable outcome.

Govindrajan and Chakraborty had wanted to create something bigger than Aztec, with the paydirt they hit at their first venture. But it seemed that the answer lay elsewhere. It was now time for a ‘pivot’.

By 2012, the need for products that make personal finance easier and more accurate for a large population was clear for all to see. 

As a country with low levels of financial literacy and a widespread lack of social security, it was vital for individuals to be up to date with their personal finances and retirement goals. However, finding paying customers and executing this product profitably at scale was very difficult.

Indians got their financial advice from a variety of sources. 

The friendly neighbourhood uncle, the relative who is an insurance agent, and the CA who does the income tax advice at the end of the financial year were all common sources of financial advice.

Picking up on the theme, the founders of Perfios decided to branch out to serve these distributed centres of financial advice, rather than remain end-consumer-facing. 

Old Customers, New Money

They started to work with CAs, wealth managers, and independent financial advisors to sell their existing products. 

However, finding volumes at a profitable scale without burning cash proved to be difficult here too. Finally, in 2014, the founders of Perfios decided to complete the pivot. They had prior experience selling to corporates and companies and it is this segment they turned to when they decided to pivot.

An enterprise customer has a higher means and willingness to pay. Perfios used the same suite of products to target B2B clients. Converting from personal finance datasets Perfios now decided to target digital lending systems

The difficulties faced by the different stakeholders, such as banks and borrowers in the lending process could be solved by the suite of products that Perfios offered. Govindrajan and co were convinced they could simplify the lending process.

After working on a PoC for 12-18 months, they added an analysis layer on top of the original product and took it to banks and financial institutions. The data was being aggregated in a similar way as before. However, the analysis it was doing was more of what an underwriter or a credit manager would be looking for.

There was no such product currently available in this market and it took a lot of evangelisation. They had to convince the financial institutions that they needed this product to simplify their lives. 

Additionally, the push from the government and the early fintech revolution helped Perfios get their initial clients. Fintechs were happy to ally with Perfios to differentiate them from traditional bankers and NBFC.

By 2016, before it raised its first round, Perfios had already got  50-60 customers with the largest financial institutions in the country, including NBFC, banks, and fintech as its clients.

Perfios raised $6.1 million in 2017 in Series A to fuel its expansion

May You Always Live In Interest(ing) Times

Data was growing exponentially. 

The increasing adoption of technology and data science in credit decision-making presented a significant opportunity. Perfios was on the right track to success.

Indian credit industry had 2 significant problems brewing- longer turnaround time and low accuracy in the credit-decision process. Perfios claimed to solve both of them.

Driven by macroeconomic tailwinds, banks and NBFCs sought a core technology platform that aggregated and analysed financial data. The analytics techniques found applications in credit assessment, monitoring, fraud detection, and banking data aggregation.

Perfios struck the iron when it was hot.

Positioning lower TAT and increased accuracy and efficacy as their USPs, Perfios partnered with over 200 banks, NBFCs, and fintech companies globally.

Perfios boasted of a strong client base. Marquee banks like Axis Bank, AU Small Finance Bank, HDFC Bank, and Deutsche Bank partnered with Perfios after realising the potential of the technology.

Leading NBFCs like Aditya Birla Capital, JM Financial, Edelweiss, and Bajaj Finserv integrated the software into their credit decision-making processes. Notable fintechs, including Paytm, CapitalFloat, InCred, and IndiaLends, demonstrated their faith in the potential of this technology.

On the profitability front, the bar turned green when Perfios registered a profit of Rs 4.4 Crores on a topline of Rs 43.6 Crores in March 2019. The founders realised they were all set for the next phase of tremendous growth.

In November 2019, Perfios closed the raise of a Series B round of $50MM. This round saw participation from large PE investors led by Warburg Pincus LLC. Existing investor Bessemer Venture Partners infused more capital by participating in this round.

This round saw the exits of some of the early angel investors. Primary capital secured in this round was focused on three key areas: investing in technology to develop new offerings; international expansion through MENA and Southeast Asia regions; and potential acquisitions.

All this served as validation for Perfios that they were heading in the right direction.

The first step that Perfios took after closing this round was acquiring the IP rights and other assets of digital lending solutions provider FintechLabs Technologies. Based in Noida, the company sold digital lending management software to 40 clients (banks, NBFCs, online marketplaces) across 10 countries in India, Southeast Asia, and the Middle East.

This integration improved the tech for Perfios and opened the Southeast Asia and MENA region gates for them.

Cash And Carry

Third-party credit underwriting was still a white space at the start of the current decade. 

However, a few competitors were raising their heads – from established players like CreditVidhya to new entrants like Crediwatch. But Perfios dominated the market, with a self-proclaimed 90 per cent market share.  

Perfios’ first-mover advantage played out in two key parts as a category-creator in its segment.

The first was that the banking is an industry that works on trust.

Perfios had established its credibility by serving marquee names across banks like Axis, HDFC and NBFCs like Aditya Birla and Bajaj Finserv. This allowed Perfios to significantly expand its client base to 270 domestic financial institutions by the end of 2021. Perfios’ value proposition was clear – it reduced turnaround times for credit decisioning processes from one week to one hour.  

The second advantage Perfios had was the deep expertise in understanding pain points for financial institutions and developing data-driven solutions to resolve them.

Perfios became the only player supporting bank statement analysis for over 1,700 formats across national, co-op, and rural banks. Data extraction processes were refined to an extent where even paper-based statements, printed by dot-matrix printers or photocopied, could be extracted accurately.

Catering to various financial institutions, Perfios built a repository of 175,000 analytical rule engines to implement machine learning and neural network algorithms to categorise transactions, derive risk metrics, and determine credit default probabilities.

For machine learning algorithms, large datasets mean better predictive powers. Leveraging this trait, Perfios developed a tool to assess the creditworthiness of previously unbanked customers without credit histories by analysing income and spending patterns.  

Perfios ended FY 2022 with a run rate of processing over 20 million monthly transactions, translating to a revenue of INR 136 Cr. 

In four years, Perfios more than tripled its revenue. Their EBITDA margin improved significantly, demonstrating a chance of increasing returns to scale. 

The SaaS company had blown up. 

Having established its dominance in the third-party credit underwriting space, Perfios sought to identify the next levers for its growth.

Perfios found them in product diversification and international expansion.

Perfios acquired Mumbai-based Karza, a fintech platform specialising in onboarding automation, risk and fraud analytics, and business intelligence services, vastly expanding its product portfolio.

It now wanted to replicate its success with the Indian banking ecosystem internationally. Having seen early successes by landing key clients such as Malaysia-based RHB Bank Bhd, Perfios was present in over 18 countries across Southeast Asia, the Middle East, and Africa.

Present Value

While doubling down on what’s working, Perfios is also trimming down on what did not – it shut down its first product, the Perfios finance manager, in August 2023.  

It entered the ‘soonicorn’ trajectory with its latest fundraising round valuing it at $900 million. Perfios is on track to earn $100 million in revenue in FY 2024.

Flush with capital, shedding the last vestiges of the past, building an international footprint, and an expanded product portfolio. Perfios considers this the first step in its evolution to a multi-product, multi-domain global SaaS company and jumpstarted the journey through a re-branding exercise.  

In the long term, Perfios aims to diversify from its focus on credit analytics to providing tech and data-driven solutions for end-to-end customer lifecycle management for clients across the BFSI sector.

To this end, it has launched diverse products and services.

Karza’s ‘Klookup’ tool uses recursive search algorithms traversing public domain data to trace and identify individual/enterprise contact details. Perfois will use it to enter the loan collections space. It could also be used by banks, asset management firms, and insurance companies to trace ownership of unclaimed deposits, investments, and insurance policies.

Perfois now also offers automated legal checks for over 3,500+ courts and tribunals in India, allowing it to fulfil due diligence, risk, and compliance requirements for banking and private equity firms.

Through ‘PerSeive’, Perfios promises to mitigate fraud, waste, and abuse for health insurance companies by onboarding and analysing medical records and claim documents.  

Its low-code platform ‘Integreat’, launched in 2018, has now evolved to offer multi-party use cases, allowing customers to build applications targeted towards invoice discounting, P2P lending, and customer onboarding.

It further boosted its product expansion spree by acqui-hiring Fego.ai in September 2023, an open finance platform that allows businesses to embed financial products within their applications using plug-and-play APIs. It’s also an account aggregator offering financial intelligence services.

Today, Perfios has over 300 customers, of which 250 are in India. It derives about 50 per cent of its revenue from banks, 30 per cent from NBFCs, and 20 per cent from fintechs. Unlike conventional wisdom, it is a software company that makes money from Indian customers. 

Perfios has set the scene for its next phase of growth. 

Pricing To Extension

Though Perfios is already a clear market leader within its space of third-party credit underwriting in India, its potential for further growth is still limited.

The problems that Perfios is solving, are staggering in their scale.

Using alternative data points like investment spending, EMI contributions, e-commerce spending and utility bill payments to generate alternative credit scores, Perfios (and its competitors) can bring a huge segment of previously unbanked businesses and individuals (without credit histories) into the banking fold.

This would mitigate a credit gap worth a staggering USD 530 billion for medium and small enterprises in India alone.

Its new levers of growth could be its entry into the underserved spaces of unclaimed assets recovery and insurance fraud mitigation

Estimates peg unclaimed bank accounts, investments, and insurance policies to amount to USD 10 B. The insurance industry loses approximately USD 6 B in fraud every year.

While it establishes a foothold in these whitespaces, Perfios’ future roadmap includes establishing a foothold in the U.S., further geographical and product expansion through inorganic opportunities (perhaps funded by subsequent VC rounds), and an eventual listing on the public bourses within the next three years. 

Perfios has been a long journey since 2008, but it has proved multiple things. Being quiet and building is possible. Selling software to India is possible. Building a $1Bn company just by doing this is possible. 

As it sets its sights globally, the company is on track for an even bigger decade. Perfios could help not just underwrite India’s credit revolution, but the emerging world’s.

Writing: Bhoomika, Nilesh, Nikhil, Shreyas, Vishal and Aviral Design: Chandra and Omkar

Ixigo recently created history by crossing INR 10,000 crore GTV with over 50 million bookings, as it gets ready to IPO

Boarding a One Way Startup Ticket 

Aloke Bajpai was a bright student with a great academic record. 

He completed his graduation from IIT Kanpur and was in Europe working for a French travel tech company. He was always known for thinking out of the box, and the 35-hour working weeks in this nice, well-paying job was not something he enjoyed.

He started thinking and could see it was not Europe but India growing faster than most economies. It was 2006, and Aloke could see that the future belongs to India and to those who will build this future of India.

He wanted to take a bet on India. But it took a lot of work and required a lot of soul-searching. He had yet to repay the loan he took to do his MBA, which made the decision tricky.

He was not alone. 

Rajnish Kumar, who was also an IIT Kanpur alum and working for the same travel tech firm, was also doing some soul-searching and could relate to the entrepreneurial itch that Aloke was feeling.

Maybe Shahrukh Khan’s character in Swades (2004) or this speech by Steve Jobs (2005) gave the final push. Aloke finally decided to take a decision he would never regret.

By 2006, Aloke and Rajnish had resigned and returned to India. The duo rented an apartment in Gurgaon to work on their startup with a small investment of 6 lakh rupees.

Having worked with a travel tech company they had some frustrating personal experiences they started building a travel meta-search website for travel in India. For almost one year, they worked, without any salaries, to develop this product.

In 2007 Ixigo was born, before the internet was even a thing. The ride began with turbulence. 

Investors felt this space was too crowded with players like Make My Trip, Yatra, Cleartrip and other travel websites already fighting in the online travel agency (OTA) space. One investor even challenged Aloke that they wouldn’t be able to raise even 100K in funding.

The rollercoaster had begun with a steep drop.

But against all odds, by December 2007, it reached 100,000 users per month. Ixigo reached $10,000 monthly revenue within 6 months of launch with zero marketing spend.

Derailed with a Crisis

By early 2008, the traction started showing early signs of product market fit (PMF) and the handful of investors in India were ready to bet on Ixigo.

Ixigo raised a $1.5 M seed round from investors, including Make My Trip, a leading online travel agency founded in 2000. Ixigo founders always had the thought process to focus on the product and the customer’s core problem. 

When they started building Ixigo they had a unique insight that most of the portals focussed on the booking, where transactions happened. But for customers, the most anxious period of any travel plan is the time before and after the booking.

That’s why it started with the flight meta-search website providing all the information a customer may need before and after the booking. While customers started loving Ixigo as a product, real monetisation would take a while.

Ixigo founders and early team were well aware of the tradeoffs this long-term bet will bring and they were ready to make short-term sacrifices to build an enduring company.

2008 was one such year that started on a high, and by August, everything changed in a blink. By the time Lehmann Brothers collapsed, Ixigo was a 15-member team 

With an almost closed $5M round promise, they started burning some money to drive growth. But as travel collapsed, they were in for a shock as the round never happened, and the founders suggested laying off 50% of the team unless someone had a different solution.

The ixigo rollercoaster had dropped hard again. 

Ixigo’s team took a voluntary pay cut until they did not have enough cash to pay salaries instead of letting go of their colleagues. They stuck together in difficult times and worked to bring out industry-changing products by focusing on customers and their problems.

They could see that Mobile was getting traction, and if they had to truly stay ahead of the competition, they must start investing in a mobile app. 

Getting on the Mobile Track

In 2010, Ixigo launched its mobile app, making it one of India’s pioneers in mobile travel solutions.

With a primary use case in place and continuous customer feedback, Ixigo knew they needed to expand to cover the larger travel space related to train, hotel and bus booking.

With its mobile app gaining traction and a rapidly expanding user base, Ixigo focused on strategic partnerships. The company formed alliances with major airlines, hotel chains, and travel agencies to offer exclusive discounts and deals to its users. 

This approach provided added value to customers and fueled Ixigo’s growth as it began to earn commissions from bookings.

This team then built and launched many products in the next two years, taking the average number of visitors from 200K to almost a million by April 2010.

By April 2010, Ixigo registered its first profitable month by expanding into different verticals and keeping the expenses bare minimum. The Ixigo rollercoaster was going up. 

Investors were slowly coming back to look for the survivors after the recession of 2008. 

They started taking a keen interest in Ixigo, which had crossed monthly traffic of more than 1 million users by then. Ixigo had become a one-stop portal for anyone who was planning to travel

This was a significant number given that in April 2011, around 18 million users visited travel-related websites. Of them, Indian Railways had the highest number of visitors at 8.4 million, followed by Make MyTrip with 3.9 million visitors. In contrast, Yatra had 3.5 million, ClearTrip.com had 2.1 million and US-based Expedia Inc. saw 1.8 million visitors.

Ixigo at that point, was an informational website and not a transactional website or OTA like Make My Trip, which customers used to make the booking.

The competition was tough, and Make My Trip was looking for ways to beat the competition and explore inorganic growth opportunities. Make My Trip, could see synergies with Ixigo’s informational business.

In almost an exact parallel, MakeMyTrip did fulfilment like Swiggy when it started, while Ixigo did the informational discovery like Zomato. But unlike Swiggy and Zomato, here MakeMyTrip was much bigger 

The idea was not to acquire but to let both businesses co-exist and grow. let the Ixigo founders run the business and formulate a win-win strategy.

By 2011, they partnered with other investors and funded a Series-A round of $18.5 Million, taking up 75% of the business. While it helped keep Ixigo alive, selling a huge chunk of the business to a competitor was not necessarily a win. 

It would be another twist in Ixigo’s unique story as it survived for another day. 

Riding the High Ticket Volume Train

While Ixigo had built a substantially large information portal for all sorts of travels, it began to see there was an opportunity waiting to be taken.

Millions of people travelled via trains in India, making it the largest chunk of traffic.  

In 2013, Ixigo had launched its first mobile application focused exclusively on mitigating the information asymmetry for rail travellers. 

By the end of 2014, Ixigo had launched a total of 6 applications – with use cases ranging from finding eateries for road trips to offline Goa travel guides.

As expected, the Railways app was by far the most popular amongst these. It witnessed over a million downloads in its first four months and continued to see more than 100,000 monthly downloads throughout November. 

By 2015, Ixigo’s portfolio had grown to offer travel meta-search functions across flights, hotels, buses and trains. 

Its varied portfolio and innovative social media marketing tactics involving ‘travel hacks’ articles and videos served over 2.5 million travellers per month.  

But underneath these strong metrics, a storm was brewing. 

Ixigo struggled with monetising its user bases, with its losses amounting to approximately half its revenues. The money raised from MakeMyTrip four years ago had run out. 

Ixigo was mortgaging its financial assets just to stay afloat. The rollercoaster had turned yet again.

In June 2015, a white knight appeared in the form of Micromax, an indigenous mobile manufacturer, which bought an undisclosed minority share in Ixigo. 

Infused with new dry powder, Ixigo continued its diversification spree by launching a meta-search app for intra-city cabs, which soon became the fastest-growing product in Ixigo’s offerings. Boosting the app’s organic growth, Ixigo acqui-hired Rutago, an inter-city cab aggregator, in August 2015, to help scale its offerings in this space.

It also acqui-hired ‘IndiaBackpacker.com’, which provided information on backpacking hotspots and had formed a community of enthusiasts.  

There were clear reasons for Ixigo’s efforts towards horizontal diversification. 

The meta-search model heavily relied on advertisement revenue, which in turn depended on user traffic. To attract the most users possible, Ixigo wanted to become the first stop for anyone researching travel options online. 

The other reason was the changing nature of the travel aggregator industry. Historically, most travel aggregators focused predominantly on reducing information asymmetry for airline bookings, driving down margins in this space. 

This meant that for Ixigo, while airline bookings fetched margins of 4-5 per cent, hotel bookings could yield margins as high as 15 per cent. But trade-offs existed when it came to volumes. While Ixigo was facilitating 2,000 airline bookings per day, hotel bookings were limited to one-fourth the amount. 

Ixigo’s ace-in-the-hole, however, was its deep understanding of the pain points faced by railway travellers. At that time, it was the only travel meta-search platform offering to only provide real-time seat availability PNR status to its customers and offer highly accurate predictions of wait-list conversions. 

Ixigo was soon serving 60 million travellers by 2016, making it the largest meta-search travel platform in the country. It had an astonishing 70 per cent market share in the space. 

Half its customer base resided in tier 2 and tier 3 cities due to the moat it built around its railway offering. 

The twist of financial fate had again helped Ixigo focus, as it stayed alive to win. 

Jumping on Online High-Speed 

Learning from its brief period of financial stress, Ixigo sought to deepen its customer funnel to improve its user monetisation potential. 

It introduced instant one-click booking for flights and hotels in March 2016, preventing the need for its users to be directed to its partner’s websites.  

Doubling down on the moat built around its railway app, it added various value-added offerings in this segment, including coach and seat maps, alarms to notify users of station shops, and an AI-assisted chatbot to help users resolve their queries. 

It introduced a Hindi-only app to expand its user base in tier 2 and 3 cities and the rural hinterlands. Partnering with Uber, BlaBla car and Red Bus on its railway app, it sought to offer its users last-mile connectivity. 

Meanwhile, India’s travel industry was witnessing an online evolution. 

Gross online bookings aggregated up to a staggering $5.5 billion – accounting for 60-70 per cent of the total e-commerce transactions by the end of 2015. Of this, air travel bookings accounted for an outsized 60 per cent, followed by railways at 15 per cent and hotels at 13 per cent.  

Spurred by the low prices following Reliance Jio’s disruption, India’s internet user base of ~300 million was on track to witness double-digit growth over the next five years to reach ~700 million by 2020. 

Macroeconomic factors, coupled with Jio’s disruption, solved customer accessibility. Online travel portals are now needed to solve retention and monetisation. 

Therein lay Ixigo’s challenge. 

While excellent for acquiring users, its travel meta-search business model needed help with retention and monetization. 

Users were attracted to Ixigo’s platform because of its diverse portfolio offering comprehensive solutions to information asymmetry across price, dates, bookings etc. 

However, once identified their desired route and transportation, the bulk of their wallet value was captured by Ixigo’s OTA partners and end-suppliers that Ixigo’s platform linked to. In essence, Ixigo was enabling the cannibalisation of its users. 

Once the booking was done, Ixigo could not offer any further value-added services, such as booking alteration or cancellation. 

Recognising the limitations of its travel meta-search model, Ixigo began its journey to becoming a full-fledged OTA. 

A $15 million fundraising round helped sustain this expansion. Things were looking up.

Meta-search platforms redirect users to bookings on partner websites, their margins are earned on a ‘pay-per-click’ model – each visit sent to a partner site earns a small margin amount for meta-search businesses. 

On the other hand, OTA’s take full ownership of a user’s booking journey and can earn significantly higher margins for each completed booking on their websites. 

Ixigo was now directly competing with its investor-partner MakeMyTrip.

Reading Competitive Signals

In 2017, the OTA industry was amidst a consolidation. 

MakeMyTrip, the most significant player with a market share of 31 per cent, had just acquired Goibibo, the second largest player with a market share of ~27 per cent, allowing the combined entity to dominate the industry.   

Interestingly, the government-owned IRCTC captured the third largest chunk (~23 per cent) of online travel bookings, despite offering only railway offerings. The rest of the space was divided between Cleartrip and Yatra. 

To succeed in a space dominated by its investor-partner, Ixigo played to its competitive advantage. 

Ixigo’s railways app, focused on resolving multiple customer pain points, had long been an outperformer in its portfolio. Ixigo’s railways app had ~15 million monthly active users. Ixigo’s flight app had around one-third of that amount. 

Mapping its competitive advantage against the wave of exploding internet users outside of tier 1 cities, who were also the most significant users of railways, gave Ixigo its key target customer segment – “The Next Billion”. 

This segment consisted of the population’s huge swathes who first obtained internet access as a utility in the past decade. They did not reside in tier 1 cities and preferred to converse in local languages over English. They accounted for an overwhelming 90 percent of rail users. 

Ixigo partnered with IRCTC to become the first OTA to sell rail tickets on its own application. Ixigo’s rail app soon began to process 500,000 transactions monthly, growing 10 per cent month-on-month. 

The rail ticket payment processing margins were the lowest among all segments, ranging from ₹20–40 per ticket. However, the game was of volume – almost ~66 per cent of reserved tickets were booked online in 2018. 

Having built up trust with the next billion user segment for years, Ixigo envisioned its platform as its first gateway into online travel transactions. 

To facilitate this, it enhanced the multilingual features of its platform. It developed non-complex and light applications with large font sizes to ensure ease of use for the new mobile internet user. 

While playing a low-margin, large-volume strategy, this segment expected large portions to transition into an aspirational middle class eventually. 

Train booking was like buying milk in a grocery store, a loss leader to higher margin products. Trains allow it to cross-sell and upsell higher-margin flight, hotel and tour bookings to an established, trusting customer base. 

By 2019, Ixigo’s rail app had become the world’s sixth most-downloaded travel app and India’s third. It processed 4.27 million transactions valued at ₹3.8 bn per annum and had a ~90 per cent repeat transaction rate. 

However, profits were still an unattainable goal for Ixigo, which it tried hard to achieve. 

Pandemic Cancellation

Ixigo turned profitable in December 2019, a shining moment in their 14-year-long journey. 

The future looked great and promising as the team had just embarked on a profitable journey. But, the pandemic happened in March 2020 and the travel and tourism industry came to a standstill.

Online Travel Aggregators (OTAs), including ixigo saw a massive decrease in the number of bookings matched by a huge increase in uninstalls. Suddenly, they found themselves heading towards a zero-revenue trap.

As a knee-jerk reaction, all the leading OTA players took steep-cost cutting measures, including reducing marketing spending and lay-off people.

However, ixigo’s response was different as it narrowed its focus on addressing customers’ pain points, increasing engagement on its mobile app, and did no lay-offs and exited the non-core business.

Refunds post widespread flight cancellations were the biggest pain point for consumers. Ixigo was the only OTA that proactively refunded all affected customers, sometimes even before the money was released by partner airlines.

Ixigo launched new products to keep traffic coming to its site with minimal marketing spending – a COVID Centre inside its train and flight app, and entertainment content to keep customers engaged and entertained during the toughest months of lockdown. 

Some of its videos went viral.

As the travel industry started picking up post-June-2020, Ixigo introduced Assured, which enabled customers to access full refunds for cancellations up to 24 hours before the scheduled flight time by paying an extra 200 rupees.

Ixigo also worked on an internal discounting model giving users personalised deals on flights by partnering with airlines and hotels.

To focus on core business, Ixigo did a part tech, part IP deal with Spicejet for Travenues, which was built to create a Shopify airline platform. Ixigo also saw huge opportunities in ground transportation as digitisation was changing the dynamics of the industry.

In February 2021, the firm acquired ConfirmTkt, a fast-growing train-focused business, and together they became the number one OTA for train bookings in India, with over 42 per cent market share among OTAs by the end of FY21. 

In August 2021, ixigo added another essential leg to its next billion user growth story, through the acquisition of the bus business of AbhiBus with a focus on strengthening its market share across travel categories

Ixigo’s response to the COVID crisis was different than other OTA players and the result was sweet, as it became an outlier in the OTA industry charting growth and profits in FY21 despite the challenges of the COVID.

It had to complete what it had started with MakeMyTrip 7 years ago. 

Reaching the IPO Station

Ixigo’s evolution from a meta-search platform into an OTA had organically outgrown MakeMyTrip’s investment, and the intended synergies had long depleted.

The two had collaborated on content and international flights in Ixigo’s earlier avatar. 

However, there was now an unmistakable overlap and unavoidable competition between their businesses.

MakeMyTrip’s presence on the cap table felt passive and was no longer the protective shadow for Ixigo to grow under. In August 2021, the two separated, with the former making close to an 8x return on its investment of ~$5 million, and the latter filing for a Rs. 1,600 crore IPO.

SEBI had approved the public issue in December that year. By then, however, the red-hot IPO market, which had also seen the successful listing of EaseMyTrip in March, had begun to mellow. Ixigo postponed the IPO and doubled down on operations instead.

By March 2022, Ixigo touched 5 million daily active users and 55.5 million monthly active users across all its platforms – Trains, Flights, Confirmtkt and AbhiBus. The multi-app strategy made it relevant to affluent travellers and aspiring Tier II, III & IV India users.

New habits learnt during the pandemic also meant that smaller towns and cities increasingly turned to online modes to book bus and train tickets. Ixigo saw 84%, 87.5% and 93% of its transactions with either the origin or the destination being a non-tier-I city in FY19, ’20 and ’21, respectively.

Ixigo’s economics had also improved dramatically, with a gross margin of ~65%. Its viral and thoughtful marketing combined with a strong product made marketing fall to 6% of overall AOV. Excluding employee spending and technology costs, it made a 30% contribution margin. 

Even including employees, it was making a profit on every transaction. 

Ixigo’s model of making small monies from a very large user base had found resounding validation from its assiduously acquired user base. Counting Patna and Lucknow as its biggest markets, Ixigo was also one of the first anomalies in the Indian tech space, built for Bharat before it expanded to India.

Its headcount of just over 500 was between a tenth and a third of its peers. Ixigo had also leveraged data science and machine learning to translate travel information and crowd-sourced data into actionable business intelligence, thereby operating efficiently.

Further, a repeat transaction rate of 85% also meant declining annual customer acquisition spending, which stood at Rs. 84 per customer in FY22, falling by over 11% since FY20.

Ixigo’s frugal positioning was thus built into its way of doing business. 

Getting Confirmed for Greatness

Travel has always been a browse, and not a search, category. 

The user typically looks for ideas and options rather than a specific result. The widespread adoption of ChatGPT in late 2022 means that travellers now want an LLM to act as a friendly neighbourhood travel agent.

Ixigo was the first to launch a GPT-powered plugin named PLAN to offer personalised recommendations and itineraries to users.

In 2023, Indian travellers are on the lookout for shorter vacations, flexible plans and thematic packages built around adventure, heritage, wellness and spirituality.

Riding the wave, Ixigo has launched its own independent hotel booking platform, collaborating with Booking.com earlier. It has joined hands with a travel-tech startup called Pick Your Trail to offer packages and tours.

Revenge tourism was one of the mega narratives in the aftermath of the pandemic. The vengeance is visible in Ixigo’s business performance.

The company has seen 5x growth in 3 years, with an emphasis on being self-sustaining and cash flow positive. Revenue for FY23 is estimated to have clocked in at north of Rs. 500 crores, with an EBITDA margin of more than 7% and is expected to grow to ~Rs. 700 crores in FY24.

The platform now oversees 50 million yearly bookings totalling Rs. 10,000 crores and has set a steep target of doubling it over the next two years. Cumulative app downloads currently stand at 8 million every month.

Ixigo’s performance augurs well in a revenue-first reality, marked by a tempered funding environment and widespread layoffs, which it has appreciably avoided.

The upcoming public offer of Yatra.com would offer a peek into the public market’s appetite for tech startups in general and OTAs in particular.

Regardless of its next act, Ixigo’s painstaking rise to become one of India’s leading OTAs is a shining example of perseverance and the triumph of the entrepreneurial spirit. It has repeatedly survived the course to create an archetype for consumer tech startups looking to scale.

Therein also lies a lesson for internet companies coming out of India – that the consumer is money-minded yet discerning. She needs to be understood, catered to, and customised for as one of a kind. Absolute trust, hence, precedes successful monetisation.

Aloke and Rajnish took an established Western business model and Indianised it at every step of their journey. The founders, who have as much talent for survival in their DNA as business pluck, take pride in having built a cockroach enterprise.

The official sponsorship of the ongoing Men’s Asia Cup 2023 is yet another sign of Ixigo’s arrival. The platform had its genesis in accurately tracking PNR status for rail travellers. 

Despite its ‘Waitlisted’ IPO and multiple near-instances of its existence getting ‘Cancelled’, Ixigo’s relevance in the new-age, tech-savvy, internet-consuming Indian mind space seems ‘Confirmed’.

Writing: Abhinay, Ajeet, Nikhil, Shreyas and Aviral Design: Abhinav

Last fortnight, ISRO completed the historic Chandrayaan 3 mission to the moon, commencing its Aditya L-1 Sun Mission.

Swadesi Space Dreams

It was audacious for a newly independent India to even think of a space program. 

For centuries, humankind has been fascinated by what lies beyond the earth’s atmosphere. India was no different. 

But India in the 1950s and 60s was far from being able to afford one. It seemed like a risky experiment with no apparent benefit in sight. 

Thanks to the vision and resolve of a few brave men, India embarked on an audacious space adventure. A country that was barely beginning to walk was looking to fly. 

The visionaries of India’s early space foundation were Homi Baba and Vikram Sarabhai. While both pursued their postgraduate research at universities in London, the outbreak of World War II brought them back to India, where they would meet at the Indian Institute of Science (IISc) in Bangalore. 

They believed space technology could be harnessed for its communication, remote sensing, agriculture and education applications. 

Once the USA and USSR had started the space race, the USSR launched Sputnik, the first ever satellite in space. By 1963, the USA had opened up collaboration with other countries and India’s geographical location near the earth’s magnetic equator made it an ideal candidate to study the upper atmosphere.

Sarabhai jumped at the opportunity. 

In the same year, he gathered a team and made it possible for an American sounding rocket to take off from Thumba, a small fishing hamlet in Kerala. These rockets served as prototypes for probing the earth’s atmosphere and test components for space vehicles.   

Establishing the rocket launching station at Thumba was a quantum leap for atmospheric sciences and turned into the first lab for rocket systems in India. 

Thumba turned into a hectic activity centre for rocket launches – between 1963 and 1975, nearly 800 rockets flew into the skies from here. 

The location was like a studio where scientists from all over the world came to launch their rockets and conduct experiments, providing huge exposure to the people who worked there. 

Sarabhai gathered engineers and scientists from across the country and beyond to study rocket launches and eventually master building them. 

By 1969, the space program led by Sarabhai had started to gain the stature of a government department – all the operational work of building and launching rockets, satellites and their launch vehicles came under one roof called the Indian Space Research Organization or ISRO.

After Sarabhai’s demise, the reins of India’s space program at ISRO were handed over to mathematician Satish Dhawan in 1972. He was a former professor at IISc and was convinced to take over the chairmanship by Prime Minister Indira Gandhi.

Like his predecessor, Dhawan wanted the space program to have an economic or developmental agenda for India. ISRO’s headquarters were moved to Bangalore. He got cracking right away on ambitious tasks such as building India’s satellite launch vehicles and developing India’s first indigenous satellite. 

From just building rockets, ISRO was now developing a full-fledged space program. 

Satellite Se Kabhie Khushi Kabhie Gham

One of Sarabhai’s ambitions was for India to have its satellites. 

These were the proverbial ‘eyes in the sky’ that helped gather data and conduct experiments. 

The satellite program would be headed by ‘satellite man’ U.R. Rao, one of Sarabhai’s earliest students. With a team of 20 engineers, he began designing India’s first satellite. However, at this time, they weren’t even sure how they would launch the satellite into orbit. 

For any satellite to go to space, it needed a powerful rocket to escape Earth’s gravity. So far, India was only launching sounding rockets that went up to 55kms and fell back on the earth. 

India had not yet mastered the art of launching a rocket into space. 

Thanks to the Cold War complexities at that time, help to launch the satellite came from the Soviets. Post initial discussions, they decided the satellite would weigh 360 kilograms, and carry payloads to conduct experiments in X-ray astronomy, gamma rays and aeronomy of the study of the upper regions of the earth’s atmosphere. 

The budget? 3 crores rupees or USD 363,000. Frugality and innovation were part of ISRO’s core from the beginning.  

India’s first satellite would be built out of make-shift sheds in the Peenya industrial area in Bangalore, with materials coming in from across and outside the country. The USSR would only provide the launch vehicle and some basic technology – everything else would be learnt locally in India and ‘figured out.’  

The satellite would be called Aryabhata, after the great Indian mathematician. On 19 April 1975, around 30 Indian scientists traveled to Russia for the launch. 

Additionally, Indian scientists huddled at a monitoring station in Sriharikota. Incredibly, two toilets behind the Peenya sheds had been converted into another ground station to track the satellite 

Few minutes after the launch, the first telemetry signals were received by the Indian stations from Aryabhata. ISRO had sent a spherical emissary into space, something that was deemed impossible a few years ago. 

Four days after the launch, the satellite faced an electrical failure, halting the experiments it was to conduct. 

Sarabhai had made bouncing back from failure and learning from mistakes part of the culture at ISRO. The event only increased the odds of success in the future and did nothing to dent the scientist’s pride in putting a satellite into orbit. 

My Name is ISRO and I am Not a Fluke

A year after India’s first satellite launch, the sheds in Peenya were converted into the U.R.Rao Satellite Center and became a hub of activity for future launches. 

The next step for ISRO was to design and build a satellite launch vehicle or SLV. They could no longer depend on the Soviets or the US each time a satellite was to be launched. Sarabhai had first voiced plans for a launch vehicle in the mid-1960s. 

Compared to a sounding rocket that only needs to go up, a launch vehicle needs to put a satellite into orbit by injecting it at a very precise angle and velocity. It accelerates through the atmosphere, escaping gravity, sheds parts and then orients itself to place the satellite in orbit. 

Sarabhai had chosen the third on the list of the six configurations suggested for the SLV, thus the name SLV-3 for ISRO’s first launch vehicle. It was a four-stage launch vehicle, with one scientist in charge of each stage and Dr. Abdul Kalam as the Project director.  

This time around, the launch site for India was planned on the east coast because launching a rocket eastwards, in the direction of the earth’s rotation, helps it gather more momentum. The search led them to Sriharikota, a small land of the Bay of Bengal in Andhra Pradesh. 

After almost a decade of work and about a million components put together, the SLV-3 was planned for launch in 1979. The vehicle would carry a 40 kg Rohini satellite and place it in an orbit 300 kms from the earth. 

Just months before the launch, six engineers suffered acid burns from an explosion during the flight tests. After a few months’ delay due to the incident, the SLV was ready for takeoff in August 1979. 

Standing 22m above ground, it was the most giant rocket to leave Indian soil. Five minutes after it took flight, the SLV-3 crashed into the Bay of Bengal.

It was ISRO and Kalam’s first major failure. 

Despite the profound disappointment and frustration from years of work going up in flames, they persevered. Once again, Satish Dhawan’s message to the team was to learn from mistakes and return stronger. Undeterred, Kalam continued on the project.   

The government had spent 80 crore rupees on the SLV program. While by no means a hefty sum for a rocket launch, the stakes were high for an India still finding its feet. 

In July 1980, SLV-3 was launched successfully, putting the Rohini-1 satellite in orbit. The moment marked the birth of a self-reliant Indian space program, only the sixth country to launch its satellite. 

Abdul Kalam was the hero of the mission. 

By 1983, ISRO conducted two more launches of the SLV-3, gaining attention from international press and space agencies. This was followed by the Bhaskara series of satellites that focused on remote sensing with applications in Earth observation and agricultural planning. 

A true underdog with limited resources was feeding off the hunger of a passionate, driven scientific community to deliver stellar outcomes for the country. 

ISRO had put India in an elite club of countries with its space program.

Space Ke Liye Main Hoon Na

ISRO’s initial satellites in 1970s and 1980s focused on gaining operational experience and insights for future missions.

ISRO also established the National Remote Sensing Program (NRSP) that focused on using satellite information for applications in forestry, water management and urban planning. 

With a focus on commercialization, satellites were developed during this time for communication and meteorology to improve teleconnection across the country and weather detection.

By 1988, ISRO launched the INSAT-1C, a communications satellite designed to meet specific communications needs of the Indian Navy. This expanded the horizons for the space sector

After a few attempts, India launched the PSLV (Polar Satellite Launch Vehicle) in 1993. 

The first launch failed due to an altitude control problem resulting from an oversight in the software implementation. With learnings from SLV-3, ALSV and PSLV, the first successful launch occurred in 1994.

PSLV allowed India to launch its Indian Remote Sensing (IRS) satellites into sun-synchronous orbits, a service only commercially available from Russia then. 

Since its launch, the PSLV became the workhorse launch vehicle – placing both remote sensing and communications satellites into orbit, creating the largest cluster in the world, and providing unique data to Indian industry and agriculture. 

It also marked India’s entry into the Big Rockets league, as it could carry a payload of up to 1,000 kg.

ISRO received funding from the Department of Space budget, over INR 4,000 crore before 1990. With the challenging economic conditions in the 1990s, the budget dropped to a little over INR 3,200 crore in 1991-92.  

To generate a secondary source of income utilising the success of previous missions, ISRO, in September 1992, incorporated Antrix (a variation of the Hindi word Antariksh, meaning space).

The aim was to maximise the commercial value of the Indian space program by creating a robust ecosystem using ISRO’s capabilities. 

The first commercial foreign satellite launch occurred in May 1999, when ISRO launched satellites for Germany and South Korea and India’s OceanSat, a satellite for ocean applications. 

South Korea paid US$1 million to launch the 110 kg satellite when it cost the US more than US$2 million to launch a satellite of similar weight.  

Antrix, with the success of PSLV, has enabled India to become a prominent space player worldwide. Many space centres worldwide have relied on India to launch their satellites because lower costs cut them down by as much as 66%.

ISRO could do this because of the lower salaries of engineers, local manufacturing, the ability to work with fewer resources, and a clear focus on maximising outputs.  

The establishment of Antrix, the evolution of IT services in India, and liberalisation in the 1990s paved the way for an increasing belief in the privatisation of the space sector. The Department of Space promoted this growth and outsourced manufacturing to private players.

ISRO was beginning to become the Indian platform to give wings to private players and other countries

Chand Par Le Jayenge

In early 2001, the words of APJ Abdul Kalam echoed: the Space Industrial Revolution was on the horizon, poised to mark mankind’s next giant leap. 

In this melee, ISRO, armed with a mere $400 million budget, embarked on a journey set to disrupt the space industry. NASA, at the same time, had a 40x budget of nearly $14 billion

The decade’s inception witnessed the inaugural flight of GSLV, India’s largest launch vehicle, carrying the experimental communication satellite GSAT-1. While not meeting its intended orbit, GSLV’s affordability as a satellite launcher put India on the commercial map.

PSLV was designed for polar orbit satellite launches, whereas GSLV was intended for geostationary orbit satellite launches. GSLV could also carry bigger payloads and used three-stage liquid fuel with a cryogenic engine, making it more cost-effective.

Notably, ISRO lacked an official logo until 2002. The chosen emblem featured an ascending orange arrow tethered to blue satellite panels, bearing ISRO’s name in two text variants – orange Devanagari and blue Prakrta typeface.

2002 saw the launch of Kalpana-1, India’s first dedicated meteorological satellite, via the PSLV.

Meanwhile, China’s human spaceflight prompted PM AB Vajpayee to set eyes on the Moon, he pushed ISRO to develop technologies to land humans on the Moon and plan planetary crewed missions. 

It was the beginning of the Chandrayan dream. 

By 2003, GSAT-2, a 2000 kg experimental communication satellite, made its mark aboard GSLV-D2’s second developmental test flight. 

Over time, India’s space program forged a self-reliant and cost-effective space infrastructure, yielding substantial economic and societal benefits.

EDUSAT, or GSAT-3, was India’s inaugural “Educational Satellite,” empowering distant classroom education. 

By 2005, Antrix, ISRO’s commercial arm, continued to secure international contracts for satellite launches, showcasing India’s prowess.

ISRO’s satellite manufacturing prowess shone, delivering satellites in approximately 28 months at $40-60 million for a 2-ton satellite. Lower-orbit launch by PSLV cost under $20 million whereas a Delta II launch in USA costed approximately $60 million for a similar payload

For a geo-orbit launch, using GSLV was near $50 million compared to Atlas V launch cost of approx $200mn

India displayed fiscal efficiency.

In innovation, the AVATAR Scramjet project aimed to birth a cost-effective, reusable launch vehicle tailored for small satellites, fostering commercial viability.

The era witnessed monumental achievements like the successful launches of GSLV-D1, D2, GSLV-F02, and F04, carrying crucial payloads like INSAT-4C and INSAT-4CR. The pioneering CARTOSAT-1 joined the fray, providing in-orbit stereo images.

ISRO’s success was backed by the vision of Dr. Vikram Sarabhai, solid and continued political support from the Indian Government and a high-calibre technical workforce, 40% of whom are doctorates, post-graduates and graduates. 

Venturing beyond space, ISRO’s cryogenic technology expertise fueled collaboration with Tata Motors, birthing a hydrogen fuel cell prototype car for the Indian market.

The journey wasn’t without its challenges. GSLV-F02, carrying INSAT-4C, faced setbacks in 2006. Nevertheless, PSLV triumphed in commercial missions. 

Notable among these were the Italian Space Agency’s AGILE satellite launch in April 2007 and the Israeli satellite TECSAR’s deployment in January 2008. April 2008 showcased ISRO’s prowess, launching ten satellites in a single mission.

The stage was now set for India’s foray into lunar exploration.

Space Race Ka Badshaah

The moon has always held strategic importance in space. 

Its relative proximity, scope for further research, considerable resource potential and the glimmer of life support.

With the launch of Chandrayaan-1 on 22 October 2008, ISRO entered a rarefied circle of national agencies – only the fifth – to reach the lunar surface. 

The project’s broader purpose was to survey the lunar surface over two years, particularly the chemical composition at the surface and the three-dimensional topography. However, the mission’s most significant achievement was discovering the widespread presence of water molecules in the lunar soil. 

The landmark achievement raised ISRO’s stature and the scale of India’s space ambitions.

What escaped attention at that time was a module within the mission called the Moon Impact Probe (MIP), which had the national flag inscribed on it. On entering the lunar orbit, the probe was programmed to drop near the south pole, serving as symbolic evidence of India’s arrival on the moon and a precursor to soft landings in the years to come.

ISRO then championed utility projects to improve telecommunications and broadcasting (GSAT series), facilitate disaster management (RISAT-2), urban planning & infrastructure development (Cartosat series), monitor coastal zones (Oceansat-2) and further forestry and agriculture applications in general.

In November 2013, ISRO launched the Mars Orbiter Mission (MOM) or the Mangalyaan, the country’s first interplanetary mission, cementing India’s status as a space superpower. 

India was the first Asian nation to achieve the feat and the first in the world to do so in its maiden attempt.

The historic mission cost just $73 million, showcasing ISRO’s well-chronicled frugality. ISRO attributed it to a modular approach, judicious ground tests and 18+ hour working days for scientists. 

The broader objective included exploring Mars’ surface and atmosphere using indigenous scientific instruments.

By this time, ISRO had also mastered the playbook of building technologies with comprehensive use cases and added application layers to disseminate them at scale. It quietly developed the world’s largest constellation of remote-sensing satellites.

In 2018 it went live with Navigation with Indian Constellation (NavIC) or the Indian Regional Navigation Satellite System (IRNSS). It could provide accurate real-time positioning and timing services in India and up to 1,500 kilometres beyond borders. This alternative to GPS no less could soon make its way into smartphones.

ISRO was truly becoming the champion in the space race and the collective pride of India

Baki Desho Ke Sath Bana Di Jodi

By 2018, the space industry was opening up.

It had once served as an exclusive platform for global governments to showcase their soft power. The industry was increasingly moving towards a free market and, thus, higher competition.

Despite ISRO’s reputation of getting things right at scale, a market share based on cost advantage alone was unlikely to be enduring. 

Private companies like SpaceX successfully tested reusable rocket technology. New upstarts included the Dutch space solutions provider ISI Space and USA’s Made in Space, which offered 3D printers for space. 

There was also significant regulatory risk, with several ‘America-first’ companies actively lobbying for rules to prevent USA’s satellites from being launched by ISRO.

Like the USA, Japan shifted to the private sector to boost growth and competitiveness. China had also conditionally opened its space industry to entrepreneurs and private investors. The Chinese National Space Agency held part ownership in all space startups while allowing them autonomy in research and development. 

India’s NIAS also highlighted the importance of developing the private sector’s capabilities.

Even in the changing landscape, ISRO continued to be in good stead, for it had mastered the fundamental first principle in space missions – that the cost to launch a vehicle off the ground is directly related to its weight on the ground. 

This explains ISRO’s reliance on its storied workhorse – the PSLV.

While it appears oversimplistic, ISRO’s ostensible advantage resulted from making a virtue out of economic necessities and prioritising ruthlessly. 

For instance, the Apollo 11 mission took just 4 days for astronauts to reach the moon in 1969. It used a powerful Saturn V rocket to push the spacecraft in record time.

On the other hand, ISRO’s Chandrayaan missions used much smaller rockets and instead relied on continued orbiting to build up the spacecraft’s velocity. The process took longer while cutting down the project expenditure to a fraction.

ISRO has also been helped in no small part by the good old jugaad of its vendors and contractors. Its suppliers commonly procure satellite patches from abroad and re-engineer them in bulk at a significantly lower cost while maintaining a tight grip on quality.

Similarly, ISRO’s standard mission timelines appear substantially crunched compared to other national agencies. That requires close collaboration, precise planning & resource allocation and very limited experimentation. 

This drives a culture of efficiency across the organization.

ISRO’s stellar track record and autonomy from the Indian state has allowed it to become a preferred partner for satellite launches (400+) and spacecraft missions (100+) for other nations. 

It entered MoUs or Framework Agreements with China, Japan, UAE and UK.

Domain excellence works best in an environment of mutual dependence. Space exploration continues to be marked by soft alliances and convenient partnerships rather than a head-on turf war. As it was one of the few nations in the world to go to space, it became an attractive partner for countless nations and private players. 

The Space Agency had truly become a space platform from India to the world. It was about to explode. 

Phir Bhi Space Hai Hindustani

The Government of India liberalised the space sector in 2020, marking a huge step. 

One of the key guiding principles behind this move was to democratise access to not only space, but also ISRO’s facilities, guidance and mentorship. India’s space tech stack would no longer be limited to ISRO’s vendor ecosystem of 400-500 companies.

ISRO had become the India stack for Space Tech in all ways.

The rationale behind this was obvious. Despite ISRO’s technical prowess, it was competing on the global scale with a blunt edge. 

Its budget of $1.7 billion in 2022 was minuscule compared to US $30 billion and China’s $14 billion. India’s share in the $440 billion global space market amounted to just 2%. 

ISRO needed money to flow in. 

Action followed quickly. NSIL, ISRO’s commercial arm, was leveraged to identify and execute opportunities for technology transfers to the private sector. In FY22, 69 technologies were transferred from ISRO to NSIL, allowing the latter to achieve a turnover of ₹1,675 crore.

The Indian National Space Promotion and Authorisation Centre (IN-SPACe) was formed to promote and supervise the private space sector, including enabling access to ISRO’s resources. 

Through IN-Space 2021, startups like Agnikul Cosmos and Skyroot Aerospace obtained access to ISRO facilities and vehicle testing expertise

On 18 November 2022, Skyroot Aerospace launched India’s first privately manufactured rocket, Vikram-S, from ISRO’s facilities in Sriharikota. Seven days later, Agnikul Cosmos formally established India’s first private launchpad and mission control centre in Sriharikota. 

As one would have guessed, money quickly followed too. In 2023, India’s space tech sector ranked seventh globally in funding. It was about to do the impossible. 

On 23 August 2023, India became the first to soft land on the moon’s south pole. It was an incredible feat, but along with liberalization, it was India’s second big step. 

The objective was not easy. Visualise remotely landing a spaceship travelling at a speed 10x faster than an aeroplane on a hazardous, cratered surface, while operating in a reduced gravity & no-atmosphere environment! 

Of all the lunar missions launched in the past six decades, almost half have failed. Only 37% soft landings have been successful. These challenges had overwhelmed ISRO’s previous attempt with Chandraayan-2 to soft-land on the moon. 

Dauntless, ISRO returned to the drawing board and developed a ‘failure-based design’ for Chandraayan-3, focusing on protecting against all potential adverse scenarios. These included strengthening the lander’s legs for faster landings, adding more solar panels for increased power generation, and increasing the target landing area by 40 times. 

Chandrayaan-3’s mission profile was also simplified. Chandrayaan-3 did not carry an orbiter as Chandrayaan-2 had and carried 6 payloads vis-à-vis the latter’s 14.  

With Chandrayaan-3’s success, ISRO put India’s space program on the global map, spotlighting the young and ambitious space tech sector of India 

Akin to the Mangalyan Mission, the cost frugality of the entire mission again came to the spotlight. The mission cost only ₹600 crore ($74m) – half of what it cost to produce Interstellar. 

Exactly like the India stack for fintech, ISRO had platformed into a tech stack for space. The flood of entrepreneurs to build on top of it were coming. 

Chak De India

Regulatory ambiguity in space has now turned into full-blown encouragement. 

The Indian Space Policy 2023 seeks to institutionalise the role of ISRO, IN-SPACe and NSIL in promoting the growth of the private space sector. 

As of February 2023, IN-SPACe received applications from over 160 private entities to utilise ISRO’s facilities. In collaboration with Social Alpha, ISRO has also launched the SpaceTech Innovation Network to promote venture development in the sector. 

The global space exploration market is predicted to reach USD 1,879 billion by 2032, and the government has declared its aspirations for the Indian space sector to account for 9% of the market, suggesting continued support in the future. .

Smaller satellites use Small Satellite Launch Vehicles (SSLVs), which can cost almost one-fourth of Polar Satellite Launch Vehicles (PSLVs), used for larger payloads. 20 companies expressed interest in building SSLVs for ISRO under the technology transfer scheme in August 2023. 

Companies like Agnikul Cosmos and Skyroot Aerospace, which utilise technologies like 3D printing, bring down the costs even further to range of INR 20 crore per SSLV. 

Reaching space is just one of the problems being solved by spacetech ventures. 

Bellatrix Aerospace is busy testing multiple propulsion technologies to be used by satellites once they are in space. Pixxel, Kawa Space and GalaxEye Space are emerging as pioneers for imaging technologies to be equipped on satellites. Astrogate Labs is building ground-to-space optical high-speed communication technologies. 

InspeCity is positioning itself as a satellite repair and servicing provider, aiming to enhance the life of satellites. Perhaps one of the most ambitious Indian startups, it eventually seeks to build O’Neill  cylinders for human habitation in space. 

Yes, human settlements in cylinders. The lines between fiction and reality are blurring. 

Digantara is working on developing solutions dealing with detection & mapping of space debris. SatSure hopes to gather, refine and sell satellite-based data & analytics services across multiple sectors. 

While enabling the little guys to grow up, the big daddy of all ISRO continues to hone its platform.

With private pioneers ready to exploit the available space-based commercial opportunities, ISRO focuses its resources on strategic and exploratory missions that could unlock further opportunities. 

ISRO’s current pipeline of projects draws a promising picture. 

The Aditya L1, ISRO’s first mission to the sun, launched on 2nd September this year, with aim of analysing the surface of the sun, including phenomena like coronal ejection and flare activities. It will be placed on a LaGrange point, wherein the sun and Earth’s gravitational forces negate entirely each other. 

The Mangalyaan 2, ISRO’s second unmanned mission to Mars, will take place in 2024, consisting of an orbital probe to assess the planet’s geological cycles. 

In the pipeline is Gaganyaan-1 (est. 2024.), which will be ISRO’s first step towards the pinnacle of space exploration, with three astronauts being sent to space for three days, on indigenously built spacecraft. 

This could be a precursor for launching sub-orbital space tourism missions, for which feasibility studies are currently being conducted.

Other missions include a trip to Venus (est. December 2024) and an unmanned return mission from the Moon (est. 2026-2028). 

ISRO today stands as a beacon of unity for the nation, transcending its diverse demography in pursuit of the cosmos. It serves as a reminder for every Indian, that in the grand tapestry of the universe, we are but one, bound by shared dreams and aspirations- Vasudhaiva Kutumbakam.

As Sagan said, the cosmos is within us. We are made of star stuff. We are a way for the universe to know itself.

Embodying these ideals, ISRO symbolises India’s commitment towards humanity’s most extraordinary quest – exploration of space, the final frontier.

Writing: Keshav, Nikhil, Priyanshu, Rajiv, Shreyas, Tanish and Aviral Design: Omkar and Saumya

Last fortnight, GreyOrange announced it had 5,000 robots in operation all across the world, as it was named Spark’s leading autonomous mobile robot vendor in the world

Sparking Circuits

Akash Gupta and Samay Kohli were students at BITS Pilani. 

In 2007, they met through their shared passion for science and mathematics, which led them to pursue robotics at BITS’ Center for Robotics & Intelligent Systems (CRIS). 

At CRIS, they would go on to build Acyut, India’s first humanoid robot. They then represented the country in global humanoid robotics championships, winning the Gold Medal at the San Francisco RoboOlympics in 2009. 

This would start a long and successful partnership between the two. 

Around the same time, Wolfgang Hoeltgen, an electronics engineer at IBM and an entrepreneur, was organising a science and technology show in Germany. He invited the duo to present Acyut in Hannover. 

Akash and Samay were deeply inspired by Wolfgang’s experience across research, manufacturing, engineering and software development and approached him to act as their mentor. 

This would continue for the next few years, as the duo would contact Wolfgang occasionally to share their ideas with him. 

An internship at C&C Technologies in the United States would give Akash and Samay their first exposure to a product that would later become the heart of their entrepreneurial venture. 

At C&C, a company primarily focused on surveying and mapping terrain, Akash and Samay were tasked with developing a small Disney park (400 sq. ft.) with the special effects entirely automated. This would be the first time Akash and Samay were involved in a project of such scale. 

Shortly after that, the duo started GreyOrange in 2011 from their savings of Rs 5 lakhs during their internship in the US. They initially pursued the field of robotics training and began teaching at universities. 

They immediately understood that dwelling in education was not their cup of tea. They decided to move over to the service industry and began finding business opportunities where they could provide value. 

Before the internet was mainstream in India, a company was building robots.

Thinking, Inside A Box

To truly understand which industry they could fit into, Akash and Samay set themselves some essential criteria. 

They wanted the problem to be global, the solution to the problem to be disruptive enough and the solution to involve both hardware and software. 

In 2012, a visit to a Flipkart warehouse in Delhi gave Akash and Samay the opportunity they were looking for. 

The warehouse was cluttered with piles of different products spread entirely throughout the floor, and people needed help sorting and picking up all the products. 

The chaos at the warehouse made an ideal scenario for the duo to explore. 

They were convinced that they could build an elegant robotics system, backed by complex software, that could help warehouse workers pick and move the products much more efficiently. 

As they had done in the past, they contacted their mentor Wolfgang and presented their newest idea. Upon hearing the idea, he was convinced that it was the perfect match of the duo’s skills and real worldwide demand. 

He immediately flew to India and helped work out a business plan. 

Within a month, he liquidated his life insurance, rented office space, bought a CNC (computer numeric control) and hired engineers. 

Flipkart would give them their first order of Rs 35 Lakhs to build a warehousing solution, and just like that, GreyOrange Robotics would have its start. 

The duo shared a lofty vision, imagining warehouses run entirely and managed by robots. 

They ran into early hurdles though, as the need for a language to allow communication among multiple robots, and of a proper prototyping environment in India, meant that they had to build everything from scratch.

The GreyOrange Butler Robot System was the first product they would start working on. 

It consisted of Butler Robots, autonomous mobile robots, Pick/Put stations where the warehouse employers could interact with the product, Mobile Storage Units and Charging Stations. The centre of the system was GreyMatter, an end-to-end order fulfilment platform that controlled and managed all the devices to drive collaboration.

Alongside the Butler, they set out to build the Sorter, even though they were a team of barely 10. The Sorter would be a mobile warehouse sorting capability to sort packages/products based on rules. 

Armed with a massive vision, changes in e-commerce were afoot

Brain Racking Problems

For two years, the team would switch between building the Butler and the Sorter. 

Building them in parallel was not possible, due to the complexity of the problem. Three years after its conception, the first robot butler system would be installed in Hong Kong, with 10 mobile butler units. 

The Sorter would be a part of the Flipkart warehouses in Bangalore. DTDC would be onboarded soon, and many more were to follow.

The end of 2012 would see GreyOrange receive their first-ever VC funding from the BITS Spark Angel group. 

This group of BITS Pilani alumni globally invested in BITSian-founded Indian startups. The round would see GreyOrange compete with 23 startups and become the only one that received funding. 

GreyOrange saw a massive demand for their robotics solutions as they showed more and more value to their existing customers. 

Flipkart reported picking items from 100-120 in eight hours to 400-600 per hour. DTDC could handle 20-25% more daily volume at each hub. The shipment turnaround of 6-7 hours now dropped to 1-2 hours. 

While more and more companies wished to adopt GreyOrange’s solutions, they chose to be selective in picking who to partner with for their next generation of robots. They preferred installations in Singapore and in international markets.  

They soon moved to Singapore as a base, giving them better operational flexibility and access to the rest of Asia. 

2014 saw GreyOrange raise Rs 54 Crores as its Series A funding, as a means to scale internationally and focus on R&D to improve the autonomy and efficiency of their systems. 

With supply chain efficiencies primed to be a pivotal factor for global trade in the upcoming decade, GreyOrange were right in the midde of solving a massive global pain point. 

GreyOrange Robotics had begun making their mark, not just in India, but across the globe. 

Forklifting Spirits

Samay and Akash recognised the transformative potential of robotics and automation across industries, but as newcomers, they wanted to focus their efforts early on.

By 2015, the e-commerce industry was soaring domestically and globally, revealing scalability gaps. Within this realm, warehousing and fulfilment emerged as labour-intensive bottlenecks in the supply chain. 

Yet, labour shortages were rampant and projected to persist. An astounding 73 per cent of third-party logistics firms highlighted the struggle to secure, train, and retain skilled labour as their foremost challenge. 

Moreover, high training expenses, labour efficiency limitations, and constraints in handling volume within tight timeframes plagued the warehousing sector. The alluring promise of 1-day e-commerce delivery unveiled the vulnerabilities of manual labour.

Technology emerged as the crucial component to facilitate sustainable scaling.

After thorough industry exploration, the team honed in on the e-commerce, burgeoning retail, and consumer goods sectors. The surge in e-commerce and logistics, both internationally and domestically, offered many opportunities.

Around the world, companies were excitedly adopting and investing in warehouse robots. These robots were helping businesses and their workers handle challenges like higher costs, lots of orders, shortage of staff, and tight deadlines, all while making fewer mistakes.

Amazon’s acquisition of Kiva in 2012 was a highlight of this trend. At a time when the global logistics and warehouse robot market was expected to grow to over $125 billion within the next decade, Samay and Akash discovered a niche and went all-in.

They began by locally creating and selling their technology, expanding their customer base.

Around the same time, India introduced the GST (goods and services tax), greatly benefiting GreyOrange. 

This new tax system encouraged businesses, including e-commerce players, to use centralised warehousing instead of having warehouses in each state, which was the norm before GST that aided companies to avoid entry taxes. This shift to centralised warehousing opened doors for automation, where GreyOrange excelled.

By 2016, their customers included prominent names like Flipkart, Myntra, DTDC, GoJavas, and Jabong in the e-commerce and logistics sectors. In just five years, the startup achieved nearly 90% of the market share of India’s warehouse automation market, establishing a near monopoly.

Acknowledging the fierce competition in the industry, they emphasized research and development (R&D), with over a third of their workforce dedicated to it. This strategic focus would open a myriad of opportunities for the team.

A science project had transformed into a real company, with a big moment for the company soon to arrive. 

Loaded Docks

Home Logistics’ Osaka centre selected GreyOrange Butler for warehouse automation in 2017

Despite having numerous alternatives, GreyOrange won. This decision held significance beyond the local context, marking GreyOrange’s foray into the exacting tech landscape of Japan and its stringent requirements.

GreyOrange’s accomplishments shine for their impressive technology skills and knack for navigating an arduous journey. The company’s entry into complex global markets showcased its software, hardware, electrical, and mechanical engineering expertise.

GreyOrange’s progress soared as time passed, achieving a remarkable 300% year-on-year growth by 2017. 

Unstoppable in their pursuit, GreyOrange’s founders harnessed their deep understanding of automation to achieve remarkable success. What began with modestly paid trials swiftly evolved into substantial contracts, with single warehouse deployments worth between $10 million and $20 million.

GreyOrange founders relied on hands-on experience, gathering practical insights during warehouse visits as the automation landscape evolved.

As the autonomous warehouse era began its adoption cycle, GreyOrange’s dedication to continuous improvement remained evident. They focused on agile hardware, holistic software solutions, and platforms to flexibly vary warehouse operations.

Their dedication to high standards led to implementing a “10x KPI,” ensuring that GreyOrange installations delivered a tenfold increase in cost savings or time efficiency for their customers.

With the consignment processing capacity soaring tenfold, GreyOrange’s technology emerged as a potent tool in minimising human errors in labelling and routing, especially valuable for courier companies like DTDC.

Beyond efficiency, GreyOrange was equally dedicated to enhancing customer onboarding, a critical component in their journey. They achieved this by delivering installation times a quarter of the industry average, reducing downtime and optimising resources, unlike the conventional approach of immediate large-scale installations. 

GreyOrange’s robotic “Butlers” real-time capabilities boosted efficiency and curtail costs. As their fleet of robots grew, implementing smart orchestration became paramount. Optimal task assignments reduced onboarding and support costs and streamlined operations to an impressive degree.

Embracing the industry’s advancements, GreyOrange surged ahead, achieving a notable break-even point in 2019, realised within less than a decade since its inception. 

In just five years, their revenue mix also underwent a transformative shift. While remaining a significant contributor, India accounted for 10% of the total revenue, the United States claimed half, and the remainder flowed in from Europe and Japan. 

The company was building from India to the world. 

Plane Spaces

The foundation of GreyOrange’s ambition demanded a corresponding scale of solutions. 

The company would investing over $1 million to set up its U.S. headquarters in Atlanta, Georgia. Spanning a sprawling 110,000 sq. ft. office and warehousing space, this campus strategically positioned GreyOrange to tap into the city’s well-established supply chain and logistics provider network.

Complementing this move, the creation of an R&D unit in Boston aimed to attract top-tier tech talent from renowned educational institutions across the globe.

Meanwhile, GreyOrange expanded its footprint into Japan and Germany as its workforce neared the 600-mark. This expansion necessitated the cultivation of diverse talent and ecosystems across different locations. 

Despite this growth, the company’s commitment to technology remained steadfast, with more than a third of its workforce dedicated to research and development.

In a significant stride forward, GreyOrange introduced its flagship Fulfilment Operating System in December 2019, incorporating the innovative GreyMatter intelligence as a learning layer within Ranger GTP (Butler), Ranger Mobile Sorter (Flexo), and Ranger Picking (PickPal).

Ranger Mobile Sorters transported parcels from receipt to dispatch. Ranger Picking Pickpal collaborates with robots to assist or fulfill tasks. Fulfilment Operating System enhanced store efficiency by precisely packing orders. 

The ranger robots communicate to recalibrate priorities and strategies in real-time, considering commitments, speeds, availability, and windows.

By 2020, the company had scaled to an astonishing 1,000 Cr of revenue. This was not just an incredible feat for an Indian startup but also one for making robots from India. 

Amidst these advancements, GreyOrange was not alone in the race to revolutionise warehouse automation.

Sorting Out The Competition

Amazon set the precedent for nearly a decade before the pandemic instigated a seismic shift in global supply chains. 

Fulfilment operations, especially susceptible due to staffing shortages brought about by social distancing and isolation measures, were suddenly ripe for transformation – an opportunity that robots seemed poised to seize, in part if not in entirety.

GreyOrange was in global contention alongside half a dozen rapidly burgeoning players in warehouse automation and fulfilment management. 

The field included the likes of Geek+, Alibaba’s favoured warehouse robotics creator; InVia, headquartered in Los Angeles, which leased automated robotic technologies to fulfilment centres; Gideon Brothers, a Croatian startup; Berkshire Grey, one that amalgamated AI and robotics to automate the fulfilment processes of retailers, e-commerce entities, and logistics enterprises; Quicktron from Germany and Canada’s Otto Motors, among others.

The space would see massive amounts of capital. Geek+ would raise $2.8B, Berkshire Grey would go public, raising $2.5B, and Invia and Gideon would each raise $200M. 

While emerging challengers showcased their novel innovations, GreyOrange also faced stiff competition from industry stalwarts such as Swisslog, SSI Schaefer, Siemens, Daifuku, and Mitsubishi, all of whom showcased offerings transcending mere robotics and fulfilment, expanding their influence across various domains.

The industry’s ultimate aspiration remained steadfast: developing intelligent, integrated solutions fusing IoT, 5G, edge computing, and real-time computer vision to supplant traditional conveyor-belt assembly lines. 

Key differentiators would be affordability, deployment speed, and scalability. 

GreyOrange’s distinctive strength resided in its ability to deploy systems within a remarkable timeframe of under six months, starkly contrasting to the 12-18 months demanded by conventional automated storage and retrieval systems. 

This accelerated implementation, coupled with the option for gradual scaling, avoided upfront investments and underutilisation during the initial phases, effectively positioning GreyOrange as a formidable contender in its sphere.  

As the fulfilment industry reached a staggering $9 billion, with the promise of swift expansion as automation permeated every facet of production and logistics, the market structure seemed poised to evolve into an oligopoly gradually over time.

However, the world would watch this industry face rapid changes, as the unforeseen challenges brought on by the pandemic would completely disrupt supply chains across the globe.

Bionic Arms Race

Pre-pandemic, the warehousing sector had been on a slow burn

Innovation and automation upgrades were limited due to the prevailing perception of warehousing as a cost centre. Efficiency was often sought through cost reduction rather than technological advancement. 

However, the pandemic proved to be a seismic catalyst, disrupting the supply chain sector and prompting a complete 180-degree shift in approach. As the pandemic unfolded, the traditional methods of scaling operations became untenable. 

This unprecedented situation fueled an unparalleled demand for robotics in the manufacturing sector.

During this crucial juncture, the demand for robots skyrocketed, with large retailers desperately seeking solutions to meet the new needs of efficiency and speed. Amazon deployed an astonishing million robots in its warehouses to accommodate the surge in e-commerce demands, while other retailers needed help managing 20-30K robots.

The post-pandemic era heralded the beginning of the “Robot Wars.” 

In this landscape, Amazon introduced Kiva, Alibaba embraced Geek+, and GreyOrange emerged as the choice for other retailers. The company became a pivotal robot supplier to many prominent clients, including Walmart, H&M, COS, Coupang, and GXO Logistics.

GreyOrange experienced rapid growth across diverse customer bases, applications, and geographic regions, further underscored by achieving a remarkable 170% gross retention in contracted revenue from existing customers in 2021.

The demand for GreyOrange’s omnichannel fulfilment platform grew immensely post-pandemic. 

Retailers worldwide came to acknowledge robotic automation in the fulfilment process. This marked an extraordinary moment when an Indian-origin hardware company was shining on the global stage, actively onboarding customers across diverse countries ranging from the United States to Japan.

In a significant milestone, GreyOrange secured $110 million in funding, strategically fueling global expansion, consolidating market dominance, enhancing the deployment of their industry-defining software platform, and accelerating the adoption of their cutting-edge solutions worldwide.

Despite the growth, 2022 would be a rough year for GreyOrange as they would scale slower than their competitors in the gold rush. The company had a planned IPO at a $1.6Bn that wouldn’t materialize. Investors would nudge for a change. 

The change would come.  

Picked-And-Packed Future

As the company entered 2023, it would see changes in its team

Samay Kohli would move on as the CEO of the company, with his co-founder Akash picking up the mantle. The team would also beef up its management team, looking more like a global organization.

Despite the challenges faced by GreyOrange, its journey would be exceptional. Lacking any sort of ecosystem in India for hardware, it emerged as a global leader. 

Becoming Spark’s leading autonomous mobile robot vendor would be no mean feat. 

As the team is organized for scale, substantial growth still beckons. Retailers worldwide will actively seek avenues to enhance their supply chain capabilities, creating a sustained demand for innovative solutions.

GreyOrange’s estimation of the addressable market further bolsters this conviction. 

Globally, the percentage of smart warehouses remains small, ranging from 8-10%, and some countries, like the UK, possess a mere 2-3% smart warehouses. 

GreyOrange has thus made significant investments into expanding its leadership team. Strategic appointments such as a regional CEO for North America and a global COO are steps to unlock growth potential fully.

It plans to introduce an additional 300 roles spanning engineering, product development, and marketing and assemble a formidable team.

Hitting an estimated $150M in revenue in 2022, the company looked better positioned to win in 2023. 

GreyOrange continues to emphasise product quality and the prowess to introduce pioneering projects. The company’s inception was rooted in the conviction that fulfilling modern demands must rely on something other than technology tailored for a bygone era. 

Remaining true to its foundational principle, GreyOrange recently unveiled a multi-robot orchestration feature, enabling robots from different manufacturers to function collaboratively within a warehouse setting. 

This innovation aligns with their anticipation that by 2026, more than 50% of companies deploying intralogistics robots will embrace a multi-agent orchestration platform.

From a modest courier service in India to a cutting-edge logistics warehouse in Osaka, GreyOrange’s journey has transcended expectations. 

It is a humbling and awe-inspiring embodiment of “Make in India for the World.” The journey has merely commenced as the company progresses, promising a bionic future.

Writing: Bhoomika, Ajeet, Raghav, Mitali, Nikhil and Aviral Design: Omkar and Stable Diffusion

Last fortnight La Pino’z opened its 2nd store in the UK after explosively going international in 2022. 

Shake it Till you Make It

Sanam Kapoor had a stable job at HCL.

He always intended to start something, which he shared with his father. Completely against general wisdom said in 2011, he left his stable job.

He started a small pizzeria and called it Pinocchio Pizza.

Sanam started with a single 120-square-foot store in the bustling market of Sector 9 in Chandigarh. Wanting to do something different in the industry, he began selling giant slices of pizza inspired by a similar trend in Western countries.

Despite having no formal training in the culinary arts or the food industry, Kapoor ventured out. Starting a pizza business in an industry worth 1,300 crore, dominated by a few international brands, hardly seemed logical.

At the time, Domino’s controlled the industry with a 54% market share, followed by Pizza Hut and Papa John’s.

Pizza was a novelty when these brands first entered the market, served only at big five-star hotels. By 2011, they had managed to carve out a call for themselves, with delivery in under 30 minutes and new affordable small pizzas at 29 rupees becoming all the rage.

They were also growing at an astonishing rate. With a CAGR of 46%, Domino’s opened around 60 stores in 2010 alone, increasing to 410 stores in 96 cities by mid-2011.

But Kapoor saw an opportunity here: to create a pizza brand that was catered to the taste preferences of the Indian population. Pinocchio was rebranded. 

“La Pino’z” literally means “Giant Pizza Slice” in Italian.

La Pino’z aimed to create an affluent brand, exuding the look and feel of an authentic Italian establishment.

He started alone with a small capital from his family. He did everything by himself, from branding, designing the stores, developing recipes and making the whole pizza from scratch with fresh ingredients.

He focused on creating a menu that combined the familiarity of Indian flavours with the novelty of the pizza. For this, they used indigenous vegetables for toppings.

In no time, people began to appreciate the taste and freshness of the pizza. With no marketing, La Pinoz started growing through word of mouth alone.

On a Franchise Roll

By 2012, Kapoor was taking a slow and steady approach to expanding his business. 

He was struggling to go beyond one restaurant. He started with his first outlet in Chandigarh but faced numerous challenges. 

He opened his second outlet in Mohali, where he faced a different set of challenges due to the diverse customer base. He learned to adapt to the market, adding new items to the menu based on customer feedback.

Kapoor’s pizza business initially offered only giant pizza slices. 

However, he quickly realised that he needed to diversify his offerings to cater to different customer preferences. 

He added small round pizzas and later introduced medium and large sizes. He emphasised the importance of adapting to market needs and responding promptly to customer feedback.

After establishing his business, Kapoor started franchising in 2013. 

However, the initial franchising attempts were unsuccessful due to various issues, including franchisees not adhering to the brand’s quality standards and needing to report sales accurately. 

Kapoor learned from these experiences and reevaluated his franchising model. He reduced the royalty rate and emphasised the importance of maintaining product quality and following ethical business practices.

La Pinoz crossed 50 outlets by 2015, scaling from just 1 in 2013. 

The rationale for sticking to franchising was simple. It allowed a “physical” food brand to scale without the constraints of setting up stores. 

The pioneer of franchising, McDonald’s leveraged franchising to achieve rapid expansion, tap into local market knowledge, reduce costs, boost brand loyalty, and foster continuous innovation. 

Each store was franchised, usually by a local operator whose understanding of the nearby market is likely far superior to any national or mainstream player. Locals tended to understand better the target audience, areas, and native tastes and preferences.

Franchisees shared the financial risk and benefit from training and support, while localised marketing enhanced customer engagement. This scalable model attracted diverse talent, solidifying the brand. 

Maintaining quality and process at scale was the real challenge, but it was successfully done. McDonald’s did it in India through Westlife, Domino’s did it through Jubilant. 

La Pinoz would do it in India, as it entered 2016 with momentum. 

Too Many QSR Cooks Spoil the Broth

2016 seemed like a great year for QSR. 

During this time, the food services industry was pegged at a market size of Rs. 3.1L crore was expected to grow at a CAGR of 10% over the next five years. 

One of the fastest growing segments of this market was the quick service restaurants (QSR). It was expected to grow at a CAGR of over 22% from its base of Rs. 9,100 crore in 2016. Around one-third of this was attributable to the market size of pizza-focused restaurants alone.  

QSRs had arrived on paper. However, the ground reality was different. 

KFC’s outlets in India decreased from 395 in 2014 to 315 in 2016. Barista outlets were reduced by 35 from 2011 to 2016. Almost half of the QSRs then playing in India had negative EBITDA, and only 22% had margins of over 10%.  

The reason was apparent. 

Over 80% of the QSR chains were competition for the same consumers, concentrated in big metro cities. The vast opportunity described by the on-paper numbers had led to a fast expansion spree. The advent of food delivery apps amplified the options available to consumers. 

The laws of supply and demand were disturbed in the food market and the commercial property space as rents in attractive streets skyrocketed.  

The same story was playing out in the pizza space. The market was characterised dominance of the early entrants – Domino’s and Pizza Hut. Both utilised aggressive discount-fuelled marketing tactics in a value-obsessed Indian market. 

Even multinational chains were suffering. 

In 2015, Eagle Boys Pizza, an Australian brand, planned to increase its stores in India from 18 to 350. By 2017, it was left with only one store in Pune. South Africa’s Debonairs entered India twice before giving up. 

Sbarro’s master franchisee in north India initiated the shutdown of its stores during the same period.  

Sanam navigated a problematic market by constantly adapting to customer feedback. Initially offering only a slice for around ~INR 80, La Pino’z added small, albeit entire, pizzas for INR 49 to match their competitors’ value proposition.  

Subsequently, medium and large-size pizzas were added, in line with industry standards set by its competitors. 

Not only did La Pino’z adapt to market expectations when required, but they also differentiated themselves to stand out. 

Its pizza base was thinner than its competitors, and its dough was freshly made multiple times daily. 

Unlike Domino’s, where bases are transferred to outlets from central distribution centres. It allowed its franchisees to open exclusively vegetarian outlets based on local cultural practices. 

Through these cycles of adaptions and differentiations, Sanam strove to retain the brand’s focus on quality offerings by regularly visiting franchisee stores. 

On one of his visits, he noticed an outlet using a cheaper sauce, compromising the quality of the offerings. On another visit, he identified a franchisee owner selling products without billing to bring down their royalty payments. 

The eagerness to adapt and respond to feedback extended to La Pino’z’s business model. 

He renegotiated the terms with the offending owner, bringing down the royalty share from 8% of outlet revenues to 4%. Of this, La Pino’z would take 2%, and the local operator would take 2%.

The explosiveness had started to show. 

Subway to 100 Store Heaven

By 2017, the La Pino’z brand had crossed 100 outlets nationwide. 

By 2018, it was 150. As it entered 2019, La Pino’z took about six years to reach its first hundred outlets and just two to add the next hundred.

After the cautious start, extensive groundwork was laid while resolving teething troubles in the early days of the franchise model. 

The painstaking effort meant that the business could now compound.  

Kapoor’s meticulously gathered knowledge of the Indian customer’s desired flavour profile, an unwavering focus on product quality, financial prudence and value-for-money positioning developed La Pinoz’s core for its next leg of growth. 

The conscious commitment to use fresh dough and produce without resorting to a centralised procurement model continued to affect unit economics compared to bigger QSR chains. 

However, the lack of national-level marketing and lower rents owing to compact, delivery-oriented stores (~700 sq. ft.) partially offset the same. Likewise, the capex was tightly regulated, resulting in overall franchisee costs of ~Rs. 30 lakhs, with a payback period of under four years.

Steering clear of the master franchise model, which was the modus operandi of multinational QSRs, La Pino’z preferred local operators instead. 

These operators’ limited locus of control was quickly made up for by the high degree of hold and unique insights about the geographies they catered to. To Kapoor’s credit, Pinoz allowed the franchisees an unusual degree of autonomy at the cost of complete standardisation. 

This was seen in the operator building for the local context. 

Certain devout Indians are renowned for being equal parts food-loving and God-fearing. Their keenness to try new cuisines and exotic flavours was often restrained by an unconditional requirement that the cooking premises be meat-free. 

Keenly aware of the community’s regional sentiments and unhampered by excessive SOPs typically imposed by large international QSR chains, many franchisees in Gujarat became home to ~30% of La Pinoz’s outlets. Gujarat’s La Pinoz was positioned and operated as a vegetarian-only brand.

Another example of Kapoor bucking the trend and betting against the consensus can be seen in how La Pino’z has spread its footprint.

Learning from the extreme competition in urban centres and metros, La Pinoz did what was strategically the right call.  

In 2019 when there were 130 outlets, 80% were in metros and Tier 1 cities, in line with the industry norm. As it grew, the share of Tier 2 started to reach an appreciably healthy 42%, meaning the non-metro push was deliberate.

Over time, this decision bestowed La Pino’z with moat-like benefits as it went past the inflexion point of 150-200 outlets for local and regional QSR chains. 

However, the variability in offering and positioning could hold it back as it scaled up. Winning in the QSR market needed one thing. 

Scale. 

QSR BOGO Mania

QSR chains accounted for Rs. 18,800 crores in FY20.

Despite the struggles of 2016, they kept going. QSR was the fastest-growing segment in the organised food services market, buoyed by favourable demographics, growing disposable incomes, changing lifestyles and increased convenience facilitated by food aggregators.

The broader industry witnessed a conscious rethink of store space and footprint to optimise the channel mix and maximise the average spend per customer. 

QSRs were increasingly the preferred format, given the compact store sizes, tighter kitchen management practices, focus on store-level profitability and the proven success of Domino’s and McDonald’s. 

Moreover, the rising share of takeaways and food delivery services meant that players found even more merit in rationalising real estate in their operations and focusing on digital capabilities. 

Within the chain QSR segment, burgers and sandwiches accounted for a 31% revenue share, followed by pizzas and chicken at 26% and 15%, respectively. 

While international brands continued to dominate the space, the peculiar preferences and palate of the average Indian meant that between a third and a fourth of the offerings by Domino’s, Subway, Pizza Hut, McDonald’s, Burger King, and KFC (‘the Big Six’) were exclusively India-specific.

As such, the customisation was worth the effort and the spending, given that India’s 15-24 age bracket had an affinity for QSRs. 

The focus resulted in a higher average outlay and a general propensity to eat out or order in more frequently than their elders. Discounts and wise bundling further induced this through combos and value meals. QSR Chains counted on patrons having exposure to global food trends, familiarity with exotic cuisines and openness to newer formats. 

This meant that between one-half to three-fourths of the stores of the Big Six were concentrated in the top eight metro cities. Specifically, India’s chain pizza and chicken space was hyper-fragmented, enabling the Big Six to quickly corner a healthy market share.

The industry faced a chronic shortage of talented manpower, which meant that in-house training programmes acted as significant differentiators. 

Moreover, significant property costs, disjoint supply chains and ominous compliance requirements would translate into sizable gestation, which, in turn, imposed a capital barrier to enter the market.

Scaling in this landscape was thus incredibly difficult. But La Pinoz was used to difficult. 

Until 2020’s shock would have all players reimagine how they operated. 

Slicing Through Challenges

In 2020, COVID-19 strikes and the nationwide lockdown immediately shut down all eateries, hitting the QSR industry hard.

Dine-in accounted for 75% of the industry’s revenue and was virtually nonexistent. Even when restrictions eased, the fear of infection kept customers away.

The pandemic also disrupted the supply chains of these QSRs. Restrictions on transportation and a reduced workforce meant difficulties in sourcing ingredients and maintaining consistent quality.

In terms of employment, a report by the National Restaurant Association of India (NRAI) suggested that the restaurant industry, which employed 7.3 million people in India in 2019, saw a decline of about 40% in the workforce during the pandemic.

Before COVID-19, La Pino’z had a balanced business model, with dine-in and delivery making up 50% of their sales. However, as lockdowns ensued and dine-in options ceased, the balance tipped in favor of delivery.

Due to the lockdown, La Pino’z faced an existential crisis. Their physical stores were lying vacant, the delicious aroma of baking pizzas replaced by the chilling silence of lockdown.

The brand had to adapt, and it did so.

With determination and foresight, La Pino’z shifted its focus to delivery. The idea was simple: if people couldn’t come to the pizzas, the pizzas would go to them.

La Pino’z’s doubled down on their delivery service. 

As the reality of the pandemic set in, the company quickly understood that home delivery would be the new norm. The brand shifted its strategy to prioritise delivery further, ensuring survival during these challenging times.

This strategic shift was successful, and even after the immediate impact of COVID-19 began to ease, the growth in delivery sales continued to stay strong. 

This sustained growth can be attributed to customer convenience and promotional incentives offered through La Pino’z’s app. Delivery boys in La Pino’z uniforms became a common sight, zooming through the empty streets. Online orders surged, and La Pino’z was back in business.

But challenges were never far behind. 

Local competitors quickly filled the void left by international giants. Local pizza places undercut La Pino’z and global chains with tantalising offers and lower prices. Most would name their stores after the large brands. 

This was a battle for survival, and La Pino’z knew they had to play their cards right. 

La Pino’z knew how to stand out from giant single slices to monster pizzas. Despite the trend shifting towards ‘everyday value’ offers, La Pino’z continued with its famous “Buy One Get One Free” (BOGO) offer. Sticking to their signature offer worked in their favour, attracting a loyal customer base.

Their vegetarian focus, strength in Tier 2, local flavours and word of mouth kept them going in real tough times. 

By 2021, La Pinoz was back to its explosive growth as the landscape tottered. 

Spreading the Dough

Where multiple MNCs shut shop, La Pino’z prevailed. 

In FY22, Copenhagen Hospitality Private Limited, the holding company for the franchisee business earned profits of Rs. 27.8 crore on operational revenues of Rs. 109 crore. 

The most significant revenue stream for the company, however, is not royalties. Almost 83 per cent, amounting to Rs. 91 crores of its revenues, were derived from selling raw materials to its franchise outlets. Outlets are contractually mandated to purchase certain types of ingredients from La Pino’z. 

The company also earned Rs. 7.4 crore in royalties and Rs. 9.1 crore in franchise fees, cumulatively accounting for ~15% of its income. Franchise fees are the initial cost paid to La Pino’z by franchisees to set up their outlets and amount to Rs. 10 lahks.

The remaining 1.4 per cent was earned by rendering freight and marketing services for its franchisees. 

However, its profits are skewed differently. The margins from selling ingredients to franchisees account for only 35 per cent of the company’s bottom line, with the remaining 65 per cent mainly emanating from franchise fees and royalties.  

To understand what it means for La Pinoz, we must understand what it means for franchises.

In 2022, La Pino’z had 350 to 450 franchisee outlets in India. As such, La Pino’z earned royalties ranging from Rs. 1.6L to Rs. 2.2L per store. Each store pays a royalty of 4 per cent, equally distributed between La Pino’z and state-level local operators. This works out to a per-store revenue range of Rs. 80.2 lahks to Rs. 1 crore as of FY 22. 

Purchasing input ingredients is the most significant expense on these revenues – accounting for almost 40 per cent of a restaurant’s revenue, leading to around 60 per cent gross profit margins. The second most crucial chunk of expenses is usually attributable to employee expenses, including delivery charges, accounting for another 20 per cent. Utilities, rental and maintenance expenses take away another ~15 per cent. 

Royalties and applicable charges add up to another ~5 per cent, leading to EBITDA margins of ~20 per cent. After accommodating depreciation & taxes, the net profit margins for each store are usually around 10 per cent.  

Each store requires capital expenditures of Rs. 50 – 60 lakh, inclusive of franchise fees. With sustained sales growth, each store can attain 4-year payback periods.  

We can extrapolate the above numbers to arrive at La Pino’z brand revenues across all its stores in India. 

Noting an increase in store numbers to 600 at the end of FY 23, and assuming a per-store revenue of Rs. 1.5 crore, with the increase attributable to inflation and sales growth, we can arrive at total brand revenues of approximately Rs. 900 crores across all of La Pino’z franchises in India as of FY 23. 

La Pino’z Franchises have seen an astonishing growth of almost 10x in 6 years, incredible for an entirely homegrown brand. 

La Pino’z had set sights outside the country. 

Rising to the Top of the Food Chain

By 2022, La Pino’z had established a firm presence in India with over 500 outlets. 

The question posed was, “What’s next?” 

Like any business, pizza chains constantly seek ways to expand their customer base and increase revenues. 

One way to do this is by diversifying their offerings. Introducing new formats, such as burgers and cafes, allows pizza chains to cater to a broader range of customers and their varied food preferences.

New product introductions can keep current customers interested and coming back. 

When a pizza chain such as La Pino’z ventures into new formats like burgers and cafes, it’s often driven by a desire to increase its same-store growth rate, or SSGR. 

By diversifying its offerings, La Pino’z can tap into new markets and consumer segments, potentially driving a higher steady-state growth rate over the long term.

Cafes and burgers are also popular and widely consumed food formats. By branching into these areas, La Pino’z tapping into established markets with high demand. This means they can potentially see a significant increase in their customer base and revenue.

Moreover, diversifying their offerings helps pizza chains mitigate risk. 

If the pizza market faces a downturn, they have other product lines to fall back on. It’s a business diversification strategy that spreads its risks across different food categories, reducing its vulnerability to fluctuations in a single market.

Another way to diversify is to go global and tap into established markets. La Pino’z has successfully launched its brand in the UK and UAE, becoming India’s pioneering QSR pizza brand to reach the international market.

In 2023, La Pino’z launched a new venture called Lord Petrick, a high-end brand specialising in burgers and coffee. Kapoor has ambitious plans to expand Lord Petrick, with a target of opening 100 outlets across India by the end of 2023.

In addition to being known for La Pino’z Pizza, Kapoor’s vision is to establish Lord Petrick as a leading brand in India, renowned for its large burgers and exceptional coffee. 

The ultimate goal is to make a global mark with La Pino’z Pizza and Lord Petrick, setting new standards for premium pizzas, burgers, and coffee.

A dream seen in 2011 was now coming true. 

Bursting Through the World

Born out of sheer determination, the brand, against all odds, achieved a staggering revenue of INR 1,000 Crore, purely on its own steam.

A completely bootstrapped venture, La Pino’z Pizza relied not on external investments but on the quality of its offerings, its strategic expansions, and the robustness of its business model. This remarkable feat is set against a highly competitive market dominated by international giants.

The potential for exponential growth is genuine with the management’s audacious vision to open over 1,000 stores in the next two years. The favourable market scenario further supports this bullish sentiment.

The anticipated annual salary increases for white-collar workers beginning July 2023 should bolster the average disposable income. This would likely surge the demand for quick-service restaurants (QSR) like La Pino’z Pizza. 

The expected increase in infrastructural spending before the central elections 2024 could lead to an overall improvement in macro liquidity, further fueling the QSR market.

However, amidst this rosy growth trajectory, the company is grappling with a few challenges that could hamper its momentum.

One of the critical issues pertains to the compromised quality of home-delivered pizzas. The reliance on delivery riders from various online food aggregators, coupled with lengthy delivery times of about 35-40 minutes, has reportedly resulted in a discrepancy between the quality of in-store pizzas and those delivered home.

The freshly prepared dough, a signature aspect of La Pino’z and a competitor differentiator seems to lose its charm when it reaches customers’ doorsteps. To combat this, the management is investing heavily in enhancing the store ambience, encouraging customers to dine in and experience the pizzas in their best form.

Additionally, La Pino’z faces an issue of inconsistent store ratings due to individual franchisee management. This variability, often due to differing operational practices and varying degrees of customer service passion, has made standardisation across all stores challenging. 

But as it opened its second UK store, it is impossible not to see what has been created entirely from scratch. 

The story of La Pino’z Pizza is one of ambition, achievement, and aspiration. As it stands on the cusp of phenomenal growth, addressing these challenges could translate the company’s ambitious vision into reality. As they say, no journey worth having comes without its share of obstacles. 

This relentless aspiration shapes the ethos of La Pino’z Pizza – a brand that aims to succeed and set the benchmark in the Indian QSR industry. 

It has fought competition, consensus and built quietly as the industry has gone through cycles. With its never-say-die spirit, La Pino’z is poised to turn the world of pizzas in India, one slice at a time.

As it sets its path to reaching 2,000 Cr of store revenue, it could be India’s first homegrown 10,000 Cr QSR export.

Writing: Nikhil, Parth, Samarth, Shreyas, Tanish and Aviral Design: Abhinav and Stable Diffusion

Last fortnight ideaForge went public, listing at 94% higher than its IPO price in a blockbuster opening.

Winging It in College

Rahul Singh wanted to build a hovercraft in 2004 for IIT Bombay’s Powai Lake. 

Rahul’s innovation eventually turned into a quadcopter,  a helicopter with four rotors, commonly used to shoot video at functions today.

In fact, the drone in the famous Bollywood movie 3 Idiots is an Ideaforge product. 

After graduation, Rahul Singh and his co-founders founded the company in 2007. They continued to build on the technology and do projects with IIT Bombay. One of the projects was for a competition jointly held by the US Department of Defense and the Indian Army at Agra. 

IIT Bombay ended up winning in the ‘hovering’ category. The aircraft, including all its hardware, electronics and software stack, was built by Rahul and his team.

This was a huge validation and recognition of the capability the company had been building. Post the competition, the Ministry of Defense secured Ideaforge’s autopilot technology to supplement their drone experiments. 

Ideaforge was born. 

They saw an opening here and continued to build prototypes and improve on the technology. They started to receive more inquiries about the autopilot technology. 

In 2008, the unfortunate Mumbai terror attacks on 26/11 turned out to be a turning point in the company’s journey. Seeing naval choppers hovering around the Taj hotel and trying to look into the third and fourth floors, they realised that this was precisely the job for a drone – small, agile and easy to command.

They regretted that their technology wasn’t being used in such an operation. 

From that day on, the company turned its focus to building technology for the armed forces and homeland security would go on to be an early customer.  

The founders realised that despite the many drone applications, there needed to be more interest or products available. Propelled by the early years of technology building, they stared at an entirely new market. 

The market of flying vehicles, without people

Taking Flight

Unmanned aerial vehicles (or UAVs) are aircraft that can fly without the presence of pilots onboard. 

They comprise aircraft systems that help them fly, sensors and ground control stations. UAVs function as eyes and ears in the sky while being controlled from a distance. Sometimes, they could be used as a transportation device. 

‘Drones’ and UAVs were used interchangeably. Usually, UAVs have some form of autonomous flight capabilities – they can operate without being controlled by a human! 

The applications for these vehicles were extensive, ranging from security and inspection to disaster response to agriculture monitoring and mapping services. 

While picking a use case, in addition to the value of reliable aerial surveillance to the defence sector, Ideaforge also considered the ability of customers to find returns on investment. Given the high initial costs, a consumer system would take a long time to find value for a hobby drone. 

From the early days, the team consciously built the full-stack software solution in-house. They didn’t import products from China or use off-the-shelf software. 

In 2009, they could leverage no open-source software or autopilot technology. Moreover, considering the software would be used by defence forces, it was tested in some of the most challenging conditions. 

This called for a high degree of robustness and depth in the technology stack they built. 

While this was challenging and increased the time to market, it allowed them to make changes to customise the product and create differentiators in the market. As they perfected the technology for the defence use case, they found other customers with similar use cases.

The survey of India required survey-grade mapping with high accuracy in measurements such as volumetric estimation. 

Other agencies used it to track project progress over large areas, mapping land in villages or monitoring religious congregations such as the Amarnath pilgrimage.

Ideaforge was pushing the boundaries in UAV technology.

In 2009 they developed a 10gm UAV – the world’s smallest and lightest. In the same year, they released India’s first fully autonomous vertical take-off and landing UAV.      

Ideaforge also ensured that its products were easy to use for the defence sector. 

Ankit Mehta, their co-founder, admitted to middle school-educated jawans being able to operate their platforms with minimal training. 

While it seemed like an exciting value proposition, in 2011 the company hit a significant roadblock.

Unfriendly VC Skies

Nobody wanted to fund ideaForge. 

Developing such technology required a team. Hardware businesses are more challenging to fund than typical tech startups that raise capital based on initial user growth or transactions. 

Investors need to be convinced that hardware can scale. 

In addition to the hardware problem, most Ideaforge’s business came from the government sector. VCs usually see government-aided projects as risky and uncertain with their payment schedule. 

Ideaforge was a tiger at a zoo – that people wanted to admire from a distance but not go near. Investors want to see differentiated products and confirmed deals of a certain quality and size to fund.  

In 2012, Ideaforge had both. But nobody bit. 

They had built a proven technology stack applicable to a range of applications and, by 2014, had delivered about 70 drones to Indian government agencies.

Customers started to include the armed force, central and state police departments, disaster management forces, forest departments and civil customers. Their vehicles played a crucial role in many situations. 

In 2015, Ideaforge UAVs were used for search and rescue activities during an earthquake in Nepal. The following year, they delivered critical intelligence during a terrorist incident in Pampore. 

In 2016, the IT major Infosys led a $1.5 million round. This was followed by a VC-led $10 million Series A the same year. 

Characteristic of the drone sector, the company first had to prove results before receiving funding rather than the other way around. 

Given the capital requirements to build cutting-edge technology and the need for talent, this was a chicken-and-egg problem.   

However, with the wind beneath their wings from the initial contracts and funding, they could stay capitalised with a combination of VC funds and debt. 

With a golden goose in the form of the government sector and rising interest from civil customers, Ideaforge was finally taking the long flight. 

Regulatory Turbulence

The opportunity in front of Ideaforge was huge. 

The demand for drone technology in India’s defence and enterprise markets, such as mining, broadcast, telecom, oil and gas, agriculture, photography and infrastructure, was apparent. 

But in 2016, drone technology still needed to take off in a big way outside defence.

Within the defence market, mainly, ‘Make in India’ drones started getting a big push. Given the need for intelligence and surveillance projects and the perceived risks associated with imported drones, there was an urgent need for domestically manufactured ones. 

This helped to position ideaForge quickly as a critical player in the market with the advanced capabilities they were developing.

Beyond the defence sector, applications existed in product delivery, disaster management, and more – the many uses of drones were being discussed and implemented in different parts of the world as technology advanced every day. 

A few of these applications had already been seen in action. 

ideaForge UAVs were used by the Indian Army to look for survivors after the Uttarakhand floods, disaster management during the Nepal earthquake, and crowds during the Kumbh Mela. One of ideaForge’s drones also helped track a man-eating tigress in Uttarakhand. 

While these were infrequent use cases, they expanded the capabilities of Ideaforge and things were starting to get exciting.

Despite the capital issues, operational glitches and demand cuts from time to time, ideaForge persevered to stay at the top of every situation. However, regulation was an area that was beyond their control. 

Just as drone deployments finally began to see traction, it was offset by global incidents showing that drones were a nuisance around critical infrastructure. 

Consequently, the government banned private use of these systems in 2017. Then, with a new policy, it also banned the usage of drones by homeland security forces. 

The entire industry was on the back foot, and it was difficult to operate in the space.

Up, Up and Away

The market was in a quagmire for a year, with no demand and no approvals. 

ideaForge and the entire sector received a need fillip in the form of the blanket ban on drones being lifted in 2018. 

While the regulations did not go the whole hog, they were an essential step in the right direction. 

The new drone regulations 1.0 allowed operators to fly after taking clearance through a mobile app, kicking in on December 1, 2018. The easing of the rules was expected to trigger a boom in the use of drones by public/private enterprises and private service providers.

By the start of 2019, ideaForge had delivered over 100 UAVs to the Indian defence, central armed, and state police forces, all extensions of the Indian government. The company enjoyed an enviable 95% market share for this segment. 

However, industry estimates suggested that nearly 90% of the drones on the commercial side – used for mapping, surveillance and weddings – were imported, mainly from Chinese manufacturer DJI. 

Importing drones was subject to permission from the DGCA and the Directorate General of Foreign Trade. 

An estimated 40,000 drones were flying in the Indian skies, almost all illegally. 

Flooding the market with smuggled drones prompted the government to ban imports in 2018. But operators continue to import illegally by circumventing the approval process, as no domestic manufacturer could match the price and quality of the Chinese products. 

The new regulations were meant to change that and make imports harder.

For civil operations, India took an exciting route. 

The `Digital Sky’ portal, an online platform for automated flying permissions for civil operations, was launched on December 1st, 2018. Through this portal, individuals and organisations could apply for flight permission. 

Once the permission was granted, the user uploaded the protocols on the UAV to unlock the Autopilot software for flying the UAV legally. 

ideaForge’s decade of struggle was paying off. 

NETRA was one of ideaForge’s products, with a vertical takeoff and landing UAV, the only one in India. It was built on a quadrotor configuration that the team developed in collaboration with Defence Research and Development Organisation (DRDO). 

This UAV could take off from a small clearing by the roadside and fly over an area up to a height of 400m while sending continuous real-time videos of movements on the ground. The UAV had 60-minute in-flight endurance – more than any other globally.

The orders rolled in. 

In 2019, NTPC, India’s public energy company, was using NETRA to study the degradation of solar photovoltaic plants, LiDAR-based terrain mapping, photo gram metric volumetric analysis of coal stockpiles, and visual inspection and monitoring activities at NTPC sites.

ideaForge’s drones borrow mechanisms from several disciplines. Rather than employing off-the-shelf prototypes, the ideaForge team has chosen rigorous improvisation and integration through the development of indigenous software.

Pricing of the products has primarily been a function of market dynamics, and the pricing range was wide. Products suitable for customers wanting to dip their toes in the domain for the first time were significantly cheaper than those fully qualified and rugged, delivering leading performance.

By 2020, it would be in pole position as India’s leading manufacturer. 

Lifting Defence Spirits

COVID’s requirement to operate at a distance would make drones life-saving. 

Delivering supplies, goods and services, drones were not just a good to have but a must-have. Another major incident would make drones indispensable for the Army. 

Post the 2021 terrorist attack in Pathankot, the army began paying greater attention to using drones and snapping them up. 

The Indian army ramped up their orders for drones with ideaForge. They wanted more drones to help patrol the borders. 75% of ideaForge’s revenues began to be driven by defence projects.

ideaForge’s drones continued to be used by the government beyond defence use cases. 

ideaForge’s drones mapped land in 660,000 villages to give its inhabitants clear titles to their land. ideaForge implemented the tender in 2021 to map towns in six states in the project’s first phase.

Such use cases were expected to drive demand on the enterprise side.

While costs are always a huge consideration to adopting any technology in a human capital-rich country like India, drones benefit from the fact that their capabilities are sometimes unmatched. 

For example, a mine surveyor takes many days to assess stockpile and find haul routes for trucks, a task that drones can do in two-three hours.

While the enterprise and defence side of the business were expected to grow dramatically, the consumer side faced headwinds. Rigorous import permission process and training requirements were mitigating factors. 

Service providers were required to take training from DGCA-authorised schools to communicate with air traffic controllers. The regulations made it expensive for explosive adoption.

Even as demand was diversifying, the company rapidly enhanced its technology. 

In 2021 the company Prime Minister Shri Narendra Modi presented two indigenously developed drones, one of them being ‘SWITCH 1.0 UAV’ developed by ideaForge. This was part of a $20 million order the company had received from the Indian Army.

SWITCH 1.0 UAV, with its peerless capabilities of 1.5 hours flight time and 15 km range at more than 4500m take-off altitude, beat its international and domestic competitors to qualify for this deal. 

SWITCH could support the Indian Army’s most demanding surveillance operations. By 2022, the company will list seven variations of drones on its website.

The global revenue for the drone industry had exploded to an estimated $21 billion in CY22. India’s drone sector was only $2.7 billion. 

As India grew, the drone sector had too as well. ideaForge was now poised to turn on the burners and charge ahead.

Aerial Showdown

ideaForge came 7th globally in the dual-use category of drone manufacturers in December 2022

Establishing itself as the pioneering market leader with a market share of approximately 50% in 2022, every 5 minutes, an ideaForge-manufactured drone took off for surveillance and mapping in 2023. 

Their customers have completed over 350,000 flights using the company’s UAVs as of March 31, 2023 

Seeing ideaForge’s success, other competitors followed. 

The company’s biggest challengers were Urban Matrix, PixelVision Technology, and Big Bang Boom Solutions. In 2023, a total of 278 drone startups existed in India. 

Ideaforge remains with the highest market share relying on its broad range of products with feature-based differentiation such as weight class (approximately 2-7 kg), endurance class (25-120 minutes flying time), take-off altitude range (up to 6,000 meters), communication range (approximately 2-15 km). 

From Ladakh to the Thar desert, ideaforge’s UAVs have operated in extreme conditions of extremely low temperatures and high altitudes. 

The highly crucial application of defence operations, idea forge has consistently maintained a cutting-edge standard of their UAVs Some of their UAVs have flown more than 4,500 flights, as against the minimum requirement specified in RFPs for 500 flights under warranty. 

The Indian Army signed an approximately $20 million contract for a high-altitude variant of SWITCH UAV after a drone attack at the Indian Air Force base at Jammu. 

As only ideaForge could qualify and deliver the functional requirements of real-life conditions, idea forge led the Indian Army’s aggressive technological advancements. 

It was now making serious money too.

Sky’s the Limit

Post 2021, ideaForge exploded. 

ideaForge grew at an astonishing CAGR of 137.47% in terms of revenue from operations over the last 3 Fiscals, with a ROCE of 12.5% in FY23.

The company’s revenue went from INR 35 crore in FY21 to INR 186 crore in FY23. The majority of its revenue was from the defence sector

To continue this momentum, ideaForge needed money to grow. 

It planned to raise ₹550 crores, of which nearly half will return to paying debt. The rest would be utilised in developing new products and meeting the needs of running its daily operations.

Sunrise sector, the market leader in its segment, ranked 7^th globally in dual-use drone manufacturers, well positioned for scalable and profitable growth. 

Raising funds looked like a piece of cake. The raise looked easy on paper, but in reality it was a different story. What was true in 2010 was true in 2022. 

More reliance on government-aided projects was a big risk for drone manufacturers, with much thrust on defence sectors.

Governments aren’t known to be timely with their payments either. To some extent, it is evident from their financials as well, as its receivable days are more than 500 days in FY23.

It continued to be a capital-intensive sector. Hence, justifying a valuation of 14x on revenue or a PE multiple of 88x looked difficult. 

Due to these factors, attracting VC money remained challenging for the company. But nobody expected what would happen in the public markets. 

As the company approached the public market with the narrative that it’s a nascent sector with high growth potential. ideaForge took a strong make in India’s narrative, where they were strengthening the Indian defence sector. 

India would never go through what happened in 2008. 

The public markets lapped up the narrative. In a time when tech stocks were battered, the ideaForge IPO got oversubscribed by 106 times.

550 crores came like a flood. 

ideaForge got listed with a bumper listing gains of 94% and was off to a flying start on public markets.

Defying Market Gravity

ideaForge seems to have the wind beneath its wings, but there could be turbulence.

ideaForge has the first-mover advantage. They have been around for over 15 years and have been able to fine-tune their products to grow the nascent drone ecosystem. But it is only recently that drones have taken off significantly. 

Plenty of competitors have emerged quickly.

23 entities have qualified for the PLI scheme. These include a behemoth – the Adani Group, which has a joint venture with a premier Israeli company. Israel is considered a pioneer in this space, as they were the first country to use drones in a war in 1973.

Another big threat to ideaforge is the import of drones for the defence sector, because this is not banned and it is ideaForge’s core revenue segment. 

India is contemplating importing Predator drones from the US worth US $4 billion. 

These unmanned aircraft will help with surveillance and can even drop missiles when needed. That’s not something ideaForge’s drones can do yet.

ideaForge does not have long-term contracts with its customers, even though they have developed long-standing relationships. We have seen in various cases how new entrants have eaten up incumbents’ market share.

ideaforge can bank on its past strengths to maintain its market lead and learn what works from its decade-plus operations and experience.

If we look back at their journey, the story has just begun with drones increasingly finding their potential to be employed in multiple use cases across infrastructure, retail, agriculture, homeland security, and many other sectors. 

The breadth of opportunities available are unprecedented and the government is determined to make India the Global hub of drones by 2030. 

In 15 years, a college startup that built a company around drones has gone public. ideaForge looks set to continue to shock, awe and surprise as drones become more commonplace.

Writing: Keshav, Ajeet, Anisha, Rajiv, Varun and Aviral Design: Chandra and Omkar