How To 100X Your Money In Boring Businesses & Spot Hidden Opportunities Asish Mohapatra | FO567 Raj Shamani

52:06That may be more socialist, communist and all that. And I actually think, oh, you know what? If this party comes into power, I may not be able to build a great business. I'm going down the road and I'm seeing something being demolished on the side. And I think about, hey, why is this being demolished on the side? Maybe some things will get affected. And let me not put my money behind that demolition. So not to ignore signals. Credit is about reading signals way before a normal human being can. Interesting. And the third, Is to make sure that you are always tapping the cheapest source of funds.

52:44Because that's how you make money and that's how you grow your wider consumer base. So if you're trapping money from a bank, it is cheaper. You go to an external source, which is a bilateral donor, it is probably even more cheaper. So you are always on the hunt for the cheapest source of money. Some people are. some people have these kind of let's go to the fourth the fourth one is for arbitrage cost arbitrage I think first is that you need to talk in a foreign language a lot of us don't have it now you sit with a foreigner you need to speak like a foreigner he doesn't understand you our cultures are very different he has to listen to you and has to make sense of what you're talking not many people can, I can't I don't have that skill why?

53:32well I think why don't I have it or yeah why can't you because very early in my when I was in my late teens as you know I figured out that I'm probably the first or the third I'm probably a large manufacturer or a lender and then I didn't kind of put all these are acquired skills by the way you will never be born with each of them and hence I did not put too much energy capital as well as time behind building that skill because i knew that my dispensation or my you know my passion is probably one of these two but why can't you talk and attract a foreigner in their own foreign language foreign accent can i yes but am i the best at it the answer is no got it can i manage because of pure self-pride and performance i probably can but will I be the best at it?

54:27You said 10 lakhs to a thousand crores, right? So I need to be the best at what I'm doing. So I think that's one. I'll have to speak in a language that the foreigner finds it easy to understand. A lot of us tend to have it, right? And they build on it. So that's one. And I think the second one is to make sure that your cost is continuously going down because the arbitrage will always be taken away. Today, India is cheaper. Tomorrow, Nigeria is going to be cheaper. So you have to set up operations in Nigeria. After Nigeria, maybe some other East African country will be cheaper. So you'll have to take your cost of manufacturing or your cost of services down.

55:09So you're always on the lookout. So you have to be a lot more global. It's a difficult business. All four businesses are difficult. I think I find this business to be the toughest. Cost arbitrage business. A lot of people find that the easiest. well it depends on what you're looking for because your question was do you want to be the world's largest fair see a large business you want to build thousand twenty two thousand five thousand crores out of if you want to do that this is the toughest business because fundamentally it will get taken away see bpos were at one point in time very very large businesses but suddenly they got taken away now ai is taking it all if you look at pharma companies pharma companies that were out of India were pretty much the vogue about 20 years back.

55:51But now, they are probably being built in Africa. Yeah. So it can get taken away. Our pharma companies only are building in Africa now. Our pharma companies are building in Africa. So you have to do that, right? So fundamentally, this is the business which I have given my own dispensation of skills, I find the toughest. But yeah, coming back to the original question. So there are these two or three things in my opinion, wherein you need to first make the choice very early in your life that this is what I'm passionate about. because I probably don't have those skills, but I'm very enthused by those skills.

56:24And then you start putting time, your extra capital that you're earning, pocket money to begin with, and your energy behind it. And that's how you start your journey. You think of it first in your head. Hey, I'm going to be a manufacturer. Let me start thinking about it. You will not, likely you will not have the capital because you are probably not born into one of those large conglomerate families any which way. If you are thinking then definitely not. Then you are definitely not because otherwise you will be forced to anyways go there. Once you have made that choice, there will be a time in your head wherein you would have figured out that hey, I have put in all my resources behind it already and now I am ready.

57:07The way you get to know is when the ideas that come up in your head, when you see somebody similar who's actually built something actually trump the ideas that he comes up with so you think you're better at it then you know that hey you're ready now comes your next step this will take years this will probably take between two to five years to get there once you've done that you cannot jump into each of these four businesses you will have to figure out a via media like in our case bid assist was a via media or the trading engine was a via media to becoming a manufacturer. The via media to build lending for us was actually our commerce business.

57:51Yeah. So you have to figure out a via media. The reason you have to figure out a via media is because the cost of entry into each of these businesses is extremely high in each of these four businesses. So first you have to figure out a via media. It's probably a software. It is probably through an association with a friend. it is probably by doing something by which you can actually understand the risks of what you are doing and then do it better probably by getting somebody else's capital like get a private equity player or get a rich man to fund you or get your dad's savings down your pocket, whatever it is right but you have to get a via media because likely a 25 year old in India does not have capital, he has the time, he has the energy he has the bandwidth but not the capital so you have to figure out a via media for capital that's the second once having taken the why media most likely you'll have to spend two to five years again going to one of those four businesses so it's probably a journey of two to five years plus two to five years after having made the choice so you start in your late teens by the end of late 20s is when you would have landed up in each of these four business sorry for this long theory but that's how i think but if if you have to be specific let's say given your understanding of business and the data that you get by working with thousands of businesses in india right right and knowing hundreds of entrepreneurs right give me one specific opportunity or a specific business which you feel today in india nobody's building and nobody who had to start you could have built it and probably made some money out of it you don't know how big that will become you don't know how small that will be.

59:31But if you this is an opportunity where something can be made.

59:38I think that is somewhere in the chemicals, cosmetics, pharma domain. The reason I say this is because

59:55See, building out something on the chemicals, cosmetic, pharma domain, it has the largest potential of usage. Okay, the world uses it. All the developed countries use it. All the developing countries use it. But it is manufactured in very few locations. Why? Because it pollutes the air, the water, the soil, the environment in particular. So I think to build a business around chemicals is high usage, but can only be manufactured in pockets. In places like India, or for that matter, any developing countries, which are less environment conscious, they're getting more environment conscious. There is a potential to build because actually there's a lot of demand which wants to get centered in a few locations.

1:00:40So if I would be thinking today, I would start thinking chemicals. Chemicals that may or may not pollute an environment. But chemicals that actually have wide usage but can be manufactured in India. That's what I think. Give me an example. Any chemicals that goes into cosmetics, a lot of APIs that goes into pharma manufacturing today. Isn't that a lot of competition already? Like insane amount of competition. There is. There is a lot of competition. But the world is moving, right? Because where it is being manufactured, where it was being manufactured yesterday is not where it will be manufactured tomorrow.

1:01:15So today is the world in transition. So I can give you a stat from what I know. Industrial chemicals in India today is a 250 to 300 billion dollar opportunity. If I take a three to five year lens out. Today it's probably between 150 to 200. It's probably the single largest opportunity in India today. And there you can start small. But why a big guy who already knows this game and is one of the largest players or large manufacturer of chemicals would not enter all of these opportunities that will come from let's say Europe and US. Yes, yes, yes. So Europe and the US are fast moving their production destinations out to countries like India, Southeast Asia, LATAM and all that.

1:02:00Yeah. Are the big guys doing it? 100 % they're doing it. Yeah. Right? But the big guys are sluggish. Slow. They are slow. They're slow in selecting. They're slow in starting something from zero. They would rather have somebody having done the grunt work and having taken up to a level to which they can take it to the next level. The big guys hate zero to one because zero to one needs passion. Zero to one needs energy beyond the normal eight hours a day you work. It needs you to dream big. The big guys have stopped dreaming. They are big because they dreamt about it yesterday. There are very few who are large but yet dream.

1:02:43So there's a lot of opportunity available. I would say this is one thing that is staring at us in the face. It's actually happening in and around us. There are a lot of chemicals. I mean, it's not just chemicals that pollute, but food grade chemicals, pharma chemicals is actually moving to places like India. The second I would say is renewal energy. To complete that thread, you're telling me that if you're young when you want to build a small manufacturing unit or start just like you want to make a lot of money the opportunity will be something to do in chemicals so you would go look out which are the countries which are hardest and going really hard on any environmental concerns look at the chemicals which they produce and they are really large at it and then try to find out an addition or something like that chemical in india and start making here because you know that they'll be pushed out soon or probably they'll be moving here or they'll the production will be that or the reverse that's one good way of putting it right or the reverse of it which is to say that india probably is importing a lot of that chemical today and start making it here start making it here because for that chemical because that's going to recede any which ways and it's going to get more expensive as in their environmental tax goes up yes see if you look at how india has started manufacturing ring our first prime minister uh mr jawar al nehru always approached the conglomerate houses and said hey you know what i do not have forex reserves because i don't export today but i'm importing a lot of stuff and because i'm importing a lot of stuff my foreign exchange reserves are depleting so as a large conglomerate houses why don't you build it or we'll build it as government that's always been the case so i would do it at a small scale as well that's how LACME was born that's how the cars were born in India right so I think that also stays so it depends whether you want to do it for the domestic market if there's domestic market I would probably bet it on import substitution if it's building out for the global markets building out for the global markets is relatively difficult in the beginning because it requires you an understanding of diversity which you can get away with if you're building for the domestic market so I would rather go for just the reverse and having gotten some scale, I would resort to what you were saying.

1:05:04How do you stand out in this market? Because everybody would be making it. There's no competitive advantage. You're just building another chemical, which 20 other people are also making. Then how do I get my client? How do I actually start selling it? Correct. See, because I won't be cheaper because I'll be starting. So by just virtue of it, I can't produce the cheapest. I won't be the most innovative. At this point. So hence the why media. So first what I would do is I would reduce my risk by actually trying to get into that market by probably getting a few guys together. By probably doing a chemical which probably is a smaller market and not many people are doing.

1:05:49So hence there has to be a why media. You can't just see eventually you have to be very very large. You have to achieve the unthinkable. but if you plan to achieve the unthinkable in the beginning when you don't have the resources then you will fall flat on your face so hence there has to be a via media to it probably you pick up a chemical which today less number of people are excited about because of variety of reasons maybe the market is very small you probably pick out a chemical which you sell in a few areas where nobody's going and stuff like that you need to figure out white spaces especially as a young entrepreneur right because otherwise i mean as you rightly said you don't have uh you don't have the ability to do it and the second point which you touched upon is the want to stand out i don't think you should look at i mean that's not how i made i don't think you need to stand out in the very beginning at the in my opinion the building block of the business is first you need to demonstrate what you are doing is actually fit for the market and usp which is important to have can be built at a slightly later stage first you need to make money first you need to get your product sold you need to you need to make it at a cost you need to design your services or your manufacturing so that your cost is lesser than what your product sells at and then think about usb if you're thinking about usb too much in the beginning this is probably not the right way to do it probably the second one wherein you are building out a micro distribution business maybe the maybe the right approach for you because you're a great marketeer by the way raj because that's how you think.

1:07:23A USP first business is not going to be a regulatory oriented large manufacturing facility. True. If you're thinking USP first, you're probably thinking micro distribution, brand, patience, that's probably more important. That's my brain works like that. Your brain works like that and hence you are probably the second. You will likely make a product that will reach every nook and corner of this country. Which you probably have. And I think about micro distribution how do we distribute a large thing into smaller pieces built into ecosystem fair so coming back to that point so if you are a manufacturer in the beginning you don't need to think about usp you're telling me no you need to think about contrary contrarian insight other people say that you need to actually have something which nobody else is offering that's how good businesses get built Yes, great.

1:08:21I agree with that. But that is not for a manufacturing-led business. In my opinion, a manufacturing business is very simple. That you need to build a product which sells at more than your cost of manufacturing and you have a channel that can expand. It may or may not have a USB. Good. So, in second, you were telling me about renewable energy. Yeah, renewable energy in my opinion is another sector which I think India needs a lot. There are lots of regulatory tailwinds around it to build it out fast and India has certain advantages when it comes to renewable energy like low cost of manufacturing, like for example, you know, renewable sources of energy.

1:09:06We have lots of solar, we have lots of wind, we have lots of water sources as well. So I think renewable as such is also another sector which, I mean, you could build anywhere in that chain. But that's another thing that I would look closely at. What's your framework to identify big money in an industry? Because you talk about large industries. and i'm sure you talk about large industries definitely not because you have the capital of let's say the large conglomerates of 50 000 crores but you must be thinking something else yeah yeah yeah where you are able to spot money so what is your framework to spot big money in in industry yeah yeah yeah so first it has to be those four right uh but within those four also within a particular sliver of those four industries also you need to think about which ones because those are very large ones themselves right the way I think about it you know when I was a kid there was this there was this mythological serial that I saw of it was called it was I don't remember which I think it was Vishyamitra wherein they did something called Sagar Mantan wherein a large mountain was milked both sides one sides were the were the demons and the other sides were the gods right and when they when they did the mantan then what happened is poison came out fish and nectar came out amrit okay that's how i think about businesses that fundamentally you're looking for that nectar right so the business has to go through some kind of an upheaval there is there is some big thing that is happening which actually is causing a tectonic shift.

1:10:57If it's more the regular, then you will not get the poison. There has to be sagarmantan happening. Now let's go back. In chemicals, if you look at it, the last 5-10 years, actually the last 5 years to be more precise, in fact the last 3 years, several governments have come in and said, I want zero carbon emission. There are lots of government pacts, cross government pacts have come in. People have said as countries that they want to get to what is called zero carbon deficit, carbon emitting and stuff like that. It has all happened in the last three, five years. All chlorine, fluorine eminating gases have been put to a stop.

1:11:35There's Sagaramanthan going on. There's a big shift. There's a big ectonic shift. If you go to renewable energy, the same thing is happening. But if you go to some of the other sectors, like AI, what's happening? It's a huge shift. So there has to be a huge shift. There has to be extreme volatility. for you to actually enter. So now going back to your question of this 10 lakh person who's 20 years old, now he's aimed with the 2 to 5 years initial wherein he's done the thinking. He's done the 2 to 5 years wherein now he has probably rounded up the via media. But then he should jump when there is massive entropy happening.

1:12:17That's how you pick up one versus the other. If things are normal as they are, the capital wins. if things are going through massive entropy then entrepreneurship is that's all I think I mean frankly if I was a rich guy I wouldn't think like that but yeah we all ended up we all started up as not being rich what what would be like what are the industries three or four industries where you see tech-todding shift happening which you have not covered right now don't tell me chemicals don't tell me renewable tell me three or four industries where there's big tectonic shift happening and somebody needs to pay attention.

1:12:59Don't say AI. Where people are being thrown at the problem.

1:13:06Where, meaning where the, you know, there is the human mind is not being put into action. That industry is going away for a toss. If you're doing the same thing over and over again, like for example, credit I was talking about, right? Doing the same thing over and over and over again. those kind of industries will go away. AI is taking some of that. The world in general is taking more of that. But if we have to put our mind to taking a decision at every point then that industry is not going away. So, you know, one of the things that I have seen in a lot of our manufacturing units we today have about 40 manufacturing units is that there are lots of companies that have cropped up in the US, in India that are actually studying the movements of workers to design robotic arms that can replace those workers at large scale.

1:13:55So I think anything that is mundane in nature, whether it is physical or it is service-oriented, will go away. AI being an example of it. But there are very many examples around it. A tectonic shift happening in India as we speak around how to increase the agri input per or the yield per hectare. Mechanization in farming today is a huge shift. It is not mechanization just in terms of machines going in there, but just the data availability to the farmers, the input availability like good seeds, good fertilizers. That also is going through a massive... India has lagged behind the world average yield per hectare for a really long time.

1:14:46I think that's getting disrupted right now. With the advent of low cost machines, with the advent of, you know, data being very cheap at a cost level, with regulatory money being available that it can be pushed through cheaper inputs, subsidies and all that. I think that one sector is also going through a huge tectonic shift, in my opinion. I think we are seeing the early part of it. but if we have political stability which we have been lucky to have for the last I would say close to now the third term if we have political stability for another 5 years that industry fundamentally will change What else?

1:15:25One more Where tectonic shifts are happening I would give you another example I think low end manufacturing very low end like garments it's like swing stitching very low end manufacturing is also going through a massive tectonic shift because fundamentally countries that were actually like I think apparels is going through that apparels and accessories they are all going to move to countries like India, Bangladesh they already are it's been there for about the last two three years I think that speed is going to increase especially with tariffs having played out the way they have the free trade agreements having created corridors wherein it has become even more difficult to manufacture in high cost destinations the i think low-end manufacturing particularly for household items and garments is going to come to india and india fundamentally because they have a lot of people who unemployment is still an issue the low end manufacturing is actually quite lucrative for governments to invest in so I would say that industry also is going to, I mean in my opinion it's a huge sunrise industry I also feel the food we are eating that is going through a big tectonic shift because of just general awareness of that how you should be eating the movement away from cereals the movement of I want to eat clean like i don't want pesticide i agree with that i don't want rotten i don't like all these examples of an ias doing his thing or a content creator becoming big or a farmer telling about what he or she is doing like stuff like this this information is reaching to every nook and corner that is creating some level of silent public outrage yeah so so my only point around that is that in my opinion it's not a tectonic shift raj particularly because the demand is there but the supply is not geared up okay i don't think we actually have the the bodies and i'm happy to tell you a little more we have the bodies to actually make sure that or rather we have the supply to match that kind of demand that demand came in and i think covid really really rammed it up but do we have enough or enough of an organic ecosystem to produce to measure to certify the answer is not but you're big on organic farming you talk about it right i used to i think i kind of got that feeling that that's this demand is coming up during the time of covid we invested behind it as well but i figured out that it's a difficult business it's a difficult business because fundamentally a lot of people cut corners out there and the regulatory mechanism per se which actually is going to create the guardrails for anybody who wants to play it clean has not really come up in place.

1:18:36There has been some talk to actually get them up and running through Apeda and other government bodies but it has not come in as it. When it does, it will be a huge tectonic shift again. Today, the organic game is not as lucrative because particularly for domestic. Because there's no enough checks and balances. Yes. Where you don't know if X person is selling you, like it is conning you with a wrong product versus Y who's selling clean. That's one. And two, also the incentive for the grower to actually make it organic itself is not really there. Because the premium for an organic food is not really well established because the checks are not there.

1:19:25because you don't know you don't trust the trust mechanism is not there yeah not so much true for export oriented products but domestically that's an issue and hence the tectonic shift is not really is not really there do you also feel where a framework to build a business or find out an idea is look at places and industries where people don't trust and can you bring trust in that market by doing something do you think that is a place where businesses can be built

1:19:57so you need trust across see because when you are starting off everybody needs to trust you whether it is your first set of customers even if they've given you money in advance your suppliers need to trust you your lenders your investors your employees need to trust you So I think that element is true across. Can you build a business purely out of trust? In my opinion, it can be a via media. But it has to land up in one of those four businesses. Building trust is an important game in itself. But it's not the end game. People having trust in you is great. But then it has to be monetized. It can be only monetized through those four businesses.

1:20:43How do you build trust?

1:20:48how business builds trust I can tell you our approach I'm sure there are others I think it was very fundamental to what we do so first is to believe in the fact that trust is an important facet of our business because it takes years to build it and minutes to lose it I think to first understand this and put this into everyday action is the most important one. First, you need to tell yourselves that it will be slow to build and not fast. If I'm going and telling somebody to believe me, he's not going to believe in the very beginning. And I'll be okay with it. Because it takes years. And having built it to really conserve it at your, you know, close to your heart is very, very important because it takes minutes to lose it.

1:21:39So first to understand this and put it into everyday action is the toughest. Because most guys who are young who will come in and tell you hey you know what I went and told him about the features of our product he didn't take it and they'll be very frustrated with it yeah but to put it into that action saying that hey you know what probably will take another meeting maybe two more for him to listen to you maybe three more to buy from you is something that you have to do daily because the human mind is actually trained to say hey maybe you didn't say that that's why he didn't buy it from you. The human mind is trained to actually for quicker action.

1:22:17The trust is just the opposite. You need to be slow to build it. First to understand that it's a slow process is the first one. The second is to do things which fundamentally augment trust and I'll tell you what those are. To make sure that you are taking the losses on you. If there is an issue you actually take the loss on you. I remember this great example. There was this example of Johnson & Johnson that it used to make a paracetamol lookalike product called Tylenol in the 80s. Okay. And there was some sabotage likely in the 80s wherein some kind of, you know, unknowingly some kind of contaminated product had reached.

1:23:03What Johnson & Johnson did is that it recalled the entire set of Tylenols that were available in the market for the last three years and faced a massive loss. I also read this case about American Express once in the early 70s. The way American Express is American Express is because somebody had cheated them. It's probably WhatsApp factory, but I just like this example so much. But somebody had cheated them and they owed a lot of money to lenders. And one fine day, they decided the brand is bigger than the capital in the coffin. So they paid everything back. So those are the, when you actually start taking losses on yourself is when you actually augment trust.

1:23:46That's the second. Because the human mind is trained to do just the opposite. It's to avoid the losses. But if you are building for trust, you would take losses upon each other. And the third thing is not speaking about it. So if I go and tell you, hey Raj, you should trust me when I say this. if I'm advocating or I'm being vocal about trust then it is likely that I shouldn't be trusted trust comes in silence trust comes from when the other person trusts you not when you say I think those are the kind of very simple things take the losses on you take time be patient and be silent about it wait for it to get built has someone cheated you many times many many times tell me one exam give me one story knowingly unknowingly tell me both one one now it's a great facet you have whenever I give you options you take all life is not like that but anyways you always have to choose but yeah unknowingly a lot of them unknowingly comes because of the fact that you know they believed they were right in business you actually see that you know there is another person taking a decision with the variables that he had he took a call and it kind of fell flat on the face that's an unknowing one that you need to ignore yeah right unknowing is still you can give if intention was not there you can give some limit to that person that he did not probably put in that much amount of effort and hence you can think of it as cheating but yes that happens and let's forget that probably next time when you're giving that person a chance you'll be very cautious like probably you won't even give but you want to hold them accountable for that like maybe hold them accountable not like never be you can be forgiving about it yeah if it's unintentional yeah yeah yeah so you want to know an example of when i'll tell you of cheating on a regular basis that happens and it particularly happens when you are in the business of manufacturing or selling manufactured products right particularly in commodities where the prices go up and down a buyer could buy and the prices just suddenly fall and you may back out of the deal it happens very commonly or a supplier because the prices go and went up he renegated out of the deal

1:26:16people trusting you less if if it's happening regularly with you there's some issue with you happening in business it's a facet of business right so how do we deal with first the you know suppliers backing out I think it's everyday due for course the way I think about it is to say that if somebody's done that to me let me not do that to him that builds trust if as if a customer cheated me because the prices went down and he renegated out of the deal let me not renegade from a supplier and that will build trust so if I am faced with an opportunity like that and I've learned it the hard way initially I did not think like that if i'm faced with an opportunity like that wherein i can back out of a deal because the bargaining power is with me right now today i likely won't because i know that will create trust and in the long run it will pay off in the initial days i did yeah i i saw this first time with my father this exact thing which you're telling me right now i saw that as an example where there was a huge crisis going on with the raw material because of some shortage in the global market so he had to buy it from some manufacturer sitting out of gujarat sura i don't know i think i think udaipur or somewhere and gujarat or rajasthan he he locked the price everything was done and then the prices just went up really went up next next next next morning and the supplier said that i can't deliver it at this price i never told you this price and then but at the same price my father had committed the same amount of he still supplied supply to other people and then he supplied at the same price and he bought it at a much more expensive price and then he took the losses yeah and i saw him doing these kind of things multiple times because it's like if i've committed if i've given my word and if someone else has gone back on the word i can't so i have to probably build the trust yeah so my point on that one.

1:28:26My point on that one is nobody can do that from the outset. You will start up by being at the wrong end of the stick and you will probably do the wrong end of the stick. It is when you realize, it is when you realize is what defines you. If you ask me, have I renegated out of deals wherein the commercial benefit was for me? The answer is yes. But after having done business for like three four years i realized oh you know what i'm actually giving away the forest for the trees right so i think that is something which is important i realized that i i kept the right end of the bargain but i lost the customer and because of that particular customer i lost more customers and then i one day i realized hey you know what it's common sense and my father he doesn't even talk about it to other people that's the silent rule right that you build us to me the fascinating part was he didn't even tell the person that hey the other person is cheating me but I'm gonna do it like you usually talk about these kind of things no you would never some people will get to know eventually some people would never get to know yeah yeah the golden rules are the same be patient be silent take the losses and take the losses that's how you you said cheating so give me an example give me a story where you got cheated intentionally by a person within or a person outside you can't take both let's not get one let's say cheating let's say cheating and it was within the ambit of saying that it did not tantam out to a legal fraud let's put it that way which is that he was aware that a deal will go awry but that deal actually if portrayed in the right way looked right like doing an doing an acquisition which looked hunky-dory but if he puts in a little bit of more effort and it was visible to him that you know the deal is not that great he went ahead with the deal and looked great in the system because we acquired a company and it has happened to me how many did you lose?

1:30:33a few crores a few tens of crores 20-30 crores did you fire that person? no how did you find out? it was found out on day one when we started running the company we figured out that hey you know what doesn't make sense And why didn't you fire the person who intentionally did it to you? See, you can never know whether it is intentioned or whether it is non-intentional. And the way I thought, I kind of reasoned out to myself is to not delve deeper into the fact that whether it is intentional or non-intentional. Because I truly believe that if somebody has actually done it by intention and you kind of overlook it, the person's own conscience takes over.

1:31:13And the next time he'll get it right. by being nasty again nothing but this was again unintentional then no it was not unintentional I have reasons to believe that it could he could have known but I didn't put too much of my mind into it so you ignored I am talking about a time where somebody probably had to pay you some money and they didn't well I am in the financing business that happens quite often like do it because it happens pretty regularly it happens pretty regularly see our gross NPAs, as they put it, is 0.74%, which means that 0.74 % of the time, I am cheated. It could be because of their willingness to pay or could be because of their ability to pay.

1:31:58That doesn't matter. But it does happen. How do you do that? You actually factor for it in your business. You know that some things will go wrong. That's why business has to earn a margin. What happens in India, the practical reality, when somebody who owes you money doesn't want to give you money? What can you do? Can you do anything? Very good question. The first question is you should not land up in such situations. And hence... But how? Like India works on inherent trust, right? So let's say X person has bought one crore worth of goods. Doesn't want to pay in advance. Largely, that's the practice.

1:32:38So there's a credit term. There's a credit term. I mean, 45 days I'll pay 1 crore rupees. This person delivers. Now this person like I've taken the material. 1 crore I'm not paying you. Because I am somebody sitting in some small village. Do what you can. And this is a very normal thing which happens in India. What can you do? Okay. So what can you do should come later. First, let's understand that you should not land up in that kind of a situation. How do you do that? first is the understanding of credit should revolve around what you do as a business and what geographies you are exposed to so for example in this particular situation if you're delivering pan-india you're more exposed to it if you're delivering in only localized kind of geographies you're less exposed to it so hence one of the design principles that you should take is when you give out credit you give out in geographies that you really have tight control over meaning that you have substantial businesses there and not really give it off to any geography that you don't have any exposure to so that's one the second is when you are giving out that particular material you should know that the person has something to lose if he doesn't pay you for example you could have a sub you could belong to a supplier community for example you could be selling a product to him which he probably does not have too many options other than you or maybe too many viable options other than you and then only you should be selling to them the third thing is that when you are doing that transaction you shorten the duration for example 45 days is a long credit 45 days if you are doing you rather do it through a financial institution you probably take a bank guarantee through a letter of credit or you do it through a pdc which is less uh you know you do it through a check meaning you have something see but in in your activity it doesn't work like that a lot of times it does a lot of times it doesn't like i'm i'm a small guy i'm desperate to sell my products and i'm also in desperation to actually grow my business there's a there's another vendor or a buyer coming from small district wants looks like a decent option everything's great let's say first time he paid me second time he paid me third time he paid me fourth time he's like now bye bye correct so it doesn't land into the situation you can after keeping all the checks and balances.

1:34:58Absolutely you can. See, the question is how much of that? See, I'll give you some basic rules about what financial trading businesses operate in. Trading businesses say 90 % of the time you'll get your money. Okay. 90 % if you want, if your business margin is higher than 10%. Let's say your business margin is 20%. And 90 % time you're getting the money. It's okay. Doesn't matter. So you can now sell. Because your margin is not is not wafer thin. It's double the 10 % rule. Yeah, fair. Right? Let's say your business is wafer thin. Then what do you do? After 90%, if let's say your business margin is only 5%, which is likely going to be the case in trading, then what you need to do is you need to put in processes.

1:35:42That will likely reduce that 10 % down to 5%. What are those processes? Those processes are for credit evaluation. It's not rocket science, but it requires discipline. It requires people to follow it. after having put in that those processes are for evaluation for actually making sure that you are doing the evaluation right and stuff then you need to have some kind of a financial guarantee that reduces your five percent down to three percent like taking a check for example like doing a signed contract for example like taking a bank guarantee if it is available like taking a part advance for example you probably move the needle from five to three percent from three percent down to 0 % is what the difference between an average business to a great business is right in that 3 % comes in how you as an entrepreneur or you as a business have solidified more grounds than what is commonly known I agree with all of these I'm asking the simple thing that let's say after keeping all of these things still somebody is not willing to pay me one crore what do i do okay so that person is running the business yeah it's great i have the check i have the blank check pdc whatever whatever security signed contract i have the bills i have everything i've gone to the police i've gone to the courts put in a case nothing's happening yeah so what do you do yeah so the first question is you can be one of three so the first question to ask is is it incrementally more than what your business margin is let's say um it's happening to you two percent of the time your business margin is 20 you have the option to ignore okay the second question to be asked that's what most people do that's what most people do yes the second question being the more important one that do you want to set an example some people massive generally pursue because they want to create a massive example of the fact that hey you know what if you actually trap my money then i'm going to go hammer and tongs at you so that it creates an example for others they may not retrieve the money in the first place any which way so second is do you have a compulsion other than just the business margin at demonstration so that question you need to answer for yourself and the third question to answer is is it going to cost you more to actually retrieve then what the money out at large is for example if i have say a 10 000 rupees sitting out in a remote village wherein my to and fro cost of transportation plus my employee going and sitting out there for seven days will only give me a part of the money and that will not pay out for the cost that i'm going to incur i better forget i think those are the three things what is the cost of collection second is do i want to set an intangible example and third is what is the money at stake versus margin?

1:38:40I think those are three questions to be answered. And if the answers to all three are affirmative, meaning margin also I'm losing out. Cost of collections is very low. And the third is that, you know, I want to set an example. Go hammer and don't set it. Don't leave it. Can you go hammer? If you want to set an example, can you go hammer the person who has taken money from you is not giving back? It's getting better. It's very difficult in India. It is very difficult but it is getting better. I think particularly for larger corporates, it has become relatively easier than what it was judicially for larger corporates.

1:39:20Like for example, the insolvency laws in India have gotten tighter with time. In 2013, the national company law tribunal came in and hence it's not that easy to cheat anymore. And the bells and whistles around the judiciary. The MSME, small business. small MSM is 1 crore, 2 crore, 5 crore, 10 lakh, 20 lakh. It is difficult. Very difficult. You can't get money back. Yes, it is difficult. But what I will tell you, Raj, is that it is relatively getting easier because, for example, it is, I mean, there are judicial laws around it. For example, you have something called the Negotiable Instruments Act, which is the 138 law for check bonds.

1:40:02the time taken for the verdict to be announced in a court has significantly got shorter it's still a couple of years it used to be 20 years now it's probably two years but it but i think in general what's changing in india is that people don't want to get into that mess because of the fact that your ability to extract credit out in an information efficient world after having cheated is something which is actually playing out. For example, in the olden days, five years back, you could cheat and nobody would know. Today, everybody gets to know. So, I think one of the things that we as businessmen kind of resort to is that can we disseminate more of that information when one such occurrence happens.

1:40:54So that person has to pay social cost. Yes. But yes, can you do stuff to really get our money back when it is lost? We are years away from it. Okay, coming back to the question of building a business and doing things. How do you know if it's a good idea or a bad idea?

1:41:18You will never know in the beginning but you will know with time and a bad idea is one when you are missing milestones consecutively so if i believe something is a good idea i should know what my next milestone is for example if i believe that a good idea i've come up with a good idea i share it with a few five close friends i think a good idea will be bought in by three of them that's my first milestone right my second milestone again with day wise right my second milestone is that i actually go and talk it to a person who i think i respect and understands business very well he will hear me out and build my idea on my second milestone my third idea may be that if i talk about it uh with a few friends they will want to jump on the idea want to join me uh fourth idea is that once i go and try to sell that idea uh and put it into execution to either customers the suppliers they will lap on it so a good idea is one that gets reinforced with every single milestone getting met a bad idea is one when we are consecutively missing it i actually have a very simple rule when i think of an idea i put very easy milestones in front of it easy or fast milestones a day one milestone a day two or a day three milestone at best a week's milestone and i believe if i miss two maybe three it's a bad idea most people do not have that discipline a lot do your idea got rejected by 73 investors yeah but the reality is that I knew for sure that I needed only one investor right so but you were not able to hit that milestone theory right correct 73 times you got rejected probably you must have doubted yourself that probably but I was getting debt at the same time these were all investors what is being lost out in that narrative is that our suppliers were giving us credit to run our business.

1:43:16Now think about it. If I was rejected 73 times it was over a period of 6 months. That means the business had to shut down. But the reality is during that time we got customer advance. Our first institutional lender actually came in. They gave us money. Our suppliers gave us credit. So capital is not dependent on investors. So it was getting reinforced by somebody else. the discipline to have is to say that hey you know what if it's happening consecutively then there's something wrong now you could be a more patient guy and say that hey I'll take 5 I may be I'm very impatient I probably take 2 maybe 3 but that rule is important and that kind of reinforces the fact whether the idea is good or bad how do you attract capital I think it's a question for me or a question in general?

1:44:12Question for you. Question for general entrepreneurs as well. So the first thing to think about is what attracts capital? I think four things attract capital. The first is a deep market. When I say a deep market it does not mean a large market. It means a market that has one of two facets. either the profit pool is large because few people are doing it or second you believe that the pool will become large so one is facet of the market the second thing is a great guy a guy you want to listen to a guy who you think will attract and retain people a guy you think a good guy a great guy a good guy is not enough, a great guy the third thing is to say is cheap.

1:45:10See, fundamentally, I go to buy a stock. If I think this is the value, but it's trading at much lesser, I'll buy it. It attracts capital. If it's cheap, cheap attracts capital. Overvalued things generally don't attract capital. If I go to a house and think, you know what, it's about a crore. It's available for 80 lakhs. I'll put my capital. So it's cheap. In my opinion, the fourth thing that attracts the capital is a business model that sounds attractive to me because of variety of reasons, largely personal.

1:45:41So if I can make my ideas seem personal to the person I'm sitting across the table, he'll likely give me a schedule. So four things. A deep market, a great guy. Conceptually feeling that the value at offer is cheap. And the fourth is a business model that he thinks is personal. Is personal. Not the business model that will make money. A lot of people you know invest in ideas because they think of that idea as their own.

1:46:21How do you make that how do you give that feeling to an investor? How do you make idea personal to an investor? By observing. By listening more than saying. by conversing and not talking. The difference being

1:46:43there are two ways to speak. One is you come with an agenda about why your idea is good and give it out verbatim. May not be together but in stages. But the second is to listen and customize.

1:47:04listen and build on what the other person is thinking it's difficult to cheat it's at the margin right you can't take a zero to a hundred but yes can you take a 40 to a 60 the answer is yes but in my opinion those are the four things and i will go with the with an order wherein say wherein it says guy first everybody wants to put money in a guy market second cheap third fourth is business model or personal business model in that order and when you say a guy how do you become a great guy where everybody wants to put capital on you that will not happen across the table that will happen because you are a great guy that will happen because you've put in that amount of thinking as well as action so who's a great guy right a great guy probably or a great entrepreneur who attracts capital who attracts capital is fundamentally is a guy who can spot opportunities

1:48:19he's a guy who will spot he's not a guy who will follow if you ask him a question he'll have an answer

1:48:28if you ask him a question he will give you a contrarian answer he will not say I don't know so he is a spotter second he builds his own resources if he doesn't have investors he will have debt he will have supplier money he builds his own resources third he attracts people people want to be with him spend time with him work for him get work from him see for example I have a personal work I have to take my father out for a hospital visit right I don't have the time I won't go to everyone I may go to Raj I trust him so he's a guy not only who you work for him but you want to get work done by him he attracts people he's a spotter he's a resource provider and that you can know and that is easy to find you can get it in a conversation you can find out you can find out important is are you looking for it an investor looks for it a good investor looks for it and how do you identify difference between someone who's a great storyteller spotter thinker opportunistic versus a great executor because having a contrarian insight is not equal to building a great business not really the great scientists are not great business every great scientist has found out something contrary has invented something contrary and most of them far majority of them died in poverty yes So your question was how do you find out a great executor?

1:50:27Versus someone who had just contrarian insight. So you can't find a great executor. What you can do though is you can find out a poor and weed him out. So if I spoke to you Raj and I believe that you actually believe in my own dream vision and all that i will actually have to trust with you for execution whatever i ask you how many hours do you work um do you really put your head down you will give me all the right answers yeah so i have to take you in not because of you're a great executor i have to take in you take you in because you are a great believer in what i do execution i'll find out execution you will find out the poor ones you will never find out the great ones so you have to go in with believing till he is poor is great at execution so if i'm sitting with you and you believe you show excitement to what i'm saying i know that hey you know what somewhere the twins are meeting so you and i are dreaming about the same thing okay let me take a punt on execution let me put you to roll you start working and then over a period of time by seeing you by observing you I will know whether you are great or poor you will never be great you can only be poor so till you are poor you are great if you see what I mean I didn't explain in a better way so I keep believing in you that you are great at execution till you fail till you've lost interest you don't turn up at work till then I have to keep taking the punt on you because it's a very difficult thing to figure out it's just you transferring your belief in me as long as you and I are believing in the same thing I'm happy to take a punt on you that you are a great executor and then I have to fail at it and if I fail at it then you'll know and then you'll weed me out weeding out is very tough but I have to weed you out there that's when you actually fail with me you are a poor executor but a great is difficult to know in my opinion till the time I don't fail I'm not great no till the time you do not fail you are great because you don't actually know because I don't know the reason being that execution comes from passion comes from habit comes from a variety of emotions which I may not know true like your mother works for you she's a great executor in cooking she may be passionate about cooking some do it purely because of habit because she has to do it yeah so you'll not know execution has a lot more variables around it how do you fire people

1:53:19how do I fire people as in how do I tell them the news I tell them exactly on the face as is because my fundamental belief is that if I am letting somebody go I am taking one I am harming one person but I am actually saving thousands so let's go through that I am definitely saving the thousand people around him who could get polluted by him true I am definitely saving him because he will not go anywhere the only person I am harming is myself because I have trouble in actually saying that in as many words so as long as I am of the belief that I am saving everybody around him I am saving that person because he will probably do it better elsewhere I'll take the pain and when do you fire?

1:54:11the moment I get to know I give him generally one chance never two do you still not believe in work-life balance? do I believe in work-life balance? do you still not? so there are two parts to it so I don't believe in it for myself I'll be very honest I think my biggest differentiator is that I can work really hard that's my differentiator as well yeah it's a 10 ,000 hour rule right how fast you get i'll outwork everyone in my competition because that's in your control right what has changed though raj is i'm okay with a lot of others not putting in that much effort i think a couple of years back maybe five years back i used to get impatient with others not matching up i think that has changed you told me this last time that that had changed?

1:55:02No, that it bothers you. It bothers me. It has stopped bothering me now. It was less bothering. Now it's stopped. Because I understand now that, you know, particularly with the world around us changing, some people can do it the smart way. And I'm okay with that. Why do you keep, why are you wired like this? Why do you want to keep working all the time? More than working, it is about doing something or the other. It is not, it is not necessarily working for the business. It is about doing many things. I like doing many things. I think it develops an individual a lot more. It builds a lot more facets to your personality.

1:55:41You have a lot more things to talk about. You have a lot more things to think about. It just makes you a much more complete man. And I think ours is the only thing that the God has gifted you with. He's not made one person materially more intelligent than the other person. And that intelligence is also dependent on the ours that he's put in so i think yeah it's just that belief and it's kind of got hard by it but is it because you also believe in competition that someone else somewhere is working harder so you're going to beat that do you have that kind of philosophy

1:56:17I have a different philosophy. Not that, that somebody is working harder. What I believe is that

1:56:27everything requires a definitive number of hours. So the more you put, the faster you get there. I think to master every activity requires a certain amount of it. Like the 10 ,000 hour rule, right? every activity needs a certain amount of time so if you can put more time you get there faster and I'm a man in a hurry like most people my age you know like if building a business is a skill or if building a business is an outcome that you're looking for and that requires let's say 10 ,000 hours you want that 10 ,000 hours to be fastest let's say you're doing 100 hours a week then you do it in 100 weeks you're there in two years versus somebody who's doing 70 hour weeks you get there in three years so yeah better two years man in a hurry and is it only for business or other things as well true for other things as well hard jayi you want everything fast fast yeah man in a hurry why why are you so like what's the rush because you it's time right so if you're a man in a hurry you can do more things I would love to do more things I think I do fewer things than I want to even today so but you give time to your employees you give time to people there you're not hurry what I heard you know thousand employees by their name yes why is it important to know names of your employees of everyone who don't even work with you directly it's a large organization yeah why is it important for me yeah you could get away by knowing 50 people's name because those are the people you'll interact with on a daily basis probably well to be very honest I believe that if you have a personal connect with an individual they will go beyond their call of duty when it comes to matters that are connected to both of you or things that are overlapping to you if i now know raj personally and there is an activity that is important to me i know that raj will likely make more effort than he would i don't know him agreed and i think great companies great institutions or for that matter great teams are made when people go beyond their call of duty so one of the reasons why people go beyond their call of duty is because of personal connect i would do anything for my parents because simply i mean i'm connected to them there are other reasons too why people would go beyond their call of duty but i think the way i think is that you have to find out reasons why people work harder than the rational reason the transactional reason.

1:59:06One of them is to build a connect. What are the reasons why people go beyond, above and beyond to work?

1:59:15Because they believe that they are in a place where they can achieve their dream. And that is being strengthened with

1:59:27things that are happening around them. So if you want to be rich, right, and you see a lot of people getting rich around you, you will work harder than usual. If you want to be famous and you see that people around you are getting famous, you will likely work a little harder. It's when a reinforcement of environment is happening to positively influence the fact that they can achieve their dream is when people go harder at the problem. How do you do that in your company? how do I create an environment in company where everybody is going above and beyond and working one is connect second is money money not necessarily it is a combination so second one is actually quite important it's probably more important than the connect because connect actually taps out at scale the second one is we have a very simple belief that people work for only three things rich famous and power so rich is you're making more money than what people of your skill your batch are making fame is if you are doing something good not only does your boss tell you but he tells the whole world maybe external to even the company and the third is power as you are doing something good you have more people obeying you than the other way around fundamentally those are the three drivers we don't have employee satisfaction in that we don't have work life balance in that we don't have outings in that those are important but not front and center of what we do I believe and I fundamentally always believed that for like close to two decades that a human being is driven by these three choices some may be more important than the other but it is a combination of those three A, B, C, A

2:01:34so having that clarity that people work for only these three things is important not four or five things that outings are important satisfaction is important coming in early is important and those are important but three things rich famous part interesting that makes a lot of sense do you do town halls? yeah we do we do town halls and is it you telling them exactly what you want to tell them or is it like ask me anything? So we have a very fixed format for a town hall. So we have a five pointer format. All our town halls, in fact, we've done close to about, my sense close to about nine or 10 till now.

2:02:14We didn't do it in the COVID years because there's no possibility of it. We tried doing virtual, but didn't work. They have always had these five format point. So the first is an icebreaker. And that icebreaker is not a very you know it's not a very brainy game it's people shouting running around and you know making noises and stuff like that right so so one is that then we have a session wherein we talk about and clap for everyone team by team typically a session taken by a leader of the company generally used to be me but talking about it and talking about what have we achieved and just clapping right so i have a very simple theory people come to either shout or clap or drink or laugh clap shout drink laugh okay so the first one is to shout icebreaker the second one is to clap people love clapping right and the third one that we have is typically a session wherein we give awards again clapping okay lots of awards close to 15-20 awards the fourth one is fun like we would make some funny award or a funny thing and give somebody right laughing and the fifth one is drinking which is the entertainment so every town hall has these but information vision talking about that's the second session that's it the clapping the clapping one and it's not like you ask you giving them opportunity to ask you questions opening the floor teaching them something new in general most things actually have that kind of an environment where people can ask questions my personal view of asking a question of giving people the opportunity to ask questions especially in a large company like ours nobody would really bail the cat it is more on us as the speaker to actually encourage address the elephant in there address the elephant in the room or cold call somebody in the room to ask a question I think that's the format that I have seen as being more otherwise people ask rehearsed questions nobody will ask you actually a painful hard question so the painful hard question has to come from you or has to be forced out of the other person by actually pointing out saying that why don't you ask what is going on in your head and once he asks that question he says this can't be going on in your head why don't you ask me something around this so yeah so that's the format in which we do a download interesting And do you teach something to people in your townhouse?

2:04:45No. No, never. Because your founder, this is what I've heard, like a lot of founders have typical way of, typical point of view to see the world. And it keeps evolving and changing. And the way it would be changing, it's very different than others, right? And you want, out of the 20 things which you are seeing or learning, maybe one or two things you want that everybody in the company should at least know and few should follow. No. my fundamental belief in town halls i've always followed that in my life is they should begin by shouting but how because that gets the energy flowing then they should align then how do i align town halls i don't think are an opportunity to align it's everyday action that has to align if it has to be done periodically then you're not aligning if you are being forced to align in a town hall that means you are misaligned for the rest of the time.

2:05:35I believe, or at least everybody in our business believes, our simple goal as a company this year is to achieve 1000 crores of PAD. Let's say it is a goal. We align it with every single action. Every question is addressed towards maximizing PAD for the company. Very simple as that. The simple goal in our financing business is to reach 15 ,000 crores of loan book this year. It started with 11. Simple goal. Every time we talk about loan book. So alignment if it is forced in a town hall you are misaligned most of the time. Town hall is an opportunity to do just four things. Shout, clap, laugh and drink.

2:06:24How do you build right culture? Do you even think about culture? No. It's a part of me now. have you ever thought about culture because it looks like that you have some standard operating procedure and you're like if I'm like that my core team is like that automatically will become a thing yeah I do think like that so what I think is if you are practicing what you're doing it'll get disseminated and people who don't disagree who don't agree with it will likely fold in or fold out any wish so So, my way of building culture is that if you've just read about it somewhere, you like it from having heard about it somewhere.

2:07:10And to me, that's not something that I would even think about. For me, culture is something that I've seen in action. And I've seen the benefit of it elsewhere. Where I was a part of that culture, not the one setting it up. And those are the ones that I've invited. what I've seen in other organizations that I've worked are the ones that we've picked up and it's not just true for me people around me if they've seen something else that has worked for them while they were a part of that culture building process is what we have been right so that's one you should have experienced it second is you do it on your own you do it on your own people will copy and the third thing is culture is something that if you start thinking about doing it consciously to make people change their behavior it won't happen and fourth in my opinion it should be very simple you should be able to put it down in half a sentence how do you know who's right in the office who's wrong in the office who's doing politics who's not how do you know that a new leader or a new team leader or a new HR or somebody in the office who you've gotten come from a different background they follow the same principles as you and they're building the organization in the same way as you even though you've told them you know them they know you you're there aligned there's alignment how do you know it's actually getting translated on ground you'll never know but there are steps that you can take to increase it I'll tell you what are what are thinking around that it's very simple we have a very three-step culture it's called abc a for apprenticeship b for brotherhood c for camaraderie that's our culture okay how do we practice it very simple again if you go to any of our offices half the posters that you see on the walls are abc it just says apprenticeship brotherhood camaraderie you stare at the same thing over and over and over over again like i've seen this thing build don't talk for so long today because i've been staring at it that tomorrow if you ask me what comes after build i will not say build india dlf i'll say build don't talk so just paste it everywhere take it apologies for that example but second thing that we say is in our KPIs am I guaranteeing that that part of that culture is being rewarded for example for our new joinies we have a program called 40 under 40 wherein what we say is apprenticeship means you are teaching things so if you teach for 5 hours recorded and sent to HR wherein minimum 5 people are attending you get some amount of money brotherhood and camaraderie if you are taking minimum 5 journeys 5 times in a year for an outing which is funded for by the company you get some amount of money so you are forcing it by making people see it by making people do it but before that you have defined the culture in half a sentence ABC is very simple it's one word ABC so put it simple make people see it make people do it and be a part of it and you are part of people so you have to see it and do it that's how I think so culture to me but how do you solve let's say the blame game the I don't want to solve it it's human see blame game politics it's human nature what I want is culture what I don't want if it's happening I have to be okay with it so if I want what is apprenticeship apprenticeship basically means a for apprenticeship basically means if somebody do is doing it around you you better copy or you believe something is important for the company teach the other person teach teach and learn teach and learn teach and learn so it's apprenticeship not through a subject but by doing that's apprenticeship be brotherhood if he's in trouble go help him whatever be the issue look out for people who are in trouble and help them and see his camera have fun together if you going out for a drink take the other person along simple that's our culture fair anything other than that should happen should happen everybody has a view but it's not important for the company to have it for the company these three things are important how do you make sure in large company that the right information is reaching you I don't you don't care about right information I don't because for me it is not essential to our success for me there are many things that shouldn't happen in a company there are many things that should happen in a company but they are not essential to a company to be very honest with you apprenticeship is important within the company I'll tell you why because we are doing something that has not been attempted elsewhere which is to do those three things together that we were talking about because everybody does one sliver of a business so teaching and learning is very important for us brotherhood is very important for us because we are a very people intensive business.

2:12:37We are a lot of people working in the company and a lot of people will be in trouble. So helping them out controls attrition in the company. Helping them out gives you a goodwill that the company is out there to help you. That goodwill is important because it controls attrition for me. So having figured out what is important is the most critical one. You can't solve for everything. In fact, to be very honest with you, A was not a part of our culture. it was only B and C after 5 years we realized that A has to be there in fact we had some other word for B and C as well when then somebody some smart alec in fact one of our early co-founders came in and said hey why don't we call it ABC it sounds very interesting so we made that as culture so actually if you go to our offices half the posters say ABC but don't you think that whether people are happy or no whether people are enjoying or no No.

2:13:32People want to be rich, famous, powerful. The company wants them to have apprenticeship, brotherhood, camaraderie. Period. Done. That's off business and oxy is a few. It has 30 ,000 people. So, company has a simple expectation out of you. Demonstrate ABC. And you as a member of off business, need to have three expectations out of the company. Are they making you rich, famous, powerful? so if you you think that if anyone who wants to be rich famous and powerful in a short period of time you don't care about work life balance happiness enjoying are you doing all of this passion all of that etc etc nothing no yeah exactly I don't care about it because I can't offer that I can't give you joy because your joy may be dependent on a lot of other things which I don't control but can I make you rich yes can I make you famous yes if Raj is working with me and I figure out that Raj has done something well I can go to LinkedIn and say that Raj is the best guy in the world and here are the three reasons why that's in my control I can make you powerful I can put three people under you to help you out and stuff that you're doing other things I don't control then does that mean that you pay the most in your industry or you pay the highest that won't right no no no we would be end of second quartile somewhere around 50 % somewhere in the middle maybe slightly lower then you're not making people extremely rich yeah but what we do though is that we have we have an equity sharing program the ESOP program which actually if the company does well they'll be the richest guys by a distance and we kept up to that promise see in ESOPs giving out equity is not how people become rich liquidating it so that people have money in their hand is how people become rich I can give you equity worth 10 crores which today is money on paper is not how you think you are rich but if I have given you equity worth 2 crores out of which 1 crore is in your pocket because you liquidated it and the other 1 crore is lying with you you think you are rich true so what our emphasis has always been on liquidation in our 10 years we have had 8 liquidation rounds the company has raised money 6 times but it has liquidated ESOPs 8 times nice how do you do that in a bootstrap company you can buy back Zerodar does a lot you give ESOPs and you buy back you give ESOPs and you buy back difficult to do in a bootstrap company and hence I think the option to make ownership liquid is a very important milestone for everyone and hence there are very few bootstrap companies but very very difficult but coming back to your original question I think the clarity about what culture stands for defining it I used to always say defining it in a sentence now I've reduced it to say defining it in half a sentence to now saying proudly that it can be done in a word one day I'll stand and tell you that it has to be in three letters ABC

2:17:05interesting talking about entrepreneurs again you know the entrepreneurial journey is not rosy it has its ups and downs it is filled with extreme pain yeah sometimes times do you think the pain taking capacity of an entrepreneur needs to be very high or else he can't or she can't build a business no it need not be um i think if there are moments of extreme pain there are also moments of extreme joy to compensate so um anybody who has extreme moments of joy will also have extreme who will have the ability to take extreme amounts of pain i don't think that differentiates an entrepreneur what differentiates though though it's similar and hence i asked you to repeat the question is the fact that can you sacrifice not many people can sacrifice very difficult to sacrifice completely willingly like for example are you ready to sacrifice the fact that you have a kid and you will not see him for seven days in a row willingly without anybody around you asking.

2:18:18If you've seen that movie Dhurandar, it says Balidaan. Can you do sacrifice willingly without anybody asking is what defines entrepreneurship. Because entrepreneurship needs sacrifice. It sacrifices your personal time. It sacrifices it makes you take sacrifices which are against human nature. Like remember those cutting of losses for yourself? It's against human nature. It forces you to be patient when the inside of you is raging in anger. Can you make sacrifice of that emotion? I think entrepreneurs need sacrifice.

2:19:00And what's the difference between an entrepreneur who can sacrifice versus who can't?

2:19:09the entrepreneur who can't make a sacrifice will become a manager of people because he will make others sacrifice because a business building needs sacrifice so he will make others sacrifice and finally those people will run away because they probably are not gaining too much from that sacrifice so I think an entrepreneur who can't sacrifice will never build a business in my opinion. That's the single largest determinant between an average entrepreneur and a below average entrepreneur and an average one. Are people wired to be of this nature where they are just willing to sacrifice? No, they are not.

2:19:54And hence not many are entrepreneurs. So then how can you become that person? Does it come to you? Because if you are not inherently a person who is here to sacrifice, Yeah. So it doesn't come naturally. What happens is that the first time you start, you will be forced to make a sacrifice. Right? And there are some people who just fall off. Fall off that. Saying, I don't want to make this sacrifice. So you've fallen off. Second time, before the sacrifice comes in, people around you will kind of, without telling you, will kind of make that, you will have to sacrifice. It's a given. And then you'll have to sacrifice without people asking.

2:20:35and the third time it will come in your nightmares that this tomorrow this is what the sacrifice is going to be and you'll do it and the fourth time you will just do it yourself so the level increases every time so nobody's hardwired to make a sacrifice yeah and see every every great entrepreneur or an athlete or a musician or someone who wants to achieve big things they go through these periods of sacrifice sacrifices and they sacrifice a lot their personal time their party time their entertainment, friends, family, you know, chilling with just people, alone time, travel, vacation, all of that.

2:21:12You sacrifice this, you don't even realize like there's a cost of discipline and the cost of achieving something big, right? You do that. Like, how do you, but what excites you then? Like, what are you chasing that you're sacrificing almost every little joys of life?

2:21:36No, so if you take an athlete, like let's say an athlete is, athlete typically starts when they're in the late single digits, between seven to eight years old, six to eight years old, right? I think there is that humongous dream. Somebody dreams of an Olympic gold medal, for example, right? You know it's 20 years out. And you know it needs 20 years of hard work. So there is that belief. It's not that difficult, though. It's not that difficult. what do you get excited by? the dream what dream? my dream my dream is very simple

2:22:16the first time I said it I got trolled a lot

2:22:23I actually said it in Hindi but the person understood something else so I translated it in English I'll tell you the Hindi and the English it was very simple Hindi was to do Raj. And the English meant Reliance Adani Bajaj.

2:22:44Yeah, so yeah. You want to build that, become that conglomerate? I'll try. As large conglomerate as they have built. I think to be known for exceptional work in their fields is what is an aspiration. Yes. But three in one. They were all one in one. So that's the aspiration. I think that will need a lot of, I would say, people. It can't be just me. It has to be a lot of others. What are the top brands that you manufacture for? By volume or by reputation? Reputation. I think Uniqlo would be one. You manufacture for Uniqlo. Yeah. If you go to Uniqlo and you see their belts, they're all manufactured brands.

2:23:32Throughout the globe, we probably have a 60 % market share. Wow. Of their builds. We do for Zara.

2:23:45We do for Michael Kors. Coach. Adidas.

2:23:56Reebok. Nike. You manufacture for all of them. Nobody knows you. and nobody knows this side of you. Yeah, so I think there is some factoid saying that out of the top 100 April and accessory brands, we probably do 80. But we are small, so we are increasing our wallet share. So you manufacture for top 80 brands? Out of the top 100 brands. Well, it's not that difficult, right? The difficulty is in actually increasing your wallet share in those. So we probably are not as relevant to any of those as yet. it will soon be aspirations there so today if we talk about it we are close to about 3000 crores of exports and this is largely to large brands we were talking about sales last time would you consider yourself a good sales person?

2:24:46yes what's what is about human psychology that great sales people understand versus average people don't? oh it's very simple they listen they observe listen then they can figure out. They are not in a hurry to say. They are in a hurry to understand and listen. Great sales guys do it in a matter of seconds. So it's not obvious that they are listening.

2:25:19The worst ones, they don't do it at all.

2:25:26That's it. Yeah. Because sales is about connecting with the other guy. it's the other guy who's the most important you have to play the man not the situation not yourself and how do you do that by just making them talk well not really um it's become involuntary with time but i think the very basic principles are one to figure out a common connection and the more basic it is like a language or a region or a or an accent or a common interest area is an important one to figure out. That's one. Right. I think the second one to figure out is to say that

2:26:10is to say that whatever he is saying, you build off it.

2:26:19And not build away from it. So if you say something and I say, hey, you know what? what you're saying is right but you're building away from it I close out with you first logically and then I go to my point I think very basic things but not so basic for a lot of people very difficult to practice because human mind is wired for you to give out your agenda right to suspend the agenda is very tough great sales guys suspend the agenda it's not that they are not talking but they suspend the agenda they would forget about it But if I come into the room and Raj is in trouble because he had a tough day at work, I would rather talk about a tough day at work and not sell what I have to sell you.

2:27:05It's a very difficult thing to do. It's an easy thing to say, but a very difficult thing to practice, especially over and over again. True. I have a rule for this is a framework that I've built based on my learning from selling. Like if you want to close big tickets, I think there's a 99-1 rule. I mean it like 90 % you listen. 9 % you just reframe their 90 % problem in a very short time. I've not given you a solution. I've not told you anything. Whatever you told me in the last 90 minutes. Very simply in one statement or two statement of reframed your problem with much more clarity. So you're listening, right?

2:27:47Yeah. So listen the whole time. And then 1 % is where I just give you very pinpointed small solution and then leave it at it. and do nothing and then in meetings where i've done 100 % time selling versus in meetings where i've just 90 % listened and just reframed problems and then provided solution the conversion difference is this much yeah very true i agree with that and maximum selling happens when i understand the person very well and they just reframe their problems in much more articulated way then they they have been they would have done it yeah true very true very true see it makes sense yeah it does it does it does but listening is more important than talking in general whether it's selling whether it's anything anything

2:28:41but people are in a hurry to say what they have to see but in India you know what happens is apart from all of these logics and listening and all of that you have to give a kickback to the purchase manager. You have to bribe them. Does it? Isn't that a big practice? It is. Isn't that the big factor how you will close the guy? You still need to do it. Because the reality is After listening and all of that you still need to pay. It's other round. If everybody is paying you need to listen to actually make sure that you know that while he's meeting your card rate still he's being heard meaning that probably everybody pays but the guy who listens wins any which way okay so the standard practice standard practice whatever is transaction cost you have to do right I mean frankly but the good part is that I think as you grow higher in size larger in size you have to do lesser of it because beyond a point I think sometime the institutional capability takes over but can you be fully clean in India it's tough particularly for businesses starting off how do I know that my business needs equity or debt

2:30:06explain equity money and debt money by the way yeah from whose lens from the entrepreneur's entrepreneur's lens like make an entrepreneur understand what is equity what is debt when to take one when to take what so let me take this question as saying what form of capital is the right capital and let's make it a little broader i think that's where the answer lies so in my opinion there are five forms of capital each in let's take the descending order of which one is the best thing to have in my opinion the best thing to have is if you have profits already sitting with you since you've earned it great use it okay no questions asked the second best form of capital in my opinion is customer advance if the customer is paying you in advance that means he really values your business that means he really trusts you that means likely he doesn't have options where he can actually get it on credit so customer advance in my form is my second best form of capital you likely don't have to pay an interest on it as well right the third form of capital is supplier credit because again the supplier is trusting you likely he is doing it because you provide enormous value to him and stuff like that likely the interest is there but not that high.

2:31:29The fourth form of capital in my opinion is debt. Because you're not losing ownership. It enforces you to have discipline. It makes sure that there's a larger pool of debt available in the world. It makes sure that you actually are dipping into a very large pool. So if you've taken debt once you actually have access to a much larger pool of capital. Equity doesn't guarantee you that. And then last comes equity. Because it's the most expensive. It causes the maximum amount of burden on you. Because there's a moral burden too in addition to your ownership going away. So if you have the choice, you better go through this cycle.

2:32:12If you have the money earned through profits, better take it. Then go to customer advance, take it. Then supplier credit, then debt and then equity. The problem is that businesses can't do them. because they have not fully formed their business model that can actually make them either on profit or get customer advance and stuff like that. So early stage businesses have to go the reverse way. They are forced to. So when you're forced to take equity in the beginning because they don't have this. They don't have debt. They don't have supplier credit. They don't have customer advance. They don't have profit.

2:32:48They don't know what's going on. They have to take equity. They have to because there's no other option. if I had debt available as an option in the beginning I would have taken debt to be very honest with you like going back to one of the other points 73 rejections didn't bother us because we had other forms of capital we were getting supplier credit and debt so I think on market is very simple for me the way to think about a market is to say that hey is it a market that is all pervasive meaning how many people use it or will use it meaning is it solving a basic need the basic need is is food clothing shelter at the end of the day so is it solving for that so the moment I think about food clothing shelter I already think okay market exists if it's not food clothing shelter for me the next Maslow's hierarchy is to say that hey okay it may not be food clothing shelter it may be entertainment or it may be satisfaction of some kind so i think about it like that which is to say that hey is it solving a very basic physiological need and then an emotional need and then finally an aspirational need so i think the investor is trying to on the market side he's trying to pin you down saying that hey if the market exists today great then let me try to project it out for future but if it doesn't exist today is it is it a need that will either emerge or exist today but unsolved I think that's the categorization that he's doing.

2:34:22Investors are of two types. Some investors believe that market wins over the entrepreneur. And some investors believe an entrepreneur will find a great market. Right. So I think the weightage of whether one or two is always dependent on the investor. The third and the fourth are followers. the price and the business model will it make money because nobody knows so there are few investors who inherently are like if the guy is great just put in money he'll figure because he'll figure it out he'll figure it out he'll probably change markets but there is this Warren Buffett philosophy wherein he says the entrepreneur howsoever good does not win over the market it's a very it's a very well watched or very viral clip of charlie munger when he's been asked about elon musk where this is the same conversation which goes on yes yes yes yes i think also the reality is it also depends on the investor type so fundamentally there are three types of investors there are angels or vcs who are early they likely will weigh more on the person founder then there are private equity or late stage investors and then there are public investors public investors i don't think will care too much about the founder per se because i think the data is is there and they are not taking a very illiquid position the position is very liquid like spacex is they're betting on founder they are it's an exception though but typically if you see public market investors their windows are between three to six months because they are more ira like investors and would exit in and come in and go out very very soon okay so hence for them it's less relevant is it relevant and answer is yes but the weightage differs apart from an exception apart from an exception the debt though is very very different the debt form of capital the customer advance and all that is very very different works very differently now i was only talking about vc like the vc money what are vcs optimizing for what are they looking for in a founder just i think depends on vc to vc but i'll tell you what is common across all vcs one thing that they're definitely looking for is the ability to build teams.

2:36:40And the ability to build teams is attracting talent and retention of talent, both. And they are different skills. Okay. The second thing that they are looking for, for sure, meaning again a commonality, is the ability to sell. Because when there are no resources, only selling counts. The third thing that they are looking for, again a commonality, is integrity. Because in India, there have been issues with governance, with basic ethics and all that. So I think these three things are common. Attraction and retention of talent, governance and selling skills. And you have SoftBank. Yes. do you still have the amount of capital yeah very much right so you what you convince soft bank to put money in you which soft bank usually is known for putting money in like large some visionary kind of companies in the order the very different kind of company that they've built all right they've taken a bet how did you convince them how did you convince soft bank to put money on you so soft bank is looking for extraordinary outcomes right and to own a massive chunk of it right and they come in at a stage wherein the business model is typically figured out right and it needs capital for scale i think they saw something different in us i think what they saw in us is a couple of things one is a relevance of technology in a b2b domain which they had not seen because b2b typically is about discipline capital allocation large-scale manufacturing and stuff like that they actually saw the relevance of technology that's one i would say the second thing that they saw is a very india centered solution which they thought is actually true for all developing markets i would say these two are big apart from the usual stuff maybe they like the team and stuff like that but these two are to them or they reached out so in my case it was a little unique in the sense that one of the members of softbank was actually a common alma mater for me so we were in touch as individuals sartak mishra by name he and i were both at matrix um though not uh at the same time so we had been in touch and obviously after some scale he'd been in touch with me and then after some scale he approached nice so and you pitched to them or you pitched to masa or like what everybody has to go through masa so i had the masa round as well actually you had the masa round what is the masa round why is it so famous

2:39:34that's the eventual round yes i think masa round is is unique because of two three things three things actually the first reason is that Masa lets you talk right he really listens that's one second is

2:39:54Masa will give you an offer that offer can shake you and I think Masa is a visionary if you have thought about your business being X Masa will if he likes you he will think about it 10x so that's the masa round how was it with you? explain it had all three elements so masa lets you talk so I think it was 90 % us versus masa talking 10 % the whole team or just you?

2:40:31there were 3-4 of us but it was mostly me talking because presenting so then you present he will listen it was right in the middle of COVID second part of covid so we didn't have the luxury of meeting him but we met masa a few times when he was in india though but but during the investment period it was difficult to go back to japan and then when he you said he gives you an offer and what do you mean every founder who saw bank invested they say that masa will give you an offer what is that it is a pretty outlandish offer because his view of the business because he's seen so much i mean he's seen so many businesses is being created to that bigger scale, his aspiration is when he likes something, it should be of that scale.

2:41:13And hence he makes an equivalent offer. So it's not you asking for money, XM money. Typically, Masa makes an offer. So you don't, it's just like, I mean, you put it into the notes, but Masa has his own way of thinking. He does think big. He thinks really big. So how much were you asking and how much did he put? I don't remember exactly. We got 150 million in the first round. dollars 500 crore no no it was it was 70 back then so this is 1000 crores okay this is 2021 June he would have offered like my sense is about 3x of that so yeah he offered 450 he didn't he doesn't offer the way it transpires with him is he thinks that this much is the money required to get to the scale that he thinks it should and then he offers it to you saying that hey why not take it from South Bank?

2:42:08Then that you know so you cut a deal then. And then you're like no no we don't want 450 we don't want liquidate this much at this and all of that negotiation will happen. But it is but I must tell you I mean being in a business conversation with him is extraordinary because he does think extremely big one and two he can really spot the mega trend. Give me an example. Like for example I think the first time I met him he talked about how he had cut a deal with yahoo japan so he'd caught on to the trend that you know that mobility will be huge and will just trump everything over so that's one i think the second thing is about how he caught on to the mega trend of ai his deal with open which is widely talked about um and he thinks really big and there's this famous story about his interview with David Rubenstein where he claims that he got some a billion dollar a minute right.

2:43:08That's the most famous one. And then there's another famous one that he lost the NVIDIA thing. He lost the NVIDIA one very early. But he does talk. I mean, he takes things to a different level. How do you spot a mega trend? I'm learning. I think I'm good at micro trends.

2:43:34Megatrends hence angel I think I can spot a microtrend particularly in areas that interest me maybe manufacturing B2B supply chain and financing but megatrends I think if you can spot a megatrend you can be like you can do extraordinary things I don't think I'm there yet and then the third thing you said that he will think big and he will he will make you think way beyond it happened with you yeah it did you started thinking 10x of your business after the meeting

2:44:12well not really but i think some of the pointers he made were were crucial to how our next couple of years shaped out for sure like like for example i think um i remember during that time our financing business had a significant overlap with our commerce business meaning that we were financing largely the customers who we were who we were giving materials to his view was that those two businesses should grow independent of each other it's something that had not struck us so vividly till then and they did become independent of each other interesting and to the extent that the financing business raised money after a year so that's how it shaped from June 2021 to March 2022 in that period of nine months the financing business became a truly independent business so that's one I remember the second thing that he is saying is about the fact that private labels will be a very important part of our business because it can make your business extraordinarily sticky with customers and it has transpired out that way one of the biggest things i would say which is true for our extraordinarily high nps is because of the fact that we have our own labels because we control everything there whether it's a cost with the quality whether it's the packaging whether the branding around that and stuff give me an example okay so i'll give you a number first in the example so out of the 20 000 crores of revenue that we do 40 % is self manufactured by us and it's increasing 2-3 % every year and in each of those products wherever we manufacture wherever we have a label thing made by our business the customer stickiness I mean there's hardly any customer attrition practically 0 % the customer just doesn't go away because it's cheaper right it's cheaper it's better quality and they know the brand so they can just reorder the same thing again again and again and trustworthy.

2:46:15See, because fundamentally if you're an aggregator, it goes under your name but the customer knows that it's made by someone else. It has the promise of delivery. It has the promise of standing true to quality. But what if it's better quality? What if it's cheaper? In India, one thing sells for sure. Cheaper at better quality. Trust may sell, may not sell. But cheaper at better quality is a great 100 % sales every day. Yes. You have built a very large business. Thousands of crores. Right. Scale-wise. Scale-wise and even profit-wise, you're making shit tons of profits. At some scale, you make money.

2:46:59Which is very unheard of in the startup world. Right. At least with the kind of startups where they grow very fast, profitability is always a question. Because at some point, they'll make profits. Right. And then you are this founder of a large company with large pedigree, all who's of the world wants to come to you and you're sometime it gets to your head. And it's not a founder's fault in some way because the founders revolving around this world where everybody wants to actually just, you know, make him the God. and then to have a humility to maybe put your thoughts your point of view your perspective aside and be like maybe this new thing which is probably not even worth 10 minutes of my time or can be much more insignificant in my large context of things that I do let me give it an ear and let me give it a thought that is very rare and you have that even first time when we were sitting and I was the one asking you 500 questions you still gave me and I when small pockets of five six minutes when I was telling you something no my strong belief Raj is that you know at the end of the day knowledge is a function of what all information you consume right and you as an individual will likely consume information for whatever 16 18 hours but people around you let's say you have 100 people around you they're consuming information for 100 times that number.

2:48:32So it's more important to observe and build off that because what you're consuming you anyways have, right? So I'm a strong believer in the philosophy that the knowledge rests outside you and hence has to be consumed than it rests inside you and hence has to be dissipated. I would dissipate it if you need it. But I definitely need the knowledge. So hence looking out for more teachers rather than students. But has it gone to your head ever? At any point? Was there a phase? business-wise it has gone as an individual on the personal side it hasn't so on the business side what happens is sometimes what happens is that you know you're doing a lot of right things and the law of average catches up with you that has happened to me wherein i have kind of given away the first principles nature of evaluating a particular opportunity because i had this big thing in my head that whatever i would touch would turn gold midas touch the midas touch and that fails you and that has happened to me on the personal side really then give me an example when did it happen okay i will tell you the first one i i remember and we were talking about it a few minutes back i think going to uh we started building the agri business the agri products business right when we were building the agri products business i intrinsically knew that going into food products that had a lot of regulatory mechanisms that are relevant for them would actually inhibit or impede the growth of the business.

2:50:04I intrinsically knew. I knew that you can't make too much margin beyond a point. You can't be too large. You will have to be massy oriented and all that. You can't really build a large business out of that. I knew that. But when I touched it, it suddenly became big and I kept building it. I did not build the guardrails around it around which we could have controlled it and it suddenly became very large for me to take a call at a very large scale to actually cut it down so so that's one example what made you realize that you have to cut it fundamentals of business i started losing money putting in more capital which was not generating incremental return because see business is a very simple principle at least as per what i operate is that if you put in capital you have to make money and if you put in more capital then you have to make more money than what you were making already.

2:50:52So business has to accelerate. So for example, a return on capital in the beginning can be 0%. It's fine. But incremental capital that you put has to be 2%. Further, what you put has to be 4%. Because you are learning. I mean, at the end of the day that capital has to reflect that learning. And when it starts going down when the incremental capital is not generating or the diminishing margin comes in then you should know that you're making the wrong choice. But did you learn this or observe this by yourself or somebody called it out? It was very evident. I actually ignored the data for a really long time because I thought I could turn it around.

2:51:26I had the mid-ass touch, if you remember. It is when it started happening for quarters in a row that I actually started thinking that, no, there's something wrong. So on a professional side, you tend to do a lot more errors. I think personally, it is easier to be disciplined. But maybe someone that's your CFO or your co-founder or somebody, did they point it out or you yourself got it did they not object or everyone was as in together we are in the mid-ass touch it happens it happens so there was a time i would say sometime around 2022 maybe 23 uh wherein a lot of decisions that we were taking was actually turning out to be gold so i think collectively we were under that impression it's everyone together everyone how bad is that if you don't realize for a long time the entire core team thinks that we are golden which happens i'm sure to a lot of people it does happen um how often is that or how bad is that how bad is that um i can tell you purely from experience that uh one it is uh bad so second thing is that it happens to everyone and the third thing is um how do you rebuild after you've known it's bad so first you have to fail extremely fast so if you realize it's bad you just have to wind it down that's one and second is how do you build off it because there is inertia of rest and then there is inertia of motion so if you've done something wrong how do you really get out of it is is the one that really determines us i think for us what we did is when once we understood that it was wrong we actually shut it down very very fast and we forgot very fast that we shut it down and that actually helped us tell me what is the scale today where are you now okay so so we have as you just heard right we have three businesses so one is a revenue generation tender generation engine we don't make money out of it we say it's a service that we give you for free because for me it is an acquisition tool it's a great marketing tool fair i am doing it on a non-commercial side we have a lot of users there but doesn't make it makes enough money to cover its cost so let's forget that part for a minute if we go to commerce business wherein i'm supplying raw materials that's Bid assist?

2:53:38That is bid assist. That is bid assist, yeah. And the second business is to supply raw materials, right? That business today is close to about 20 ,000 crores in terms of revenue. It's a 10-year-old business. And yes, it is profitable. It has been profitable for 8 years out of the 10 that has been in operations. See, in B2B, you should be making money. And financing? And financing today is a 7.5-year-old business because it started a little late. financing today it does not have a revenue number it is a loan book number it's asset based number so asset base wise we are close to about 11 000 crores today and it's been profitable from the right first month so overall the group like you would identify yourself as a group business right or each and every one of the group business it's a group business so group business would be at what revenue last year we ended up with about close to 21 and a half thousand crores 21 000 crore of revenue and what's the profit that's the quite tricky part the profit last year was close to about a shade above 600 crores of pat pat yeah 600 crores yeah in a fast growing startup and this year have you grown um we would grow between i mean in the scenario that we are in is very difficult to predict but But I think our top line will grow in the late 20s, somewhere around the 25 to 30 percent mark and our profit growth will be much higher.

2:55:09Because business fundamentally has what is called operating leverage, right? Which is the revenue grows at a pace, but the cost doesn't grow at the same pace. And hence, typically for large businesses which have achieved some scale, you would typically expect the profit to actually outstrip the revenue growth. so you're growing 25-30 % year on year typically and you're growing your profits as well and you're building boring business, hardcore you know typical no margin business area where you're operating and you're building high dependency because someone who has tasted blood with you once would typically want to stay with you if I am as a small manufacturer because the substitute is very poor right here's to go back to the trader typically if I have like I've explored 50 options and then I come to you I buy from you you finance it and then I find a revenue source and in the end I make money if I've done this cycle once then I love you typically because then this is your my you're my everything and I want to I have given you reason for me to hate you like if I for you to hate me rather but once if I made money with you then I want to squeeze out every penny out of you yes that's right right so that's right I would do that so the high dependency why are you hidden like nobody knows about you it's a little bit by choice it's a little bit by choice but it's such a lucrative business every startup makes so much noise even if they're of one tenth scale of you to be very honest with you raj it's a little bit by design and a little bit by philosophy so let me explain both so by design we are not many products right as you heard we are in four verticals with 30 products the world is like probably a million of products so we are very localized in products that we are we are also today five percent pan india india today has close to about 800 sme clusters we are only in 40 the reason we are there is not because we are some gods but because we need to create that efficiency i have to give it 0.5 percent cheap and make money for myself right and hence we are very localized so it's we're not all over the place so that's one second design choice is that we are in businesses which you fundamentally don't think about like for example you would think about coffee but you would not be thinking about the agrochemical that goes into growing up that coffee so these are not very intuitive businesses right and hence by design choice we are mostly in in i would say raw materials which actually a normal person like you and me don't think about and the philosophy in addition to that raj is that the more we are under the radar the better it is for our business if a customer comes to know that I'm making as much money as we probably do he will likely squeeze me out more like you know there is this cast of businessmen in India called the banyas, the banyas are actually taught right from birth to say that they are losing money irrespective of whatever they are making right so it's more of philosophy as well so it's a combination of those three because so let's say from a business point of view but from a startup point of view right a startup typically makes a lot of noise even though when they don't make profits and it's very unheard of that in india you see a fast growing startup growing at this pace with large revenue and making insane amount of pat pat is unheard of until they reach public there are a few though but yeah like until they reach public like for for reaching public then they actually align their business interest with the public market interest and then they go profit and then they build it profitably right so it's in your case it's not like that you're profitable since very long time yes why don't you talk about it and why don't like nobody talks about it a startup making profits even we don't talk about it between ourselves right so I think one of the big things that we have kind of believed as individuals and I'm not talking about myself alone but in general people who are responsible for what we are is to say that your badge should be doing the talking like in cricket we say like i can see a lot of cricket gear they say that the guys who actually speak the most are not the ones who score the most right so i think there's a general aversion to be in the public eye i think it helps our business as well so that kind of feeling has actually got strengthened with time so that's one Two, I think media also picks up a lot of B2C stories.

2:59:37Because if they are going to talk about a business that sells steel or chemicals or garments, nobody's really interested, right? Because you can't relate to it. So I think media also finds it less fascinating to talk about products that are not in everyday use. So that's the second reason. And I would say the third reason is we are that kind of people. I mean, I think the family values that we got from generations was to say that, hey, you should be putting your head down and let the world take notice of you rather than the other way around. Fair. Fair. but don't you believe that you should be building a brand for yourself for the company for myself no doesn't that help in today's world don't you think that it helps building a company brand being known being just understood by a large amount of people yeah so I think and this is my philosophy I believe that you will have to reach a certain scale before you build a brand because there are two ways of building the business you can throw money at the problem build a brand and then expect to make money later whereas the other way to say the other way to build is to make sure that you build a business and have the money that you can throw at the brand and then get known I think it's more the latter for us and it's purely because of the industry that we operate in and people who we are so I think we would rather try to make our own money so that we can spend on the brand and then get known for it uh and i don't think we are close so yeah so yeah so fair you know every time i search about you on google i try to because i know you and i love uh like lord not many people know this i have picked up so many things from you based on our last podcast and then whenever i speak to you i just pick up and learn 100 things from you you don't even realize that so okay but i keep searching okay and i keep searching google i want to know what the news is what linkedin is talking what other other world is talking one thing pops up is you and your wife you both have built billion dollar companies which is but it's with the same set of values i think but this is incredible right it's both partners they both were doing a job they both leave the job they both build billion dollar companies they both are profitable by build after building a billion dollar company which is it's something to be celebrated.

3:02:15What do you guys have in common which has helped you build this? Both in boring businesses, complicated businesses. Having said that, the core philosophy is that it's not just the similarity. The respect comes, the love and affection comes from the fact that we both have some things in common but the respect comes from the fact that we both are different in a certain way where we believe that what the other person is doing, you can't do it yourself. so if you see that right so i think there are reasons why we are common and i'll tell you those but there are significant number of reasons why we are different from each other and hence we believe that oh okay she is doing that that which i can't do and that's true for every individual right so you need to have the love which binds you together but you need to have the respect and then only you can actually give me an example of a similarity and difference so similarity is we would like to do things on our own rather than delegating too much.

3:03:11Hands on. It's a very core principle of what we do. Yeah. Right? A difference would be in terms of me wanting to first think of the opportunity and not the risk. She thinks more risk. She runs financial services, right? And her entire team and people who started the business with her are more risk first. They would first see the risk. Whereas what I would see is is there enough opportunity available is there enough profit to be made can it be a large business whereas the first thing that they would think is can we lose money so the first thing she would think is protecting the downside you would think is what's the what's the upside do you fight over this yeah yeah on new opportunities very much very much to be very honest i think the way we have kind of and there are it's not an individual versus individual team versus team we have said that while we will healthily fight the teams, the team that is responsible for driving that business will have the final call.

3:04:16So as long as, let's say I'm fighting with you, but if in your business, I can give you an input, the decision rests with you is how we have kind of reconciled. And to have that discipline to make sure that I'm not imposing myself on you and it's just an input into your decision making is an important element. so it's more the execution these are very simple things to talk about but very difficult to practice and get it right over and over again tell me what are three important metrics that every founder should know about about the business about himself Both.

3:04:56I ask you a question, you make it better and then you land yourself into it.

3:05:06About the business, I think the first thing, the first metric is to say whether he's got to product market fit. Which means, in my opinion, that his revenues are increasing month on month. for maybe three to six months. Which means getting revenue is not important because you could just do that through relations. But revenues are increasing either three months, six months depending on the nature of the business. If it's a consumer-oriented business, it can be three months. But if it's a B2B business, then it should be six months. So product market fit demonstrated by increasing revenue for at least a three or six month period.

3:05:44So that's one. The second thing that he needs to measure himself, this is for an early founder. The second is, and this is a tough one to get, by the way. Because there will be inherent seasonalities in the business. Something will happen. You don't know, right? Accidents will happen. The second thing is to get profitable product market rate. Meaning that he is earning enough money to cover its cost. Doesn't mean that he's just breaking you. It has to be a certain percentage so that the capital employed is more than the cost of debt. so if the debt is giving him a 6 to 8 percent return which is what it gives today the revenue minus cost the profit should actually generate a cost of capital of at least 10 percent so that the four percent are incremental for you four percent is incremental for you and demonstrable over maybe one or two quarters depending on the nature of the business b2c one quarter okay b2b two quarters the third metric in my opinion that he should put is the scalable product market business scalable profitable product market business which means that not only is he profitable right now but he's being able to generate cash flow because that cash flow will be used to actually fund his own expansion and hence he may not need investor capital from outside so that's the third metric that happens at a later stage like in our 10th year did we generate any free cash flow we generated profit in our second year of operations but free cash flow meaning enough capital so that i can put for future and still make money so that is the third in my opinion these are very three important parameters you can have other things in and around it but these are real gateways but do you track something on a monthly basis which is very very fundamental to business let's say revenue profits i don't know expenditure of some sort or that depends business to cm3 i don't know whatever that is yeah in our case so cms i don't believe in i believe that if you track cms you'll never get to real profit because then you adjust right cm is an adjustment it's not an accounting parameter whatever whatever whatever shows up on the balance sheet is is what profit is so uh we track ebitda and pat like every business with us right um but it depends business to business um when i said about profitable for one quarter two quarters it means pat not ebidda because depreciation is a real cost so is tax so is interest all right so pat is one so pat for sure so the first is product market fit which means revenue increasing for three or six months that for me is essential for that we do even today which means that in certain clusters or in certain products if you're not demonstrating that three to six month cycle over let's say two years and all that that means there is an issue got it so it's a continuous metric it is not a metric that has to be demonstrated only in the beginning similarly for profitability that you have to do it for one to two quarters if you're not doing it over and over again then there is an issue got it and the third is also true how do you attract talent how do you retain talent attraction is through scaling purely through selling because make it customized to them you attract the best talent by telling them that what you are building is is very adjacent to what they have that's attraction for me it's pure selling it's like selling to an investor or selling to a customer.

3:09:27Okay. Retention is a difficult job and that is what differentiates the good companies from the average ones. Retention requires you to give them three things which you already know. Rich, famous, power.

3:09:45Love that. Okay. I have three more questions. Okay. I've just written out of these. What are, because they tell me what three dying industries where you wouldn't put money invest or in business in business

3:10:06I think the first one is

3:10:12BPOs, KPOs they are going that's obvious they are going I think the second one would be manpower heavy industries which are doing analytics like for example TPAs

3:10:29transcription all that is going

3:10:34the third one would be I think

3:10:43very B2G oriented industries business to government business to government which are fully 100 % government they need to have a balance between government and private P or B2G I would resist like example maybe infrastructure fully government oriented if not doing anything for private large companies is a little risky business it's not dying but it's risky it's not my cup of tea and where would you not invest three companies which are dying three industries where you would never invest the first two would be manpower heavy industries especially the ones where the manpower is actually doing a desk job.

3:11:21So that's one. Where I would not invest second is industries which are actually I mean it's a personal choice. They're not dying though. Is industries which actually are extremely service oriented. Marketing, project management very service oriented and you know they go through their films. Yeah. Right. where one project can define the character of what your business is so that i wouldn't invest i would say the third thing that i don't wouldn't invest is is where indian companies who are completely dependent on offshore operations

3:12:07because i think familiarity with our domestic way of doing business is important because we don't know what happens elsewhere so so that's my personal choice again give me an example of the last like somebody who's gone up and set up a manufacturing operation in making it up in europe or for that matter is doing a you know some some small services or analytics setup or a data oriented setup in let's say a developed country that i wouldn't do because i just believe that what we don't know we don't know like other nations it's very difficult only other nations I mean having in India and abroad is okay but just abroad is an issue like going out in different country and building it completely from scratch that's happening today that does happen today it's scary it is scary because we don't know what we don't know nuances we don't understand we don't understand yeah that's fair you said manpower heavy textile is one of them manpower heavy but where it's a desk job okay textile you're one of the guests on our podcast said the textile industry is dying yes the so textile has three parts so the first part is basically ginning which means taking cotton bales and making it into thread the second is spinning which is to take the thread and make them into yarn or make them into fabric and the third is garmenting i believe garmenting is a very as i said one of the sunrise industries the textile part which is the two previous ones are dying which is a spinning and the ginning or the weaving because they are they are extremely exposed to commodity prices of raw material one and two there is no differentiation that you can bring in one versus the other so where the textile business is actually looking interesting right now is if you're doing a backward integration from garmenting there it makes sense but otherwise it is a dying industry how a small manufacturer anything whether textile or anything at all because you said small manufacturing people should do and you support them how a small manufacturer can compete with a large manufacturer today they can't which is why we exist what i was saying is our business has been built for small manufacturers because they just can't compete nobody builds anything for them which is what makes our business stand out and how do they win let's say a new customer where locally they're local in manage and locally if there are two small manufacturers one says that I'm 20 % cheaper and the other is not how do you how a customer wins then like how a manufacturer would win a customer then because there's no differentiation there is no differentiation yes I think the small manufacturer has to consistently invest in either innovation or cost cutting that's the only way in which a small manufacturer can win because relationship building is is true and relevant but only for the short term it'll go away i know you you give me business may not be true a year later that's a good foot in the door but won't last so consistently exploring then because he gets to know the customers ins and outs very quickly so using that knowledge to actually make innovation happens so that he can make it more customized it for the customer is important and happens in a lot of auto components for example they are inside their small manufacturer based inside a large factory they get to know what the design challenges are they quickly make a product and then give it or cutting costs heavily i think a small manufacturer has a has a lot of degrees of freedom by which he can cut down his operating costs which a bigger manufacturer can't because he's actually made a lot of capital investments he would be into long-term agreements with union he would have signed up service agreements with downstream and stuff like that so i think cost cutting plus innovation true apart from tying up with us what are common ways somebody gets crude as in a business yeah an entrepreneur what are the ways an entrepreneur can get screwed by investor by suppliers first is by co-founders first is from within nobody's out there to really screw them out to screw them from the outset he has to first do a mistake to get screwed externally but without doing a mistake he can get screwed internally so he has to watch out for the right co-founders a right founding team then the right employees and all that so that is necessary you may not get there if you have a great co-founding team or a great founding team but that's necessary for the business to take off.

3:16:54That is what he has to watch out for. I think implosion is the worry. And what are the ways investors screw a founder? You've been on the investor side. You've been on the founder side. Yeah, yeah. So, it's very difficult in the Indian context for an investor to screw a founder. That's very, that's very unlikely. Very, very unlikely and second, it cannot happen to an intensity. And I think if the investor is screwing a founder generally the founder is at fault because the investor has already done his part of the bargain he's already invested so he is almost at your own baggery to treat him right and deliver the growth that you promised him so if you are getting screwed by an investor it's likely your fault is my opinion that's one and the second I would say that if an investor is screwing you badly most investors are typically minority investors to begin with and you are the one in ascendancy and in majority so you actually have the entire world favoring you and if you're still tom-tomming about the fact that you're getting screwed by an investor it is because even legally you can't be protected so likely it's your fault like in our language in the financial markets we say that the lender is never wrong because he's given you his money.

3:18:18If lenders can't be wrong, investors can seldom be as well. Because once you've taken money from someone, it's your obligation to make sure that you are close to what you've promised. True. And if somebody has given money, I would scantily expect them to actually go and play around with it and risking it by trying to be nasty. It's just common sense. Fair. Last two questions I ask every guest is, what is one advice nobody should follow? What is one advice nobody should follow?

3:19:11Don't be yourself. Try to learn. Try to adopt. The best chance you have to win is to be yourself. If somebody is asking you to change the fundamental core of who you are as a person. Just ditch it. The best chance that you have as a professional, as an academician, as an entrepreneur, as anybody is by just being yourself. So if people are teaching you stuff, it's okay. If people are pushing it down your throat, it's not okay.

3:19:44and we have a wall which is a cost of ambition wall okay so we asked this question like what cost have you paid personally to build a billion dollar boring business i haven't given enough time to family i've been at home um very little and whenever i've been i've been uh occupied so yeah that's my cost cost of family time cost of family time and also being thinking about other stuff while being with family so it's been that's how you are like that getting better or you still like that getting worse and your wife how is she I would say the same for her you both thinking nobody is thinking I don't think she's at as big a fault as yeah I mean the good part about us is that we've had an extended ecosystem so my in-laws are close by and we've had my parents were also there my mom went away during COVID but we were lucky that way or the kids just watch you and be like we are like we are also thinking about something else to be honest new age kids are very very different they are more glued to electronic devices than or maybe they are like dad built a unicorn mom built a unicorn now it's up to me to build a unicorn I am much more vocal about it I tell them that you know hey we will probably hand you over a company of this size you will have to take it to 10x we did it in so little a time.

3:21:23So, please be more efficient. No, but jokes aside, I think that's a common thread. Can't really escape that. Thank you so much. It was a pleasure talking to you again. Yeah, same here. Truly enjoyed the conversation. I think it was very, very reflective in nature. So, seldom get the time to do that. Thank you. Thank you. Thank you. Thanks for having me. Hello. Big man. How are you? Big man to you. How are you? I'm doing well. What about you? Oh, how are you, buddy? I was telling you that the principles, there were two, three things that just stayed with me forever. Like you didn't have a cabin.

3:22:01Ah, okay. So I gave up. My desk, you saw the outside? Right here, that's my desk. Okay. Is that the one just outside the door? No, just outside the door. So I gave up the cabin. After that. I didn't even have a team. Okay. And then we built podcasts and then for... But nobody else other than you also has a cabin. nobody else other than you also has a doesn't have a cabin it's a shared cabin like everybody has a like it's it's like HR has a department but all four or five people will sit there or like a guest team will have a but then everybody will sit there it's not like a dedicated this is you and your no designated no no no no no so that you told me and stayed with me and to me it works a lot because when you're the founder a lot of new people old people they don't give a shit about you they are very friendly but a lot of new people they are scared to talk to you and when they see you all the time here after a week or a month or two months then their fear goes away like Raj is just random dude walking here and there because he is just out there and that has helped me a lot because it increases transparency a lot of people talk to me I understand a lot of people the communication level has just gone up So, very good principle.

3:23:18I have followed this and I've told about this principle to 50 people in my life. It's a good thing. Thank you.

3:23:48Thank you.