H O W A G I L E
INSIDE
Expanding to conquer
Raymond Apparel’s logistics head
Samar Roy says the company is
focusing on long-term plans
Bitter
IRONY
India can be the food supplier to the world. But not only is an inept supply
chain an obstacle to that, it results in food worth Rs. 58,000 crore getting
wasted every year. Fasttrack explores what ails the Indian food supply chain
SHEFALI THAPLIYAL
I
ndian agriculture, in all its abundance, can
not only provide a surplus to the country’s
billion-plus population but also become the
food supplier of the world. However, a high-
ly inefficient supply chain is the biggest ail-
ment the food industry suffers from, result-
ing in produce worth millions going waste.
According to Atul Khanna, Director, Global
Cold Chain Alliance (GCCA), India division,
despite the country being the second-largest pro-
ducer of fruits and vegetables in the world, as high
as 30 percent of it goes waste due to inefficient sup-
ply chains. “This is as much as the consumption of
the entire United Kingdom!” Khanna stresses.
GCCA is an umbrella organisation that unites
partners to facilitate communication, networking
and education for the perishable food industry.
Due to the high wastage, it is the consumer who
ends up paying as much as 35 percent more than
what he should be.
Processing industry
The processed food industry constitutes 14 per-
cent of manufacturing GDP and plays a critical
role in linking the farmers to the final consumer in
the domestic as well as international markets.
I S Y O U R
Sunny proposition
The country’s infinite solar resource,
if tapped efficiently, can make India
pg 3 a power-rich nation
However, it is still in its nascent stage with conser-
vative estimates putting processing levels in the
fruit and vegetable sector at 2 percent, dairies at 14
percent, fish at 4 percent, bulk meat de-boning at
21 percent and meat and poultry to the tune of 2
percent.
The processed food industry’s potential for
growth is boundless in a country of 1.08 billion
people. Moreover, the upward mobility of income
classes and the need for convenience is driving
demand for perishables and processed foods. The
trend of eating out in urban India and the grow-
ing acceptability of processed food to home-
cooked food has, therefore, created a year-round
market for perishables like fruits, vegetables, meat
and poultry.
The supply chain snags
According to Prof. N Viswanadham, Clinical
Professor and Executive Director of the Centre for
Global Logistics and Manufacturing Strategies,
Indian School of Business (ISB), the supply chain
in the food industry in India is complex, several
small stakeholders involved right from the field to
the shelf. And its biggest handicap is that each
stakeholder – the farmer, wholesaler, manufactur-
er and retailer – works in silos. Khanna agrees:
“There is no ownership of the products when in
For an e-zine version for your friends and colleagues, write to us at fasttrack@safexpress.com
C O M P A N Y
pg 4
transit due to which there is no check on damage
and wastage.”
An absence of demand forecasting is yet anoth-
er issue as farmers push whatever they produce
into the market. Infrastructure, or the lack of it, is
also a big hurdle in having an agile supply chain.
“Power, for example, is erratic,” Khanna says,
adding, “so even though you have cold storage
facilities, what is the point if there’s no power to
run the refrigeration?”
Mohammad Salim Balbatti, Head of Product
Development at food and beverage chain Java
Green says trained manpower is a hiccup. “We
don’t have specialised supply chain managers,”
says Balbatti. “A supply chain specialist needs to
study the company in detail, realise which city
needs more supplies and which doesn’t. He/she
also needs to be involved in negotiations at all lev-
els, beginning with the farmer.”
For companies like Java Green, where a major
part of business involves perishables – such as its
sandwiches and pastries – having a sound supply
chain is intrinsic to success. “We are the front-end
sellers and have simplified supply chain models
that ensure we provide the freshest and most
hygienic products to the customer,” Balbatti
Continued on Page 2
ISSUE 24, JANUARY-MARCH 2010
Funding and nurturing
It’s a time to rejoice for SMEs as
PE and VC firms restart funding
after the recessionary slack
pg 6
MESSAGE
FOOD FOR
THOUGHT
The importance of having a sound sup-
ply chain can’t be ignored and business-
es which do, face the risk of being left
behind. But when it is an entire indus-
try, faulty supply chains not just harm
company profit, they can affect the
entire nation. The food industry is one
such domain where inept supply chains
have led to shockingly high amount of
food wastage and directly affected our
country’s economy. Food worth many
crores is wasted by the time it reaches
the market shelf. It is ironic, thus, when
we are told India is the second largest
producer of food in the world. The lead
story of this issue highlights just such
ironies.
Another sector which faces ambiguity in
supply chain efficacy is the still-nascent
solar power. While solar energy could be
the answer to all of the country’s power
needs, a lot remains to be done, includ-
ing setting up efficient supply chains.
Once those are in place, we could have
a truly sunny economy. The good news
is a number of domestic and interna-
tional companies and manufacturers are
showing keen interest, as explored in
Inside Out.
SMEs are also experiencing heightened
interest from Private Equity and Venture
Capitalist firms as the ill winds of the
slowdown gradually subside. The com-
ing months could see increased funding
for SMEs, which is definitely good news
at this time.
Talking of good times, and quite literal-
ly, the consumer is king in the luxury
watch market. Big players are moving
beyond the super-rich and wooing
newer segments with interesting
schemes and loans. Anything to pull in
more business. The best part, though, is
no one seems to be complaining!
PAWAN JAIN Chairman & MD,
Safexpress Pvt Ltd
informs. Java Green has city-specific production and apart from capital shortage. “We are controlled conditions. These OPPORTUNITIES
vendors. keen to expand our frozen, ready-to-eat range from physical damage
“The most important aspect of supply chain is that segment within the country but have and vermin infestation to
FOR IMPROVING
the product should have minimal shelf life and be been unable to do,” says Mishra, improper temperature, THE FOOD SUP-
fresh,” he says. The second is packaging. “If packing explaining it is too expensive to trans- humidity and air-flow meas- PLY CHAIN
is not done properly, contamination or physical dam- port frozen products in reefer vans to ures,” he says. “McDonald’s,
age can take place,” Balbatti adds. various cites in the country. “If we have through its unique cold chain, Prof. Viswanadham sug-
to transport, say frozen paranthas from has been able to both cut gests ways for bettering
the food supply chain in
Monginis’ model Delhi to Cochin, each turns out to be down on its operational
India:
Monginis, the cake, pastry and general bakery Rs. 15 than Rs. 5,” he explains. wastage as well as maintain
major has a unique supply chain structure. “We have Another limitation in the frozen the freshness and nutritional Cold chain infrastructure:
predefined routes and use contractual vehicles in foods segment is that the ready-to-eat value of raw and processed Investments in real estate and cold
chain infrastructure are capital
which we send the products to our outlets,” a compa- market is still not well-established. “It is food products. This has
intensive and will yield slow
ny spokesperson informs. a mere Rs. 70-80 crore market,” involved procurement, ware- returns. However, with 100 per-
The company has a smart ordering policy where informs Mishra, citing conservative cus- housing, transportation and cent foreign direct investment
the dealer places the required order daily and the sup- tomer mindset as the reason behind it. retailing of perishable food (FDI) allowed in this sector, there
plies are also done daily. “Hence, production and sup- products, all under controlled is tremendous scope to develop it.
ply is as per the daily order, thereby maintaining fresh- The McDonald’s paragon temperatures.”
Third party logistics: The food
ness and reducing wastage,” she adds. A classic example of integrating a supply chain is temperature sensi-
To ensure timely delivery, which in turn improves successful supply chain model is inter- Need of the hour tive and manual handling reduces
sales, the company has its own van schedule system. national fast food giant McDonald’s. “There is no According to the product quality and life.
Talking of the drawbacks, the spokesperson listed According to Abhijit Upadhye, ownership of the Viswanadham, best practices Logistics providers with air-condi-
tioned trucks, automatic handling
bad roads, traffic congestion, parking, etc., as the hur- Director, Supply Chain and Menu such as data integration,
products when in equipment and trained manpower
dles in the smooth working of the supply chain. Management, McDonald’s India, the financial flow management,
supply chain has been a “critical com-
transit” supply-demand matching,
can provide end-to-end support.
They can also adopt state-of-the-
The cold truth ponent to McDonald’s success in Atul Khanna, Director, India collaborative forecasting, art techniques such as cross dock-
The cold chain is a logistics system that provides a India.” Upadhye informs the company division, Global Cold Chain information sharing and ing to reduce the transit times
and inventory.
series of facilities for maintaining ideal storage condi- worked closely with suppliers from the Alliance (GCCA) goods movement syncronisa-
tions for perishables from the point of origin to the start of their operations in the country. tion through efficient trans- Food processing industry: The
point of consumption in the food supply chain. Hence, “The success in India is a result of port scheduling should find government allows 100 percent
its vital place in avoiding wastage. commitment to sourcing almost all their way in to the food sup- FDI in this sector. There are incen-
However, according to a FICCI report, for the 135 products from within the country. Our ply chains. tives for setting up processing
plants either in agri-export zones
million tonnes of fruit and vegetable produced, there logistics and warehousing system is “Also, the supply chain
or outside of them. Sourcing of
is a mere 10 percent cold storage facility available in robust and that prepares us to deliver needs to be designed and built raw materials, either fruits and
the country. products at the same temperature as a whole and also in an inte- vegetables or flowers or meat, is
“We have less than 6,000 cold storage facilities throughout without a single break in the grated manner with the easier with an AEZ as participants
available, and that too mostly for potatoes, in the coun- cold chain,” he informs. processes of new product with knowledge about the industry
standards already exist. There are
try,” Khanna says. The attention and importance from development, procurement
opportunities to create the follow-
The poor cold storage network led Kohinoor sourcing to serving the product to its and order to delivery process- ing in India:
Foods Ltd. – a company synonymous with its basmati customer makes the McDonald’s supply es well designed and well sup- a. Halal hub (export to South
rice and which has now entered the ready-to-cook chain unique and efficient. Significant ported using IT tools and soft- East Asia, Middle East)
products as well as frozen foods segments – to focus on investments in terms of money, technol- ware,” he points. b. Vegetarian hub (20 percent
of Indian population plus
exporting its products rather than expand in the ogy, training and processes were made
overseas)
domestic market. “The cold chain model in the coun- to set up the network, informs Upadhye. Taking a cue c. Organic food hub (Europe
try is in its nascent stage,” says Sushant Mishra, McDonald’s revolutionary cold Viswanadham also and the US)
General Manager, chain is the lifeline of the busi- emphasises on the need to d. Seafood hub
International “SC has been a ness. “Prior to McDonald’s embrace the concept of
Retail: One of the largest sectors
Marketing, Kohinoor critical component to arrival in India, the concept of a
“Food should be a Efficient Consumer Response in the global economy, retail is
Foods. “Though it has McDonald’s success” cold chain for the distribution of (ECR) – a set of strategies that going through a transitory phase
become better in the food and dairy products from the calculated aims to get companies across in India. One of the prime factors
Abhijit Upadhye, Director,
last five years, a sound farm to the end supplier, in pre- commodity...ensure a supply chain to work closely for non-competitiveness of the
Supply Chain and Menu food processing industry is inap-
cold chain system has- determined and stringently you are par stock” to serve their customer better propriate cost and quality of mar-
n’t yet been devel- Management, McDonald’s enforced climactic and hygienic
Mohd. Salim Balbatti, Head, and at a lower cost – which keting channels.
oped.” India conditions, was at a very nascent was introduced in the US in Globally, more than 72 percent of
Product development, Java
According to stage. the 90s and is followed world- food sales occur through super
Mishra, it is difficult to “For six years prior to opening Green wide in grocery supply chains. stores. In India there are 12 mil-
find distributors any- our first restaurant, McDonald’s “Opening food courts is a lion outlets selling food and relat-
ed items, including push carts,
where other than met- pioneered the effort to develop good idea as it leads to mini-
wet markets and neighbourhood
ros. “There are no dis- this cold chain so that the highest standards mum wastage and the food is cheap,” suggests kirana stores. The kirana stores
tributors even in tier-2 would be assured,” Upadhye says. Viswanadham. are generally located in a small
towns and cities like While on one hand, McDonald’s cold chain According to Balbatti, inventory management is a space and have no cold storage
facilities.
Ahmedabad and has immensely benefited farmers, it has enabled crucial aspect of supply chain. “Food should be a cal-
The Indian retail sector is estimat-
Pune.” customers at retail counters to get the highest culated commodity. Ensure you are par stock (amount
ed to have a market size of about
The problem, he quality food products. of stock that is needed in a sustained operation).” $330 billion; but the organised
says, “is the lack of a Upadhye also admits there’s a high amount India is blessed with vast cultivable land, favourable sector represents only 2 percent
country-wide network of food wastage happening in the country. seasons for production of fruits and vegetables and a of this market.
A strong retail front-end can also
of cold storage facilities “Every year, food produce worth many crore is well-developed agribusiness system. What it really
provide the necessary fillip to agri-
and the absence of wasted in India because of lack of proper infra- needs is a standardised and robust supply chain. Then culture and food processing and
sound technology structure for storage and transportation under India could become the food basket to the world.„ other industries.

JANUARY-MARCH 2010
2
LEADERS
O
ne of India’s biggest apparel
companies, Raymond Apparel
Limited or RAL, has established
itself as a one-stop solution for
the discerning customer, offering
a range of fabrics, garments and
accessories in a premium-shopping environment.
Like every other sector, the 2008-09 slow-
down hurt the textile and apparel market in
India. Raymond Apparel also registered a 3-4
percent de-growth during the lean phase and suf-
fered losses of about Rs. 240 crore in the Q2
2008-09. The gross turnover of the company was
Rs. 1393 crore as compared with Rs. 1337 crore
in the previous year.
However, the company is unfazed. This is
because, empowered by its intrinsic strengths in
terms of quality and distribution, the company
is looking beyond immediate challenges and
focusing on long-term goals.
As part of those targets, the company recent-
ly announced that it intends to pump Rs. 100
crore to open 300 stores across the country, tar-
geting tier-3, 4 and 5 cities.
Samar Roy, Head of Logistics, shares with
Shefalli Thaplliyall Raymond’s expansion plans
and how its robust logistics facilitate the ambi-
tious campaigns.
Raymond Apparel has been steadily opening
outlets in the past few years. What are the future
plans?
Raymond Apparel is continuing to open
exclusive brand stores at appropriate cities/loca-
tions for its various brands. We are emphasising
EXPANDING TO
CONQUER
With its extensive growth plans, Raymond
Apparel is taking big strides towards long-term
goals, leaving the slowdown’s nominal impact
on its growth far behind
more on our new retail concept, viz, “Neckties & each brand to service the products coupled with
more” for selling fashion accessories and “Shirts common backhand support.
& more” for selling shirts of our brands along
with accessories. What kind of cost-ccutting measures did you
implement in the company’s supply chain during
Raymond announced its plans to open 300 retail the slowdown?
outlets in the next two years. What logistical RAL brands performed well in the recession-
challenges do you face while expanding the retail ary time. During these tough times we relooked
segment? What kind of logistics framework do all our input costs and successfully reduced them
you have to stock your newer stores? without compromising product quality and its
The major challenge for store expansions is presentation.
with their timelines for opening. Any delay caus-
es extra inflow of inventories. However, to have Distribution in the apparel sector is akin to the
“We remain in touch with our retail department (when
expanding) and other channel heads to closely monitor
store-opening schedules and accordingly reschedule the
merchandise plan”
Samar Roy, Head of Logistics, Raymond Apparel Limited
better services and minimise the impact, we durables business but the branding and the sup-
remain in touch with our retail department and ply chain management is like the FMCG prod-
other channel heads to closely monitor store- ucts in areas like shelf-llife and turnaround time
opening schedules and accordingly reschedule (of designs). What’s the average turnaround cycle
the merchandise plan. for inventory?
The average turnaround cycle is three
There are a number of brands under the months.
Raymond umbrella – ColorPlus, Park Avenue,
Manzoni. Does each brand have a separate sup- With the idea of offering flexibility and customi-
ply chain or is a common supply chain path fol- sation in the supply chain, what measures have
lowed for all? you taken to improve the distribution systems?
Each of our brands has its own product-spe- We do give advance intimation to the cus-
cific cycle. We do have separate supply chains for tomers for the expected supplies during the sea-
JANUARY-MARCH 2010
3
son by month and make them flexible for serv-
icing of those orders. This is very important for
the seasonal products like woollen knits, winter-
wears and festive merchandise.
With fast-cchanging trends, stock redundancy is a
common problem that apparel companies have
to contend with. How does Raymond Apparel
handle it? What kind of sales forecasting – lead-
ing back to a stable demand/supply balance do
you undertake?
We have a robust sales forecast, which has a
bottom-to-top approach and inputs from the
market. This enables us to reduce the problem of
stock redundancy.
However, some percent of merchandise still
gets left over after season. We sell these through
our factory outlets and discount formats such as
Brand factory, Mega Mart, etc.
What role does information technology play in
Raymond’s supply chain? What kind of invento-
ry tracking system do you have to improve sup-
ply chain efficiency?
We have recently implemented System
Application & Products (SAP) in our company
and it is in the process of stabilisation. However,
IT does play a major role for smooth functioning
and to bring efficiency in the supply chain.
Through our earlier legacy system, we were
monitoring an SKU-wise sale through and stock
positions at the various locations to further
improve the sale through. We are improvising the
response time further through SAP, which is a
centralised database.„

SHEFALI THAPLIYAL
A
s a country aiming at 8 percent-
plus GDP growth, India’s power
production falls severely short of
its requirements. The power sector
has a total installed capacity of
approximately 102,000MW, of
which 60 percent is coal-based, 25 percent hydro,
and the remaining gas- and nuclear-based. Power
shortages are estimated at about 11 percent of
total energy, something that is likely to increase
in the coming years. According to analysts, with
the energy demand growing at 5.2 percent every
year, India will require another 10,000MW of
capacity in the next 10 years.
Adding to its woes is the fast depletion of fos-
sil fuels, and CO2 emissions caused by using
them. This makes India the fourth-largest fossil
fuel CO2-emitting country, according to data
from US-based Carbon Dioxide Information
Analysis Center (CDIAC).
A bright solution
The sun, shining bright in all its glory, could
be the answer to the country’s power problems.
India, due to its geo-physical location, receives
nearly 5000 trillion kWh/year of solar energy,
which is equal to 600GW. This is more than the
current total energy consumption of the country.
Moreover, the miles of arid, undeveloped land
across the country provide abundant space to put
up solar plants.
“Solar energy is the most promising and scal-
able energy source for the future,” says Manoj
Kumar Upadhayay, Managing Director of
ACME Telecom Pvt. Ltd., a flagship company in
the field of infrastructure solutions.
The company has partnered with eSolar, a
US-based solar thermal generation company, to
develop low-cost methods for producing large-
scale solar energy and electricity. The company
will build, own and operate solar thermal plants
in India.
Although the scope is immense, power gener-
ation from solar thermal energy is still in the
experimental stage and only a negligible amount
of solar energy – 0.2 percent of total energy
resources – is being produced today.
Solar history
Globally, the solar energy industry has expe-
rienced unprecedented growth from 2000 to
2007. According to US-based National
Renewable Energy Laboratory, global private
investment in solar energy had increased from
Although the scope is immense, only
0.2 percent of solar energy is being
produced in India today
around $500 million in 2004 to over $12 billion
by the end of 2007. This phenomenal twenty-
fold increase during a short span of four years
clearly indicates that solar technologies are fast
maturing and narrowing the gap between con-
ventional sources of energy.
In India, the solar programme began in the
mid 70s but while many parts of the world have
progressed greatly in the production of photo-
voltaic cell, India has lagged behind. By 2000,
only nine Indian companies were manufacturing
solar cells. But with increasing global awareness,
India has joined the bandwagon. A number of
national and international companies are manu-
facturing and setting up solar plants.
JANUARY-MARCH 2010
4
A SOLA
“We are setting up a first-of-its-kind, 10MW
solar thermal power project in Bikaner,” informs
Upadhayay. The first phase of this project is
expected to be complete by March 2010, at a cost
of about Rs. 5 crore per MW for a 10MW plant.
The company has also set up its supply chain for
implementing this project.
Another company, Astonfield Renewable
Resources Limited, provides technology solutions
for solar, biomass and waste-to-energy-based
power. The company offers turnkey solutions for
all the plants it develops, lining up the financing
and technical partners as well as acquiring its
own land. “We have over 700MWs in the
pipeline and are ready to execute our plans as
soon as the tariff structure for doing so is in
place,” says Sourabh Sen, Co-founder and Co-
chairman of Astonfield Renewable Resources
Ltd. Sen also informs the company has broken
ground in Bankura, West Bengal, where they are
building a 5MW solar PV plant.
Sunborne Energy is another startup that has
recently entered the Indian market and is aiming
to develop projects of over 1GW in the next 5-7
years, commissioning over 200 MW of solar
power plants by 2014.
“We have won some of the largest allocations
for such plants in several states and are finalising
the agreements to launch these first-of-their-kind
projects in India,” says James Abraham,
Managing Director and CEO. Abraham also
informs that the company intends to work with
local partners to “indigenise the supply chain”.
Since the solar power sector is yet undevel-
oped in India, starting new projects came with its
set of challenges. The high initial costs of deploy-
ment make solar power prohibitive. To spawn a
thriving solar market, the technology needs to be
competitively cheaper, which means it should
attain cost parity with fossil energy. Upadhayay
endorses: “For a renewable energy project, the
biggest challenge is to keep the cost at as compa-
rable levels to the conventional energy genera-
tion costs as possible.”
Lack of policy
According to Sen, the biggest challenge faced
thus far was the lack of proper policy framework
for their renewable energy projects. “The com-
pany first began its efforts in 2005. At that time
there was no policy framework that supported
the development of grid connected, utility scale,
megawatt level renewable energy in the country.
Hence, the first ‘project’ undertaking for our
company was to work with the state- and central-
government leadership to help create the neces-
sary policy framework that would facilitate rapid
growth in this sector,” he says.
Four years later, with the announcement of
the government’s ambitious National Solar
Mission, India has made huge strides to make
utility-scale renewable energy implementations,
especially solar, a reality. “Now that the leader-
ship in India is in the last stages of finalising this
framework along with a viable tariff structure, we
will strive to maintain our cost competitiveness in
the marketplace,” Sen says.
In addition to cost competitiveness, land
acquisition was another challenge the company
faced. “Land acquisition has been, and will con-
tinue to be, a challenge in India. It is Astonfield’s
AR DREAM
With about 300 sunny days in a year, India has huge untapped solar
energy waiting to be exploited. With the right initiatives, the country
could well become a pioneer in harnessing this endless energy source
policy to purchase its own land, and we only buy
barren land that would not be viable for farming.
With land availability being scarce in India, it will
always be a challenge to source and purchase our
own plots,” he says.
Solar supply chain
Solar energy industry is broadly classified into
two categories: Photovoltaic and Solar Thermal.
The supply chains (and potentials) are very dif-
ferent for each.
In Photovoltaic, the main components are the
solar panels and the balance-of-system (BOS).
The BOS includes the inverters, controllers,
wiring and assorted electronics. “The panels part
of the supply chain in India is building up with
many players such as Moser Baer, Indosolar, etc.,
growing their capacities. This is likely to contin-
ue,” Abraham says.
“But there are many new technologies (vari-
ous thin-films, eventual nano-materials) which
will have to be deployed as well. The BOS part
is fairly well indigenised, except for the inverter,”
he explains, adding, “there are players working
on localising inverters to handle the loads of a
solar plant.”
Talking about solar thermal – the main com-
ponents of which are the solar field (consisting of
mirrors, receivers, frames) and the thermal block
(consisting of boilers, turbines and generators) –
Abraham says there is no established local sup-
ply chain. “However, the global players have said
they are interested in moving capacities to India
based on how the local market develops.”
The global players include Solel and Schott
(for receiver tubes), Flabeg and Guardian (for
mirrors), and several frame suppliers. “Some of
the frame fabrication can be indigenised today,
but will take some effort,” Abraham adds.
According to him, the thermal block can be
mostly indigenised as it leans on the long history
“Solar energy is the most
promising energy source for
the future”
Manoj Kumar Upadhayay, MD, ACME
Telecom Pvt. Ltd.
of capability of the country’s thermal power
industry for boilers, turbines and generators.
According to Upadhayay, the typical supply
chain challenges with adopting a new technolo-
gy are related to educating the vendors about the
requirements and giving them confidence about
long-term sustainability of the new technology
to bring economies of scale. “Also, the indigeni-
sation of the technology to suit local conditions
and bring the costs steeply down is a challenging
area,” he adds.
Enter, government
The Indian government recognised the need
and scope for harnessing solar energy and its
mega-budget National Solar Mission – which
aims to make India a global leader in solar ener-
gy, envisaging an installed solar generation
capacity of 20,000MW by 2020, 1,00,000MW
by 2030 and of 2,00,000MW by 2050 – has been
put into action.
Implementation of the 30-year long project
will be in three phases. The first phase will aim
at achieving rapid scaling up to reduce costs.
This phase is expected to spur domestic manu-
JANUARY-MARCH 2010
5
“Land acquisition has been,
and will continue, to be a
challenge”
Sourabh Sen, Co-chairman, Astonfield
Renewable Resources Ltd.
facturing. The second phase will focus on the
commercial deployment of solar thermal power
plants while the third will make efforts to achieve
tariff parity with conventional grid power.
Another large-scale government programme
– a proposed 35MW solar thermal plant – has
been launched in Rajasthan. The main aims of
the project are to demonstrate the operational
viability of parabolic trough solar thermal power
generation in India and support solar power
technology development to reduce production
costs and bring down greenhouse gas emissions.
“One of the biggest advantages of a solar
plant is that it can be set up really fast; solar
plants of 10MW capacity can easily be put up
within a year,” says M M Vijayvergiya, Executive
Director, Rajasthan Electricity Regulatory
Commission (RERC). Two companies have been
sanctioned to build solar plants of 5MW capaci-
ty while others are waiting for the tariff plans.
“The hurdle is the delay in signing Power
Purchase Agreements (PPAs). Once that is taken
care of there will be a huge spurt in solar plants.”
Though he agreed PV panels are expensive,
Vijayvergiya felt the prices would come down as
“The Panels part of the supply
chain is building up in India”
James Abraham, MD, CEO, Sunborne
Energy
more and more manufacturers enter the picture.
The Indian Renewable Energy Development
Agency (IREDA) has a fund to help companies
offering affordable credit for the purchase of PV
systems. The Ministry of New and Renewable
Energy (MNRE) has also initiated subsidies, soft
loans, confessional duty on import of raw mate-
rials and excise duty exemption to accelerate the
growth of solar energy.
Getting real
Even with the abundant natural resources
available, what are the realistic chances that
India will emerge as a renewable energy leader?
Problems of cost, land acquisition, waste prod-
uct management and efficient supply chains will
need to be addressed. Breakthroughs in nan-
otechnology – which promise to increase solar
cell efficiencies from 15 percent to 50 percent –
would definitely help realise the solar dream as
will managing the country’s land resource.
With the thrust solar energy is receiving from
both the government and private sector, it will be
interesting to see if and when India becomes a
‘shining’ example for the world to look up to.„
SME WATCH
GOOD TIMES AHEAD
With the lull created due to capital crunch abating, the SME sector is set to benefit as Private
Equity and Venture Capitalists begin to show interest again
SHEFALI THAPLIYAL
T
he post-recession picture is looking
rosy for the 13 million-odd SMEs in
India. With banks now sitting on
excess liquidity and Private Equity (PE)
and Venture Capitalist (VC) firms
warming up to a stabler market, the
SME sector could really benefit in times to come.
“There has been more stability in the last six
months, with what is being called green shoots,” says
Kartik Parija, Managing Director of Zephyr
Peacock, an India-dedicated PE firm.
Arun Natarajan, Managing Director and CEO,
Venture Intelligence, a research and analysis firm on
Private Equity and Venture
Capital, agrees. “While the
overall level of PE funding
available has fallen compared
with 2007-08, the scenario for
SMEs is far better than that during the
2001-03 decline,” he says.
However, both Parija and Natarajan warn
SMEs shouldn’t expect a boom. “The waiting
game is at its closure but
there won’t be an exu-
berance,” Parija says.
According to Natarajan, PE
firms will be “more watchful than forth-
coming”.
The big wave
Before the downturn, the Indian PE market had
been flourishing. According to Venture Intelligence
data, 135 transactions worth $4 billion were done in
2006. “Before the slowdown hit, the market had been
riding on the 2006-07 momentum. However, during
the recession, things came to a halt as firms were
wary of lending,” he says. “Going forward, we expect
around 60 to 75 PE investments each quarter (of
which, 20-25 investment would be of VC variety).”
Talking of the slowdown period, Parija says the
PE funds stayed on the fence. “Everything was put
on the backburner; with a fall in demand for services
everywhere, there was no need to raise funding,”
Parija says, adding that his company did not do many
deals in the last year but expects to complete 2-3
deals in the next six months.
Both Parija and Natarajan stress SMEs are poised
to benefit from the growing confidence in the Indian
consumption story. “There will be a pick-up in PE
activity, especially in SME business,” says Parija,
adding however, “valuations remain a challenge”.
According to a recent report by World Bank, the
SME sector in India has traditionally depended on
bank loans, but banks have been chary of lending
due to the greater risk of non-performing assets
(NPAs) in the slowdown.
Moreover, larger companies, which raise funds
through both bank loans and capital funding, have
increasingly turned to banks, thereby offering banks
a more lucrative option than lending to SMEs.
However, this has opened more avenues for PE/VC
firms to enter more deals.
Capital boost
A company that received venture funding
from Zephyr Peacock last year is Miles
JANUARY-MARCH 2010
6
Software, a Bangalore-based SME that provides soft-
ware solutions to financial services. Chief Financial
Officer Rakesh Sakaria says the funding helped the
company expand its business. “In addition to provid-
ing capital, the investor company added value to
Miles Soft by leveraging its global relationships in the
international corporate and financial markets,”
Sakaria says. Though the slowdown did affect busi-
ness, Sakaria adds the company did not face any dif-
ficulty looking for an investor. Miles is one of the two
companies that received funding from Zephyr
Peacock.
Another SME that received funding from a VC
firm prior to the slowdown is Bangalore-based
Rubicon Research. “We took the funding to set a new
business vertical,” informs Surabhi Pilgaonkar,
Manager, Corporate Planning and Strategy at
Rubicon.
“We are seeing some reversal right
now,” says Pilgaonkar of the trend in PE
fundings. Talking of the mood, she says: While the
“Firms have become more cautious in carry-
ing out their due diligence now but there’s defi-
nitely more cash in the market.”
overall level
Historically speaking, investing in a SME has
never been easy due to the risk profile of a small
of PE funding
or medium enterprise. “SMEs are risky
businesses than the established ones as
has fallen
says.
there are no assured returns,” Pilagaonkar
compared to
“SMEs don’t have the scale,” says Parija of the
challenges SMEs typically face. “SMEs face diffi- 2007-08, the
culty in finding capital funding due to the obvious
risks that come with going for a scenario for
smaller player rather than an estab-
lished one.” SMEs is far
The favoured land
Over the last few years, the invest-
better
ment climate in India has been conducive
and attracted huge foreign funds in the
shape of PE. “India is showing strongest
growth along with Southeast Asian coun-
tries and even Africa, and international
pools want to benefit from that,”
Parija says, asserting the fact that
foreign flow has increased tremen-
dously in the country.
Natarajan says though India is an emerging mar-
ket, it needs to be seen how much domestic money is
available for private equity. “All the money is coming
from overseas but we need to have a balance between
foreign and domestic investment,” he concludes.„
RESPONSE
SET ON THE RIGHT BASE
HCC’s impressive profits stood tall amid the sea of construction businesses whose foun-
dations shook during the slowdown, and are still shaky
CORRESPONDENT
T
he construction industry in India –
which grew at a rate of 12 percent in
the last five years and contributed Rs.
3.8 trillion to the GDP during 2007-08,
according to Confederation of Indian
Industry (CII) statistics – also faced the
same decline during the slowdown as every other
sector.
However, construction giant HCC continued to
progress during and after the slowdown, defying the
downward momentum of the industry. In the
Chairman’s letter in the 2008-09 annual report of
the company, Chairman and Managing Director
Atul Gulabchand said despite 2008-09 being a diffi-
cult year, HCC has done “remarkably well”. During
2008-09, the company’s operating profit increased
an impressive 17.9 percent to Rs. 431.5 crore. The
revenue for 2008-09 was Rs. 3,572 – a rise of 13.3
percent compared with the previous year.
What played in favour of the company is that
their major chunk of work is for the government.
“We are in the business of infrastructure develop-
ment which is a tool used by governments to
counter the depression business cycle. Most of
our clients are government bodies and PSUs
which were not affected much by the melt-
down,” says Praveen Sood, Group Chief
Financial Officer with HCC.
Taking a call
However, to maintain growth, the company took
the proactive approach. “In our engineering and
construction business, we were required to take a call
on whether to slow down construction or allow
working capital to swell due to uncertainty, nonpay-
ment or late decision-making. In most cases, we had
chosen not to slow down and have faith that our
clients would pay up, though delayed. Consequently,
we managed to meet our sales and profit targets,”
Sood says.
Supply chain was a crucial area where the com-
pany revised its existing model. “We have brought in
more efficiency at the site level to reduce inventory
of raw material,” Sood informs. “A longer credit
period is also being negotiated as steel and cement
companies are losing money and willing to accom-
modate us to boost their sales.”
Sood also informs that the company undertakes
big projects, which, though less in number, give the
company the required turnover and help utilise its
In most cases, we
chose not to slow
down and have
faith in our clients
management bandwidth in a more efficient way.
“Also, we get the chance to work with experienced
and well-funded clients like NHPC and NHAI,
which reduces the client risk,” Sood says.
In real estate, HCC has adopted a new business
plan which the company says sets it apart from con-
ventional real estate companies. “With this new
strategy, HCC will provide a complete knowledge-
JANUARY-MARCH 2010
7
based solution instead of investing heavily in pur-
chasing land and its related risks,” Sood says, adding
“we are approaching land owners and providing
them a business plan for converting it into a good
real estate proposal, arranging finance, building and
operating it.”
HCC Real Estate will leverage best practices,
technical and financial strengths to develop real
estate projects encompassing integrated urban devel-
opment and management projects, theme-based
townships, industrial parks, urban renewal projects
and other commercial and residential projects, Sood
further explains.
New projects unfazed
HCC has earned a reputation for undertaking
projects of a humongous scale. Its latest projects, the
Lavasa hill city near Pune and the Bandra-Worli Sea
Link are two of the most ambitious till date.
However, with work already in progress when the
global slowdown took place, did the projects face any
hiccup?
“No, the slowdown did not affect the projects.
On the contrary, we were forced to advance the
opening of second town of Lavasa due to
heavy institutional demand,” Sood informs.
The Bandra-Worli Sea Link’s southbound
carriage has been open and operational since
July last year while the northbound traffic is
expected to be ready by early this year. “By the
end of fourth quarter of 2009-10, we hope to
generate revenues to the tune of Rs. 150-200 crore
through this project,” Sood says.
Expansion plans
Talking of future projects, Sood informs the
company is targeting projects in all five verticals of
their engineering and construction business –
hydropower, water solutions, transportation, nuclear
power and EPC. “In BOT (build, operate, transfer)
sector, we are looking forward to the NHDP pro-
gramme of NHAI as well as owning a few hydro-
electric power plants in the near future,” Sood
informs. For HCC, it’s not just the present which is
perfect but future too.„
PRIORITY
EXPLORING
NEW HORIZONS
T he last quarter has been quite
enthralling for Safexpress as an
organisation. It demonstrated its
prowess and leadership in the
Supply Chain & Logistics industry
yet again by winning multiple
awards between October and
December 2009 as the Best Supply
Chain & Logistics organisation in
the country.
These awards reiterate the fact
that Safexpress has been providing
exceptional services through
incomparable infrastructure and
zeal to serve its customers better.
These awards also prove that
Safexpress has garnered tremen-
dous brand visibility over the years
through its holistic marketing
efforts and innovative approach
towards brand building.
Safexpress has launched four
state-of-the-art Logistics Parks in
Chennai, Salem, Puducherry and
Pune in the last three months.
So far, the company has
launched nine Logistics Parks
across India in the last nine
months. Safexpress is the only
Supply Chain & Logistics Company
in India that has been able to cre-
ate such an infrastructure within a
short span of time. With their cut-
ting edge technology and infra-
structure, these Logistics Parks
would further boost the 3PL and
transshipment capabilities of
Safexpress in the country.
Safexpress CMD and ‘Logistics
Guru’, Mr. Pawan Jain, has been
conferred with the prestigious
‘Distinguished Entrepreneurship
Award’ by the PHD Chamber of
Commerce and Industry on
December 23, 2009, at Hotel
Ashok, New Delhi. This highly ven-
erated award was presented by
Hon’ble Finance Minister, Mr.
Pranab Mukherjee, at the glittering
ceremony of PHD Chamber Annual
Awards for Excellence 2009.
Mr. Jain has been awarded for
demonstrating exceptional
Business Leadership and
Entrepreneurial Spirit in the field of
Supply Chain & Logistics. The
‘Logistics Guru’ was chosen for this
honour ahead of numerous other
business leaders from India Inc.
This is also the first ever occasion
when a business leader from the
Supply Chain & Logistics industry
has been conferred with this
award. Over the years, Mr. Jain has
been widely acclaimed for his piv-
otal role in revolutionising the
Supply Chain & Logistics industry
in India as well as contributing to
the success of the economy.
OFFBEAT
LUXE TIMES,
FOR THE PEOPLE
Apart from the crème de la crème, luxury watch compa-
nies are luring the new breed of salaried class who aspire
to own a premium timepiece
SHEFALI THAPLIYAL
L
uxury watch companies in India are tar-
geting the burgeoning middle class and
the new crop of salaried professionals –
who are getting a taste of what is called
inspirational lifestyle – along with the
super-rich bracket that already exists.
And how!
From zero percent financing from banks to insur-
ance on watches or exclusive club memberships, com-
panies are pulling every trick in the bag to lure the
common man into owning that watch he only dreamt
of.
The watch market
The luxury watch market in India is estimated to
be about $170 million and is growing a robust 20-30
percent every year. With rising disposable incomes and
the new breed of young affluent professionals, man-
agers, doctors and executives, watch companies have
recognised the new vertical. “Recently, the availability
of young Indians’ purchasing power has increased and
opened a new market with specific buying behaviours
and desirabilities,” says Olivier Bernheim, president
and CEO of Swiss watchmaker Raymond Weil.
According to Bernheim, the watch is very appeal-
ing to a consumer segment of the new upcoming
executive directors, doctors, lawyers, etc., with an
average age of 30-plus years. “Our desire is to appeal
to a young, confident, elegantly self-aware clientele,
both male and female, that share our motto,” he adds.
Highly popular Swiss brand Tag Heuer offers
interest-free loans to its customers, making it possible
to buy a Tag for the price of a regular watch with an
EMI of less than Rs. 3,000. “We have tied up with
credit card companies and the customer can make
monthly payments,” informs Raja Shekhar, Chief
Financial Officer of Ethos Swiss Watch Studio, which
stocks a number of luxury brands.
Talking of the new emerging segment, Shekhar
says they make for the biggest target. “The salaried
class, like young executives, is getting introduced to
what is called an aspirational lifestyle. These are the
people who are getting introduced to luxury and apart
from the traditional rich, this class offers a huge
opportunity in terms of sales,” he says.
The store has classified its potential customers into
two segments – prestige and luxury. “The prestige seg-
ment is the one that has your salaried, aspirational
buyer who will purchase a watch priced between Rs
5,000 to Rs. 1 lakh. This is a segment that is growing
rapidly.”
Insuring as an incentive
Tag Heuer is also the first company to offer insur-
ance cover on its watches. “This is the first time a
Fasttrack is a quarterly magazine on management, with a special emphasis on supply chain issues, brought to you by Safexpress Private Ltd. The
magazine is committed to promoting business agility. Fasttrack reaches out to CEOs, finance heads and logistics heads of companies. We would be
happy to take on-board issues related to supply chain that you might be facing.
JANUARY-MARCH 2010
8
watch company has tied up with a national insurance
company,” Shekhar informs, adding that though the
offer is only on Tag watches now, it may soon be
extended to other brands. The insurance, free on
every Tag that is sold from an Ethos store, covers
theft, fire and accident.
According to Shekhar, the move to insure every
Tag came from customer feedback. “Every customer
is looking for more than warranty. A person who may
be considering buying a Tag will get attracted to the
idea that his watch would be insured,” he says. The
response, Shekhar says, has been, “Very well.”
Welcome to the club
Some watchmakers have started clubs that offer
exclusive membership. Raymond Weil’s RW Club, the
first of its kind to be offered by a luxury watchmaker
in India, offers schemes for travel, operas, music
events, etc. “It provides an exclusive, unique and per-
sonalised service for Raymond Weil customers,”
Bernheim says.
Ethos, too, operates its Club Echo, a loyalty pro-
gramme with about 10,000 members. “About 20 per-
cent of our sales come on account of the repeat pur-
chases made by members of this club,” Shekhar
informs.
The programme offers points to a member every
time a purchase is made. The accumulated points can
be redeemed on any product in the store.
Sticking to being rare
However, not all premium watch companies are
following the ‘mass sales’ path. Tejas Soni, Chief
Financial Officer of the super swank watch company
Timond, says the company believes in being “rare
and exclusive”. Timond, which has been in India for
the last five years, has been making profits by target-
ing a niche client segment only. “We manufacture
only 5,000 watches every year and focus on giving our
customer the feeling of owning something exclusive,”
Soni says.
The company, in keeping with its code of exclusiv-
ity, will soon be offering customised watches in the
country. “Our effort is to make owning a watch an
experience. By customising, we will be providing just
that,” Soni says. The customisation will only be open
to the company’s A and A+ section, which includes
CEOs, top-level executives and the super-rich.
He also adds that if Timond has a patron, he/she
would most likely not need any incentive such as an
interest-free loan or EMI. “Chances are, the person is
able to make the payment at one go.”
However, for the non-A-grader who may still
desire to purchase that one classic timepiece, incen-
tives from watchmakers like Raymond Weil and
retailers like Ethos, will definitely help make his
dream come true.„
A MINDWORKS MEDIA PRODUCT FOR SAFEXPRESS PVT LTD
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