11 March 2023 | BW BUSINESSWORLD | 51 convenient to channel such instruments into our markets. Hence, with a PN regime for foreign portfolio investors (FPIs) still open in India, this has been a loophole waiting to be exploited by investors from across the shores ... both on the way up and the way down. If indeed, the Adani stocks were deliberately inflated pre the FPO as part of the capital raising strategy, then PNs would have been very convenient, apart from multi-layered investment structures through the Mauritius route. Only the scale in this case (rise of 800% + in market capitalisation in three years) has been humongous in comparison to the distortions created by similar PN investments since the early 2000s – but then it is not in Adani’s DNA to think small! Similarly, there can be no doubt that this was the mechanism used on the way down too to explode the Adani bomb with the Hindenburg report being the proverbial trigger. Unfortunately, such is life in a free market! Participatory Note flows can work both ways which probably the Adani group did not consider in its assessment of risk whilst following this strategy of raising capital. Since Adani controls about 75 per cent of the shares (plus 10 per cent to 15 per cent more through friends, associates and passive institutions like the LIC), the logical inference that the attack came in coordination from overseas participants (ie. through PNs) would seem obvious. Such enormous short selling through PNs has no precedence in India. Furthermore, activist analyst reports which call for shorting stocks are not infrequent, but they do not impact actual prices unless it is timed to perfection with large short sell orders on the market by market participants who are willing to bet on the short side. Who could that market participant be, though, remains a billion dollar question. Furthermore, given the illiquidity of the stocks in the Indian markets, futures contracts, put options and deep out of the money put options are bound to have been the domestic instruments of choice used to both profit and hedge the overseas exposure of these brokerages. The details of these, including their beneficial owners, should be easily available. All these issues lie within the purview of the Sefraudulent. In this context, the stupendous rise of its market capitalisation over the last three years (approximately 800% +) culminating in a Follow On Offer (FPO) of Rs 20,000 crores at these elevated levels of market capitalisation seems part of a carefully crafted strategy to raise capital. The fact that this rise was not accompanied by strengthening financials, was massively out of sync with global multiples for similar companies, and has been through relatively low trading volumes on the markets with investments from a very small group of investors (possibly shell companies in tax havens) – and common across the group companies – raises genuine questions of stock manipulation. Proving it, though, is a matter of investigation. To understand the potential for fraud in this saga, we need to start by understanding the instruments and mechanisms of global financial markets, and loopholes in our own regulations. As we had observed during the Global Financial Crisis of 2008, derivatives of structured products are packaged and sold globally by international banks and brokerages for Ultra HNIs in offshore jurisdictions on a wide variety of “themes”, “asset classes” and strategies like “total return swaps”. The ultimate ownership remains opaque in such cases. The Participatory Notes (PN) regime, which has been permitted in India for decades, is very similar and Unfortunately, such is life in a free market! Participatory Note flows can work both ways which probably the Adani group did not consider in its assessment of risk whilst following this strategy of raising capital Photograph by Sanjay Sakaria
52 | BW BUSINESSWORLD | 11 March 2023 GUEST COLUMN pen on its own. The example of blue blooded companies of immaculate governance standards like Wipro bear testimony to this where the promoters, associates and trusts hold more than 85 per cent to 90 per cent of the stock for decades – and have never seen wild gyrations either on the way up or down. This is simply because of one critically important ingredient in Wipro – promoter credibility and impeccable trust in the financial statements. The precision and total secrecy of this strike was nothing short of a military operation. What would have taken Adani off-guard in this carefully planned, immaculately timed and brilliantly executed kamikaze attack was the fact that no one in India would have dared to stand against the group for known reasons. And ultimately it was this brazenness, or over confidence, which led to them being caught napping in this surgical strike from foreign shores. Though it would be of paramount importance to know who the “jockey” was, more significantly this episode introduces India to the dangers of such moves in its financial markets, and opens up possibilities for the future too for Prabal Basu Roy curities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) and we should wait for answers from them. This brings us to the issue of regulation. One of the core reasons why Adani shares reached stratospheric levels, without an accompanying change in fundamentals or without any relevance to globally listed comparables, is because India does not allow short selling of stocks (except through a thinly used and cumbersome securities borrowing and lending mechanism called SLB, apart from stock derivatives. India is primarily a “long only” market for most. For all the misplaced hatred we have towards short sellers, it must be understood that short sellers have a balancing role in financial markets for precisely these sort of situations. Hence, I would argue structural gaps in our regulation allow for what happened. Both Adani and overseas investors merely used these loopholes to their advantage – one to potentially inflate stock prices to optimise its capital raising plans, and the other to exploit the arbitrage thrown up by the obvious mispricing of Adani shares in the Indian markets – of course, at the cost of some Indian investors. Structurally too, the Adani group stocks represented an almost perfect opportunity for the mayhem we witnessed. It has very low floating stock as officially promoter holdings are all around 70 per cent to 74 per cent (except for the cement twins ACC and Ambuja). At a reasonable guess, associates and friends would have at least five per cent to seven per cent and passive institutions like the LIC about five per cent. This would leave about ten per cent to 15 per cent for active trading in the markets. Such a capital structure in illiquid, listed entities creates a protective shield in favour of the promoters in case of hostile takeovers. But such securities can be very volatile too due to the low floating stock should there be interested, and concentrated, buying or selling – and thus open to charges of stock manipulation. This is the charge Hindenburg leveled when the stock was rising – and, therefore, the same rationale must be applied when the stock witnessed a bear hammering. The point, though, is such movements in stocks need what in market parlance is called a “jockey” – a person who drives the initial move and creates a momentum on the way up or down. It will simply not hapStructurally too, the Adani group stocks represented an almost perfect opportunity for the mayhem we witnessed. It has very low floating stock as officially promoter holdings are all around 70 per cent to 74 per cent ... Photograph courtesy: Sansad TV
11 March 2023 | BW BUSINESSWORLD | 53 The author is a Sloan Fellow of the London Business School, non-executive director, and an advisor to chairmen of corporate boards Questions have been consistently raised in Parliament on the unnatural appreciation of the Adani stock price, and repeated letters to SEBI, ED, CVC and other agencies by our feisty MP, Mahua Moitra – who did what a parliamentarian is supposed to do but sadly most do not – have been simply ignored since 2019. That this should be even feasible in a democracy is a concerning comment on the supremacy of our parliamentary system other entities with similar characteristics. Regulation, therefore, on the P-Notes regime will necessarily need to be tightened if not eliminated. As would the accountability of the regulators’ role for allowing phase I of this saga to proceed for three years in broad daylight. I would not be too worried about the issue of corporate governance at a country level though. Very well governed markets like those of the US and Europe have had many instances of businesses gaming the system. The list from Enron to Bernie Madoff, Theranos and Wirecard is endless. What is of critical importance, though, is the political will to plug loopholes and fix accountability for allowing this to happen over the last many years. Questions have been consistently raised in Parliament on the unnatural appreciation of the Adani stock price, and repeated letters to SEBI, ED, CVC and other agencies by our feisty MP, Mahua Moitra – who did what a parliamentarian is supposed to do but sadly most do not – have been simply ignored since 2019. That this should be even feasible in a democracy is a concerning comment on the supremacy of our parliamentary system in demanding accountability. The Adani Board and the CFO/CEO claiming blissful ignorance of related party transactions and opaque investors is difficult to fathom, though technically they may not be non compliant. On the matter of crony capitalism, the Parliament is seized of the issue and it is best it is resolved there. The damage, though, from the Hindenburg episode is done. For Adani, it will create hurdles for capital raising globally – both equity and debt – mainly through downgrades by credit agencies, and exclusion from passive indices like the MSCI. And given its business model dependence on the flow of capital, its future growth and returns expectations will need to be significantly moderated. To its advantage it has cash flow positive businesses and huge assets on the ground – the efficiency in their management will be key to the rocky consolidation journey ahead. This will reflect in its stock prices over the medium term which will settle significantly lower than the levels they had reached before the Hindenburg report. As regards politics, this will not alter political outcomes given the fact that the Modi government has indeed excelled in difficult times on multiple parameters ranging from deft handling of foreign policy, the economy and social policies for the upliftment of the poor and the marginalised. The implications on the overall market will be severe, at least in the medium term as and when the PN regime is eliminated or substantially modified. Given our high valuations and rising cost of capital this would be the third headwind to restrict market upsides. Though I must admit in a country where bearer bonds are legally allowed to fund political parties, it seems highly improbable that any drastic measure to curb opaque instruments like PNs – convenient to evade taxes, ownerships and linkages – will be taken. Short selling too is unlikely to be permitted at scale anytime soon given our collective political and corporate stake in “bull markets”. Hence, the casino in our markets will continue as we are simply incapable of, or unwilling to, handle the truth we all know! To maintain his clean image and the plank to eliminate corruption, Prime Minister Modi will have to be seen to act decisively as is his style – and I do expect tangible action on this in the coming weeks from the government and the regulators. Whether it is credible enough to do justice to our otherwise hallowed institutions is a matter which will be settled only over time. On that will depend whether we are willing to learn lessons from this episode. And have the collective courage to deal with the truth. Till then, the effects of the Hindenburg bomb on Adani will linger on ... in more ways than one.
54 | BW BUSINESSWORLD | 11 March 2023 As the textile industry transition into a more sustainable sector, change is perpetual, pervasive and exponential. India ITME Society has always taken the path less travelled. Breaking the conventional framework and bringing forth out of box solutions for the Textile & Textile Engineering Industry, the Society has aspired for more & has never exceeded through words what it cannot achieve through actions. Over the years, India ITME Society metamorphosed from a domestic organizer into a global brand embracing internationalism. The society has left no stones unturned in FROM LOCAL TO GLOBAL BRAND – Stamping the journey of India ITME Society Over the years, India ITME Society metamorphosed from a domestic organizer into a global brand embracing internationalism. The society has left no stones unturned in establishing itself as one of India's most successful exhibition organizers with its principles based on trust, consistency & collaboration. establishing itself as one of India’s most successful exhibition organizers with its principles based on trust, consistency & collaboration. India ITME Society is also connected with many Educational and government institutions as well as 1500 Associations in India and across the Globe. The growth of the textile industry was substantial during late 70’s and textile machinery manufacturers felt it necessary to have an exclusive platform to showcase relevant technology, machineries, accessories and components to support the rapidly growing textile industry. A plan to establish an exhibition body specifically to organize international textile machinery exhibitions in India was conceived in 1978-79. Under the Visionary leadership of Late Mr. Suresh Mehta, it was decided to set up an Organization Committee consisting of representatives from Textile Machinery Manufacturers Association (TMMA), Indian Textile Accessories and Machinery Manufacture Association (ITAMMA), Indian Cotton Mills’ Federation (CITI), Textile Association of India (TAI), Indian Standards Institution Govt. Of India, (now BIS). Thus was born India ITME Society. Under the umbrella of ITME Society, India witnessed its first Textile engineering exhibition in 1980 at Backbay Reclamation, Greater Mumbai and since then the legacy has been successfully carried forward.
11 March 2023 | BW BUSINESSWORLD | 55 Over the decades leadership has changed hands from Late Mr. Suresh Mehta (1980– 1985), to Late Mr. Atul Bhagwati (1985– 1989), Late Mr. Rasik Parekh (1989–1993), Late Mr. N. C. Dalal (1993–1997), Mr. Narendra L. Shah (1997-2001), Mr. G. T. Dembla (2001- 2005), Mr. Sanjay Jayavarthanavelu (2005–2009), Mr. R. S. Bachkaniwala (2009-2013), Mr. Sanjiv Lathia (2013-2017) & Mr. S. Hari Shankar (2017- present). What remained steadfast is the focus and commitment towards cementing the selfreliance of the Industry. Futuristic vision of late Mr. Suresh Mehta in 1980 has been carried forward by many leaders over the past 43 years. Present Chairman, Mr. S. Hari Shankar (2017 to date) has been most prolific in introducing many novel ideas such as Overseas exhibition, ITME awards, ITME stamp, online Buyer-Seller Meet, Online technology seminars, International MoUs, tie-up with overseas universities, MoU with ITC, MoU with EEPC into the activity list catapulting ITME Society into next level growth and expansion. The overseas event series - ITME Africa launched in 2020 is a seed which in coming decades is expected to become a force transforming the textile engineering Industry & economies in Africa & Middle East by opening up unlimited opportunities for investment and business in the region. Despite facing unexpected and unprecedented challenges such as the pandemic and as such cancellation of the exhibition twice, the patience with which Mr. S. Hari Shankar steered India ITME Society through turbulent times is commendable. As Head of organization, for Mr. Hari Shankar establishing India ITME Society as a reliable organization with strong foundation & instilling confidence in the Secretariat to pursue the targets undeterred required steady determination amidst all uncertainty and naysayers. Celebrating its four decades of service to India, ITME Society aspired to expand its outreach to all corners of the vast nation, to draw out talents, to share opportunity, to extend Mr. S. Hari Shankar, Chairman, India ITME Society support to rural India and to grow in strength together. What better way to do that than engaging with the Indian Postal Network having 1,55,000 post offices in the country. Indian Postal Service has the oldest GPO in Kolkata, which was established in 1774; the largest post office in Mumbai; the highest post office in the world at Hikkim; and in Dal lake in Srinagar, the only oating post office in the world. Flying the flag high under the Chairmanship of Mr. S. Hari Shankar, India ITME Society released its corporate postal stamp in the presence of dignitaries & guests from across the world. This move established the Society as a truly patriotic & prestigious organisation, modern yet connected to the roots & tradition.
56 | BW BUSINESSWORLD | 11 March 2023 INDIA ITME SOCIETY - Stamping its commitment to “Athmanirbharatha” of Indian Textile & Textile Engineering Industry. The ITME Stamp was launched officially on 20th December 2019 by Shri P. Sathasivam, Former Chief Justice of India & Former Governor of Kerala, Ms. Dorothy Tembo, Executive Director, International Trade Centre, Geneva, Ms. Swati Pande, Post Master General, and Govt. of India to Commemorate 40 years of Service by ITME Society. Progressive and dedicated towards the dream of ‘modern India’ the Society has introduced various initiatives to bring reforms in a male-dominated industry segment by encouraging and supporting women entrepreneurship and technology leadership in the Textile Engineering sector.India ITME Exhibitions paved the way for many foreign machinery manufacturers to set up their base in India. Many countries who have never ventured into the Indian market before are now exploring ‘Make in India’ & also many emerging economics are looking at Indian textile engineering industry to provide Technology solutions for their domestic textile industry. India ITME Society has added vigour towards its responsibilities in facilitating exchange of knowledge, technology transfer & Foreign Direct Investments & Joint Ventures for Textile & Textile Engineering Industry. India ITME Society is not only observant about market development in neighbouring countries but also persistent in connecting with them. India ITME Society has promoted India as a sourcing hub, manufacturing hub & Industry for Textile Technology & engineering industry across continent by organizing various programs such as ‘India Evening’, ‘India Networking Program’ in Spain, Botswana, Ghana, Kenya, Uzbekistan, Ethiopia, Turkey, Portugal, Dubai, Bangladesh, Sri Lanka, Germany, Italy etc. Unveiling of India ITME Society’s India ITME Society Special Cover signature Stamp SPAIN BOTSWANA GHANA KENYA UZBEKISTAN ETHIOPIA TURKEY PORTUGAL
11 March 2023 | BW BUSINESSWORLD | 57 Today, ITME events & programs connect 100+ countries to the Indian Textile & Textile Technology Engineering Industry promoting India as a sourcing & manufacturing hub. The Indian Exhibition Industry & Leading business publication Economic Times acknowledged & awarded India ITME Event as India’s 1st Runner up in Top B2B Exhibition & India ITME Society as India’s Top 10 Exhibition Organizers. India ITME Society successfully organises 3 Mega International Textile Engineering & Technology events. The India ITME Series hosted in India once in four years serves as a platform for both Indian & overseas & foreign companies to converge under a single roof for live demonstrations of textile Machinery as well as to launch innovative Technologies & products for the world’s second-largest industry in India. The latest edition concluded in December 2022 was used by 114 companies to launch 144 new products exclusively for the Indian market and customers. As a growing economy, India’s economic back-bone are small & medium companies mostly catering to the domestic market, bringing prosperity & employment in 2nd tier & rural communities. In order to nurture entrepreneurship & technology upgradation enabling regional businesses to upgrade quality & production to facilitate pan-India access to Textile Technology, India ITME Society launched an exclusive business program GTTES (Global Textile Technology & Engineering Show). This unique platform allows international investors & businessmen to connect to Small & Medium business in India & encourage development & growth of various textile hubs spread across the country. F o l l o w i n g t h e m a n t r a o f ‘Sab Ka Saath Sab Ka Vikas’ by our Hon’ble Prime Minister Shri Narendra Modiji, GTTES serves SMEs of our country. India ITME Society realizing the fact that today’s intense competitive global scenario demands regular interaction, networking, global visibility and outreach to new markets to succeed, launched ITME Overseas series enabling Textile machinery companies to showcase their strengths at various destinations across Africa & Middle East. The response to this event has been enthusiastic & well utilized by 57 other countries who explored the opportunity and business prosperity in new shores. This event strives to bring ‘prosperity through Textile Technology & Engineering’. The focus for India ITME Society will be to prepare for the challenges ahead not only in immediate future but for the decades to come. The Society shall always be on the path to re-examine its goals and strategies to remain best in its field of work. Today it has entrenched itself as the cornerstone of the textile & Textile Technology industry, accelerating technological innovations & collectively shaping the textile industry and positively impacting the future. Surging Forward - ITME Expo & Knowledge Center “Knowledge is power. Information is liberating. Education is the Premise of progress in every Society”, said Kofi Annan. Presented by: Ms. Seema Srivastava, Executive Director, India ITME Society India ITME Society has always believed in working with academics, researchers & has several programs ‘nurturing the future’. Under this vision for a sustainable growth of the industry & a new direction for India ITME Society, the present office bearers Mr. S. Hari Shankar & Mr. Ketan Sanghvi along with steering committee members have a vision to create a training, skill development & Expo center enabling Technology programs to be accessible globally to industry & students. Collaborating with industry experts & Technical Institutes from India as well as overseas, this center will have the capability to facilitate, display & demonstrate innovative products encouraging Technology interaction round the year. ITME Center will be a public facility for use by multi sector Industry. High-tech demo / display facility, affordable + adaptable exhibit area for short-term, long-term promotion & networking for small & medium companies will bring great convenience to industry at an ideal location in Mumbai. India ITME Society has spread its wings to soar higher with a vision to transform lives, communities & their aspirations. www.itme-india.com.
58 | BW BUSINESSWORLD | 11 March 2023 By T.V. Mohandas Pai & Nisha Holla T he Adani saga contains many lessons for India’s industrialists and its fast-growing set of next-generation entrepreneurs. Many startup entrepreneurs view listing their company on the public market and running a publicly listed company as natural extensions for their nascent enterprises. And the ongoing saga underscores the importance of robust governance, convening a high-quality board, setting realistic valuation growth expectations, and leveraging debt suitably. In a nutshell, a predatory short seller from overseas identified an opportunity, created a massive short position and released a research report which made claims about bad governance against Adani. This led to a steep decline in the stock, destroying a massive part of the market capitalisation that Adani had amassed earlier. Of course, the Adani Enterprises market cap itself had shot tic economy. Adani made the cardinal error of equating himself with India. No company can be bigger than the nation, its economy, or its stock market. This is true for any country with a stable economy and stock market system. Even though the company may be the largest company in the stock market, equating oneself with the country is unacceptable. Another vital issue to note here is that the market price of listed shares is marked at valuations that keep changing. This depends on a variety of reasons, from the country’s capital flows to the state of the market and which LESSONS FROM THE ADANI SAGA up tremendously over the last 24 months for reasons that are very difficult to fathom at this point. But this story demonstrates that as and when a company achieves scale and higher value, the standard of corporate governance must improve dramatically, enhanced transparency must be maintained, and information flows have to be different than earlier. Caught Short The simple reason is that higher valuations attract the constant attention of both the public eye and stock analysts. As the stock price ascends, the company attracts more capital and becomes the target of increased scrutiny. When this happened to Adani, the company was caught short on standards of governance. It also showed signs of believing too much in its own valuation without considering extraneous market forces. The market and economic forces are the ultimate masters of a capitalisCOLUMN By T.V. Mohandas Pai & Nisha Holla
11 March 2023 | BW BUSINESSWORLD | 59 management practices. Double-edged Sword Being in a highly – or over-leveraged position can be a doubleedged sword. Higher leverage in infrastructure and other annuity-based businesses can generate higher returns on equity. Still, it can also act as a millstone when the market goes down, or the economy stops growing. During difficult times, debt servicing becomes challenging, and access to new debt at reasonable terms reduces, as does financial flexibility. Companies must maintain robust frameworks around debt financing that enable financial flexibility and risk management. As seen here, Adani had multiple debts on the promoter accounts, promoter shares, debt in the companies, and debt in the form of bonds. The attention of the market, shareholders and analysts is inevitably on the high level of debt. The debt may be serviceable since the businesses are annuity businesses with steady revenues. However, when debt is combined with high growth, access to continued debt in the future cannot be taken for granted. Right now, Adani is in a position where taking on more debt to fuel growth aspirations may prove difficult. This saga also demonstrates that it is crucial for all companies to create a good board, one that lends credibility to the organisation. It is noteworthy that no board member of the Adani group has made any public comments or stood up for the company. In times of crisis, shareholders expect independent board members to stand up, take charge, and restore confidence. The Adani companies behaved like Proprietorships, not board governed listed companies. It is essential to have boards with high-quality, experienced people who act as sounding boards on various decisions, execute their job as per law, and ensure that during a crisis, the shareholders and other stakeholders have a voice. The utility and integrity of the board are exhibited at the time of crisis, which has not happened in this case. Overall, the Adani saga has many lessons for Indian corporates. Entrepreneurs would do well to take the time to reflect on and scrutinise their businesses and take steps to ensure that growth is not handicapped by any of the factors that Adani faced. sectors investors are currently interested in. Ultimately all corporations get valued on a comparative basis with other companies in the same space. In the event that the valuation is markedly out of sync with competitors, the company must be careful. The market itself can become grossly overvalued at times, as can be seen in the NASDAQ boom when valuations shot up. In the early 2000s, Infosys was once valued at 55 times sales and 200 times EPS (earnings per share). For the next four years, even though earnings grew at a remarkable 43 per cent per year, valuations reduced to more reasonable levels. At a time when the valuation is out of sync with comparables, one must be mindful not to do anything that can be construed as making bullish remarks to pump up the stock price. Believing in the stock price and making statements about taking valuations of all companies in the group up to a trillion dollars or about investing more than $90 billion at a time when one is highly leveraged, demonstrates naivety about market dynamics. When one grows bigger in value, one needs to be more conservative and put in the appropriate risk T. V. Mohandas Pai is Chairman, Aarin Capital; Nisha Holla is Technology Fellow, C-CAMP Adani Ports &SEZ, Mundra Photograph by Arjunjorwal123
60 | BW BUSINESSWORLD | 11 March 2023 SUMMITS GALORE As India sets its eyes on a developed country tag by 2047, there is a scramble among states to host investor meets to attract investments to fuel the ambitious growth targets By Tarannum Manjul I N HIS ADDRESS at the UP Global Investors Summit on February 10 in Lucknow, Prime Minister Narendra Modi, also an MP from Varanasi, showcased the state of Uttar Pradesh like very few could have. The PM said that the state had a very strong network of MSMEs where industries are linked to tradition and modernity, as he talked about Bhadohi carpets and Banarasi silk. He cited a success story from contemporary India. “Today, more than 60 per cent of mobile manufacturing in India happens in Uttar Pradesh alone. Maximum manufacturing of mobile components is also done in UP,” he said. Indeed, Uttar Pradesh has come a long way from being castigated as a BIMARU state. The recently-held UP Global Investors Summit, that attracted investments worth Rs 35 lakh crore - much more than the initial target of Rs 10 lakh crore – did the state a world of good in achieving an image overhaul. That “UP means business” was evident at the meet as industry captains right from Mukesh Ambani, K. M. Birla to N. Chandrasekaran, among others, spoke in glowing terms about the “enormous potential that the state has”. Not surprisingly, the Yogi Adityanath government is taking success stories from the state like “One District, One Product”, popularly known as ODOP, far and wide. Investors’ meets, organised by various states, are definitely not new, not even in the context of Uttar Pradesh. The previous Samajwadi Party government organised three investor summits – at Agra, in Delhi, and in Mumbai. The last investors’ summit in UP was held in 2018. What was new this time around, however, was an unprecedented interest in the UP event and also the ground work done by the state government in the run-up to the meet. Chief Minister Yogi Adityanath, for instance, personally met India Inc. leaders like Anand Mahindra, Mukesh Ambani and others in FOCUS:INVESTMENT PM Narendra Modi inaugurating the UP Global Investors Summit on February 10, 2023 in Lucknow Photographs by PIB
11 March 2023 | BW BUSINESSWORLD | 61 Mumbai, prior to the event. The state government organised preparatory events in different Indian cities and also abroad. Singapore, Denmark, UK, Italy, UAE, Australia, Japan signed MoUs with the UP government at the investors’ meet which saw the participation of ten country partners, and more than 1000 foreign delegates from 40 countries, as part of around 25,000 delegates. Union Home Minister Amit Shah, Defence Minister Rajnath Singh and 15 other Union Ministers addressed the event. The success of the UP Investors’ meet has set the tone for other such investors’ meets in the pipeline. The Punjab Investors’ meet is scheduled for later this month, while the Andhra Investors’ meet and Telangana Investors’ meet would take place in March. Among the recent investors’ meets, Karnataka got investments of around Rs 10 lakh crore in November 2022, while Rajasthan got around Rs 10.44 lakh crore in October 2022, and West Bengal got Rs 3.42 lakh crore in April 2022. With India as the fastest growing economy, states have a huge role to play by contributing to the national GDP. Some commentators stress on the need to have “champion states” – in terms of their economic imprint. It is reassuring to note then that various states are increasingly setting for themselves ambitious targets like a $1 trillion economy goal. Many UP officials, for instance, said that the investors’ vote of confidence in UP at the meet would help them “to reach the $1 trillion economy milestone”. India aspires to be a developed economy by 2047 and a $5 trillion economy in the next few years. More than any discussion around politics, it is the discourse around businesses and economy that, more often than not, tends to be a unifying force. When states compete with each other in improving ease of doing business, and in being better investment destinations, both lives and livelihoods are made better. According to Government data, for FY 2021-22, Karnataka, Maharashtra and Delhi were the top recipient states of FDI. According to recent CMIE data, Gujarat and Rajasthan are India’s top investment destinations. After its successful investors’ meet, UP would surely like to rank among the very best. The UP Global Investors Summit, attracted investments worth Rs 35 lakh crore - much more than the initial target of Rs 10 lakh crore Photographs by Invest UP, Government of Uttar Pradesh, India
64 | BW BUSINESSWORLD | 11 March 2023 NE MAY ARGUE it has come a full circle but not really so. The oldest form of trade and shopping was rooted in what was essentially a consumer-to-consumer model, sporting the spirit of barter. Over time, changes emerged. Modernisation led to newer versions ranging from mom-and-pop stores to shops to organised retail. In its wake, it created an entire ecosystem of the manufacturer, wholesaler, distributor and retailer, finally taking a product to the consumer. This well-settled structure did need to work hard to stay relevant in a digitalfirst world. But then struck the digital-only life of the pandemic. Businesses were pushed to cut the clutter, ditch the leaking middle distribution buckets and create more straightforward business models. They had the technology to back it, so there was a genuine case to do so. And it was precisely this situation that birthed the direct-to-consumer (D2C) brands, not only in India but the world over. O INDIA’S $55 BILLION D2C MARKET Expected to grow at 34 per cent over the next four years, direct-toconsumer (D2C) brands in India attracted investment of over $2.1 billion in tough times and look to go beyond their original proposition, scaling up into a physical, data-first future with D2C Retail & Connect to Consumer By Resham Suhail & Nitesh Kumar COVER FEATURE INDIA’S MARKET DISRUPTION PROOF: Now estimated at a noteworthy $55 billion, D2C has moved from D2C ecommerce to include D2C retail, thereby leading to yet another version of C2C, albeit this one is connect-toconsumer. C2C is an entirely new phase of commerce where opportunities to connect exist everywhere. If D2C gave merchants a direct line to consumers, C2C gives endless pathways. At the same time, these emerging channels have enabled anyone with a good product to be a seller. Boutique coffees, authentic banana chips, homemade beauty recipes, stylish interior décor, and ethnic handicrafts are just some examples of how consumers are buying from other consumers. In this next normal, where the consumer-to-consumer and connect-to-consumer models co-exist in harmony, and C2C circles back into D2C Photograph by Aoo3771
11 March 2023 | BW BUSINESSWORLD | 65 INDIA’S $55 BILLION D2C MARKET over startups that complement their larger vision, making roll-up models popular. The Good Glamm Group acquired beauty and personal care companies such as The Moms Co., Sirona, St. Botanica, MyGlamm, Manish Malhotra Luxury Makeup by MyGlamm, POPxo Beauty by MyGlamm, BabyChakra and Organic Harvest and more to create a multifaceted group. Nykaa acquired Nudge Wellness, Earth Rhythm, LBB and plans to add more lifestyle brands. With brand acquisitions across sectors, the ‘House of brands’ model is growing in D2C. This is also demanding the once D2C purist brands to be present in offline stores as well. “From personal care brands to mattress makers, all are launching exclusive stores as they embark on the next stage of their journey, the ‘click and mortar’ is the only way towards scale and profitability,” says Saroja Yeramilli, Founder and CEO, Melorra. The strategy does not limit itself to large markets. The game changer lies in the untapped markets. Building Bharat Tier-2 and Tier-3 cities are the main driving force behind the D2C sales numbers. These markets have a growing appetite that matches the pace of the more mature metro markets. Niche marketplaces can drive brands’ revenues and increase customer acquisition. The significance of these markets can be seen in the Meesho Vineeta Singh, SUGAR Cosmetics “We will continue to drive discovery, brand awareness, and brand love digitally, but we will also be available in offline stores because the market is still 85 per cent offline...” was estimated to be at $55 billion in 2022. With an expected CAGR of 34.5 per cent during the 2022-2027 period, the total addressable D2C market in India is forecast to hit $100 billion by 2025. D2C businesses in India attract attention not only for their meteoric rise but also for the different strategies that enable this sector to be more resilient in the face of uncertainties. Acquisitions and consolidation, monetising India’s Tier-2 and Tier-3 markets, growing newer business verticals and sectors, and making the most of all available channels are coming together to allow businesses to pivot faster and not stagnate. The Build & Buy Strategy Perhaps the most prominent trend in the D2C sector is large-scale consolidation. Companies are keen to take the equation, the opportunity for growth is limitless. The Growth Story In India, the D2C growth story has been much more fascinating than some of its global counterparts. With more than 190 million online shoppers, India has the third-largest digital shopping base. The country is already home to more than 600 D2C brands. According to a Mordor Intelligence report, the Indian D2C market size Photograph by Vilas Kalgutker
experience last year. Even though most D2C startups began their online journeys with behemoths such as Amazon and Flipkart, in October 2022 Meesho surpassed Amazon in festive sales to take the second spot in order volume, as per a RedSeer report. This was a result of its penetration in Tier-2 cities. This also indicates that shopping behaviour has picked up in markets where retail may still be playing catch up. In a flat India, demand from ‘Bharat’ will only rise and D2C brands will play an important role in fulfilling it. In November 2022, the Ministry of Information and Broadcasting stated that India has more than 1.2 billion mobile users and 600 million smartphone users. This penetration enables consumers across Tier-1, Tier-2, Tier-3 and beyond to better connect to the urban part of the nation and to be able to shop in a borderless digital ecosystem. Newer Segments on the Rise Some categories such as fashion and accessories, consumer electronics and home decor are more prominent in the D2C space. However, newer segments are emerging. Given the evolving health-conscious mindset, Indian consumers are keen to make sustainable choices in food and even the likes of clothing. According to a Bain report released in June 2022, sustainability is a growing concern for Indian consumers. 20 per cent of consumers in India are environmentally and socially conscious while 49 per cent are health conscious. Newer players are entering climate tech, healthy food, pet care and lifestyle, these will grow bigger and bigticket investments would follow. Discussing the trend of investors’ inclination towards early-stage startups, Karthik Reddy, Blume Ventures comments, “The larger VCs such as Tiger, Sequoia and Accel are doing a little earlier stage. They essentially express underconfidence in either valuation or in the possibility that the later stage bet can become a billion-dollar company. There is the possibility that this earlystage option can become a billion-dollar company.” The growing Indian D2C consumers are keen to buy from categoryfocused and more niche brands. Beauty, skincare, childcare, home décor, FMCG, health-conscious food, sustainability-centric and organic products, apparel, smart wearables and other categories will continue to attract capital and customers. D2C early players hold immense potential to attract domestic as well the international capital given the innovative product-market fit. “With the big fund you can play a little bit more boldly in anything which comprises of early-stage risk,” Reddy adds. Decacorns In Making The omnichannel strategy has opened the door to a multi-channel business Saroja Yeramilli, Melorra "From personal care brands to mattress makers are launching exclusive stores as they embark on the next stage of their journey, the ‘click and mortar’ is the only way towards scale and profitability" Ghazal Alagh, Mamaearth “Omnichannel is where we will be and where our customers want us to be. It does not have any geographical boundaries; it lets you reach thousands of customers at once..." COVER FEATURE INDIA’S D2C MARKET
11 March 2023 | BW BUSINESSWORLD | 67 model. During the pandemic, brands were forced to adapt to online marketplaces but as the market stabilised, brands began taking offline routes and opening stores to be present wherever their consumer is. Also, consumers feel more confident with available where consumers shop.” Challenges Continue, So Do Profits Growing competition and sustaining the profitable path will continue to remain the larger challenges for D2C startups. Another challenge is the constantly evolving shopping behaviour. For harmonised retail, the D2C brands morphed themselves into an omnichannel presence. The flip side is, the marketing spend for D2C brands is said to be the most cash-burning segment. Bringing down the cost of customer acquisition and retention remains a big challenge for startups in the D2C space. “Being primarily a D2C brand, digital media is our key focus, with an emphasis on content marketing. However, we have also explored traditional marketing avenues such as print and TV, when it aligns with our integrated marketing campaign approach,” says Ankit Garg, Co-founder and CEO, Wakefit.co. He shares that the growing popularity of D2C brands has fueled demand. “We now intend to reach Rs 1,200 crore in revenue by the end of FY 2024,” he adds. More To Come As players invest in physical stores, the D2C retail business model will also grow in India. This allows for a one-on-one relationship with customers and assists the brand at a broader level, where customers can browse the products while multitasking and shop at the exclusive stores nearby. As a result, it adds more points for consumers to build trust. The connect-to-consumer era itself puts authenticity, loyalty and trust at the heart of every interaction between merchants and consumers opening up a road of longevity for D2C brands. [email protected]; [email protected] Ankit Garg, Wakefit “Being primarily a D2C brand, digital media is our key focus, with an emphasis on content marketing. However, we have also explored traditional marketing avenues...” physically tried-and-tested products in the store. “Omnichannel is where we will be and where our customers want us to be. It does not have any geographical boundaries; it lets you reach thousands of customers at once and retain loyal customers in your early stages,” explains Ghazal Alagh, Co-founder and CIO of Mamaearth. She added that omnichannel helps brands compete against the distribution networks of giants. With multiple touch points, an omnichannel presence benefits consumers. Customers experience complete control over their shopping experience as more brands go omnichannel. It also assists businesses in optimising their inventories and developing smarter replenishment practices. Moreover, omnichannel marketing strategies help businesses build an approach that ensures a customer-centric, positive, consistent, and personalised experience on each channel. Elaborating on the need for this, Vineeta Singh, Co-founder and CEO, SUGAR Cosmetics, asserts, “We will continue to drive discovery, brand awareness, and brand love digitally, but we will also be available in offline stores because the market is still 85 per cent offline and this will continue for long in India. To crack the Tier-2 and Tier-3 cities, it is important to be Karthik Reddy, Blume Ventures “The larger VCs such as Tiger, Sequoia and Accel are doing a little earlier stage. They essentially express under-confidence in either valuation ”
68 | BW BUSINESSWORLD | 11 March 2023 THE BIG PICTURE 600 $55 billion 190 million $100 billion 34.5% D2C brands in India estimated D2C market size in 2022 the total addressable D2C market is forecast to grow almost threefold by 2025 expected CAGR for India’s D2C ecommerce market during 2022-2027 online shoppers, India has the third-largest digital shopping base. SECTOR WISE $43.2 BILLION Fashion & Accessories $30.6 BILLION Consumer Electronics $5.4 BILLION Home Decor $25 BILLION Grocery & Gourmet $14 BILLION Apparel & Footwear $3 BILLION Healthcare INDIA’S D2C MARKET AT A GLANCE D2C Market Projections by 2025 D2C Market Projections by 2027 DATA POINT D2C
11 March 2023 | BW BUSINESSWORLD | 69 boAt: $160 million (includes $60 million raised in Oct 2022) The Good Glamm Group: $150 million Lenskart: $440 million Licious: $395 million Mamaearth: $88 million Bluestone: $36 million FASHION & ACCESSORIES Among the largest D2C segments in India APPAREL & FOOTWEAR Led the ecommerce D2C sector with a market size of almost $12 billion in FY2022 in India CONSUMER ELECTRONICS Doubled in value since 2020 BEAUTY & PERSONAL CARE The highest ecommerce order volume in 2022 GROCERY & GOURMET Pegged at $5.4 billion in FY2022 D2C’s SUPER SECTORS Data Sources: Statista Research, Mordor Intelligence THEBIG HITTERS (Investment Values during Jan 2021-Apr 2022) Graphic by Shivaji Sengupta
70 | BW BUSINESSWORLD | 11 March 2023 OLES APART. That is exactly how the two founders of the super successful consumer electronics brand boAt come across as we get them together on a Sunday afternoon in Mumbai. The interview is at short notice. “Aman takes two flights a day,” quips the Communications Head accompanying the founders as they walk into their Mumbai Office in Andheri East. With over 32 per cent market share in the consumer electronics space, and with revenues close to a staggering Rs 3,000 crore, boAt is now looking at category expansion at the back of a recent big funding. As we settle into the conversation, Sameer Mehta, Co-founder and Chief Product Officer, camera shy, reticent and with an absolutely business-like, no-nonsense kind of aura around him, opens up about the first meeting with Aman Gupta, Co-founder & CMO, boAt. “Some random guy thought that it would be good for us to meet and I remember we met at Taj Lands End. That was the start of the journey and we have not looked back ever since,” recalls Mehta. We pose the same question to Aman Gupta. He, however admits to having had doubts about this partnership. P SMART STARTUP/ boAt With over 32 per cent market share in the consumer electronics space, and with revenues close to a staggering Rs 3,000 crore, boAt is now looking at category expansion By Ruhail Amin D2C ANCHORS OF THE boAt
11 March 2023 | BW BUSINESSWORLD | 71 “Even when we met for the first time we had our doubts about this partnership. I had an old company which did not do well and Sameer also had a ‘not-so-pleasant’ equation with his past co-founder. Somehow, it clicked well as we discovered some mutual synergies,” says Gupta The two founders have their roles cut out. Mehta is based out of Mumbai and looks at operations, logistics, products, finance etc., while sales and marketing report to Gupta. It’s not always as hunky-dory and believe we have done,” explains Mehta. While we break for coffee and order rolls, Aman Gupta explains the need for constant innovation and how they ensure that boAt stays on top of this game. “Our R&D team is stationed within the boAt ecosystem and there is a continuous innovation engine that is working there. Through that we are able to bring our quality products for the consumer. If you don’t innovate, you will become irrelevant, especially in this fast moving technology world. You need to keep up the game because the consumer is changing. You have seen companies that stopped innovating and they are no longer relevant.” The only similarity we could notice between the two founders is their emphasis on ‘humility’. It is almost like a strategic mindset they have adopted which “keeps them grounded and helps them stay the course.” The conversation drifts to some recent claims that boAt is not manufactured in India and that it’s actually a ‘Made in China’ brand. “People still question what we do – I would just use the Hindi song– ‘Kuch toh log kahenge logon ka kaam hai kehna’,”says Gupta. “We made one crore units in one year and this is something we are very proud of, and 80 to 85 per cent of our watches are Made in India now,” he says. “There is an overarching support on all sides of the government to make ‘Make in India’ a reality,” Gupta points out. He also has a word of advice for founders. “The path to profitability is very critical and gone are the days when people would buy market shares. For early startups too, I would say don’t get into the race of valuations, instead, build a strong sustainable company, keep your head down and work hard,” was his advice to would-be entrepreneurs. cool as it looks. The two founders have their share of conflicts, arguments and showdowns, but it never gets out of hand, as finally the brand’s interest takes over. “Conflicts do occur but we always address those conflicts keeping in mind the best interest of our brand. boAt is our baby. We do what is best for the baby. Every relationship has conflict, arguments and a whole lot of issues to deal with, but as long as the objectives are the same; which is to make this a world-class company, that helps us resolve our issues and navigate through the differences,” says Mehta. While startups these days are making headlines for historic losses, the funding ecosystem is also going through a “winter” of sorts. Chasing valuations has hurt the ecosystem beyond repair, lay-offs are reported every second day. Amidst all this, the boAt brand has not just managed to anchor itself, but raised a capital of Rs 500 crore, braving the odds. According to the founders, there were times when there was excess capital in the system and everybody was getting funded, but that has changed now. “As long as all the key parameters of your company are on spot, I think money is available, people are ready to put money behind good brands and that is what we The boAt Co-founders: (L) Sameer Mehta, Co-founder and Chief Product Officer and (R) Aman Gupta, Co-founder & CMO, boAt Photograph by Vilas Kalgutker
72 | BW BUSINESSWORLD | 11 March 2023 S ameer Mehta, Co-founder & Chief Product Officer, boAt talks about building the next core which will be fuelled by Rs 500 crore investment. Excerpts Affordability is one of the main hooks for your customers. Along with keeping tabs on cost, how do you manage and keep up with the innovations for your product line? We have a world-class R&D team that is stationed within the boAt ecosystem and there is a continuous innovation engine that is working there. Through that we are able to bring our quality products for the consumer. We also understand what the consumer wants. Some of the things are very typical to the Indian consumer. How to take those learnings and put it back into the product and keep innovating is something we are always on top of. Anchoring The Big Pivot Last year, boAt closed $60 million in funding from Warburg and Malabar Investments. How do you plan to utilise the capital? We have primarily been into the audio market, now we are building the wearables core, although we are at the very start of this journey. We have made the right investments to ensure that we have the right product out there in a way that you own the entire stack where you are able to give newer features and build an ecosystem for the consumers. We don’t want consumers to think a smartwatch is just a heart rate monitor with a watch face. So that is what we want to build over a period of time, because that is where the consumers will shift to and that is where the funding is being diverted to. When you look back at boAt’s journey, what comes to your mind? How do you handle success and stay focused? There was a time when we had signed Rs 100 crore of personal guarantees just to make the business run, and that is the confidence we had in our business and ourselves. That, to me, was a big challenge for people who come from a middle class background to sign up for something like this. We don’t talk about our success often as it can get to one’s head at some point and that is where your downfall starts. We want to focus on things that are not working rather than looking just at the positive side, because what is done is done. How do you deal with conflicts, differences and yet be aligned with the common goal? boAt is our baby. We do what is best for the baby. Every relationship has conflict, arguments and a whole lot of issues to deal with, as long as the objectives are the same; which is to make this a world class company. COVER FEATURE INTERVIEW D2C Photograph by Vilas Kalgutker
11 March 2023 | BW BUSINESSWORLD | 73 A man Gupta, Cofounder and CMO, boAt opens up on the brands next big pivot and why he is not banking on the public money. Excerpts boAt’s sales jumped over two times in FY22. What factors helped you achieve those numbers? We are not fly-by-night operators, we make products that are tuned in to the Indian customers, so it’s a magical combination of the right product for the right consumer “We Are Fine Even Without An IPO” fact, I believe India will become the world’s largest smartwatch market in the coming time, so the domestic growth is something which we are focused on at the moment. What has been the most difficult moment for you at boAt till now? How do you manage to stay the course despite the highs and lows? Challenges are always there, it’s only the type of challenges that keep changing. If you ask me how I stay grounded, well there are people around me who keep me grounded. As a person, you cannot change me, staying humble is a core belief that I practise and that comes from the middle class upbringing that I have. There is a thin line between attitude and arrogance and I hope I never cross that. What are the big shifts taking place in the startup ecosystem? The era of free money is over, the time of unprofitable and unsustainable companies is over. However, if you have a good product company, money is still available. People may call the current startup scenario as a funding winter, but we still managed to raise Rs 500 crore in funds. In October last year, the company deferred its public share sale plans amid continuing concerns over the volatile stock market. What is your plan ahead? We have just got new funding and it would be another one or two tears when the markets will be in a better position that we will look at it. We are also building our wearables business and there will be growth levers on all sides. Honestly there is no hurry as we don’t need those funds, so we are fine without an IPO. that has worked for us. boAt has captured the Indian marke t well, what about expanding footprints to international markets? People often tell us why we don’t look outside India, but for us India itself is such a big opportunity that we are not able to see outside India for now. Nobody expected an Indian brand to be the top brand in the world. boAt is now the second largest wearable brand in the world, which is a proud feeling for us. If you look at the smartwatch market, which is our next big frontier, that is growing even more. In COVER FEATURE INTERVIEW D2C Photograph by Vilas Kalgutker
74 | BW BUSINESSWORLD | 11 March 2023 IN CONVERSATION DARPAN SANGHVI In July last year, you restructured the Group’s businesses into three divisions -- Good Brands, Good Media and Good Creator. Why did you feel the need to break the P&L like this? Each of these businesses has a very unique DNA and very different metrics that they should be evaluated on. For Media, it is about the reach, engagement and virality metrics that the content produced generates. For Creator, it is the number of active creators on the platform and the amount of money each creator is making through the platform. While for Brands, it is about understanding consumer needs, creating innovative products, driving new customer acquisition, and ensuring there are high repeat rates with increasing average order value while reducing marketing costs and increasing margins. We realised that we needed three different organisations, with different leadership, different goals and separate P&Ls. Today each of our verticals is run by strong leaders that have a clear mandate to make each vertical profitable. At present, what is your strongest growth driver? Our biggest growth driver is undoubtedly our Content Creator engine which has ensured that every brand we have bought in 2021 has grown between 200 per cent to 400 per cent in the last year. This strategic moat is proprietary and allows us to cross-sell every new brand to our existing customer base. We have 12 million transacted customers and have a 12-month retention rate of 45-50 per cent. This high new user acquisition coupled with extremely strong repeat behaviour is fuelling our growth. Our acquisition strategy Darpan Sanghvi, the Group Founder and CEO of The Good Glamm Group, which was last valued at $1.2 billion, is among the mavericks whose buy-and-build strategies have created a promising path of interconnected businesses By Resham Suhail too, in fact, was not to fuel growth but to fill up all the pieces of our strategic ‘Content Creator Commerce’ puzzle. Every asset was well-thought out for what the synergy will be with the Group. The creator economy is constantly changing in India. How do you ensure it continues to deliver in your ‘Content Creator Commerce’ proposition? Our mantra is fairly straightforward. Creators along with our content platforms create engaging content. Our content platforms like POPxo, ScoopWhoop etc. then generate organic impressions on social media through this content. In some of these organic impressions, we insert the discovery of our beauty brands. This can lead consumers to our commerce platforms to transact, which enables us to acquire customers cost-effectively. On your Brands side of the business, how do you prioritise and balance product innovation and price affordability? This is something we try to balance every day. As a company, we are committed to ensuring we understand our consumers better than anyone else, and then create highly differentiated products that genuinely solve their needs and problems. If you don’t create a great product, irrespective of the price, the consumer will not buy your product. Thus, product innovation always wins the debate internally at the Good Glamm Group. Please tell us more about your marketing and brandbuilding strategies, especially in ecommerce, where brand loyalty is a concern. THE CONTENTTO-COMMERCE MAVERICK D2C
11 March 2023 | BW BUSINESSWORLD | 75 The key to building a great brand is high innovation in products and disruptive marketing. As your brand gets stronger, loyalty starts coming in and retention rates get stronger. By being direct-to-consumer, i.e. acquiring the customer on our proprietary platforms, we ensure that we can directly communicate and connect with the customer, which is something most brands cannot do. This drives higher loyalty. But one must continue to invest in brand building. We are amid an investment winter even though some companies have beaten it. How will you describe your experience? Undoubtedly funding has slowed down dramatically in 2022, and we expect this to continue in 2023. This is a wonderful time for companies to tighten their ship, focus on making the unit economics very sound and profitable and build the foundation for a solid cash-generative business. This is what every entrepreneur should be focussing on. How are you seeing 2023 pan out for your company? This year is an exciting one for us. We expect the India business to hit profitability. We will be launching in several international markets. And we will also enter the men’s category. All in all, we have much to achieve in 2023. The key to building a great brand is high innovation in products and disruptive marketing. As your brand gets stronger, loyalty starts coming in Photograph by Suresh Gola
76 | BW BUSINESSWORLD | 11 March 2023 TORYTELLINGand being a part of the creative process are two areas of keen interest for actor Alia Bhatt. This, along with a “deep love for the environment”, formed the path for her to follow yet another pursuit, which was to be an entrepreneur. “My mindset has always been that of an entrepreneur and a creator. I want to create brands for our country and be among those who took a homegrown Indian brand to the global stage. That’s always been the endeavour,” she states in a conversation with BW Businessworld. The manifestation of this quest was in the form of her direct-to-consumer (D2C) venture, Ed-a-Mamma. As the founder and investor of the company, Bhatt paid specific attention to the starting point and what the brand’s ethos and purpose should be. “For us to protect our planet in the future, we have to nurture very early in our children a love for nature. That’s where our ethos comes from,” she says. Ed-a-Mamma recorded 10X growth within 10 months of its launch in 2020, becoming a Rs 150 crore business. At that time it was a pure D2C ecommerce brand focusS THE PURPOSE MANTRA IN D2C India lacks a sustainable, affordable homegrown kidswear brand, says celebrity-turnedentrepreneur Alia Bhatt as the motive behind founding Ed-a-Mamma By Nitesh Kumar SPOTLIGHT ALIA BHATT’S D2C TRYST
11 March 2023 | BW BUSINESSWORLD | 77 sing on children’s clothing. The brand has now scaled up to also become a D2C retail brand present in 22 stores. It has also launched maternity and teenage wear in addition to children’s clothing, bringing different consumer segments into its fold. The Market Gap Recalling the brand’s journey so far, Bhatt says, “I didn’t want to build just a regular fashion-wear brand for girls or women my age. There were already many such brands. After conducting our research, we found that there was a market gap of sustainable, affordable Indian homegrown kidswear brands.” Bhatt insists that not only brands. It named its teenage collection Ed-heads for example, in a bid to be “younger and cooler” for the target audience, reflecting this attitude in the brand’s design, communication, and overall style. The 360-degree Brand Alia Bhatt has high ambitions for Ed-a-Mamma, aspiring for it to be more than a clothing brand. In her words, she wants to create the Ed-aMamma world. “I dream that from the time a mother and a child wake up, they are using one Ed-a-Mamma product after another,” Bhatt states. Since educating children about the environment is on the company’s agenda, and storytelling is Bhatt’s passion, Ed-a-Mamma will also venture into stories and educative content that is entertaining. “Every story will have a certain message of kindness, hope and understanding. Hopefully, we can turn this into an animation series because children consume content visually,” Bhatt adds. The brand has already gone into the D2C retail space intending to connect with its consumers wherever they are. It aims to open more exclusive offline stores pan-India. Road Ahead Bhatt is clear that for the moment the brand is not aiming to raise funds or get more investors. Instead, she believes that Ed-a-Mamma has space for a partner, whom she describes as someone who resonates with the brand ideology and understands the company’s expansion plans. As for Bhatt herself, she has chalked out a busy 2023 to keep the brand in its growth mode. their clothes in their mouths. Every little detail shows a positive intention towards childcare and environment care,” she adds. Ed-a-Mamma’s maternity wear was added to the portfolio as Bhatt felt a gap in this category as well. “I decided to go with it because I noticed the gap in my wardrobe when I was pregnant. It’s very difficult to find stylish maternity wear in India. When we launched it, in about three weeks, we sold 80 per cent of our inventory,” Bhatt informs. Sustainability vs Fashion Sustainable clothing is not considered affordable or wide-ranging in style due to the limitations that come along with sustainable practices. Elaborating on this, Bhatt says, “One of the major challenges we faced was the notion that sustainable clothing was not affordable and certain styles don’t fall into our practices. We might miss out on those styles and textures but we decided to accept that because, in the end, we are giving something much better, which is a conscious understanding of the planet we live in.” This being said, Ed-a-Mamma looks to bring a certain attitude to its were sustainable materials used but the brand follows sustainable practices, such as incorporating sustainable fabrics, soft fabrics and AZO-free dyes. Ed-a-Mamma claims to use 100 per cent Global Organic Textile Standard certified organic cotton. The production facility is SEDEX certified and even the buttons and trims that are used in the clothes are plastic and nickel-free. “Our infant collections are even saliva tested because children put “One of the major challenges we faced was the notion that sustainable clothing was not affordable and certain styles don’t fall into our practices. We might miss out on those styles and textures but we decided to accept that because, in the end, we are giving something much better, which is a conscious understanding of the planet we live in”
78 | BW BUSINESSWORLD | 11 March 2023 GUEST COLUMN INVESTING IN NDIA OVERTOOK China as the world’s most populated country in 2023. A base of young consumers combined with their discretionary incomes makes it a fertile ground for growth. This growth is being driven by several factors, including the change in consumer behaviour, the rise of ecommerce, and the increasing availability of data and technology. The Big Market Play In India, there is a significant opportunity for direct-to-consumer (D2C) brands to tap into the growing ecommerce market. India’s ecommerce industry is expected to reach $200 billion in size by 2026. This presents a substantial opportunity for D2C brands to reach and sell to consumers directly online. Today, 80 per cent of Indian consumers prefer to purchase on their smartphones, and more than 50 per cent of consumers, from nonmetro markets, prefer to shop online. Due to this change, customers are becoming more likely to discover or connect with brands for the first time online. The success of D2C startups often depends on their ability to identify a specific problem or need, offer high-quality products or services that solve this problem, and effectively market a n d s e l l t h e i r p r o d u c t s t o consumers. Right Product, Right Consumer D2C brands have captured the attention of this population and emerging section of shoppers, and this trend is expected to continue in I AN ONGOING GROWTH STORY Growth and future opportunity for direct-to-consumer brands and scenario of capital flow in the industry By Shashank Randev, Co-founder, 100X.VC the future as well. But why would D2C brands continue to succeed? One reason that D2C brands are expected to be on the growth trajectory in India is that they have a direct relationship with their customer, bypassing traditional distribution channels and the challenges that come with it. This allows them to gather data and feedback to improve the products, like never before. The user information gives these brands the ability to create personalised experiences for their customers, leading to loyalty, which is difficult to get, usually. The future is in the potential to disrupt traditional retail channels and capture a large share of consumer spending. As more consumers shop online and become comfortable with buying products they haven’t seen in person, D2C brands are well-positioned to have a pool of loyal customers. Tech-backed & Future-ready In addition, D2C brands have managed to integrate artificial intelligence, machine learning, and augmented reality to create more engaging and personalised shopping experiences for customers. This is enabling them to stand out in a crowded market and build D2C
11 March 2023 | BW BUSINESSWORLD | 79 stronger relationships with their users. From a venture capital perspective, D2C brands’ penetration to address the needs of this new consumer base is attractive. However, it’s important for investors to carefully evaluate each company’s business model, market potential, and competitive landscape before making an investment. As with any investment, there are risks involved, and not all D2C brands will be successful. The Disrupters It’s worthwhile to mention a few players successfully disrupting the space in specific categories. Mamaearth, a personal care brand that offers natural, toxin-free products for babies and mothers is among these. Smiles.Ai, a dental care service at affordable pricing using technology; boAt, a consumer electronics brand that offers a range of audio products, including headphones, earphones, and speakers. The list also includes Wakefit, a sleep solutions brand that offers mattresses, pillows, and other sleep-related products; Beyond Snack, a new age Authentic Kerala Style Banana chips made from an exclusive variety called Nendran; and SUGAR Cosmetics, a makeup brand that offers high-quality, affordable products. The list can go on! A Bright Future There are many more emerging brands in the country that are disrupting traditional industries and capturing market share through innovative products and business models. With online retail penetration at 5 per cent across the country, there is room for significant growth. We will witness online and hybrid models emerge as companies continue to grow. Whichever route they choose, they all lead to that customer who is sitting on the other side, willing to pay for the experience! “From a venture capital perspective, D2C brands' penetration to address the needs of this new consumer base is attractive. However, it’s important for investors to carefully evaluate each company's business model, market potential, and competitive landscape before making an investment. As with any investment, there are risks involved, and not all D2C brands will be successful”
“D2C Is Solus-, Not Omni-Channel” IMPROMPTU/ MARKETING On standing out in a cluttered online space… D2C brands are solutions looking for an application. They are sought out by the consumer, as opposed to brands that are pushed down a consumer’s gullet. To that extent, D2C brands fit the new age definition of brands being solutions ferreted out by consumers. D2C brands are therefore bottom-up offerings. In such a scenario, for a D2C brand to stand out from the clutter, the most important aspect is product quality and the key defining point of what the product achieves for the consumer on the prowl. You need to have the USP of being a product that is cutting-edge in what it does, or even better, bleeding-edge. D2C brands stand out in terms of how they work. It is not what they do but how distinctively they do it as well. On building trust and brand loyalty… The brand is a thought. It needs to build that unique thought in consumers’ minds. That one thought triggers just this one offering and nothing else. Brand trust and loyalty follow. Positioning is a very key aspect of building D2C brands. You need to be able to position your brand with a finer degree of uniqueness. Narrow spectrum positioning works best in this space. You cannot be everything to everybody. You need to be just that one thing for that one body. And there are enough such bodies that will chase your offering then. On D2C purists versus the rest… There are D2C purists and then those who treat it as yet another channel to offer their products and services. I am a purist. D2C is a solus-channel strategy to get the brands moving. Not an omni-channel exercise. The D2C offering must be available only through the D2C platform, not everywhere and anywhere else. I see companies discovering the joy of using D2C solus. Those who do, are discovering revenues that are focused, repeat and deep. On D2C marketing – the way forward… I do believe every brand will have a D2C avatar in the years to come. D2C offerings will distance themselves from their mother-company identities. In the future, you will buy stuff on D2C without depending on the name of the company that made what you are buying. Pedigree does not matter in D2C. Much else does. And the early players in the D2C segment are discovering this ‘much else’. In the future, I do believe D2C offerings will cleave the way for consumer-to-consumer offerings that will develop. And this is where the role of barter will emerge once again in Indian markets. This is the next big wave we will witness in niche segments of craving. The D2C offering must be available only through the platform, not everywhere and anywhere. Those who discover the joy of D2C solus get focussed, repeat and deep revenues, argues Harish Bijoor, Business and Brand-strategy expert and Founder, Harish Bijoor Consults Inc. D2C 80 | BW BUSINESSWORLD | 11 March 2023
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82 | BW BUSINESSWORLD | 11 March 2023 D2C’s Decade! By Karthi Marshan POV / MARKETING LEADERS THE MARVELLOUS trifecta of high-speed internet, powerful processing speeds of our devices and the ubiquity of smartphones are given credit for having triggered the ecommerce revolution. But I submit that it has also quietly enabled the direct-to-consumer (D2C) model to blossom. When we look back now, it’s almost self-evident why mass manufacturing inevitably led to mass distribution, thus making the consumer and the creator anonymous to each other. In some ways, those were easier times for brands, because they didn’t need to worry about hyperpersonalisation. But when delivery disruptors added their shoulder to the wheel along with the digital trifecta, the world was never going to be the same again. What the postal system could not deliver (pun unintended), what the courier industry wasn’t designed for, the logistics industry solved, and voila! The D2C revolution has helped spawn hundreds of new labels in many super niches. It has also nudged established brands to smell the coffee. Discerning customers enjoy being directly in touch with creators, and smart creators delight in the rich insights they collect from this direct contact. When the Open Network for Digital Commerce takes wing, it will democratise the D2C space, enabling all players on the supply side to connect directly with all consumers on the demand side, and we will see the smallest producer, the most hyperlocal service provider and the remotest consumer participate in a D2C era that will herald consumption and GDP growth at an unprecedented scale. Into that heaven of prosperity, let my country arrive! MANY NEW AGE consumer product brands discovered that you can bypass the complex distribution models of India, consisting of distributors, wholesalers, modern trade, general trade etc., by doing something different. Go direct-to-consumer (D2C). Make your product and position it based on consumer insight. Sell it through various ecommerce platforms. Who wants the headache of hundreds of distributors, sales reps etc. Just sell direct and rake in the moolah. Alas, things do not happen so easily after all. Many D2C brands hit a plateau soon enough. The margins platforms eat away can keep you permanently in an ocean of red ink. We are seeing several D2C brands touted in Modern Trade and General Trade. What about the legacy brands that have a robust system of selling and distribution? Why do they want to go D2C? Two reasons. First, is the most obvious. In several categories, consumers are shopping online in a big way. While overall FMCG sales may still be largely offline, with online accounting for just 10 per cent, in several other categories like diapers, it is significantly higher. If you are a big brand you better be where your consumer is. But there is a catch. Platforms own the consumer data and don’t want to share more than what they think is ‘sensible’. There has hence been a kind of a global awakening that it is not just enough to sell through platforms, but it is important to develop your platform and be even more D2C. The Obvious Road Karthi Marshan is a marketing veteran and former president and chief marketing officer of Kotak Mahindra Group By Ambi Parameswaran Ambi Parameswaran is an independent brand strategist & Founder of Brand-Building.com; his latest book ‘All The World’s A Stage’ is a personal branding story D2C
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84 | BW BUSINESSWORLD | 11 March 2023 The rise of D2C was also because it was tech-backed, and asset-light, matching products to consumers directly online. Now as many players look to go the D2C retail route and begin physical stores. How this will impact their growth and revenue? The last five years have been disruptive for the consumer brands’ space in India and have seen the emergence of hundreds of new brands, primarily digital-first brands commonly known as direct-to-consumer (D2C). The combination of strong digital media choices like Instagram, Meta and Google and ecommerce channels like Amazon and Flipkart gave the brands a new business model to offer the internet-savvy millennials relevant products and services. The post-pandemic scenario has, however, seen the re-emergence of consumer shopping in physical retail stores and looking for experiential options through touch and feel. This presents a challenge and an opportunity for new-age brands. While physical distribution is complex and can be high working capital intensive, it also allows for a much larger growth opportunity. The critical requirement is how these businesses design for this new omnichannel opportunity, leveraging available third-party logistics, payments and marketing infrastructure across channels. Mamaearth and boAt have found a strong growth opportunity with this omnichannel approach Q&A/ BRANDING and have significant distribution across traditional trade channels. Newer brands like The Sleep Company and Baker’s Dozen are expanding their business through a combination of online commerce, offline stores and Q-commerce (quick commerce) players like Instamart, Blinkit etc. Where do you see the D2C market, that as per reports is pegged at $55 billion in India, heading in the next two years? We believe the inherent opportunity for new-age disruptive brands is still at its nascency and we will see many more such brands emerge. The business models of most of these brands will necessarily have to adopt an omnichannel approach even though several of these will begin as digital-first brands. Consumer engagement could continue to be largely digital. Social media and new emerging digital channels especially in regional media are becoming default engagement options for consumers. The challenges will be centred around designing the customer acquisition funnels to be cost-effective and also integrated with the multi-channel options. In terms of trends, we see health and wellness continue to be a big area of focus for consumers and conscious consumption will feature in many choices. Virtual living is also becoming more mainstream and sectors like gaming and entertainment are fast emerging. Finally, more and more consumers are evaluating brands on the scale of how they impact the planet and society and responsible consumption will pick up at a faster pace. The Indian market saw an ecommerce boom and a bubble burst in the last decade only to rise again in the wake of Covid with certain clear leaders and market patterns. Will D2C ecommerce face a wave of slowdown as well? With the shifting consumer behaviour, the share of ecommerce is only increasing, and we think that from a demand standpoint, the share of digital-first consumer brands in sectors, such as food and beverages, home, personal care, fashMany more such new-age brands will emerge and some sectors to watch out for include health and wellness, gaming and entertainment and sustainable brands, says Kanwaljit Singh, Managing Partner & Founder of Fireside Ventures in a chat with BW Businessworld. Excerpts: “The opportunity for disruptive brands is still at its nascency” D2C
11 March 2023 | BW BUSINESSWORLD | 85 ion, pets, and health and wellness, is only going to go up and propel digital-first brands well past the role of ‘challenger’. In key categories like beauty and personal care, food and beverage, and fashion, D2C brands are already competing alongside legacy players. The big challenge facing D2C brands today is the increasing customer acquisition cost. To mitigate that and to leverage the opportunity to expand ecommerce into newer distribution channels like Q-commerce, social commerce and eventually offline distribution is going to be the next growth driver for these brands. What is your advice to the established and emerging D2C players in India? Some key learnings that D2C startups and brands can imbibe and invest in is to better understand consumer insights and why they are buying their or their competitor’s products. Focus on deeper engagement via communities, better content and higher personalisation. Define the brand proposition very sharply and very early on. This is as critical as product-market fit to building a long-term sustainable business. Omnichannel is here to stay. It’s not two separate silos of online and offline. Leverage the fast maturing infrastructure and technology tools to build a seamless consumer journey and design for multi-touch points for the same consumer without friction. There is no substitute for building responsible brands. Consumers of tomorrow are not going to forgive your brand if you are not doing good for the planet and society as well as doing good for the business. From an investment viewpoint, for a young brand entrepreneur, raising the right amount of money at the right time to establish the product-market fit while maintaining a healthy unit of economics is the only prudent option. Once the above is achieved, then putting the foundations for growth like channel strategy, product roadmap, building the team for scale etc. becomes clearer and justifies the next fundraising. This is not a winner take all space and chasing rapid growth at any cost invariably backfires.
WINNERS/ INDIA’S TOP BRANDS AMID INVESTMENT winter, layoffs and a significant slowdown in technology and other sectors, some companies have managed to buck the trend and hold their own in the last year. A common feature among a majority of these is that they have managed to build a direct relationship with their consumers. India’s direct-to-consumer (D2C) revolution emanated from growing consumer needs during the pandemic but the momentum has continued, creating the blueprint for the future of ecommerce itself. Against this backdrop, BW Businessworld India’s Top D2C Brands is an initiative that recognises those who are taking this emerging market to newer heights. India’s Top D2C Brands honours 50 homegrown companies that are breaking the mould in different ways. The Winners To arrive at this list of the top 50, BW Businessworld’s editorial board and an advisory council studied more than 300 D2C brands that included names which have managed to grow, attract funding, scale up operations and open up new sectors. The top 50 were eventually selected from those whose models show the promise of being future-ready. The awards look at year-on-year (y-oy) growth, revenue, market share, technology innovations and ability to scale up. From this list, more than 50 per cent of the winners have witnessed over 100 per cent y-o-y growth. Around 50 per cent of the featured brands are constantly developing innovative products using technological advancements. Since they sell to consumers directly, they have built a loyal base, particularly among Gen Z consumers. Due to the advent of Web 3.0, the rise of new dimensions in technology allowing for more immersive experiences, combined with the advent of D2C Retail, the future of ecommerce is changing. The D2C ecos y s t e m i s e m b r a c i n g t h e c o n n e c t - t o - c o n s u m e r ( C 2 C ) strategy. Many D2C brands have incorporated omnichannel marketing and sales strategies to cut down on customer acquisition costs and convert first-time buyers into recurring customers. Most of the winners are also investing in building customer relationships, which continues to be an important trend for the year ahead. Going beyond large markets remains an area of focus for D2C brands per se, more so for the brands that have made it to this list. In fact, the revenue of more than 50 per cent of the large brands in India’s Top D2C Brands 2023 come from Tier-2 and Tier-3 cities. India’s Top D2C Brands 2023 is organised by BW Marketing World and BW Disrupt, along with BW Retail World. The initiative will be undertaken annually to celebrate growing brands in the sector. 86 | BW BUSINESSWORLD | 11 March 2023 India’s Top D2C Brands 2023 looks at homegrown companies that are leading the connect-to-consumer era with their unconventional propositions THE D2C DAREDEVILS By NITESH KUMAR Photograph by Mironov Konstantin D2C
INDIA’S TOP D2C BRANDS 2023 Mamaearth Varun Alagh, Ghazal Alagh 2016 ≈Rs 1000 cr IPO/ $112Mn D2C Ecomm + Retail Beauty & Skin Care 82°E Deepika Padukone & Jigar Shah 2021 <Rs 100 cr Rs 600Mn D2C Ecommerce Skin Care boAt Aman Gupta & Sameer Mehta 2016 Rs 2,500 cr> $177Mn D2C Ecommerce Electronics Noise Gaurav K & Amit K 2014 Rs 800 cr NA D2C Ecommerce Electronics Licious Abhay H & Vivek G 2015 Rs 700 cr $490Mn D2C Ecommerce Food Bewakoof Prabhkiran Singh 2012 Rs 250 cr> Rs 1.8Bn D2C Ecommerce Fashion Heads Up For Tails Rashi Narang 2008 NA NA D2C Ecomm + Retail Pet Care Bombay Shirt Company Akshay Narvekar 2012 Rs 20 cr> $9Mn D2C Ecomm + Retail Apparel Bombay Shaving Company Shantanu Deshpande 2015 Rs 38 cr $46Mn D2C Ecomm + Retail Personal Care FS Life Ayushi Gudwani 2015 Rs 80 cr> Rs 710Mn D2C Ecommerce Apparel Country Delight Chakradhar Gade & Nitin Kaushal 2015 Rs 600 cr $158Mn D2C Ecommerce Food & Beverage Curefoods Ankit Nagori 2020 Rs 90 cr $183Mn D2C Ecommerce Food Earth Rhythm Harini Sivakumar 2020 Rs 100 cr> $9.2Mn D2C Ecommerce Skin Care Happilo Vikas D Nahar 2016 Rs 1000 cr $39Mn D2C Ecommerce Food Lenskart Peyush Bansal 2008 Rs 1502 cr $980Mn D2C Ecomm+ Retail Eyewear mCaffeine Tarun Sharma and Vikas Lachhwani 2015 Rs 200 cr> $37.5Mn D2C Ecommerce Personal Care SUGAR Cosmetics Vineeta Singh 2012 Rs 210 cr $85Mn D2C Ecomm+ Retail Beauty & Skin Care TenderCuts Nishanth Chandran 2016 Rs 100 cr> $19.3Mn D2C Ecomm+ Retail Food Company Founder Founding Year Revenue Funding Areas of Operation Sector 87 | BW BUSINESSWORLD | 11 March 2023 *in no particular order
88 | BW BUSINESSWORLD | 11 March 2023 Vahdam Teas Bala Sarda 2015 Rs 160 cr $62.3Mn D2C Ecommerce Beverage Nicobar Simran L & Raul R 2016 NA NA D2C Ecommerce Apparel & Accessories Wakefit Ankit Garg & Chaitanya Ramalingegowda 2014 Rs 630 cr $145Mn D2C Ecomm+ Retail Electronics Wingreens World Anju C Srivastava 2011 Rs 100 cr> $50Mn D2C Ecommerce Foods & Beverage Snitch Siddharth Dungarwal 2018 Rs 100 cr Rs15Mn D2C Ecommerce Apparel FreshToHome Shan Kadavil & Matthew Joseph 2015 Rs 1500 cr > $200Mn> D2C Ecommerce Food Nat Habit Swagatika D & Gaurav A 2018 NA $6Mn D2C Ecommerce Personal & Skin Care Bummer Sulay Lavsi 2020 Rs 50 cr> $280K D2C Ecommerce Innerwear Supertails Aman T & Varun S 2021 NA NA D2C Ecommerce Pet Care Spice Story Soumyadeep M & Gayatri G 2019 ≈ Rs 10 Cr NA D2C Retail Food Beanly Coffee Rahul Jain & Samayesh Khanna 2018 NA NA D2C Ecommerce Beverage The Good Glamm Group Darpan Sanghvi 2021 NA NA D2C Ecommerce Beauty & Personal Care OZiva Aarti G & Mihir G 2016 Rs 100 cr $17Mn D2C Ecommerce Wellness Skippiicepops Ravi K & Anuja K 2021 Rs 30 cr $10Mn D2C Ecommerce Food Beyond Snack Manas Madhu 2018 Rs 10 cr> $70K D2C Ecommerce Food Dogsee Chew Bhupendra Khanal & Sneh Sharma 2015 Rs 100 cr $14Mn D2C Ecommerce Pet Care Beco Aditya R, Anuj R & Akshay V 2018 ≈ Rs 5 cr $3.5Mn D2C Ecommerce Home & Personal Care Company Founder Founding Year Revenue Funding Areas of Operation Sector INDIA’S TOP D2C BRANDS 2023 *in no particular order WINNERS/ INDIA’S TOP D2C BRANDS
11 March 2023 | BW BUSINESSWORLD | 89 Lahori Zeera Nikhil Doda & Saurabh Munjal 2017 Rs 250 cr> $15Mn D2C Retail Beverage CaratLane Mithun S, Avnish A & Gurukeerthi G 2008 Rs 483 cr $58Mn D2C Ecomm + Retail Jewellery Sleepy Owl Coffee Ashwajeet Singh, Arman Sood & Ajai Thandi 2016 Rs 5.2 cr $7.7Mn D2C Ecommerce Beverage HealthKart Sameer Maheshwari & Prashant Tandon 2011 Rs 1000 cr> $150Mn D2C Ecomm + Retail Health & Fitness Mokobara Lifestyle Sangeet Agrawal & Navin Parwal 2019 NA $6.8Mn D2C Ecommerce Travel & Hospitality Tech Phool Ankit Agarwal 2015 Rs 120 cr $9Mn> D2C Ecomm+ Retail Home Fragrance The Sleep Company Harshil S & Priyanka G 2019 Rs 200 cr Rs 1.9Mn> D2C Ecomm+ Retail Sleep and Wellness Yoga Bar Suhasini Sampat & Anindita Sampat 2015 Rs 120 cr $11.6Mn> D2C Ecommerce Food & Wellness Jimmy’s Cocktails Ankur B & Nitin B 2019 Rs 50 cr> Rs 225Mn D2C Ecommerce Beverage Neeman’s Taran Chhabra 2017 Rs 50 cr $9.8Mn D2C Ecommerce Footwear Slurrp Farm Meghana & Shauravi 2016 ≈ Rs 50 cr $10Mn D2C Ecommerce Food Nykaa Falguni Nayar 2012 Rs 5 cr> $200Mn> D2C Ecomm+ Retail Beauty & Fashion Urban Monkey Yash Gangwal 2013 ≈ Rs 50 cr NA D2C Ecommerce Apparel & Accessories Veeba Foods Viraj Bahl 2013 Rs 500 cr> $45Mn D2C Ecommerce Food Sirona Hygiene Deep Bajaj 2015 Rs 100 cr> ≈$17Mn D2C Ecommerce Personal Care Company Founder Founding Year Revenue Funding Areas of Operation Sector INDIA’S TOP D2C BRANDS 2023 *in no particular order
90 | BW BUSINESSWORLD | 11 March 2023 HE INDIAN MARKET is one of the fastest growing consumption markets. The Indian economic growth, added with its digital adoption is breaking many a divide – geographic, linguistic, gender, and many more. Yet some of the divides have not been bridged yet, leaving it either as business opportunity or an unplanned seller-bias. The Indian ecommerce market has bencent of Indian PIN codes. The number of internet users in India is expected to cross 100 crores by 2026. Assuming that even a quarter of them use online shopping, it could propel the Indian ecommerce market as a larger (volume) consumption market. Various market trend research suggests that Indian ecommerce could cross $160 billion of trade. Demand, Data, Digital, Disruption In the digital era we live in, the number of channels that brands have to engage with consumers – both offline and online – is only increasing. Added to the age cohort, the user experience expectations vary as well. Add to this mix, the complexities of the multilingual market that India is. It is not an easy walk for the brands in telling their story to an audience whose attention span is low, and who expect strong brand-love too. No doubt that the success of D2C needs to leverage its digital strength to analyse voluminous amounts of data that they scour about their customers. It has been helped by the digital payment infrastructure that India pioneered as a digital public good. Over the past two decades, Indian brands have evolved in the way they understand consumers, serve them, and retain their brand affinity. It has been aided by the strength of technology and digital engagement. Data is the centre of attention for brand development. The brands are understanding consumers, not just from physical world consumer research, but also in understanding how the consumers use the digital world to make product decisions. The successful brands have used data sciences to generate data-driven personas that help them steer their product offerings and marketing mix. This has been helped by online engagement of brands and consumers on the social media, OTT and other ecomT India’s Destiny with D2C (A)muse & Musings By Srinath Sridharan efited from the Jiofication that we have seen over the past few years. Covid’s disruption of normalcy nudged faster digital adoption. This probably helped consumers’ willingness to experiment with newer products and newer methods of shopping – online. It has added 50 million shoppers over the last two years, primarily from smaller towns and geographically remote PIN codes. Most of these newer shoppers are Gen Z, which could positively influence categories such as electronics, fashion, etc. Today, the ecommerce sector covers over 80 per
11 March 2023 | BW BUSINESSWORLD | 91 that cater to each customer. This is the reason why some early adopter brands have started setting up their virtual-stores and experimenting with NFTs. Despite the D2C offerings, some brands have experimented with and are in the process of attempting omnichannel offerings. The physical stores work as brand enhancement tools, while for some, they play the role of product display and awareness generating techniques. Aided by Indiafocused supply chain policies, and in improved inter-city transportation that’s drastically helping smooth movement of people and cargo, it is also aiding a better and efficient supply chain framework. In short, the time-to-consumers is reducing for brands. Customer Unloyalty With all the advantages of the Indian digital ecosystem, and the consumption-focussed market we have, it’s all good going for D2C brands. But there is a counter view. For consumers love to experiment with newer products and brands, including the surrogate categories. While this might sound like disloyalty, it is simply that customers are not loyal to just one brand. They are in experimentation mode – call it, unloyal, if you so will. It won’t be easy for brands to get their consumers to stay loyal to them for long durations. The trust aspect of consumers about their brands would need to be tested for longer periods. With evolving mediums, consumers are experimenting and even flirting, with newer offerings. Marketing promotions and sales offerings could enable consumers to experiment with newer brands. Probably the popular marketing rule of 20 per cent of customers accounting for 80 per cent of the turnover might move to a 50-50 rule, where loyal and unloyal consumers will both generate same volumes and business value. While the D2C India concept has been proven, individual brands can’t yet rest on their current valuations, or their current pitch deck. Indian consumers have shown their tenacity and willingness to experiment with options, and could change their mind in an instant. That’s where brands have to do more with their consumer cohort. Call it lasting consumer engagement. Technologyled disruptions help enhance the online shopper experience from awareness to discovery to purchase to post-purchase brand engagement. Technology adoption to build search tools using voice, regional languages and image-based search is helping reach a wider set of consumers merce platforms. Technology-led disruptions help enhance the online shopper experience from awareness to discovery to purchase to post-purchase brand engagement. Technology adoption to build search tools using voice, regional languages and image-based search is helping reach a wider set of consumers. In addition, some of the brands have started experimenting with augmented reality (AR), virtual reality (VR), and artificial intelligence (AI). 5G could further add to video commerce possibilities. These madein-India-for-the-world products help in better consumer engagement, and brand imagery dissemination. The government’s policy-innovation with the development of Open Network for Digital Commerce (ONDC) democratises ecommerce in India. It removes many divides that were in favour of only the large platforms, and now also allow smaller brands to participate in being accessible to consumers. With newer emerging technological possibilities in Web3, D2C players would be able to customise or personalise solutions The writer is an author, policy researcher & corporate advisor Photograph by Graphicicons19
92 | B W BUSINESSWORLD | 11 March 2023 Priti Kate lost the only earning member of her family, her husband, to Covid in 2021. At the time, she had just about enrolled in an Abacus training centre to learn how to teach. Understanding the position Kate was in, the head of the training institute offered her an opportunity to run an Abacus training AFTER HOURS INCLUSION Not-for-profits like Project Naveli and Aspire For Her are at the forefront of efforts to empower women through gender equality and inclusion initiatives and raise their contribution to India’s GDP By Jyotsna Sharma BRIDGING THE GAP The Covid-19 pandemic exacerbated gender-based discrimination, across the world, India included. This made UNSDG Goal 5 all the more challenging. The Goal talks about achieving gender equality and empowering all women and girls, by 2030. According to the Global Gender Gap Report 2022, India comes in at number 6 in the South Asian region, with Bangladesh and Nepal outperforming it. But many would also argue that things are looking up in India. For instance, the sex ratio, once heavily skewed against girls, has seen an improvement. Girl students are increasingly getting enrolled in Sciences / Engineering/ Management courses. Even if the number of women startcentre franchise. Having never worked before, Priti was unsure of how to move forward. That is when she joined the Aspire For Her community, NotAlone. Here she received learning resources, English language classes, sessions on developing business skills and more. She has now successfully moved from the NotAlone community to being an EntrepreNaari. Joining Forces: Navya Naveli Nanda, Founder, Naveli Project (left) with Madhura DasGupta Sinha of Aspire For Her Foundation For Women, By Women: Madhura DasGupta Sinha (extreme right), Founder & CEO, Aspire For Her Foundation, with her team
11 March 2023 | BW BUSINESSWORLD | 93 ups remains abysmally low, the number of women directors in startups is steadily rising. In addition to government interventions, the role of women self-help groups, in addition to efforts by organisations like NotAlone, has been exemplar y. Take for instance, in rural India, over 8 crore women, associated with some 75 lakh women’s self-help groups, are working for the cause of women’s empowerment. While systemic efforts do bring about changes, individual interventions and collaborations, too, have the potential to be game-changers. Priti’s, for instance, is not the only s u c c e s s s t o r y f o r EntrepreNaari, which is a Nanda, that aims to reduce gender inequality and create more social and economic opportunities for women. Jaya Janardanan, former COO, Ujjivan Small Finance Bank and a joint initiative by Aspire For Her and Project Naveli. The project aims to help women become financially independent and successful within the professional space. By the year 2025, Aspire For Her hopes to impact over 1 million women and enable them to add over $5 billion to India’s GDP. Project Naveli is a not-for-profit initiative by Navya Naveli nIt will take 132 years to reach full parity: Global Gender Gap Report 2022 nReport studies 146 countries; India’s global rank is 135 n Top 10 economies have closed at least 80 per cent of their gender gaps n Iceland leads global ranking with 90.8 per cent n No country has achieved full gender parity yet n Health and Survival gender gap closed by 95.8 per cent n Economic Participation and Opportunity closed by 60.3 per cent n In the South Asian Region, India comes in at number 6 on the gender equality metric n Bangladesh and Nepal outperform India n World Bank report states on average across countries, long-run GDP per capita would be almost 20 per cent higher if all gender employment gaps were to be closed A SNAPSHOT
94 | B W BUSINESSWORLD | 11 March 2023 AFTER HOURS INCLUSION mentor at Aspire For Her, says, “EntrepreNaari is a community which has provided support to women entrepreneurs and aspirants to transform ideas into businesses and scaling up businesses through funding and other opportunities. Our work with the rural women agripreneurs has seen innovation and scale in the space of agriculture. It has been heartening to see the r e s o u r c e s f o r EntrepreNaari at Aspire For Her through the unique five-point mindset change model, not only in urban India but also in Bharat.” Impact We caught up with Ma d h u r a D a s G u p t a Sinha, Founder & CEO, Aspire For Her Foundation and Navya Naveli Nanda, Founder, Project Naveli to understand the impact EntrepreNaari has had so far and their plans for the future.“I started Aspire For Her in March 2020 because I was disappointed with the gender parity data emanating from India, and I realised India is close to the bottom in terms of women’s economic participation in the global gender gap index. We plan to add 1 million women to the workforce by 2025, and 10 million by 2030. government bodies. HSBC and Zone Startups have been their partners on some of their recent projects. Another project, one that is ongoing, is Samridh that actually began in the boardroom of the Bombay S t o c k E x c h a n g e . SAMRIDH AcceleratHER is a personalised and intensive acceleration programme that catalyses women-led technology startups to grow, prepares them for raising funds and facilitates investments. The programme is hosted by Zone Startups India in p a r t n e r s h i p w i t h EntrepreNaari by Aspire For Her and is supported by the MeitY Startup Hub, a Government of India initiative under the Samridh Scheme. The scheme provides a matching funding up to a maximum of Rs 40 lakh per startup as a coinvestor along with other investors in the same round. For Nanda, the most satisfying part of the journey so far has been creating a community that allows women to feel financially independent and empowered. Sinha concurs, and says in the near future they hope to get more government and private sector support. Clearly, efforts like Nanda’s, often complement collective enterprises working for women’s empowerment. A w o m a n w o r k i n g t o empower other women then has a multiplier effect on the economy, society and nation. Kate, who lost her husband to Covid, is today a successful EntrepreNaari, a community created jointly by Aspire For Her and Project Naveli to support women entrepreneurs PRITI KATE, Entrepreneur boards of NSEIT and Dixon Technologies, is the strategy advisor at Aspire for Her. She highlights the fact that EntrepreNaari provides business and networking opportunities for entrepreneurs from across the country irrespective of whether they are in a metro or in Tier-2 cities. In the past year they have grown the community to 20,000 members and leveraged the power of mentorship and collaboration. They count a number of unicorn founders among their mentors and have partnered w i t h s e v e ra l institutions and We plan to do this by leveraging the power of communities and networks. At the moment, in Aspire For Her, we have a community size of 225,000 women from 60 countries. Among all the communities we are building, we felt it is important to focus on making entrepreneurship aspirational for women,” says Sinha. Nanda started her own company during the lockdown and having gone through the process found that there are several challenges in putting together resources. And, as a woman entrepreneur there are a number of unanswered questions that require guidance. Inspired by her personal experience of starting a company, she decided to join hands with Aspire For Her to create a community where women entrepreneurs feel supported. EntrepreNaari was born in June 2021. Poornima Shenoy, a senior technology leader as well as a member on the
Sunil Khurana Managing Director & CEO BPL Technologies Aakash Sachdev Director of ASG Hospital (ASG) and Managing Director Foundation Holdings Gautam Khanna CEO, PD Hinduja Hospital & Medical Research Centre, Mumbai Dr. Mohit Gupta Professor of Cardiology, GB Pant Hospital, New Delhi Dr. Annurag Batra Chairman & Editor-in-Chief, BW Businessworld & Founder, Exchange4Media Harbinder Narula CEO, BW Healthcare World and Wellbeing World J U R Y M E M B E R S For Nominations & Speaking Opportunities: Smridhi Sharma [email protected] +91 98715 98343 For Sponsorships & Partnerships: Deepika Gosain [email protected] +91 96505 47770 Somyajeet Sengupta [email protected] +91 98182 47444 Kiran Dedhia [email protected] +91 98333 99009 CS Rajaraman [email protected] +91 93422 62859 THIRTY UNDER SUMMIT & AWARDS 2023 #Healthcare30under30 NOMINATE NOW LAST DATE TO NOMINATE: MAR 5, 2023 APRIL 2023
96 | BW BUSINESSWORLD | 11 March 2023 Why “Smoking” is Injurious to Health in the Corporate World! ODAY WE LIVE in a cluttered world with immense controversies! Controversies from mass layoffs by large corporations including multinationals, to governance issues in large established companies, to dilemma in the trade-off between sustainability and profitability and finally in their contribution to the pollution in this world! Many of these companies will always rationalise and give many reasons for doing what they are doing. But their credibility is hurt as most people and the public believe that “there’s no smoke without fire”! We live in a world of perception! We have to wander through “halftruths “or is it “post truths” to get to the truth! And these perceptions are hard to erase! Is it therefore, not possible for companies to have a “squeaky” clean image? While we want to hire leaders with squeaky clean images, why should corporations not have a squeaky clean image? Can we not walk the talk in governance and our commitment to society and be on the right side and win? Or are we too old fashioned to think that way! And finally, does it all have to do with leaders and their type of leadership? Therefore, the question is: is there no “dharma” in the corporate world? Dharma is defined as “the universal truth” as taught in the teachings of Buddha! It’s about doing our duty righteously! What is the role of conscience and values when we work for enterprises that are sharply focussed on a single dimension of profit over everything else? Do passing off lies or half-truths under the garb of plausible explanations meet the test of righteousness, we wonder! The recent controversy surrounding the Adani group and as we write this piece – Dell Technologies cutting down 6,000 jobs, equivalent to five per cent of their worldwide workforce – have once again brought to the fore the quesT ‘IN THE CORNER’ with KAN and SU! By K. A. Narayan & Sunandan Bhanja Chaudhary What is the role of conscience and values when we work for enterprises that are sharply focussed on a single dimension of profits over everything else? Do passing off lies or half-truths under the garb of plausible explanations meet the test of righteousness, we wonder!
11 March 2023 | BW BUSINESSWORLD | 97 venient facts by stating it in a manner that requires an expert forensic eye to detect what’s hidden underneath. It is in this context that independent directors and other executives in a firm are faced with a dilemma of whether to become a party to the disclosure or close their eyes and hide behind the convenient corporate veil of relying on the opinion of advisors or certifications of management. Are these matters of moral conscience or just convincing themselves that they are not legally wrong? v GREED VS RESPONSIBILITY: Leaders in powerful positions always have the temptation to sacrifice values for personal gains. When the gains are huge, it becomes difficult to resist temptations and stay true to protect the interests of all stakeholders. In the year 2012 the high profile Global CEO of McKinsey, Mr Rajat Gupta, was convicted by the US Court of felony and insider trading. He spent two years in prison. One wonders as to why such a high profile well-paid executive of one of the most reputed global consulting firms would indulge in insider trading! Closer home, is the case of the former CEO of ICICI Bank, Ms Chanda Kochhar, who has been accused of favouring Videocon Group promoter Mr Venugopal Dhoot, by sanctioning loans to a firm owned by her husband. Ms Kochhar was again a very high profile CEO in India Inc. – most respected by everyone in banking circles and as someone who was closest to the powers-thatbe in every dispensation in government. While the jury is still out as to whether she is guilty of wrongdoing, she was summarily dismissed by the Board of ICICI which revoked her ESOPs and all the bonuses granted to her. She was also arrested and spent time behind bars. Did someone who was so well paid with huge stock options, need to compromise her values at the altar of personal gains? We are sure, she must have faced a difficult dilemma of her dharma versus supporting her husband. Memory is still fresh of other examples like the Lehman crisis, Enron and Satyam Computers – all scandals involving fraud on shareholders with full support of many board members, auditors and executives of the company in falsifying accounts. We wonder what dilemmas the senior executives in the company must have faced while committing several acts of manipulation in the books and records. Was it fear of jobs or greed of personal gain, compromising their fiduciary duty to shareholders and the larger public! tion of whether leaders should observe rules of dharma as enshrined in our scriptures. Even in the famous epic of Mahabharata, amidst the sound of drums and bugles, Lord Krishna exhorted Yudhishthira (famously known as Dharmaputra) to tell a convenient half-truth about the death of an elephant called Ashwathama so that his Guru Drona lays down his arms assuming that his son Ashwathama had died!! We find four Dilemmas of Dharma in the Corporate World! u INDEPENDENT DIRECTORS DILEMMA: It is not uncommon, to find that business leaders across the world are advised by marquee law and accounting firms to cover up inconPhotograph by Rudall30
98 | BW BUSINESSWORLD | 11 March 2023 ‘IN THE CORNER’ with KAN and SU! K. A. Narayan, President -HR, Raymond Ltd, is fondly known as KAN in industry for his wellknown ‘Can Do’ attitude. Sunandan Bhanja Chaudhury, Client Partner, Pedersen & Partners, is known as SU by friends and family, both off and on the golf course! wGREEN VS GAIN: There’s a raging debate about the impact of global warming in the world and the role of corporates in “responsible governance” to alleviate the impending climate crisis across the world. While there is a lot of increasing awareness amongst businessmen, this is an area that requires huge financial outlays, modernising old machines with less polluting machines, usage of fossil fuels and using highly effective biologically derived enzymes for treatment of waste-water, soil and other effluents. These measures will surely impact the bottomline of businesses and hence impact shareholder value creation in the short term. The auto industry is known to be one of the major contributors to pollution and global warming. They are therefore, investing in electric vehicle (EV) technology. But whether developing economies can afford to transition at the cost of impacting demand and revenue is yet to be seen! x PEOPLE VS PROFIT: Recently the Google CEO apologised to all his employees that they had had to lay off 12,000 people to improve their bottomline. Others including IBM, Microsoft, Spotify, Amazon, Meta, Intel and many others joined the lay-off bandwagon citing reasons of recession. So far 256 tech companies are reported to have laid off a whopping 83,000 employees approximately. We hear stories of how pink slips are handed over by mail reaching the inbox of employees at midnight. As a result, many employees on H1B visas are left in the lurch overnight, without jobs, and are forced to return back to India. Many Indian companies have also started downsizing. Ed-tech major BYJU’S has also found this a good opportunity to cut many senior level positions to improve their profitability. With such a huge job loss, imagine the social and psychological impact of losing jobs overnight! It is the dharma of business leaders to put purpose before profits, but how many of them will bite the bullet is to be seen. Do we lose our good night’s sleep over these issues of dharma? Only time will tell and it will also tell on the health of the corporate body! Without “dharma” organisations will always face an existential crisis and like they say, it’s very unlikely there will be “smoke without fire!” It is the dharma of business leaders to put purpose before profits, but how many of them will bite the bullet is to be seen. Do we lose our good night’s sleep over these issues of dharma? Only time will tell and it will also tell on the health of the corporate body! Photograph by Manjunaths88
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100 | B W BUSINESSWORLD | 11 March 2023 BW ONLINE UNION BUDGET 2023-24 BW Online collates voices from across the country, from knowledge centres, economists, industry leaders and even from the realm of politics, to gauge the mood of the nation on Union Budget 2023-24 HOW INDIA VOTED ON 1 FEBRUARY NIRMALA SITHARAMAN, Union Finance Minister Photograph by PIB