A Landmark for success

http://epaperbeta.timesofindia.com/Article.aspx?eid=31818&articlexml=A-LANDMARK-FOR-SUCCESS-02052015009005#

May 02 2015 : The Economic Times (Mumbai)

A LANDMARK FOR SUCCESS

KETAN THAKKAR & ARIJIT BARMAN MUMBAI

Sanjay Thakker broke free from legacies of the trade to create one of the largest networks of profitable auto dealerships nationally with 36 outlets across five states. Now, he has bagged the first private equity investment the country has seen in this space Over a family dinner at home with his wife and kids Aparajita and Aryaman, Sanjay Thakker finally made up his mind. Always an out lier in business, he was again ready to step into something that none of his peers ever dreamed of. He was set to rope in a foreign investor ­ that too a marque private equity player -into his family jewel.

Over 17 years, Thakker's auto dealership chain Landmark has become one of the largest networks nationally with 36 outlets in five states. More importantly , unlike most of his peers who are married to a single brand, he partners four. Three of them Honda, Volkswagen and Mercedes-Benz ­ also happen to be the biggest brands in the trade around the world. And if that were not enough ­ it's a debt-free operation that he runs. Each of his franchisees makes money , and together they clocked Rs 1,500 crore in sales in FY15.

“I am generally a dissatisfied man. Every day I believe we need improvement,“ says Thakker, 49, the unassuming chairman of Landmark Group sitting in his basement office in Mumbai's midtown Worli. “In my office there is a poster of a man running and it says there is no finish line... That's my mantra in life,“ he says.

And so it was decided. Landmark will rope in TPG ­ one of the world's biggest private equity investors ­ for a $25 million investment and a minority stake in his company .Manish Chokhani, chairman of TPG Growth in India and a batchmate at Sydenham College, has been pursuing Thakker and after almost a year of discussions, it was time to sign on the dotted line for the next phase of growth.

TPG Growth is the middle market and growth equity investment platform of TPG, with more than $7 billion in assets under management and committed capital. It has offices in the US, China, India and Singapore. TPG Growth's current and past investments include Uber, Airbnb, Box and SurveyMonkey , among others.

“They bring in credibility and we are getting exposed to global best practices...Already they are helping us to focus on efficiency of capital usage,“ Thakker adds. “We have national aspirations and the south is the obvious next market for us. With TPG on board, we can break into that market.“

TPG is investing in Landmark when more than half of the organised automotive dealerships in the country are bleeding due to sluggish sales. The sector remains largely unorganised, sub-scale and scattered. For most, it's a real estate play, not retail. “From builders to diamond merchants, people have entered this space for all the wrong reasons,“ quipped an industry executive.

It's starkly different elsewhere. Wall Street's blue-blooded investor gurus like George Soros, pin-striped global PE players and even tech trailblazers Bill Gates love to bankroll auto dealers, but in the US and China, standalone car dealership chains are multi-billion dollar, scaled operations.

Last October, billionaire Warren Buffet agreed to buy Van Tuyl Group, the largest privately held car dealership with 78 locations in 10 states and $9 billion in revenue and rename it Berkshire Hathaway Automotive, betting that the sector will consolidate. Berkshire was the largest privately held entity in the US. In China, TPG has invested in China Grand Auto -the largest automotive chain in the world with over 500 touch points and 5 lakh cars of annual sales.

The annual, 2.5 million car market in India was the logical next frontier, even though options were limited. Landmark, though among the largest, sold only 15,000 vehicles in the previous financial year. In a fragmented market with over 2,500 dealers, scale and a like-minded entrepreneur were difficult to come by .

“The macro factors were obviously attractive. With 25 million cars for 1.2 billion people, India is where China was a decade ago,“ says Vish Narain, TPG Growth's India country head. “We had looked at a few others in India but eventually settled for Landmark. He is very different from the others and has managed to build a set-up which retains the entrepreneurial DNA but is professionally managed.“

Besides being profitable, Thakker breaks the typecast in many ways.

His company is run professionally, with ownership and management kept separate, a rarity among Indian automotive dealerships, where it is common to see large families managing them. There are no family members among the executives, except his sister-in-law, an architect who leads the inhouse design team for new projects. “This was the only way I could have created a scalable business,“ reasons Thakker.

This single-handedly helped Thakker to scale up the Honda dealership that he started with a friend in 1998 and later bought out.He expanded to Surat, Rajkot, Mehsana and Jamnagar and is in talks with Honda to go beyond Gujarat.

The Honda case study was attractive enough for Volkswagen, which gave Thakker the entire responsibility of the state of Gujarat. Soon, Mercedes-Benz entrusted him with turning around some of its loss-making outlets. Today, with a team of 2,500 people, Landmark operates five Honda dealerships in Gujarat and seven each for Volkswagen, Mercedes-Benz and Ashok Leyland's commercial vehicles across Gujarat, Madhya Pradesh, Maharashtra and West Bengal. Since 2014, he has broken into Mumbai and Delhi. In the next phase, he is targeting strategic, cash-rich, tier-2 cities.

Landmark is totally decentralised. Sales consultants or managers on shop floors have gone on to lead brands or branches within the company and some have even become shareholders. Thakker is proud that there is an almost zero-attrition rate at the senior level. “When I started out in auto sales, I was 32. I made it a point to hire fresh talent and they were not older than me,“ recalls Thakker, who chose to break with his family's small textile, agri-commodity, real-estate and shipping businesses.

It's worked beyond a doubt. During the Gujarat riots in 2002, his Ahmedabad showroom and office were completely gutted by a mob. Yet, the very next day, Thakker found his team had installed a makeshift tent outside along with a `we are open' signboard.

“His decentralised business model works very well and unlike many in the automotive business, he is very dispassionate,“ says a senior executive of a car company who has worked with Thakker.

Landmark is asset light ­ it does not own the real estate but takes them on lease even if rentals keep rising. Most dealers today run their shops despite making losses, hoping that the appreciation in real estate will help in the long run. “We have structured this business as a retail operation and want to make money after paying market rent.Today, we are sitting on 6.5 lakh sq feet of space. Clearly , if I have to buy, it would come at a huge cost,“ says Thakker.

Landmark is also the fifth-largest insurance broking firm in the country , with over 2.5 lakh policy holders as customers. “There is not much money to be made by just selling a car. One has to offer the entire basket of products. From after-sales service to insurance and financing,“ says Narain.

“Today, we sell insurance to only 25% of our auto clients -75% are not our cars,“ adds Thakker. “We collected Rs 300 crore of premium last year.“ From auto, it has diversified into health and life insurance.

Thakker has had his own share of missteps as well, including his attempt at the used-car business and investing in a commercial vehicle business, which led his business to bleed. “I am not a person who wants glory ,I just want to see that hard business sense prevails,“ comes his parting shot.

Inspiring tales of comeback kids

Feb 13 2015 : The Times of India (Chennai)

Why Sanjeev Bikchandani, the Naukri man, wants to be a builder and funder with Info Edge

Disc : No holding

http://economictimes.indiatimes.com/news/emerging-businesses/entrepreneurship/why-sanjeev-bikchandani-the-naukri-man-wants-to-be-a-builder-and-funder-with-info-edge/articleshow/45892016.cms

Why Sanjeev Bikchandani, the Naukri man, wants to be a builder and funder with Info Edge

By N Shivapriya, ET Bureau | 15 Jan, 2015, 02.45AM IST

Every month some 30 million people seeking to satisfy their gastronomic cravings by visiting Zomato, the popular restaurant discovery service, co-founded by Deepinder Goyal and Pankaj Chaddah. In London, people want to know more about the ambience, in Kolkata they want to know more about the food. The nuances are many and Zomato caters to all quirks and palates.

Zomato itself has a distinct global flavour. This week, it took its biggest bite with a $ 52 million acquisition of Seattleheadquartered Urbanspoon, entering the US, the largest and most competitive market. The acquisition also gives Zomato leadership in two other markets, Australia and Canada.

Back home, news of Zomato's acquisition, its global ambition and its huge appetite — six acquisitions in five months — pushed share prices of Info Edge (India) up on a day the BSE Sensex was down. But why the boost for Info Edge? The internet company, founded by 51-year-old Sanjeev Bikchandani, is Zomato's single largest shareholder with a 50.1% holding. Why Sanjeev Bikchandani, the Naukri man, wants to be a builder and funder with Info Edge Bikchandani spotted Zomato early and made a $1 million investment in it five years ago, and followed it up with five more rounds of investment worth a total of Rs 327 crore. Its investments in Zomato are now worth over Rs 2,030 crore.

This is one of the two things Bikchandani is known for. Finding and funding early stage startups and mentoring them to success. Info Edge has invested about Rs 570 crore in backing nine companies like Zomato. Sure, a few deals have gone bad — it wrote off about Rs 35 crore in three of its investments, StudyPlace, 99labels and Floost. But there are more big successes like Zomato.

Info Edge was again an early investor in PolicyBazaar, a portal that helps users compare and choose from different insurance products. At a fund raising last May, PolicyBazaar was valued at $100 million and Info Edge now owns 23% in it.

But the first thing Bikchandani is known for, of course, is his ability to successfully build internet businesses within Info Edge. He is often referred to as the 'Naukri man'; Naukri being one of India's top job portals. 99acres and jeevansathi.com are two more such examples (see table).

Bikchandani is both a builder and a funder. The remarkable thing though is that he has persuaded public shareholders to back him. Info Edge went public in 2006 and non-promoter shareholders own over 55% in the company.

Investors demand that listed companies deliver predictability of revenues and performance. How did Bikchandani get public shareholders to back his plan to build a portfolio of early stage and high risk startups? "Naukri is stable and predictable. The others less so. So it is a blended model with some volatility because of the other businesses.

But by and large, investors are well-informed and well-researched and they factor this in their decisions," says Bikchandani. He expects the top three growth engines for Infoedge in the next few years to be Naukri, 99acres and Zomato.

Bikchandani says that as the company is growing and is of a certain scale, profitable, with a strong brand and a market leader, he sees no reason why investors will not understand the model. Naukri, which contributes more than half of Info Edge's revenues, has a stable and predictable revenue stream. It also contributes more than 100% of the profit — surpluses from this business unit goes into other ventures. By building Naukri successfully, he has earned the right to fund other businesses outside Info Edge.

In the last 12 months, Info Edge's share price has gone up from around Rs 500 to around Rs 850, and its market capitalisation is now close to $ 1.7 billion (Rs 10,385 crore).

Moving in quickly

Zomato has been the most high profile of Bikchandani's bets. It has been growing rapidly. Prior to its US acquisition, last month it acquired Cibando, a restaurant search service in Italy. At last count it was in over 100 cities in 20 countries and investors funding the company valued it at $660 million in December. Only two years ago, it was valued at about $160 million.

Five years ago, Goyal and Chaddah were looking for seed funding and were in discussions with a prospective investor. The discussions dragged on for nearly two months before they got to a term sheet.

Both of them were used to working at a faster pace. Then Goyal got an e-mail from someone he had never met before. That person was Bikchandani and his mail said, "Do you need funding? If yes, you can contact me," also mentioning a mobile number.

"It was basically like cold calling," recalls Bikchandani, who was only acquainted with Goyal through his site, Foodiebay. com, as Zomato was then called.

Within three hours of sending the mail, the two had met and within 48 hours, agreed on the broad contours of a deal. "We went with Info Edge over the others because they were very quick. Speed of execution really mattered to us," says Goyal.

Bikchandani's due diligence consisted of doing basic checks and calling up some customers of Zomato. It was quick, and within few weeks, Info Edge had invested $1 million in Zomato.

"I think entrepreneurs understand entrepreneurs slightly better. Chances are they will be more comfortable with a good entrepreneur than a pure financial investor," says Bikchandani, about why Zomato's founders opted to go with Info Edge. Why Sanjeev Bikchandani, the Naukri man, wants to be a builder and funder with Info Edge

Taking the road less travelled

Bikchandani has challenged many stereotypes without intending to. Despite being an internet venture, his firm, Info Edge, has been profitable since 2003. In 2006, it listed on stock exchanges in India when others like Rediff and Sify were listing on the Nasdaq. Even today it is one of the handful of internet firms to be listed here along with those like Just Dial.

Info Edge is one of the few internet portals and ventures, even globally, that have managed to survive and stay successful from the last internet boom to the current one. "Bikchandani's strongest quality as an entrepreneur is in developing a very robust business model," says Renuka Ramnath, who was MD and CEO of ICICI Ventures, when Info Edge was one of its portfolio companies.

Bikchandani saw Naukri through the dotcom boom and the bust in the late 1990s and 2000 and made a big shift from an onlineonly business model to one which also had a physical presence.

"He felt it was important at that time," says Ramnath. "To have the confidence to change the business model, make a significant course correction, get the buy-in of investors and take the company forward is where most entrepreneurs falter. He did that extremely well," she adds. Ramnath now runs her own fund, Multiples.

When the dotcom bust happened, ICICI Ventures withdrew from many companies but stayed invested in Info Edge. "We had full confidence in Sanjeev (Bikchandani) and Naukri so we stayed invested," says Ramnath. The decision turned out to be right, giving ICICI Ventures a more than 28x return on its investment.

Bikchandani doesn't make any personal investments, though many entrepreneurs of the last dotcom boom vintage have become angels or started venture capital funds. All investments are made through Info Edge. Bikchandani says this is to prevent any potential conflict of interest. "Info Edge is diversifying. If we invest in our personal capacity, we may end up competing," he says.

Onl ine travel booking venture, Makemytrip.com, recently announced a $15 million fund for investing in innovative startups but only for those in allied areas like travel technology. Info Edge, on the other hand, doesn't have a specific corpus from which it invests and target companies need not be related to its core business. The only criterion is they have to be consumer internet firms.

Riding the next internet wave

Similar examples of other ventures that do this are global ones like Naspers, Softbank and Rocket Internet. So is Info Edge modelled on them? Pat comes the reply: "We want to be like ourselves only. We will continue to do what is best for us and our shareholders and our company."

Why did he chose this model? "We (Info Edge) have surplus cash. There are plenty of opportunities out there which smart entrepreneurs are chasing. We can't do everything in-house so we back entrepreneurs who are chasing good ideas and hopefully end up creating value for our shareholders," he says. For Indian investors, investing in Info Edge is one way to participate in the country's booming consumer internet story.

It's also how Info Edge has become a major player in the next internet wave. In September, Info Edge raised a QIP of Rs 750 crore — a large part of the proceeds will go towards building more capability for 99acres. Since then it has acquired 3D design studio and integrated it with 99acres.

Goyal says Bikchandani looks for a return from his investee companies like any other investor but recognises entrepreneurs are best positioned to run their companies. "He's not actively involved in the business but he is always there in the background if you need him. More like an older brother who will always be there to support you through the good and the bad," says Goyal.

When Zomato launched in the UK last year, Bikchandani felt it was too early to enter that market. Over the next three to six months as the struggled in the UK, Goyal realised Bikchandani was probably right. "Still, we never heard, 'I told you so', from him. We were actively thinking of how to solve it and how to make it work," says Goyal.

Bikchandani says being an entrepreneur himself, he understands entrepreneurs need independence. "While we offer our advice, if they don't want to take it, we don't impose it." And that's from a man who has built and funded so many successful businesses.

From agri-trading to a multiplex challenger: The Carnival has just begun for Shrikant Bhasi

http://economictimes.indiatimes.com/industry/media/entertainment/entertainment/from-agri-trading-to-a-multiplex-challenger-the-carnival-has-just-begun-for-shrikant-bhasi/articleshow/45769761.cms

By Nandini Raghavendra & Arijit Barman, ET Bureau | 6 Jan, 2015, 10.25AM IST

MUMBAI: In the beginning of 2014, Shrikant Bhasi was a fringe newcomer in the business of movie exhibition with just three screens in Kerala. Twelve months, two acquisitions and over 300 screens later, he closed the year as the fastest growing multiplex mogul in the country and his flagship Carnival Group already the third largest in the industry pecking order. 

But by the look of it, it seems this was just the trailer. 

So after closing the biggest deal in his career so far - Rs 700 crore acquisition of Big Cinemas from Reliance Mediaworks just last month - Bhasi is already plotting his next move. In his shopping list, say industry sources, are at least three more potential regional multiplex chains including SRS Cinemas in Delhi, Glitz (for north and Central India) and a South-based operator. 

Even for each of Big Cinemas' 242 locations there is a big turnaround blueprint that is being put in place set to kick in once the CCI approvals come through by the middle of this month. 

But one got a sense of what's imminent, when just a day after announcing the Big buyout, Bhasi took time out for a recce of the iconic Metro Cinema in South Mumbai where he instructed his management team to remove an entire row of seats in each of the screens to ensure better leg space while his CEO addressed the staff at Big in an afternoon town hall. 

Parallel to this, Bhasi is also in advance negotiations with L&T to buy their 1.15 million square foot integrated commercial real estate project in Chandigarh which houses the Elante mall, office blocks and the Hyatt hotel for an Rs 1800 crore valuation. 

Real estate is not a business but an "investment portfolio" that generates cash flows from rent yields part of which are ploughed back into the core exhibition business. Last year, the promoters of the cash strapped Leela Hotels sold two of their IT parks in Kerala to Bhasi. 

Rivals and peers gawk at these audacious moves; detractors question his financial and operational bandwidth and insist that he remains a "rank outsider" but his admirers swear by his single-minded focus and attention to details. For the moment though, Bhasi seems non-plussed with all the spotlight. 

"I am not in the numbers game," says the dapper 46-year old agri-trader turned multiplex maverick and chairman, Carnival Group. "During the Big Cinemas negotiations, I told Anil Ambani that I may not have the operational experience of my peers. But I have a definitive rollout strategy and it's a profitable one." 

It's this confidence that has always helped him breakout. Be it in Britannia where he first cut his teeth, joining as a young accounts assistant during the last year of his B-Comm studies and then rising from within the ranks to become a star agri-trader in the late 80s. It equally came handy when he started his own entrepreneurial set up Advantage Overseas Pvt Ltd a decade later and branched out to agri-financing for several global players like Bunge, where he still is an advisor.

"He never switches off and is endowed with tremendous mental and physical energy. He is very clear about what he wants to do and is very aggressive about reaching his goal," recalls Ravi Nigam, MD, Tasty Bites, a ready-to-eat foods company, and his former boss at Britannia. "But most importantly he has an uncanny ability to spot new opportunities and move in quickly." 

For Bhasi -- a Malayalee NRI from Singapore who grew up in Bhopal - a complete career switch after finding success in commodity trading and financing to move into the multiplex business around 2008 was just that. In between he even tried to replicate his structured finance learnings to bankroll and produce movies especially down south. "Financing Bollywood films was too expensive," realls Bhasi, "so we went back to our home market to finance, produce and distribute Malayalam films." 

And that's when it struck him that there were just no decent screens available for screenings. "In 2008, Kerala had only 2 multiplexes and a total of 30-35 theatres. We did a nation-wide survey and found people wanted to go to theatres but the environment was not conducive to take families. We figured a golden opportunity exists," says Bhasi. 

Right then, through a state government auction Bhasi won a tender to develop a 17,000 sq ft space above a bus shelter near the Kochi international airport. "Carnival at the bus stand" was a runaway hit -- 65-70% occupancy versus and the 40% average for competition -- buoyed Bhasi to ramp up in the South expanding to Kerala and Tamil Nadu. 

The two acquisitions - HDIL's Broadway and Big -- have now catapulted Carnival as a pan India player and more importantly has given it access to lucrative metro markets of north, west and east. It has in the process also increased its bargaining power with film producers and distributors for a larger share of the box office receipts. ""Once the industry converges around 3-4 players, a lot of equations within the film industry will change and people will exert market power. 

The big players will also see more automation as scale goes up. The exhibitors will also become partners in the industry with equal stake," feels Jehil Thakkar, Partner and head of media and entertainment, KPMG India.

But even as he goes on a buying spree, Bhasi is very clear that most of his organic growth in future will come from smaller beta cities. Going back to his Madhya Pradesh roots, he is planning to put up 400 screens across 128 centres over the next two years at a cost of Rs 650-700 crore. Bhasi has already tied up subsidies from the state government as well as a 5-year tax holiday similar to the one in Maharashtra for multiplexes. 

"Places like Satna have a decent population but do not have a multiplex. Incomes are from agriculture are rising and you find people go all the way to Bhopal, stay the night at a hotel there, watch a film and come back," says Bhasi. Aware that he has to keep his overheads and ticket prices low, Carnival will use pre-fabricated materials for these 100-125 seaters, lower the cost of per screen to under a crore and add a community centre with a small restaurant which can be a money spinner round the year. 

The whole idea is to be a holistic provider of entertainment for at least four hours per person. "Watching a film at our multiplex is just one of the options. We will also provide a viewer our restaurants and food courts, spas and entertainment zones. 

It will reduce our dependability on film content which is variable, at best and ensure revenue flows throughout," explains Bhasi. So along with the multiplex, Carnival has also launched its very own food courts under the aegis of Travancore Foods with QSR brands as diverse as Simbly South, Noodle Point, Kebab Station, Gulp and D'Bell cafes and lounges. 

The target is to reduce box receipts to just 40% of gross revenues from the current 60% while upping the share of F&B and entertainment to 60%. 

"The next set of growth will come for Tier II cities but you need to pick and choose selectively. Real estate costs will be low and these markets are starved of entertainment options. But ticket prices will not be as high as the metros but that can be offset by adding F&B," says Sudhir Pillai, Partner, Walker & Chandiok, who specializes on the multiplex sector. 

For his team Bhasi has already set an ambitious 1000 screens target by 2017. Next in line is also a logical entry into film distribution to improve his bargaining power with film studios. 

"We shall contract 500 single screens for this. We will also add our own portfolio of 400 (and counting) and aim to have a network of 900-1000 screens nationwide for distributing smaller, independent films who do not always get the right backing," says Bhasi, who himself has also made cameo appearances in Malayalam and even a Bollywood film. 

But is he biting off more than what he can chew? Questions remain about Bhasi's funding capabilities to support the growth plans. So far Carnival's total investment in the two mutiplex acquisitions is Rs 820 crore. 

Another Rs 250-Rs 280 crore will be required if he goes ahead with the next two. Even the real estate acquisition will come at a very steep valuation of Rs 1800 crore. So far his agri-trading businesses and rent income provide the group's financial backbone, but its profits are not enough to support all the sky-high ambitions. 

The multiplex operations will close its first full year operations with a Rs 90 crore topline and an EBITDA margin of 16-17%, the end of this financial year. Carnival - a debt free company before Big Cinemas buy - is securing a Rs 500 crore debt line from Yes Bank to complete the deal and Bhasi says has plans to bring in PE investors in each of the key verticals as they scale up. 

"He has to bring in equity either of his own or from financial investors to substitute debt. He is taking long term investment bets with short term funding and that can bite," warns a banker familiar with the plans. 

It's been a trailblazing journey thus far. But to draw a filmy parallel Carnival has to last the long haul before entering the multiplex hall of fame. For that, Picture abhi baaki hain mera dost