Secret Diary Of An Entrepreneur

"It's important not to link one's identity with the company"

Secret Diary of Rajesh Agarwal-Part 2

Photograph by Vishal Koul

We touched more than 150,000 units in six months. Suddenly, we were flush with money. We had a managed to wring a 60-day credit from our suppliers in China and were selling our goods on outright cash. We kept deploying the money in the business…we were really gaining traction…

Back then, private equity was not such a buzzword, but we still ended up becoming the first Indian mobile phone manufacturer to get funding, thanks to Vinamra at Grant Thornton whose brother, Vaibhav, was working as head of sales. Because of the association, Vinamra was clued on to what was happening at Micromax. He was more excited about our prospects than we were… he believed we had all the ingredients that would get a private equity firm excited. As things began to unfold, we got talking with TA Associates, with Naveen coming down from their Mumbai office and Ajit from London. We met three to four times in six months till the deal was done. It was December 2009. 

It was so surreal – we were valued at Rs.1,300 crore! The four of us collectively sold 15% stake in the company for Rs.200 crore. That was a big moment. We went to The Westin in Gurgaon and got sloshed! It was less about having struck gold and more about soaking in the success… after the anxious start, we were on course to become India’s leading mobile handset maker. I came home with such a hangover, I told myself I would never drink again. 

But that was not to be. Down the years, we raised a toast on quite a few occasions as we kept achieving new milestones…I didn’t mind the hangover of success.

While the initial phone fetched us recognition, it was when we launched the dual GSM phone that people started thinking of us as a serious player. There was aggressive competition among telecom operators to get subscribers charges for incoming, substantial discount for outgoing…people were juggling two SIM cards and one phone…owning two handsets was out of the question. That was our window to exploit. People wrote us off, saying that Micromax is going to end up losing big time, that there was no scope for dual GSM SIM phones. But it was competition that had got it wrong. The customers latched on to the phones. It took others nearly a year to acknowledge that we had created a new category…Since then, dual GSM SIM slots have become par for the course. 

We went for the kill and launched a dual GSM QWERTY phone. People started calling it “Blackberry” little realising that QWERTY phones did exist! We were selling 300,000 units a month. It had taken us less than two years to become India’s largest handset maker and the third largest GSM phone vendor in the country.  

The development came on the back of our next round of PE investment, with Sequoia leading the transaction. Sequoia had not come on board in the first round when TA had picked up a stake…then, they were offering a valuation of Rs.800 crore, which was far lower than TA. Moreover, they weren’t too keen on buying the promoter’s stake and, instead, were looking at fresh equity. Our company was asset-light, cash-rich, in a self-sustainable mode, with good cash flows; the four of us still held a majority stake…we weren’t cashing out! In September, we struck a deal with Sequoia, selling 5% stake for Rs.200 crore, valuing the company at around Rs.3,500 crore. 

In the ensuing years, we have only grown in strength. What was a Rs.350 crore business in FY09, has grown to become a Rs.11,000 crore behemoth. Investors helped us grow from just a start-up into a truly professional organisation that no longer counts mobile phones as its mainstay. We are now trying to make a mark in consumer durables and electronics… 

If the four of us have stuck together for this long, it’s only because we had chemistry…we have argued and debated vociferously but at the end of the day, we have managed to arrive at a common ground. All of us are optimistic by nature. Even if one of us was a pessimist, we wouldn’t have stayed together and achieved what we have. 

You have to believe there is a tomorrow and that you are going to become a prized company. But at the same time, it’s important not to link one’s identity with the company. That distinction helps you to be rational about taking decisions involving the company’s fortune and that of your own – your personal wealth and company’s wealth is different…the two can never get interlinked.

The biggest fear I have is about the nebulous nature of technology and its impact on the mobile phone business. No one has the ownership on innovation – one day you can be on top of the industry, in the next phase, you could be out of business. It’s already happened – once market leaders are no longer in contention… 

That paranoia keeps the four of us on edge. We are constantly on the lookout for opportunities to sustain Micromax’s lead over the competition. We wouldn’t be in business had we not created a category…pricing can only get you a one-time pop in market share. We want to be among the top five brands in the world…it may appear audacious, but then no one gave us a chance when we started out…

This is the second of a two-part series. You can read the first part here.