Secret Diary Of An Entrepreneur

"Successful people don't do different things, they do things differently"

Secret Diary of Rajesh Agarwal

  • My best teacher RK Mittal...made me love Maths
  • The day I cried the most When I left my old home in Delhi to settle down in Gurgaon
  • All-time favourite song Chitthi aayi hai
  • Favourite business book Swim with the Sharks Without Being Eaten Alive
  • Good luck charm Vaishno Devi coin, in my purse for past 20 years
  • Favourite number 5
  • Confidante My wife
  • Always look forward to Catching up with friends over a drink
  • Biggest regret Missing the ecommerce bandwagon
  • Biggest learning Never play the pricing game


It was the toughest moment of my life…but I didn’t want the brand to suffer. It was in the best interest of all stakeholders that I distance Micromax from the development. I did what I felt was right…I stepped down from the post of managing director in wake of the Municipal Corporation of Delhi bribery allegation. Every entrepreneur is as human in his failing as anyone else…it’s the ability to bounce back with conviction that separates him from the rest. It took me a year-and-a-half to come out stronger. Family and friends were there, the investors also stuck by. A strong conviction has always held me in good stead, right from the day I chose to walk out of my last job at Universal Computers, where I was working as the sales head.

Universal used to assemble and sell PCs and was doing quite well. But in 1990, things began to unravel when a rift between the four partners started impacting operations. Salaries were getting delayed…it was at this point that I began looking for options. I even landed a job with All India Radio given my degree in mechanical engineering. But I chose not to. My four years of working with Pertech Computers, Xerox and Universal on the sales side had given me a strong client connect, which I thought I could build on if I started my own business. My father, despite being a principal, never really questioned me about the path I was taking nor did my wife, who has been a pillar in my life…they were convinced that I was better off being on my own.

Getting capital from my family though, was out of question. The only prized possession that I had earned in my four years of working was a chocolate-colored Maruti 800. I sold it for Rs 80,000, it became the seed capital of Micromax Technologies, the company that I founded in 1991 with Yash Bhatia. We began assembling and selling computers. Yash handled assembly and after sales, while I looked at sales and finance. As things turned out, Universal eventually shut shop and most of their customers ended up becoming my clients…I knew them well. It was a pretty good start…

You can’t run on luck alone. It ran out for me in 1992. I lost all my money and ended up bankrupt! All because of one man – Madhukar from Andhra. He pulled off the biggest con job in Himachal Pradesh back then…running a fake organisation by the name of Industrial Research Development Authority, which he said was an independent body under the industry ministry. The entity had ended up becoming my biggest client. So much so, that I ran up receivables of close to Rs 320,000. Since payments from the government were always delayed, I didn’t suspect a thing until my friend informed me that Madhukar had been arrested for masquerading as a superintendent of a fake government body. I was stunned! I rushed to Dharamsala where the office was based. By then it was too late. The office was sealed and whatever computers were sold to them came under the custody of the court. To rub salt into my wounds, he gave cops the slip and till date I haven’t heard anything about the case or about the fraudster!

I was shattered. I told my wife on the phone: “Main raaste pe aagaya hoon.” The setback, for all practical purposes, was the final nail in the coffin for the PC business. At that point, in desperation, I could have gone back to a sales job, but I chose not to as I believed I could come out of the lean patch. With whatever little money I had salvaged, I switched to becoming a distributor for a Kolkata-based company Infocomm Equipment that made PCO machines under the Teleview brand.

Desperate to win back what I had lost, I worked hard. We went to all BSNL and MTNL exchanges and got details of public booth allotments. We contacted all of them, offering to sell the machines. The machines we were selling cost Rs 25,000, much more than the existing alternative. However, we convinced the booth owners and managed to achieve good sales. It was an early lesson that it isn’t always about the price but what you offer. In a year-and-a-half, I made over Rs 400,000. For two years, we ran the business. In 1994, we switched over to distribution of IT peripherals beginning with TVS Electronics, moving on to become the biggest sub-distributor for HP. It was business as usual but things changed with the advent of the IT boom.

It’s funny how associations work. Rahul was my neighbour for 35 years. When he was done with engineering, he was keen to start something on his own. He used to come down every morning to my house to chat. It became such a routine affair that my wife began complaining that he was eating into the only time she could talk to me as coming late nights was a regular feature for me! But the grumbling fizzled out as Rahul tagged along his friend Sumit. The three of us chipped in Rs 1,000,000 each to start Micromax Informatics. The conversations were no longer at home, the action had moved to our office. Later on, Vikas too joined us, chipping in his share of capital. I was the most experienced guy among the four…they treated me as their elder brother, that’s why we have stayed together. But the journey as a training institute was tumultuous till 2004, with the dotcom boom-bust playing out. We first began with e-commerce training, then moved to SAP, later to ERP and then gravitated towards embedded software. We weren’t investing, but then we weren’t making money either! In fact, one of the partners came and asked me, “Kuch hoga ya, main apna resume banadoo? I replied that we needed to hang in there and see how things play out. He decided to stick it out…

I knew a gentleman by the name of Natesan, who worked for Nokia. I was keen to work with the Finnish handset maker. We got the break when Nokia signed us on to develop a software application for a chip. The deal saw us graduate to a product company – we made a Fixed Wireless Terminal (FWT), which could connect a wireless network to a landline phone. Airtel was our first client. We ended up selling 35,000 units in a year. The business peaked in 2007, with sales of 100,000 devices annually. For the next four years, we were marketing telecom products. It was at this time that the mobile revolution began gathering momentum.

Should we launch a mobile phone or not? It was a hotly debated topic among the four of us…all of us were divided. Nokia, Motorola, Samsung and the likes had 90% market share. Why would anybody buy our phone? We went back and forth with the arguments, finally, veering towards the consensus that we will go ahead…but pricing won’t be our USP. If we went down that road, biggies such as Nokia would have easily wiped us out by going down further…they had the firepower, the financial wherewithal and economies of scale.

It is ironic people speak of Micromax for its pricing, whenever we tried to “price” a product, we failed miserably. We offered customers the features they needed, ensuring it fit the “value for money” peg. With the first phone, we eyed the rural market. Power was a big issue then, the phones would not even last a day. Our product reduced the consumption of the battery in the standby mode. We also increased the size of the battery from 400 mAh to 800 mAh. The model X1I was positioned as “mobile ka baap”- it was really that, the battery would stay for 30 days in standby mode and offered 17 days of talk time!

The product was ready…but it was impossible for us to spend too much on marketing and advertising. So, we thought it would be better to bundle our device with an operator. We had several rounds of meetings with all the operators, but the outcome was the same – nil, nada, zilch! That’s when we approached big distributors and retailers. Their approach was even more dismissive. They didn’t trust us and were not willing to invest in us  - theek hain phone rakh lena, bik jaayega toh paise de denge. Selling on credit was out of the question. We needed the money upfront to keep the business going.

The only option left was to tap FWT distributors and bigger retailers such as Sangeetha Retail in Andhra Pradesh and Karnataka and Prabhat Telecoms in Maharashtra. It’s through them that we managed to reach out to the rural and semi-urban customers in the first phase. Given our positioning and value for money plank, we managed to convince the retailers to sell the phone on a cash and carry basis. Boy, what a debut we had! We sold the first lot of 10,000 phones in just 10 days. We thought if we could end up selling 100,000 pieces a month, we would be the king! Then, the only Indian brand to be clocking such numbers was Spice, which was selling close to 160,000 units a month.

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…