Secret Diary of Rajesh Agarwal, co-founder, Micromax | Biography Part- 1 | Outlook Business
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Secret Diary Of An Entrepreneur

"Successful people don't do different things, they do things differently"
Secret Diary of Rajesh Agarwal-Part 1

V Keshavdev

Rajesh Agarwal, co-founder, Micromax

Personal information of Rajesh AgarwalIt 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. 

Computer sketchUniversal 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.

Rajesh Agarwal's maruti 800Getting 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 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…

Fraud Mr MadhukarYou 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 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. 

Micromax sales conference 2002Desperate 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 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 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. 

Rajesh Agarwal with brothers neeraj, rahul and sumitIt’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 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…

nkia connecting micromaxI 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. 

micromax debut phoneIt 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.  

Naveen and ajit of TA AssociatesThe 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.

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

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