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Sreevathsa Prabhakar (Servify) Explains The Business Model of AppleCare+
74 Plays2 days ago
Sreevathsa Prabhakar is the serial entrepreneur behind Servify, the B2B insurtech platform that powers extended warranty programs for Apple, Samsung, HP, and 70+ global brands.
In this candid conversation with host Akshay Datt, he reveals how Servify achieves 90% AI automation in claims processing, generates 70% revenue internationally, and maintains 18% EBITDA margins in the competitive device protection market. From being locked in a Dharavi home as a BPL service engineer to receiving a welcome sign at Apple Park, Sree's 25-year journey offers rare insights into operational excellence, platform leverage, and building lasting enterprise partnerships.
Key Highlights
👉How Sreevathsa Prabhakar built Servify into a profitable insurtech platform managing ₹2000 crores with just 15 operations people through 90% AI automation
👉Servify's asset-light business model breakdown: retailer margins, OEM royalties, insurance partnerships, and the path to 18% EBITDA at scale
👉Why 70% of Servify's revenue comes from international markets and the geographic arbitrage strategy for Indian B2B startups going global
👉The 16-year Apple partnership strategy, from running India's first AppleCare center to powering device protection across multiple countries
👉Real insurtech innovation: how Servify disrupted insurance by capping loss ratios, eliminating fraud through technology, and making claims self-service
#InsurtechIndia #ExtendedWarranty #DeviceProtection #AppleCare #SamsungCare #StartupIPO #BootstrapExit #AIAutomation #FintechPlatform #B2BInsurtech #AfterSalesService #ApplePartnership #GlobalExpansion #ProfitableStartup #FundingWinter #OperationalExcellence #PlatformBusiness #IndianStartups
Disclaimer: The views expressed are those of the speaker, not necessarily the channel
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Transcript
Introduction to Servify and its Founder
00:00:00
Speaker
So if the idea was shot down, saying, no, no, no, don't do this. One of the customers who had bought a expensive TV and the product didn't work and he really locked me up inside the house and it starts working because I just connect the cable properly. From a, you know, I will kill you, MCDC, to buy you, right? That was my learning. Srivatsa is the founder of Servify.
00:00:23
Speaker
If you have ever bought extended warranty for Apple, Samsung, OnePlus devices, then you have experienced Servify. Servify is a platform helping great brands to offer device protection to consumers. Do you see this business as a fintech business or as a
Is Servify a Fintech or Operations Business?
00:00:39
Speaker
ops business? If you are buying a 1 lakh rupee iPhone, you want Apple to it, right? Why wouldn't OnePlus be able to do that? Why would they need you to do that for them?
00:00:55
Speaker
Shree, welcome to the Founder Thesis podcast. You're a senior entrepreneur. You're operating in a very unique space. I'm yet to interview people from this space, and I would love to learn more about what exactly Servify. But before we come to Servify...
Srivatsa's Career Journey and Lessons from BPL
00:01:11
Speaker
take me back to a little bit of your history. What led up to you becoming an entrepreneur? Where did that, that itch or that desire to start your own business come from? You know, just help me understand your origin story.
00:01:26
Speaker
Sure, sure. So, Akshay, first of all, thank you. Thank you very much for getting me on this podcast. So my journey is, I did my engineering, ah one of the, I think, very, very few in the family who did engineering. And obviously,
00:01:42
Speaker
a lot of responsibilities because those days, you know, 98 is when I passed my engineering and either you become an engineer or a doctor that goes to the profession. So I became an engineer, reluctant. I wanted to be a cricketer, but I ended up becoming an engineer.
00:01:58
Speaker
So my journey started and I joined BPL as the first company, which was BPL Limited, which was electronics manufacturer back then, the largest ah manufacturer of electronic goods in the country. They were the Apple of India.
00:02:12
Speaker
So yes, true, true, true, true. true yeah I joined that company. People may not have heard as much of them. Yes. But you said nobody from your family had done engineering. Are you from a business family? Of course, you know, at least in my generation, my age group, I was, I think, probably the only engineer. Rest, ah my cousins or my, actually my dad's cousins, et etc. were doctors.
00:02:36
Speaker
But I think I was the first engineer in the family, at least in the close family. um Everybody else either, you know, worked on their own business or where, were you know, doing agriculture themselves.
00:02:49
Speaker
Of course, back in the day, you know, especially in Mangalore, Karnataka, agriculture was also pretty big. You can still lead a very, ah you know, decent life ah with the agriculture because we all had a lot of property and, you know, those Jamindar days, right? okay okay Okay. I was one of those outliers who ended up becoming an engineer. Obviously, engineering...
00:03:13
Speaker
Not that I wanted to do, but obviously, the pressure ah to do something professional. And biology was not something that I enjoyed. So obviously, the only choice was engineering.
00:03:25
Speaker
And Joining engineering was fun and because then four years, you are away from home, you could do anything you wanted. All the musty you wanted to do, all the life exploration that you wanted to do, right? Roaming around, having all the bad habits and all of that, you could you could explore all of that away from home. So I think I enjoyed my engineering and then ended up joining BPL as my first company, a first and employer.
00:03:52
Speaker
ah Obviously, coming from South engineer means you will end up coding. That's how everybody thought my job would be. And even I thought, obviously, I scored. That was also like lot of Y2K jobs, right? yeah Yeah. So this was 98, right? So obviously, ah everybody, at least in my class, ah all those who got jobs,
00:04:13
Speaker
I was one of the early ones to get a job and with ah one of the largest companies in the country. And even I thought I'll become a software engineer. I didn't know what I would become because the offer was graduate engineer trainee.
00:04:27
Speaker
And I thought I will also be coding without knowing anything about coding, obviously, because those days practical... ah you know teaching was nearly ah non-existent. right So even in our ah labs where we had computer labs, we wouldn't enter because it it used to stink so bad because of the dirty sock smell. right So that's how our computer courses were.
00:04:49
Speaker
But anyway, ah so I did ah join BPL and after me, a lot of my friends, my colleagues, my classmates joined Infosys, TCS, Wipro, VFL,
00:05:02
Speaker
all the software companies. And we were all like, you know happy that, yeah, you got an Infosys. Yeah, I got an BPL. And of course, for the first two months, it was training. And that's when I realized actually my job is not really software, but fixing TVs and fridges and washing machines. Yeah. And yeah, but it was okay but because it was in Bangalore. And then they decided our posting to be in Bombay.
00:05:24
Speaker
So obviously I came to Bombay and that was my first setback, so to say. Without knowing Hindi, you're coming to Bombay, which was known for Underworld. And, you know, it was not a safe city, right? So so the entire family was worried. yeah Even I, myself, because of course, in the college days, we were all Gundas. But coming to Bombay, you are no one, right? So...
00:05:46
Speaker
Came here, ah started my career. And of course, the the after initial few months of training and buddying up with senior engineers on their bikes to go to customers' homes, it was then ah all alone. And that's when I started realizing that this is not the easy job.
00:06:05
Speaker
ah So going to customers' home, fixing TVs, listening to all the possible bad words when the products fail, right? And that's how
Entrepreneurial Leap and TSS Expansion
00:06:13
Speaker
I started my journey. So I would say first one year of being here in Mumbai was, I think I spent more time searching for a new job rather than doing my own job.
00:06:21
Speaker
yeah So okay that's how I started my career. But I think then White2K happened. And in the meantime, you know, my friends would be ah traveling to the US on H1B, saying, hey, I'm going to the US.
00:06:34
Speaker
And I'm here in Bombay, Dharavi was my area, Sian, Dharavi, Matunga, Mahim, that belt was the area that I was responsible for where I was visiting customer homes. So not really a great experience to be honest, but I think I learned a lot in that space. And and in fact, I've told this example or this story many a times probably before, but you know those days, ah one of the customers who had bought an expensive TV and the product didn't work and he really locked me up inside the house and said, the get your owner to come and give me my money back.
00:07:12
Speaker
I mean, I didn't even know the brand service manager, forget the owner, CEO back then. Right? So, you junior graduate engineer trainee getting ah locked up in the house. so But I think after a lot of requests for two hours, he was almost about to hit me.
00:07:27
Speaker
i mean, it it was like a hundred square feet house, TV on a fridge. You can imagine Sain Dharavi, right? So if you have ever visited that area. so ah But the learning was after about an hour, hour and a half, two hours of persuasion saying, sir, give me an opportunity. And on top of it, I can't even speak proper Hindi. So you know everything that could go wrong was going wrong. The TV was not working. I couldn't speak proper Hindi. So the guys not only shouting, saying this company is a fraud, they took my money and this company appoints people from outside the state and take away our jobs.
00:08:01
Speaker
And then after about two hours, Then ah he allows me to see the TV if I can do anything because he realized that nothing's going to happen because this guy is helpless and it starts working because I just connect the cable properly. So it was as simple a mistake or a problem as that could be.
00:08:20
Speaker
And it started working and the customer is so happy. He says, I'm an engineer from NASA. So the experience immediately was, you know, have a beer. ah You are like my savior. I'm sorry I did all this to you. Now I'm going to be your savior for the rest of your stay in Bombay. Bombay is a very big place.
00:08:38
Speaker
You have to remember brother. So um ah from a, you know, I will kill you, MCBC, to brother will kill you, right? So... So that was my learning. But I think in all of this, you know like I've said many a times, and this is always the foundation for me.
00:08:56
Speaker
If you solve a customer's problem, the customer goes out of the way to compensate you. right So I think that always stayed. while I was doing my job every time the the objective was can we really solve a customer's problem because he's paid for the product and he has a right to x he or she has a right to expect a proper resolution and that's how I continued and of course I started scaling up in the company.
00:09:20
Speaker
I think the realization was Y2K 2000 when unfortunately some of my friends colleagues who were high flying in the US came back when they're unfortunately lost their jobs and I got a promotion. So it was almost like exact contrary. Somebody is saying, Hey, you know, I don't have my job any longer and I'm hearing the news, Hey, you are promoted.
00:09:41
Speaker
So I think then I realized to some extent saying, Hey, this job is good. At least, you know, I can continue to ah eat food, earn a living, ah live a lifestyle.
00:09:52
Speaker
buy a bike, ah do all of that, right? So it was good. ah Started scaling, started growing within BPL. And then of course, Koreans started kind of dominating the market. So joined Samsung briefly, and then worked with Tata and last with Nokia. So 2008,
00:10:10
Speaker
2009 is when I started my first venture. But between... In 2009, it was entirely this after sales service. Yeah, because I spent all my life after sales service, of course, from a practitioner, service engineer, to I became manager, manager, to senior manager. And of course, then moved up the ladder in the management side of things.
00:10:27
Speaker
And I was one of the young, ah you know, senior folks, leadership ah members within Tata's, within Nokia. So it was a very successful, very, you know, ah satisfying ah growth, I would say. In every company, I think, you know, it was very nice to work because I think basic funda was it's your own company and do whatever you can. Right.
00:10:51
Speaker
And of course, you know, I stayed all alone. And then of course, when I was in Tata's, I got married, but until then I was a bachelor, even after the wedding, my wife was pretty friendly. She was also working. So for us working 12 hours was never a problem or 15 hours or sometimes all night, right? So I think that culture stayed and obviously you're working for a cause. You're trying to do what you can do good for the company, which is really taking care of you. So I think all of that work, I had good bosses, good ah roles.
00:11:22
Speaker
ah Of course, in a very difficult, not so pleasant job environment in terms of customer expectations, but it was still you could you could impact. right So I think it was a happy ah time.
00:11:36
Speaker
I think between Tata and Nokia, when I had three months to join Nokia, In fact, that was when the kid of entrepreneurship began. Of course, you in all the companies you worked as if it's your own company, but that's when we actually got an opportunity to run a coconut powder manufacturing factory. Some offer came, ah some some random offer from someone and we ended up going and visiting. It was in Kudal near Goa, almost made an offer. We had some money.
00:12:07
Speaker
And it was a sick facility that we are taking over. and you know dan then could took umna We didn't know jack shit about coconut powder and anything. But South India has a little bit of coconut. like the eto That was the basic principle.
00:12:22
Speaker
But I think ah luckily that didn't go well and we did not really take over that facility because of some wrong practices that we ah got to know. But I think that led to me joining Nokia and that was my last corporate job.
00:12:36
Speaker
So 2009, I quit Nokia and again, the you know I was doing well. Nokia was the largest company in the world. i mean you know We had over 70% market share in the country. We had globally about 40% market share. So there was no better company, so to say, in terms of the scale and size.
00:12:55
Speaker
ah But my father was unwell in the hospital and i was going back and forth. It was in Mangalore. I was in Gurgaon headquarters of India, Nokia India.
00:13:06
Speaker
And After about 2-3 months of struggle, I lost my dad unfortunately. and i had to be with the family for some time. and ah Of course, when I lost my father, ah you know we had to go through that 13 days. and After the 13th day, i came back to office and ah my supervisor back then said, You have come back for a long time, you have taken a lot of time.
00:13:29
Speaker
and all that happened was tears rolled out of my eyes and I said, I'm done. So that was how I started my first venture. So became an entrepreneur ask accidentally, always wanted to do something. I think that triggered really very strongly to say that, hey, you know, there is, ah you may be working for the best and the biggest company, but it's still not yours. Right? You still have people who will say, you have not done work. So I think that was really the trigger, to be honest.
00:13:59
Speaker
Without knowing anything again, started something. could give portto barosaha And of course, we had three, six months of notice period, et cetera. And I started talking to people saying, I'm thinking of doing something on on my own.
00:14:11
Speaker
and By the time I finished my notice, obviously up it was not that my supervisor wanted to say. Unfortunately, he didn't realize that I came back from that. while He knew everything about me losing my father, etc. but I think it was not really something that he wanted to say, but something came out. and up He apologized profusely, but what was done was what was done. right So I said, no, no more ah staying back. I'll go back. And I think I was emotionally also very weak. I wanted to be with the family. I think it was just a trigger again to go back.
00:14:45
Speaker
And also, I think few things. My wife never liked to stay in Gurgaon. This was the time of where time of gurga where There was no Uber. There was not really the good of today. Right.
00:14:59
Speaker
So I was out for work morning till evening and she would sit at home all day. and She was a full-time ah corporate girl herself. and Now, leaving everything and staying with me, staying sitting at home, doing nothing was also frustrating. and She said, I'm going back to Bombay.
00:15:14
Speaker
All of that happened simultaneously. and I said, what do I do here? i mean What am I doing? ah My job doesn't respect me. i don't have my family with me. My ah mom and sisters and everybody is mourning at home. so I said,
00:15:28
Speaker
Let's go back. So that's how my first venture started. But in three months, I kind of created a pipeline of potential customers. and Customers for what? like Like what were you pitching to? flu I was like, boss, have service. Tell me, what do I want to do? What do I want to do for you? That's all.
00:15:44
Speaker
And very clearly, don't want to do job. If you are offering me a job, I will not join. So company reputation doesn't matter. should do a job. I will do a job. And actually, ah you know, my earlier boss from Tata, who was a president back then, and he had become a CEO of another company in Hyderabad.
00:16:03
Speaker
So he was one of my big gurus from whom I learned a lot in terms of management. So I had called him also and he said, tokabibi aja jaga I said, sir um mu you join ninet as an employee but my consultant ben kiang I said, no problem.
00:16:18
Speaker
so that's how i started so almost ah the same amount of money I made probably even after losing the job, but I started building sort of TSS back then. So that was the time I started. is the service solutions. yes service yeah You were offering like after sales service. Correct. like I mean, think of it like almost, so the whole concept was,
00:16:42
Speaker
you know When I was in Nokia, we had 700 odd service centers run by 700 odd partners, which means for a customer, 700 different experiences because none of them would use a common system. None of them would plan ah in a standard manner.
00:16:58
Speaker
It's all dependent on how proactive that particular partner is. So if a partner is good, service will be excellent, the customer will get good service. If the partner is bad, customer will always get bad service and practices right or wrong, all of that. right So the idea was how can we bring the married experience to certify ah to service and that's how TSS was born to say that look,
00:17:24
Speaker
ah we will be a brand that will work with the OEM or an Apple or a Samsung kind of brands. And we will set a franchise network, but all the processes, all the systems, all the hiring, all the employment, all of that will be standardized by us. And therefore it's also in a manner asset light.
00:17:41
Speaker
So you don't own the asset. You work on a partnership model with the smaller businessmen, but you control the experience, you control the partnership, you control the ah brand partnerships.
00:17:53
Speaker
So we started setting up, but we had to do it ourselves to first learn it. So we set up the first Apple care center in India, which was the exclusive Apple ah center, ah first of its kind in the country.
Servify's Operational Excellence and Risk Management
00:18:06
Speaker
So we were the first one. Again, that relationship lasted pretty long. And even today we are flourishing.
00:18:11
Speaker
So again, all of this happened, you know, I mean, while while people may say that Apple, big company, they may have certain ah philosophy to onboard a size of a partner, etc. But that's the reason why Apple is Apple, because they really believe in the dream that I sold, saying, look, I will bring the Apple Store experience to India.
00:18:29
Speaker
And I'm willing to invest. I'm willing to learn. So I think a lot of those things helped. And of course, you had some reputation of working in the industry, new people. so there were a lot of support, uh, uh,
00:18:41
Speaker
you know people within Apple knew. So that's how there could be some exceptions that were taken saying, okay, whatever you say, you do it. So that's how we started. Apple was the first location. So we ended up then scaling to about 385 locations.
00:18:56
Speaker
Pretty sizable. ah Fully bootstrapped. All these locations were for Apple? or No, Apple, we had our own 19 locations and about 48 franchise locations. So we are the largest partner for Apple in the country. Then we became the largest partner for Samsung, for OnePlus, for Lenovo, Motorola, HP, multiple brands. So we set up, scaled to about 385 odd locations, expanded outside of India to even Dubai, Middle East.
00:19:25
Speaker
and UAE and Saudi. So ah again, all bootstrapped. ah Frankly speaking, didn't know anything about startups because it was not really the startup world back then.
00:19:38
Speaker
ah It was fun to run your own business. You could take decisions. But I think the only thing, i mean, the realization was when you run your own company, you're answerable now, not only to your boss, who is your customer, but to everybody else. You are answerable to customers. You are answerable to brands. You are answerable to your employees. So the only thing you can decide on your own is when to travel where.
00:20:00
Speaker
right so So it was not easy, but I think fabulous, fabulous learning. And I think some foundational elements that I learned, which I think lasted with me forever, which was one on the you know fundamentals of running a business.
00:20:17
Speaker
Because ultimately, it's a commercial entity and you want to make money. So how do you really establish right practices practices that are scalable, doing the right things because you look for long term, it's not an overnight game.
00:20:30
Speaker
And of course, ah you know hard work. I think a lot of those elements i think built the foundation of me ah to even build Servify today, to be honest. right Today, we are a well-funded company, to be honest. But again, ah when we spend even a single dollar, the question is,
00:20:46
Speaker
we the of elluitna i got return me right so at least those fundamental so I'm not saying, you know, canju say but I think you need to invest in the right areas. It's not because the money is easily available.
00:20:57
Speaker
So I think a lot of those things helped building right practices right at the beginning, solving ah efficiency, ah effectiveness ah issues by technology.
00:21:08
Speaker
lot of those things really helped. So do I want to ask some questions here. ah so if you look at let's say uh hyundai maruti so car companies also have uh after sales service requirement they have a very standard ah model the experience between service centers does not vary greatly there is of course like people say oh this is a better service center or whatever but it is not like a very stark difference they provide ah
00:21:41
Speaker
the blueprint or you can say the operating system or whatever to all the franchises to give customers a somewhat uniform experience why wouldn't oneplus be able to do that why would they need you to do that for them why wouldn't they just go out and get franchises why do they need someone in the middle to manage franchises fantastic question so i think see they were doing it earlier the whole point was the operating cost to manage 700 partners versus the complexity to manage one partner who can then manage or one or five partners. I think that's definitely where the efficiency is, number one.
00:22:20
Speaker
Second, imagine when I'm planning, I'm planning for my 300 locations versus one location. So I will optimize, obviously. So there is a lot of optimization possible, number one. Number two. Number three,
00:22:33
Speaker
Unfortunately, in after-sales service, there are a lot of wrong practices. The cost of fraud is higher than cost of genuine service. For example, you have your friend whose iPhone screen is broken.
00:22:46
Speaker
So you make a claim in warranty because it's your friend. Versus now a large enough company... like an organized player like TSS wouldn't do that because the risk is very high of losing that business overall, right?
00:23:04
Speaker
So I think a lot of those factors, plus we would also capital, be you know you you can invest capital, you can you can expect professionalism. So a lot of those benefits, number ah number four. Number five is, you know ultimately the service was always looked at as a cost center.
00:23:23
Speaker
So everybody would optimize and mostly in companies because they are product companies. The focus is always on product distribution, services and afterthought. So whatever you buy, let's it. We don't need a society.
00:23:38
Speaker
and okay I think that is where lot of these opportunities came to third parties. And today, if you see, even Maruti, because their service revenue is bigger than sales revenue, that's why they run service.
00:23:50
Speaker
ah But in the case of electronics, that situation did did not arrive until probably now, which is like Apple today runs a $16 billion dollars service business because Apple has reached that level.
00:24:03
Speaker
Right. But we we should be like a single digit percentage of the revenue, right? i Yeah, yeah. Listen to that. It's a drop. It's a drop. It's a cost. Even today for some brands, service is still a cost. Right. Because the problem is the products are not used by customers like cars for long.
00:24:19
Speaker
ah So you have one year of limited warranty, but in two years, the product or the technology changes. So you change. So the opportunity to make money is also only one year or two years at best. So the replenishment cycle is quicker compared to ah cars, number two. number Then also, there's a technology evolution. Like you buy a car, you use it at least for seven, eight years, right?
00:24:42
Speaker
So you need, and of course, it's a mechanical, electromechanical device or product. So you have a lot of elements that require servicing, which in the case of a phone or a TV, you don't need servicing until there is a breakdown.
00:24:57
Speaker
So a lot of those elements where opportunity to make money is less. But again, today your phone is all delicate, full glass. So there is an opportunity to make money from breakages also.
00:25:08
Speaker
So that's how the evolution happened. And that's why Apple's AppleCare business is a $16 billion dollars business. Right? Right. okay Now, that's also where a customer pays.
Transition from TSS to Servify
00:25:19
Speaker
I mean, with due respect, if you're a Xiaomi customer buying a 6,000 rupees phone, you're okay to go and get it repaired through a Gafur buy on the street. Yeah. But if you are buying a 1 lakh rupee iPhone, you want Apple to fix it.
00:25:31
Speaker
Right. So that's where the opportunity to make money is also with certain ASP and above category products only. ASP as in average selling price. yeah Average selling price, yeah. High ticket. i i think have Absolutely. Absolutely. So that's how TSS journey ah evolved.
00:25:47
Speaker
One or two more questions I have over here. Yeah, please. Go ahead. So, you said there is optimization possible because you are managing 300 centers. What kind of optimization? Like supervision? Parts planning optimization. Okay. For example, if i know that in a day I use...
00:26:06
Speaker
18 displays. Now that 18 display, how do I distribute among 385 locations is in my control centrally rather than individually all 18 guys have all 385 will have to order probably, right? So there is an efficiency gain there.
00:26:19
Speaker
Second, I can centrally plan so I can also negotiate better for pricing. Okay. So a lot of those benefits is what you get when you consolidate.
00:26:31
Speaker
How does the P&L of a service center run? Like if a customer is paying, let's say, 2,000 rupees to repair a phone, does the brand get any of that money or is it? How does it happen? Brand authorized service centers, typically the way it works is ah the brand pays for the warranty service that you do. They compensate you for your efforts by paying a fixed fee.
00:26:56
Speaker
Typically, it is paid per incident. So imagine you have an iPhone and you are walking in and it is under warranty. So you're supposed to get a free service. So in that case, the brand pays the service center a fixed fee as labor and gives part free.
00:27:13
Speaker
So let's say they make 500 rupees for fixing your product. Now, of course, that in that 500, they have to recover their investment in terms of the setup, salary, operating costs, and all of that.
00:27:27
Speaker
But also, there are customers who come out of warranty where the customer pays for the service. Now, let's say you go with the display issue. And when you are replacing the display, you are paying for the display and for the labor.
00:27:42
Speaker
And at both instances, the service center makes money. So they charge a slightly higher labor fee, like 1500 rupees. And they may charge a 20,000 rupees for the display in which they make 2000 rupees.
00:27:54
Speaker
Okay. So they make that money. That's how the unit economics works. and the display you buy from the brand like you yeah buy post you if you're brand authorized you have to now there are also third party unauthorized like the Gaffer buy that I mentioned or withoutud a ah these are some of the names that we keep using for third parties right so those guys obviously can source it at much lower cost because they're not original But also, there is no reputation that goes with it. So, the customer also knows that the customer can't buy it again. If it's a brand repair, can take a replacement again.
00:28:29
Speaker
Okay. Got it. got it okay And like how much revenue would one service center make? Average? like Or some range? So, typically, i mean, if it is a smartphone like the high-end Apple or a Samsung service center, they would make about...
00:28:48
Speaker
in terms of the total revenue, in a year they may make about 70-80 lakhs, 60-70 lakhs maybe, and probably about 7-8% net margin.
00:28:59
Speaker
okay So it's a very thin margin business. But in our case, since we were consolidating, we had ah literally no ah cost of capital.
00:29:11
Speaker
We had very little inventory or ah you know people cost on ground. So for us, when we actually sold, we were doing about 160 or crores of top line with about seven or eight crores of profits.
00:29:27
Speaker
So it was a pretty sizable business. I mean, in this business, it's very difficult to make money unless you have wrong practices. But with wrong practices, you can't scale. You can run single shop.
00:29:39
Speaker
But I mean, by fooling the customer, by fooling the brand, you can do all of that. But then you can't institutionalize that ah at 300 odd locations, right? And when you run 300 odd locations, the challenge is, again, you are working with 2,000, 3,000 people.
00:29:54
Speaker
Now imagine a service engineer who gets paid 20,000 rupees is fixing an iPhone worth 1 lakh rupees. right So he does little... you know, creative stuff on one iPhone, that's his 5-1 salary.
00:30:07
Speaker
So he can go home with one iPhone and that's his 5-1 salary, right? So we built a lot of systems. We had actually built, in fact, ah some of the brands even appreciated us ah by looking at our ah the way we used to run our business. So we had set up something called as a control tower.
00:30:26
Speaker
which was in our headquarters with about 40 odd screens, big TVs. And we would have like eight, 10 people watching those TVs all the time to see that how a customer is being treated.
00:30:38
Speaker
And we had, of course, those days we didn't have AI. So we couldn't, everything had to be manual, but their KPIs would be shown. The customer's video feed would be seen real time.
00:30:49
Speaker
And more importantly, they would so you know make calls to the service center saying, why did you behave so much like this? So that fear of somebody is watching me itself is also important.
00:31:01
Speaker
And of course, we controlled a lot with technology in terms of parts order, you know customer feedback. Nobody could kind of fool the system because we were all practitioners. And you know I came from ground fixing TVs to wherever we came. right So a lot of these nuances, I think, was a great advantage.
00:31:20
Speaker
What was the revenue share between you and the franchisee? So we would work on a seventy thirty So 70% would go to them, 30% would come to us, but they would make the capital investment.
00:31:30
Speaker
Right. Which is pretty good for you then. So for them, see, this was also in some sense... you know good people, they want to run honest business and they have a limited, you know, 5 lakhs, 10 lakhs capital because in this business, you need 10 lakhs to 15 lakhs to get in.
00:31:48
Speaker
But you don't have opportunity to run an Apple service center because Apple will not give you business or a Samsung will not give you. So through us, they would be, you know, emotionally feeling nice saying, I run an Apple service center in Andheri and make, you know,
00:32:02
Speaker
50 lakhs of revenue and make 5 lakhs in a year, which was not bad, right? For for ah for ah for an independent a businessman. And honestly, when they do honest business, they are recognized, they they make money. So everything worked well for, you know, it was a win-win ah for brands, for us, for for the ultimate partner.
00:32:24
Speaker
Why did you decide to sell it? Like this 160 crore revenue you had when you sold, this was... The total revenue or the 30% share? 30% share.
00:32:34
Speaker
Oh, wow. okay We had scaled significantly. Of course, also we had international business. And then, in fact, ah you know, as as they would say... ah Because it's your bootstrapped venture, you don't leave any opportunity.
00:32:50
Speaker
So we had built consulting as a vertical. Because we had a senior lu the kiy gogar ku service. If we had consulting service, we would charge 2-3 lakhs per week. So we had built additional revenue streams. like Like a new brand entering India wants to invest in.
00:33:08
Speaker
Yeah, I mean, we did so many projects for so many other brands where they would say, carry armud is service man it thought us a talifa to put curakka we would analyze their data, we would come back with some suggestions. And okay consulting was a very, very profitable business.
00:33:21
Speaker
yeah And we used to also do consulting for global companies outside of India. So again, we would charge 800 euros per hour type fee. So that was good. Then we also used to run optimization projects, software projects.
00:33:34
Speaker
Like we did one of our biggest projects in Dubai, automating supply chain for Axiom Telecom, which had about 2,800 stores East. across ah win lists So their entire warehouse automation, all of that. So, I mean, it was like, you know, any opportunity which was in our kind of knowledge area, chaoar de and a guy said donte which case who the calm car casa so we did lot of such projects. So it was good.
00:34:00
Speaker
But I think one, obviously it had reached certain threshold, to be honest, because u saygaap kitra or broker unless you scale, i mean, outside geographies. Second, ah While all of this was happening, this company from Germany ah wanted to enter India.
00:34:20
Speaker
So they were a global company. They were meeting Apple, Samsung and saying, hey, we want to come to India. And they said, look, we don't have opportunity. If you want to really work with someone, there is some professional company that's TSS. So that's how they used to introduce us. So we got introduced.
00:34:35
Speaker
And I met the founder in Dubai, in Dubai Mall, I still remember. And we hit off really, i mean, I could see that he is a Gora Shree for me, to be honest. He said, we should do this, we should do all the stories. He used to run a consulting army, I mean, at multiple, bigger scale. So he was running Barkavi Consulting, which was TSS Consulting equivalent. We were doing probably 15 crore revenue, he was doing 800 crore or 700 crore revenue there.
00:35:06
Speaker
And he was running B2X, which was service solutions car field repair arm. He was running a company called TechCycle, which was doing kind of recycle, refurbishment. We were doing refurbishment, recycle under TSAs. So very similarities. So he said, look, we have to join hands. And that's how the JV discussion happened. From JV to 100% acquisition discussion happened.
00:35:28
Speaker
So I still wanted JV and we agreed on a 51-49 partnership. 51 with them or with you? 51 with them. So obviously he wanted to use the name B2X India. So I said, I'm okay as long as you compensate me well. And this was our first instance where, you know, while we ran a great business, we were doing well.
00:35:53
Speaker
it was still everyday struggle to manage cash flow, etc. Because at the end of the day, you have to buy parts from brands where you have to invest and you can't really push your small partners for capital. Many a times they wouldn't have money. So we were still managing all of that and it was not an easy growth. right I mean, I remember keeping my wife's jewelry also, even the Mangal Sutra for paying salaries on time. right So wherever you have, well you have to optimize every every single ah phase of your life. So When such an offer came, I said, hi I have a lot of money. We agreed for it and we agreed on a value. We agreed on a 100% acquisition value also because you know while all of this happened, I didn't know anything about shareholders segment agreement. I didn't know anything about shares.
00:36:42
Speaker
I mean being very honest, we didn't even have shares, documentation, board meeting, quarterly. We used to have you know annual audits, etc. But we were a small company.
00:36:53
Speaker
but We knew that we were doing everything right. But who professional practice, big four, all of that never was the case. right And when this happened, then we had to do all the share ah cert certificates and all of that.
00:37:05
Speaker
And that's ah probably another story for probably another day. You were the solo founder, right? Yeah, I was the solo founder, but we had good teams. So I had got a lot of my friends saying, I'll give you $20,000,000, I'll give you $8,000,000, I'll give you
Servify's Business Model and Market Dynamics
00:37:19
Speaker
$12,000,000 equivalent shares. Come on. That's $12,000,000 will be $12,000,000.
00:37:23
Speaker
So this story was sold, right? So we had a lot of good people. Who believed? cool ah And this was the time to really make good on those promises. So it was a good deal.
00:37:38
Speaker
And 51-49 and I said, okay, no problem. And there was like meeting of minds. And while this company was a billion dollar group, we were a small 150 crore
00:37:52
Speaker
ah We did the all the shareholding documentation, etc. And when we had to sell the shares, that's when I realized, oh, this was actually a big mistake because I ended up paying short term capital gain versus long term capital gain. the cardo may peavigaaa Because if you had those papers on the day of incorporation of the company versus before the sale of the company,
00:38:14
Speaker
So a lot of those learnings, I think also helped in wherever we are today. But then, ah so this happened.
00:38:27
Speaker
I did it for Karim. ah But Karim was not going to really run the business like how I was running. Karim was the founder of B2X. He was the founder of the group. He had seven companies.
00:38:39
Speaker
And he was actively involved in the consulting business, but not in the B2X business. B2X was about 330 million euro ah revenue company. ah Barkavi Consulting was 110 million euro consulting company. So he was running a group doing about consolidated probably a billion euro ah in revenue.
00:38:58
Speaker
So he was not going to be actively involved. So he had CEOs to run companies, right? So obviously became part of B2X, which is a German company. Now Karim was again, not a full German. He was half Asian, half German. So he was very dynamic, very entrepreneurial, very, i mean, super solid, trustworthy guy.
00:39:16
Speaker
But I became part of a German bureaucracy, so to say, yeah okay where CEO would say, you know i would i would travel to Germany at least twice a month.
00:39:28
Speaker
And the CEO would say, don't do this from the end. Why do you do this? You were the India CEO? Yeah, India CEO. German group CEO. Yes. A lot of the things, like, frankly speaking, the Servify idea originated within TSS where I said, this is what we should do and we will do in India.
00:39:48
Speaker
And I was, that idea was shot down, saying, no, no, no, we should not do this. What was that idea? The Servify idea of extended warranty and all of that, right? platform play, whatever we are doing today.
00:39:59
Speaker
but We'll go into details on that. Yes, I will i will come to that. So, obviously, you know, like Uberizing the service experience, all of that. So, obviously, they were not really keen. And I think, again,
00:40:13
Speaker
you know when you are very strongly convinced that this will work, so you will still pursue. And I was told to keep quiet and say like, boss, we know what we do.
00:40:25
Speaker
And I think some somewhere I also started feeling while I am 49% owner of the company, but I'm still an employee, which is what I didn't want to be. So then I told Karim, either i take back 100%,
00:40:38
Speaker
and I give you back the money that I took from you or you take 100%. There are two options. Tell me what you want. And he said, no chance of giving back. So we'll take back everything, but I don't have enough money. So we agreed on a transition plan, but then we agreed. But the idea was he said, look, and we became such good friends.
00:40:59
Speaker
So I said, whatever I do, you are my partner in my next venture too. So it's not that I'm going away from you, but I can't work in your ecosystem unless you run the company. So he said, you leave everything, you come to Germany and run the company as a CEO. I said, that's not going to happen because I will not leave. I can't leave a bomb. I can't leave a bomb. Which is my network. My family and everything. So then he said, okay, we will acquire you.
00:41:24
Speaker
And that's how the 100% acquisition happened. What was the revenue multiple at which it was acquired? What?
00:41:33
Speaker
Revenue multiple. Wow. This is like... then but so no and anyone more What was it acquired for? Let me just make it yeah simple. so This was like we made a lot of money. ah Back in the day, 45-48 dollar value. 50 cash past. We sold it in 40 million. One of the final 49%.
00:41:49
Speaker
forty nine percent But the initial one was for less. So we had agreed on earn out. So, we sold it 40 million dollar valuation. But the... but the The joke was so...
00:42:04
Speaker
I didn't know how to negotiate value of a company, right? So we met we met in Dubai, we had good time and he said, I will come to India. He flew into India in two weeks.
00:42:15
Speaker
We discussed, we agreed. And then he invited me to the buy so i sorry to Germany and he said, look, we have to do a due diligence and all of that. So then the KPMG guys came, the Udwadiya Udeshi lawyers came. Everybody's asking so many questions. I'm like, what the hell? are to to some of the coca I mean the immaturity, right? I didn't know what is this. Why are people asking so many questions? through deca here and triowa and trio like What the hell is happening? So I had a superb solid. So he's also our independent director on the board today, Shrikumar, who's been always my advisor, ah who helped build this whole, ah you know, shareholding to corporate documents to even acquisition.
00:42:52
Speaker
so we were called at Germany. And Karim made an offer and he said some number. So I thought, whatever number you have to do, you have to negotiate something. You have to show displeasure. This is basically negotiation. No idea, no logic.
00:43:09
Speaker
So I said, Karim, this is not exciting. So he gave logic. You know, this is revenue multiple, it's not x, y, z. I'm like, what's going on? That multiple is not agreed. So he said, OK, what is your expectation? So I said, I said, have random number.
00:43:23
Speaker
And we agreed to near that number. So it was like, oh, wow. Suddenly imagine you have to pay about 200, 250 crores in your hand. wow But I think all of us, so obviously, while i was the single founder, distributed wealth equally to the whole team. So a lot of us, I mean, you know, what is very, very satisfying and why I feel so proud is while I would have retained 30% of the company, but the 70% was distributed amongst people and all of us who struggled, you know, today all of us probably have to do houses, no debts, ah nice lifestyle, the family can enjoy, you know, once a while vacations and all of that, which is all thanks to those days of, you know, real hard work and people compromised on salaries, their family time, everything, right? I mean,
00:44:16
Speaker
So I think that was very, very satisfying. This 70% number was something you were ah committed to? Like you told them when they were you were joining? Or this was like you felt that I owe it to them? I mean, I understand, if someone has 10% to balance So was. okay Because also, you know,
00:44:43
Speaker
I mean, frankly, I would take 25,000-30,000 salary ah back then. mallo sort ofrekachaallanly because my wife was working ah okay or coming up with rubna laszada to all of that also was some kind of investment and there are many times where ah pea justcon it thus my neckas holding the okias parch myga savings I I was really i mean It was a very close-knit and I'm so proud.
00:45:17
Speaker
All of those people ah are still in Savify too with me. a Amazing. yeah So this is like a lifelong relationship, right? I mean, we we went through ups and downs together and I know how difficult it was. but Some of the days were extremely difficult. And again, you have an Apple or a Samsung as your customer. Who says, your job is not or you have new partner, we will take it away.
00:45:42
Speaker
All of that was also something that we... Luckily, we did not have any of those ah you know bad things to happen. But every day was... We had to earn our business every day. and You were at their mercy. like All the power is in the hand of an Apple or a Samsung. Yeah, I think yeah person that's the beauty of... or That's the nature of this business where you are working for a principle.
00:46:05
Speaker
hopeful And all that we can do is honestly deliver on our promise... And if we add value, I'm a very strong believer and this came from right from the Dharavi days to TSS days.
00:46:20
Speaker
If you keep delivering value to your partner, there shouldn't be a reason for the partner to look outside. It's only when either you become arrogant or you stop adding value that they look for other ah opportunities. Right? So I think that's been the philosophy even at Servify.
00:46:41
Speaker
So we did this ah deal. We negotiated and we got the almost what we wanted. Not that we really wanted, but it was like, yeah monkey they take out there something happened.
00:46:56
Speaker
So it was all good. So I think, you know, but in the process, I think, What I realized today is while you did all of that and you're proud, you also did few things which ah you know I think they're they're good. Like keeping my wife's jewelry in a pawn shop is not something I can... My wife can never forgive me. right ah So some of those things are still... Every day it hurts me saying, no, I don't want to do that.
00:47:37
Speaker
Sorry.
00:47:40
Speaker
But the the
00:47:44
Speaker
good thing is today we can live a very happy lifestyle. I can get probably five more Mangal Sutra for her. And she's been very understanding. So I think I'm lucky, but I think I would i would really say that one shouldn't go to that extreme probably.
00:48:00
Speaker
But you wouldn't have got that exit if you hadn't done that, right? You had to survive. much like There was no choice. You had to survive. Yeah, so survival obviously was the only, I mean, you you kind of, you have exhausted all your options, right? Then, mean, I know that we've been a fight for now.
00:48:20
Speaker
So the only thing is, you know how much ah money I gave you. I'm thinking, how much gave in return? That's not. It's not that value. <unk> go you theoja telled Because she was earning four x of my salary.
00:48:33
Speaker
uma is seventy five percent mile litaha guka ticketva yeah She was in a good decent position for an MNC. She was working for a bank. She was earning well. And we didn't have like, you know, other thing where we would spend a lot of money. We would go once a while for parting, etc. But at that time, we have to keep running. And end.
00:48:57
Speaker
behaam kitara maka I no regrets to be honest, except that, you know, I did something probably, which I still feel very ah guilty, ah but I think that's a phase. Yeah. So it was, it was a fantastic outcome at the end.
00:49:24
Speaker
ah And then one year, break, Karim also asked me to help B2X guys to kind of revamp. They went through a down phase. In fact, they were ah doing very well for them. Acquiring us was a very strategic move because ah they were the largest partner for Blackberry and Blackberry was on the verge of collapse and Apple was on the verge of like massive growth and Samsung was also growing equally.
00:49:53
Speaker
So we had Apple and Samsung, they had all the unfortunately dying brands back then. So through us, they started acquiring business in other regions where they were operating.
00:50:06
Speaker
But I think, again, at the end of the day, every company runs successfully when you have the right leaders, right? So I think they they made some of those mistakes of hiring ah extremely popular, expensive, big company leaders to run small operations. I mean, you can't hire somebody who was running T-Mobile Europe running a hundred billion dollar business to run a 300 million Euro company. right
00:50:36
Speaker
So I think some of those practices, they ended up investing like sometimes I think in excess of $20 million on a software, which was not even required. Why do you, I mean, your profits are not 5 million euros. How can you invest 4x of your profit in one software that you don't know whether we'll bring results or not?
00:50:55
Speaker
Right. So a lot of those things, that i mean, some of those wrong decisions also probably ah did not go well, but they're still in business, ah maybe much smaller than that they were before.
00:51:08
Speaker
ah So then came cerify calling So him, so but what was that idea? You already pitched the idea to yeah basically the whole idea was again, I'll go back to the automobile example, you know, over a period of so many years, you've been buying cars and people have been using cars.
00:51:27
Speaker
So the installed base is so high that they need service. Similarly, smart products, phones, laptops, and especially this came actually after Apple. Because apple until Apple, the products were plastic.
00:51:42
Speaker
Who will ask for service? If you put your Nokia phone down below, it wouldn't be broken. would be done with it. But Apple would be broken down below. Display would broken. So then you have to spend money.
00:51:54
Speaker
oh But the brands were still offering only one year limited warranty. So our idea was, look, there is a huge opportunity where the customer will pay for these breakages. And can we sell and extended coverage?
00:52:08
Speaker
And when we looked at the market, insurers were selling insurance. And our concept was, if I buy an iPhone, I want Apple to fix it. And with due respect, it cannot be an SBI insurance or an ICICI Lombard, right?
00:52:20
Speaker
i mean, it's okay for cars where you're not in love with your bumper or a body. But here is your memory, personal data. but you have to haveka memory here personal data here How can you get out of someone?
00:52:35
Speaker
And what will someone do? So, Apple has to sell AppleCare. Samsung has to sell SamsungCare as an extended coverage offering. So, this was the idea. So, we started pitching. After all, when we started all of this, we didn't know how complex this business was.
00:52:50
Speaker
But this was an idea back then in TSS days. Because Apple service center was half of it. This was a B2B offering, right? yeah The end end customer would not see Servify name anywhere. End customer is clearly buying a Samsung A100. and door exactly Okay. so but that when At the back end, you are managing that.
00:53:07
Speaker
Correct. And you are completely de-risking Samsung here? Yes. And we underwrite the risk with our insurance partner. So we also don't keep the risk on our books. ah Okay. So we have an ICIC Lombard to underwrite the risk, but they don't come in the customer contact. So we are a third party administrator as well.
00:53:24
Speaker
Okay. So we manage the distribution, which means selling at every point of sale. So we onboard all the retailers on behalf of an Apple or a Samsung. We underwrite the risk with an insurer.
00:53:36
Speaker
So our risk is gone. Then we administer the claim and get the repairs done through service centers of the brand again. Okay. So it's an asset light orchestration play, but all run on a platform. And our belief was, if a woo customer ofkaat as are me annual service unlimited to perskaliga
00:54:01
Speaker
yeah and that hypothesis pulled dr Because if your product is expensive and you want priority service, you are willing to pay. And this story goes back to Daravi.
00:54:12
Speaker
That if you have a TV on your own, the customer going to drink beer. Right? Right. So this worked. Of course, ah we had to get licenses in each geography that we operate. So we started with India. India, we partnered with Apple again. Apple has been always our... want to just very quickly summarize the business model in a slightly easy to understand way. So ah like... if I'm buying let's say a like a tablet like an from Samsung then I can pay an extra 10,000 rupees to Samsung for additional warranty benefit like either in terms of the period or in terms of
00:54:49
Speaker
what all is covered, like say, something might have limited. So this might be an unlimited, correct no matter what happens, we will replace it. So like the Apple care quality of. Exactly.
00:55:02
Speaker
And global coverage and all of that. Okay. And now if a customer comes to redeem this, so you're no longer in the ops part of the business of actually running a service. we orchestrate that too. The decisioning is ours.
00:55:16
Speaker
So the customer raises a claim either through a Samsung call center or walking into a Samsung service center or using Samsung support page, all are powered by our technology. Okay.
00:55:27
Speaker
So the request, once the request is submitted, real time, the decisioning is made. And then there is logistics involved probably to pick drop from customers' home. That's also our technology, our integrations with all the logistics providers. If the customer has to pay certain deductibles, so to say, a contribution, that payment gateway is ours.
00:55:45
Speaker
And then the service center, which service center will repair, who has parts, all of those decisionings is ours. Because Samsung's Dehage is service center. Where do they have to send? There are 50 people in the Umba.
00:55:56
Speaker
Okay. So, that decision based on again data, which service is giving, which part is, which engineer availability is, all of that. And once the repair is done, again, sent back to customers home.
00:56:07
Speaker
So, that entire thing, including what part to use is all decisions by us because ultimately, we are underrating the risk or paying for the repairs. So, you pay the labor and the part cost both to the service center? Correct.
00:56:20
Speaker
Okay. Okay. And if a customer is coming with a claim and you approve the claim, then at the back end icisa lombart is reimbursing you for that correct so our contract with them is if we approve they have to approve no questions asked okay Now, why will Munchara do that?
00:56:39
Speaker
Yeah, exactly. Like like the 100% amount is paid to you? 100%. That's a math. So, obviously, initial years, people are not comfortable. So, we got a very commercial solution. We said, look, we'll agree on a loss ratio.
00:56:52
Speaker
If I pay you 100 rupees premium, till 95, you will approve every claim I come with and you will not ask any questions. 95, I will it. okay got apaure by the bannaro So rupees. So I am taking away your administration hassle. am taking away your operations hassle. You are getting 5 rupees.
00:57:11
Speaker
While that's how we started, today we are at more than 100% loss ratio. Saying that you invest in 100 rupees premium upfront and invest in 5 rupees. We are getting 100 rupees. Okay, okay, okay.
00:57:24
Speaker
I mean, obviously, because insurance is an investment business, no? Yes, yes, yes. They should make money from the float. They should not make money from the premium. ah But ah what is the actual amount that you claim from your insurance? Basically, we are at about 98, 99%. And this is a very dynamic number. The beauty is, see, again, I'm like, can I come from a little old school.
00:57:46
Speaker
When we started it, I still remember the first initial period. It was NIA,
00:57:58
Speaker
National Insurance okay necessari yeah insurance Company, is a government company. uska branch manager ah jobbm and The guy who is supposed to do business with us wouldn't even come to meet us, because giving business. he doesn't have to worry about it.
00:58:19
Speaker
insurance, but the guy would say, no, this rate is, you have to take it, leave it. From there to now, of course, things have changed because there was no transparency, etc. Plus, they had burnt their fingers because people had a lot of fraud. Our
Global Expansion and Strategic Partnerships
00:58:38
Speaker
advantage was that we have industry, second, our technology, third, what we did is, for example, today when you are buying, let's say, an Apple Care on your iPhone or a Samsung Care on a Samsung phone or a tablet,
00:58:49
Speaker
I don't even ask you when you bought, where you bought, nothing. From the serial number, I already know that's the integration we have with Apple and Samsung and others. So, you don't need to tell me I bought yesterday. What happened a You buy after breaking, and you say fake invoice, and the dealer can give it all if you're friends.
00:59:10
Speaker
Nobody is going to validate. right All that you validate is the date of purchase as shown in the invoice. So in our case, we don't believe any of that. We are like, boss, when product is switched on, onena it has sent a signal to the server of the brand.
00:59:23
Speaker
I will check that. That's all I need. don't know if it's going to be good thing. So I know whether it is three days, five days, ten days. If it is ten days, then I ask for a video verification.
00:59:35
Speaker
So we solved that by a process itself. So a lot of those things helped us kind of control. A little bit about insurers, i want to just add here. So you said that ah before Servify, the way extended warranty was sold was essentially a customer.
00:59:54
Speaker
and And this I actually experienced firsthand. I remember buying a Galaxy Note tablet, which was probably the most expensive gadget I had ever purchased in, I think, 2015 or so. And I bought it at Knott Place in Delhi. And the showroom people said that you want extended warranty and I said yes and they whatever They did the paperwork and they gave me a Bajaj Alians paperwork. And I was a little surprised that why is Bajaj Alians here giving me a quarantine. So this was already an established business for insurance companies. Yes. You know, basically, insurers go see the whole point was insurance. The whole point was insurance. The customer has to go hoops and bounds to get a claim approved. Right. on customer conquerer these person we milanu kusha achailga kuto
01:00:43
Speaker
oh today If you see in the hospital, sir, you'll get 70% of injection, all those exclusions. I mean, you have do so page guide TNC document, and there will be 199 pages that will say what is excluded.
01:00:59
Speaker
I'm sorry, I'm exaggerating. yeah but so Unfortunately, the insurance was right. So we said, nine na a customers go no, no, no. Now, why are you doing? Because you know, unfortunately, you have 10 customers coming back.
01:01:11
Speaker
usme Nine are genuine. One is fraud. But you're making that bad experience for nine others because of that one guy. Right. So we said, can we solve it systemically by making that one guy suffer at the point of purchase itself and give great experience the balance nine?
01:01:29
Speaker
So, principle was different. So, we told the insurance that we won't give you fraud, no one believed. Then we said, okay, we cap ratio. So, for the insurance company, instead of being a B2C business, it became a B2B business. You were like a wholesale provider. At that time, B2B was a B2B because they used to partner with the retailer.
01:01:49
Speaker
ah Okay. But so each policy was individually issued. Correct. and so so group level pay okay So obviously for a customer, this is more of an experienced product.
01:02:00
Speaker
So we kind of changed that. Then obviously they started seeing. Second was we said, look, you insurance, I agree, but do you really know the product? You have been doing bunardia at the time of onboarding.
01:02:16
Speaker
But much fraud is in repair? It is like hospital. Okay, insurance. Let's go, doctor. You have gone for an orthopedic visit, but he's also going to be a neurosurgeon. Okay, understood. yeah but He said, boss, how are you controlling that? That is not how it should be, right? So we said, look, we understand that. aka did to me Because we come from that space, plus now we built the technology also.
01:02:48
Speaker
So if you have a problem with the display, know that display and at best or a component will probably use. huga You cannot say back cover changed because it's insurance, right? So a lot of those controls. We said, look, if you don't come to the new, then we'll be second. a Third,
01:03:03
Speaker
We are not using like you, Gafur Bhai and Tavde of the street. We are using the brand which has established SOPs. So, service center will not able to do it. Number four, we said we are giving a royalty to the brand for using their name, Samsung Care or whatever.
01:03:20
Speaker
And therefore, they are earning already. So, our negotiation on parts is at a bill of material price, not at the customer price. So, if display customer gives $3000, I get $3000.
01:03:32
Speaker
So, my claim cost also gets. So, the claim frequency gets, claim cost gets. So, now this is a very competitive offering. just ki would just say up becomeoga maybe become monga dealer become agar brand become my So, basically this is how the whole business was built and it was proven.
01:03:49
Speaker
So, obviously we started with some of the... ah national ones because they were the only one who would agree because I mean again I still remember when we used to do this no insurer was willing to meet us then we had to go through a broker u broker ledaha daa igdham mala frankly very shady type of behavior no no no that was prepared to underrate that division manager um
01:04:20
Speaker
I mean, why should somebody say no or why should only one guy should say yes? No, no, we should manage it. What did you manage? khaki up yeah on a simple matter then It's
01:04:35
Speaker
Why are you ready for loss? All of this. And then people would say, you know, what actual calculation. mess I would say, what is actual calculation? It's not so simple math. Because you are saying that whatever premium you pay, you will only consume 95% of that. and things my See, my biggest disbelief was somebody would say, have data.
01:05:00
Speaker
I was telling myself, have data, but if understand that I launched Apple Care on the iPhone 16, appleca launch gear So, a lot disconnect. And obviously, we were even told that you guy, actuary or whatever.
01:05:15
Speaker
appco data gavalu care what's the apple but a the qmi after tomerus data campba was data sample price car so lot of disconnect and obviously we were even told that you should hire an actorial guy a whatever And we said, but this is simple math. scalelu yeah So, of course, I mean, I'm not disrespecting again that profession. But this business, I thought that this complexity is not an actuary level.
01:05:47
Speaker
And then we said, look, I am a tech guy. I'll take all the numbers from tech. And then you have MI, ML, AI, all those things that happened today, which can even predict.
01:05:59
Speaker
So what can we do in a system? And it can do in a scalable way. And it will do more with accuracy. sega jaha Correct? So I think today we are at a stage where, I mean, obviously, luckily, we don't have any actually guys, but we're running profitable programs. We're running all our insurers. None of them are losing money.
01:06:20
Speaker
In fact, now we have even started signing profit share agreement. If they they have to return back. So the business has evolved. Amazing. So ah for ah a brand which is selling this, ah how is the money split? So say if it's a 10,000 rupee extended warranty product, yeah how much goes to the brand? How much goes to Servify? How much goes to the seller or the channel?
01:06:46
Speaker
Yeah, so typically if it is 100, 10,000 rupees customer price about the retailer makes. oh they make the maximum okay The reason, i'll I'll tell you two reasons. One, obviously, they don't make too much money on the hardware because of the competition. Amazon is selling so much in the system, if you look at Amazon, you get so much. So on a 1,000 rupees iPhone, he makes probably 1,000 rupees on which he has to take care of inventory cost, capital cost, all of that, right?
01:07:16
Speaker
Set up cost. So they obviously sell and make money from accessories or from any value-added services like extended coverage. So their expectations are high.
01:07:27
Speaker
So obviously you have to manage that. So charge 4 to 4 and a half thousand, about 40 to 45% goes to the retail. Then about 10 to 15% goes to the OEM as the royalty because it's their brand name, but also they use it on the promotion where they pay incentive to their promoters on ground because every store has a Samsung T-shirt, pan open the Apple T-shirt. pen open right So their incentives, etc. or route are also run from time to time by the brand.
01:07:57
Speaker
So they spend that money, but they also retain some money. The balance, let's say 45 or comes to Servify, which is our revenue. Now, 40, from which again, we may give 25 to 28 to an insurer to underwrite the risk.
01:08:17
Speaker
Hmm. Balance is what we retain in which we have to run our entire business, tech, offices, operations, all of that. The beauty is this is still about a 15 to 18% EBITDA business at scale.
01:08:30
Speaker
Okay. Because we've, see again, we are an asset-like business. Our entire adjudication, i mean, insurance business, major TPS, 3-3, 5-6,000 people, our entire ops team, which manages all these claims and dealer onboarding to everything,
01:08:48
Speaker
He's about 15, 18 people on a 2000 floor business. Wow. okay Okay. Because we automated like almost everything. It's self-service. Like a lot of decisioning is just done through algorithms. And the beauty is today, even the call center, etc. We gave an AI avatar.
01:09:05
Speaker
That means, customer is learning about the machine or the girl is talking about the girl. Okay. Okay. Amazing. Amazing. and okay So, is this, are you also doing this for Apple?
01:09:18
Speaker
Yeah, we do this for Apple. So with Apple, we work in India, Middle East. Middle East includes UAE, Saudi and rest of the Arab countries. And then Europe in 14 countries, we have the mandate.
01:09:34
Speaker
We are live in, I think, four or five countries only. We are still scaling. ah And poland ah Poland is Europe only. We may start soon in Turkey and US.
01:09:45
Speaker
Okay. Samsung, we work in India, in Middle East, in MENA region, Middle East and North Africa, in the US, in Canada and some parts of Europe and Turkey.
01:09:56
Speaker
Wow. How much of your revenue is domestic? How much is international? Domestic is now only 30%. Wow. Okay. Amazing. It's also because you know the the product average selling price, the blended ASP is much higher in the Western market. So just to give a sense, like smartphone as a category if have to use, let's say 150 million smartphones are sold in India.
01:10:21
Speaker
And europe alsos ah US also sells about 160 million smartphones. Now the blended ASP average selling price right from Apple's 1 lakh rupees to Xiaomi's 6,000 rupees, the blended ASP in India is still 18,000 to 20,000 rupees.
01:10:38
Speaker
ah in In the US, that's 65,000 rupees. Right.
01:10:46
Speaker
So, and obviously, therefore, so as the price goes up, the attach is higher. i mean, people find it valuable as the product value goes up. Do you see this business as a...
01:11:01
Speaker
fintech business or as a like a ops business so you know a fintech lens of looking at the business is to say that okay i am offering a risk management product uh you know i'm putting this off the books of the brand and i'm book for little like i'm distributing the risk further and some of the question yeah uh so fantastic question actually so in fact That's how we are now kind of explaining our business to the larger investor community. And as we are thinking of going public, because this is not a services business, right? So it's more of distribution of risk and therefore largely insure tech and FinTech ah orchestration business.
01:11:47
Speaker
so obviously I think, you know, it's been such a difficult time ah explaining this business to our investor community saying, people are saying, okay, you are not e-commerce, you are not SaaS, you are not insurance, you are not Quintech. What are you? are not service. So how do we kind of bucket you? I think, but now people have started understanding and we are now kind of the narration for the public market is like very similar to what you said. We are a FinTech, Insotech, Risk, ah Distribution, Aggregation, Orchestration business. We are still figuring out how to tell it, but yeah very close to what you're saying. Okay, okay. Amazing. I think you got it very well. You can become a very good VC, I think. you give me the money i'll invest it for you sure there you make money yeah so uh what you know which brand did you start with like the first please sign up and the first customer was always apple okay uh i think you know uh we've been x extremely fortunate uh to have apple as a trusted partner from day one
01:12:58
Speaker
right from 2008 in my life, ah right from India to Cupertino. There's a lot of respect for the unique ideas, for for, you know, very, I would say, culturally matching their expectations, right? So I think they've reciprocated very well. Many a times we wouldn't have done business on various aspects, but there is always...
01:13:25
Speaker
open ears to ideas. At least that's the kind of access we've got. And it it feels so proud when I visit Cupertino at Apple Park, you see a board welcome servify. right So you're such a small entity, but that's that's what you live for. right So it was Apple, but in terms of our revenue, it was OnePlus where we started making ah the first kind of real money.
01:13:51
Speaker
ah So Apple and OnePlus were our initial customers, then of course Samsung and today almost all the top OEMs that you can think of, Apple, OnePlus, Xiaomi, Oppo, Vivo, Bose, Motorola.
01:14:04
Speaker
you can You can think of almost all the brands that we do business with. But again, ah Apple and Samsung are still our large customers globally. We've signed up with HP also for many markets. We went live in UK first.
01:14:18
Speaker
We've also partnered with now many telcos, Saudi Telecom, AT&T in the US ah and many big retail like Media Mart in Europe ah or Bordeaux in Europe or Bollinger in Paris, ah some of those big ones.
01:14:35
Speaker
So this is a, I mean, now we've reached some scale. I mean, there is always an advantage. So, you know, some of these big customers wouldn't even call us because we we won't qualify, right? Saying, hey, you're too small, $100 million, $200 million dollar company. Our business is half a billion dollars. What you do? You're so But now we are kind of getting in.
01:14:57
Speaker
So AppleCare, I think, has been a product which has been around for quite a long time. So like before you were powering it, how was Apple doing it? Excellent question. So Apple Care was not available in India. So we brought Apple Care Plus to India.
01:15:13
Speaker
So Apple Care as a construct is a distribution product, which is underwritten by Apple, sold by Apple.
Servify's Innovation in AppleCare Distribution
01:15:19
Speaker
They were only selling it in countries where Apple calls it as direct markets, where Apple would have their own Apple.com and Apple stores.
01:15:27
Speaker
So in India, they didn't have until they have now a few stores. But we were the one who brought Apple Care to India saying we will distribute it because we know how to sell. So now that Apple Care Plus, but again, it's a distribution product, which means standard offering, standard price, standard margin, you can't change.
01:15:44
Speaker
So we said, but this market requires one year offering because Apple Care Plus is a two year offering. Dealer wants 45% margin. You offer 20% margin. kove chahanni So we built our own product, but with Apple's name called Apple Care Service.
01:15:59
Speaker
So we branded it as Protect Plus powered by Servify and Protect Plus with Apple Care Services. So there is Apple name. It's a complimentary product. But year, it will sell Protect Plus. Apple Care Plus will sell 2 years. But standard offering, global coverage, everything powered by Apple.
01:16:16
Speaker
But it is Servify product. so same way So basically, Apple Care Plus is generally sold in Apple-owned retail. Apple-controlled channels. Wherever there is third party like dealers and others, because they want more margins, so AppleCare Plus generally don't push. They say, what they in margin? And if they want to a customer for 2 years, they don't buy a customer. they will buy a plan from 9000 to 9000, which makes it 5000 to 4000, which is a good one.
01:16:45
Speaker
just mewa panam chatgar banna to wo cush it So that is what we power. Now, AppleCare Plus is the first product that we brought. Then we created AppleCare Services as a second product.
01:16:56
Speaker
And now we are doing this worldwide in all the markets. And the beauty is, by the way, Apple sells devices in, let's say, 160 countries. AppleCare is available only in 31 countries even and today.
01:17:08
Speaker
So now imagine the opportunity for us to grow. For example, in Indonesia, there AppleCare. In Poland, there is AppleCare. In Hong Kong, there is no AppleCare. We have to sell all of them. Right. Okay.
01:17:20
Speaker
Okay. So because it's also a license, right? So obviously, therefore, ah you know, Apple is a very compliance driven company. So they don't have licenses to sell in Indonesia, in Poland.
01:17:32
Speaker
So because they underwrite with AIG, which has limited country... coverage So they are not able to scale. So that's where Servify comes as a second best partner for them to scale beyond the existing markets.
01:17:45
Speaker
And that's where they are telling us, you can launch, you can launch, you can launch, you can can launch, you can launch, you launch, you can launch, launch. Okay. So in the direct markets ah where Apple is doing it themselves, they have like an insurance backstop.
01:17:58
Speaker
Correct. it is like But they they need a distributor to still sell in the market. Okay. Only in their own retail store, they sell and they are the seller on record. Right. But to sell through a Chroma, they need a Servify to bill it to Chroma.
01:18:12
Speaker
okay yeah Okay. Okay. Okay. Got it. Got it. Okay. and Understood. Does Apple make more money through their own AppleCare or through ah law like which is bigger revenue, like AppleCare sales or the Servify AppleCare sales? I'm to ask to ask me information in public.
01:18:32
Speaker
so I think they make the similar amount of money. Wow. Amazing. Amazing. Okay. Got it. Okay. So do you also then need a distributor onboarding team?
01:18:47
Speaker
ah like when i mean The beauty is this is a land and expand business. Of course, you need field teams. But you will onboard once in Chroma, irrespective of which brand you're onboarding it for.
01:18:59
Speaker
If you have onboarded for Samsung, then you will add to Apple. If you want to add to Xiaomi, then you will add to Xiaomi. So that's the beauty. And again, the complexity behind all of this is, see, Chroma is still an organized provider, right?
01:19:15
Speaker
But there are 50,000 unorganized general trade sellers. um because case of business carro So we created a fully scalable wallet driven model. So once they onboard themselves, because otherwise will collection with 5000 outlets. say it's It's all prepaid.
01:19:35
Speaker
or pay on the go. So we integrated UPI payment with their preferred choice ah bank. So whenever they do the transaction, it automatically... So they don't have to go out of the platform. We integrated that. We created a super wallet layer in between them and the actual wallet behind.
01:19:55
Speaker
So who's time to check qa we took all those approvals from Paytm's and the Gpay's of the world. So it is as good as they are making the payment real time when they are buying, they won't sell. if they don't have money in the bank, they won't sell. I have risk zero.
01:20:11
Speaker
So don't they already stock some sort of, like when someone is buying an AppleCare, they must be getting some card, like some nice fancy. physically closed for 10 years.
01:20:22
Speaker
Ah, okay. So it's it's purely like an SMS and an... Yeah, SMS, email, and but a digital product. It's a And you can go to Apple site and check. Oh. Or Saryusha's site and check. Oh. So what is the experience for someone at a like a general trade store? Like if I walk in and I'm buying. So you walk in, you are asked, sir, you should. So you say, yes, you should. So our merchant portal or merchant app has been given in all places. So it's available in over 150,000 outlets today.
01:20:53
Speaker
So, in our app, it will scan the serial number from our app, it will validate whether the serial number is eligible or not. Because we know the new and new stuff. So, when it is eligible, it will ask the customer details, and it will also generate a QR code. So, the customer can scan the QR code and the agent can enter.
01:21:16
Speaker
So, automatically the payment link goes to the customer. or to their point of sale if there is point of sale integration. So if they have been paid with product, the money comes back.
01:21:27
Speaker
and Now, a completes this, he or she gets an SMS from our platform, he gets a WhatsApp from our platform and an email from our platform. So subject up and now, the customer will all know Servify also because the mail comes from no reply at Servify.
01:21:44
Speaker
And a small, ah you know, six number font saying Powered by Servify. oh Okay. And so because the customer is paying you directly, so then you pass on the margin to the... Correct. So we do multiple. In some cases, they pay to the retailer. If it's a cash thing, then they would pay. Yeah. So, ah but we... Our... While the money flow could be multiple modes, but revenue is what we build to an OEM as our wholesale price.
01:22:14
Speaker
Okay, okay, okay. yeah good And so how do you get to 150,000? Like how big is your dealer onboarding team? How did you scale that up? So see, the beauty is, our case, what happens? We told Apple, we will go The sales team also helps us. Okay.
01:22:35
Speaker
Same with Samsung team. They say, sir, this our authorized distributor, our authorized provider. You have in system and register. So you have to send it tomorrow. And it's pure self-service. Dealer can just download it. Yeah, it's a self-service. It does validation of PAN, MAN, GST, all of that.
01:22:51
Speaker
Of course, I think what we call as boss team, which is our business operation support team, is I think about maybe 12-15 people today. Okay. and So, these 12-15 people are responsible for the 150,000 merchants that... Merchants and their settlement, don't get their invoice, they need to reconciliation, everything.
01:23:10
Speaker
Okay. Ideally, I mean, our... At least... vision, ambition, whatever you want to say, is that you should go to 15 people's mal yeah it's Not in the negative sense. Yeah, but automate through AI, etc. Right, right. And how big is your sales team? giving In fact, we've given now partners where they can see their own transactions, who can see their reconciliation. could they accept there was ah um maybe We've reached to that level. Almost like Amazon seller central.
01:23:39
Speaker
And how big is your sales team?
01:23:44
Speaker
India is where we have the biggest team. I think about twenty five people hoga sales me so yes he was doing what are they going to a samsung and saying work witherifify or i have two types of teams one is the account management team which will go and meet the samsung leadership and strategize and unke our daily interaction there kiss are be cry then maybe cry yes to ray after a y channel mikani or a help carru second is the field teams which we call as the regional sales teams which are
01:24:15
Speaker
like mostly Each region is managed by two, three people. and like yeah do things and drain it Distribution is there. like ah so They will go to a Chroma, they will go to a Vijay Sales, they will go to a top 10 electronics.
01:24:30
Speaker
I mean, their job is to actually ensure sales in the field. The promoters are incentivized, promoters are motivated. So, you know, they are making bike offer, Thailand offer. bannatherrethe which no Yeah, okay. it. And how does the the West work compared to India?
01:24:50
Speaker
How does the? ah Western countries, how does it work over there? Oh, Western countries are largely not a distribution driven business. Okay. So, India, mekaa telcos don't sell. It is all retail stores selling.
01:25:02
Speaker
Yeah. West made telcos are the major contributors to sale with the subscription. Hmm. So, retail stores contribute a very little. So, other than the brand-owned retail, you have only the Best Buy and the best you know the the Walmart type stores, right? The Costco, Walmart, Best Buy stores. And these are all organized. There is no... um like You don't need sales teams. You need a very expensive SVP to go and meet the EVP and the SVPs of AT&T, right? Right, right, right. And there you just need to make sure that there is placement at a prominent. No, right, right.
01:25:35
Speaker
So, our whole US k team is, I think, what? 14 people or 13 people. North America team. Wow. Okay. Which includes service, sales, marketing, ops, and project management, tech.
01:25:50
Speaker
Okay. Okay. Our biggest team is tech. a Because, see, everything starts and ends with tech for us. So, if we want to launch in AT&T, AT&T is the point of sale, AT&T is the back-end system integration, ah insurance integration, ERP integration, website integration. So, it's like some 7-8 systems that we have to integrate. So, our tech team is the largest.
Financial Strategy and Profitability
01:26:15
Speaker
So, out of the 600 people we have,
01:26:19
Speaker
Close to 300 people are in tech and product. Wow. OK. Correct me if I'm wrong, you raised about $165 million date? we've raised about million date.
01:26:33
Speaker
okay okay ah This business ah doesn't sound like the kind of business which needs a a lot of money because... Yeah, absolutely. You are getting upfront payment, right? When the customer buys, there's upfront payment. that i spend was later on So why did you need so much money?
01:26:54
Speaker
Okay. So one, obviously, in our case, we had to reach a certain scale to see the operating leverage. So today, I still need to run a 500 people organization.
01:27:05
Speaker
Because I can't say that it's an integration will be zero. But want to do integration. knet So we have to build that tech. So obviously we have to invest. Number one. Number two.
01:27:17
Speaker
Before we launch we have to take a license. lena License lene ke baad, employees... This is like an insurance license. Yeah, it's a regulated business. In all countries, it's a regulated business. Oh, so this is essentially seen as an insurance product in the eyes of... It's our tech product, yes. So either you become an intermediary or a TPA or a broker or an obligor.
01:27:39
Speaker
So one of those licenses or couple of those licenses. So licenses ka karcha hai... Then, initial integration, onboarding, plus, I mean, imagine, for example, if I have to hire even one person in the US or in Europe, I have to still spend $250,000 salary per um per year.
01:28:00
Speaker
yeah My revenue may not be even $100,000, right? so So, we had to do all of that. So, initial investments and then... While all of this is in a positive cash flow business, Chroma is example I'm giving you. So that's one.
01:28:17
Speaker
But I
01:28:29
Speaker
so that's one but muja ins ensurera ka friend premium bena same the us like say a walmart costco they will all like have courses afterwards nobody wants to pay a friend oh Okay. So, you I need to invest in working capital. Right. Now, want to bank guarantee.
01:28:49
Speaker
if i don't want to pay upfront and i want to establish a credit i have to also give a bank guarantee so wo be So in terms of our cycle, so about c imagine two months of working capital is what we need for this business. Right. That's the investment. to whogai Rest is in building and developing and licenses and all of that.
01:29:09
Speaker
So as we speak, now we are operationally profitable as well. So this year, whole year will be profitable. So we've reached that threshold now where don't have our money.
01:29:21
Speaker
ah In India, you have a TPA license. In India, luckily, we don't need any of the license because it's a service contract. ah Why is it different in India compared to other countries? Because Indian regulations, this product, either can be a service contract or an insurance contract.
01:29:38
Speaker
In India, service contract is allowed. ah So, you don't need a license. But we operate as if we are a TPA. Structurally, we operate like a TPA with all the compliances the way we want, but our group insurance policy. So what we've done contractually is, let's say I am underwriting 100 crores of Samsung and Apple and Bose and others risk, let's say.
01:30:01
Speaker
So I pay that 100 crore premium to an ICICI and have taken a group insurance. Then I declared that I will do all customers with all my customers. And since am declaring upfront, it is insurer's responsibility and I am still compliant.
01:30:17
Speaker
Whereas in Europe, etc., they don't allow service contract concept. So we have multiple licenses. Intermediary license, broker license. I don't know if you have broker license, claim to see intermediary license. Those are very regulated markets. And also we've been...
01:30:35
Speaker
I would say a little inefficient in the initial years. ah Inefficient because of lack of knowledge, ah lack of, I would say, not only lack, but I think wrong advices.
01:30:47
Speaker
Some of these consultants ah in Europe and other markets also advise. See, Europe made 27 countries means 27 different regulations. Right.
01:30:58
Speaker
So every consultant would give us some advice and they would charge like 1000 euros per hour, all of that. So we spent some money in getting those licenses and we didn't want to take any risk.
01:31:12
Speaker
yeah So obviously, ah plus, you know, as a company, because we are kind of, you know, our ambition is to be a, ah long ah generational ah company as if we are a public company. So we have Big Four doing our audit. We have one of the Big Four also doing our internal audit.
01:31:31
Speaker
We have Oracle as a ERP, which itself is a massive, massive of investment and a pain implementation. so so a lot of those, I think we kind of made ah those investments early.
01:31:46
Speaker
And I believe it's it's only good that we have those practices. So we are run like a professional company. And I believe you're looking to go public soon. Yeah, that's at least the plan.
01:31:57
Speaker
ah Of course, we will choose our time and ah timing because especially now us being profitable and ah most of our investors are not really in in a hurry.
01:32:11
Speaker
to kind of see an exit. So we will, we will while the idea is, of course, we wanted to start planning now, we have already started planning. a lot of activities are underway.
01:32:21
Speaker
So the idea is we will be ready to go public whenever we decide and within the three, six months, we should be able to kind of ah submit our DRHP.
01:32:32
Speaker
Amazing. What's your revenue, estimated revenue for current financial year? So we used to report gross revenue before, which was ah you know taking into consideration the royalty that we pay, etc.
01:32:46
Speaker
Now we have taken off all of that. In fact, for Samsung, we are even taking off the insurance premium that we pay. So from our 2000 crore plus gross revenue company, because Indias is what we have moved and three years of Indias public company. So all of that, we said, look, bottom line remains the same. The absolute number, the percentage now goes significantly higher, but that's okay. We are in a 30% margin business now, but, uh,
01:33:11
Speaker
uh our revenue this year will be net revenue revenue new which is gap uh should be around 900 or 900 crores crores but if i look at the earlier way of reporting gross revenue we would have been 2000 crore plus and the sales teams are still crying saying you targets have maybe are and or not so greatly yeah who and what what is the profit that you will earn this year so I if I can share that yet in a public forum, but small number ah because this is the first year of profit. and Understood.
01:33:47
Speaker
We will do it by 2-3% if not more. ah But I think ah next year will be good. Okay. okay cookie we have See, the beauty is our operating cost base as the business scales up.
01:34:03
Speaker
Because I'm not adding new people. I'm not adding new offices. ah So basically, 80, 85, 90% of the additional absolute value on gross margin flows through to the net or EBITDA margin.
01:34:17
Speaker
So that's the operating leverage that we have. yeah this is typical of fintech businesses, right? like Yeah, yeah. High leverage kind of a business. Yeah. Amazing. Amazing. ah You're looking at like a couple of billion dollars of valuation kind of an IPO. I'm not going to valuation. I'm a country man. I'm going to go to bootstrapped company. A lot of people, see, I think, you know, you may want to be a billion dollar unicorn, all of that. I mean, a human being at the end of the day, right?
01:34:46
Speaker
But for me, I think none of them change anything, nor does it change at least for some of our investors. ah because one you know hama business ehanana difficult and probably i'm a more sales ops business guy rather than an investor ah presentation guy the bots are a log some jeny pay not but investor i am a pass iba we and on they je them see that me carhi i wait you see that me so g three investor imara igham like they there really understand this business and they came in so
01:35:19
Speaker
I'm sure all of them have seen multi, multi, multi X growth from the time they are there. So they are happy. yeah Second is, see, all these private valuations, I think people are now realizing is probably temporary.
01:35:35
Speaker
Hmm. ah it is not the valuation that matters today. In my opinion, 5-8 years after you have 10% of the company, what is the value care high I think is what matters. So, whenever we go public also, I think the idea is we will not really be losing sleep on what value we got listed. Rather than, because I see the beauty of this business is I have visibility of next 4 years of the growth.
01:36:02
Speaker
My contract signed me for 5 years. I started now and I have the for me. I have the growth for Apple. I have the growth for Europe. AT&T is now live. I have the growth for 3 years in full potential. We have launched the Samsung business, the C business, Appliance and Electronics.
01:36:20
Speaker
to abuse kaine s salga growth ba here So growth So this 900 crores net revenue will be at least 4,000 crores net revenue.
01:36:35
Speaker
What will the value profit will be that day? I think is what matters. Because in our business, I can't value business based on what is today. oh yes yeah Hopefully we should be a good...
01:36:48
Speaker
a multi-billion business in some some time whenever i think we are at the cusp of breaking so who's your competition like is there another company like this which is doing the orchestration there are there are companies in this space so both in india and abroad largely the difference is one we are a tech first company so i think tech is a huge difference to us and anybody else out there.
01:37:17
Speaker
Second is we are the only company that works with the OEMs using their supply chain. All of them have built this like their own third party business.
Retailer Partnerships and Operational Insights
01:37:26
Speaker
butiggaffur bi is a tap carte couldiveros like at the coulddi repair carte so They have a huge ops layer or they are dependent on third parties and not the audience in our case So this you're talking of like say this Flipkart acquired this company Yantra or something. Yantra is into refurbishment and seconds phone like the onside go or one assist all those companies in India okay or outside insurers.
01:37:50
Speaker
So generally they depend on third parties and or they have acquired companies which are doing service. Right. Right. right right In our case, we don't have any liability. We are partnering with OEM. I will go to Apple's partnership with me. I will go to Apple's service center.
01:38:11
Speaker
So there's nobody else who's doing direct OEM partnership? like No. powering this Also because OEMs can't work with OEMs. So the moment you work with OEM, you can't sell anything called Servify Care.
01:38:24
Speaker
They say, Salah, you're doing a competition with my product. Whereas all of them sell their own third-party products, right? so who So you have to let go of that opportunity. Because many times, when you're working with OEM, mean, OEM is again a placeholder.
01:38:36
Speaker
yeah Let's say you're working with a MediaMart. MediaMart says, okay, forget AppleCare. We will sell media care plan, you underwrite the risk and we'll make 50% margin. Chroma also has its own extended world on what they selling. What we've been able to achieve is we've been able to carve out, Apple, Samsung, so we've created our own wish there saying you can sell it with us.
01:39:04
Speaker
And how is Proma running their program? Do you run for the the retailers? They're doing in-house. In India, many people run on-side, one-assist, one-assist, one-assist, one-assist. But we don't run. Because our principle is we will not do conflict with our OEM partners. Yeah, okay. That is a much bigger opportunity anyway. Yeah, because see, for me, GTM...
01:39:27
Speaker
OEM helps. Promoter is put on Samsung. They have bloody 6,000 promoters. will put in field where will a thousand people in the field. It's impossible, right? Right.
01:39:38
Speaker
Yeah. Okay. Okay. Okay. So let me end with this. What are your lessons from TSS that you applied at Servify? You know, think because now running a business second time, you must have... Yeah. So TSS, I think, see, knowing...
01:39:54
Speaker
And I will probably give this anecdote to probably what is happening today on politics also. Boss, you should do a job in a country's first mandri.
01:40:07
Speaker
So exactly the same story, right? aqui Because nuances are so much, you don't know who you are going to ride.
01:40:19
Speaker
So that's number one. So your process has to be keeping that learning in mind. Number one. Number two, w bun the important tear because ultimately he is the one delivering that experience to the customer, whether it is at the retail sales point or at the service touch point.
01:40:35
Speaker
Boss, if you don't add value to their lives, you're not in this business. Many people say, I talk about sales outlet, retailers, in aba carhan service engineers. saba kan was unka See, they generally do not have a glamorous role.
01:40:55
Speaker
But they are the one who makes or breaks it for you. So I think knowing that is very important, number one. Second is... How do you add value at service center? Like timely payment, things like that. Timely payment? areuso up co See, you are giving constant business to them.
01:41:12
Speaker
See, people were not giving business. And what did we do with all kinds of audits? We said, boss, you don't want to do our system. kar dega And when you get it, we will make sure that you have no business with any OEM. That is our promise.
01:41:31
Speaker
Now I will tell you, people in our system, may when you have a claim, so let's say the handset went to the service center. So the service center has to scan the device using video and it does the validation of what is the condition.
01:41:48
Speaker
Now, you see a crack, it says, okay, display cracked. Then you have to also run a functional diagnostics, which also tells you what components have failed inside. On this basis, my system says, put display in, put camera in.
01:42:01
Speaker
Now, this is not a manual decision. Now, you have to choose someone. What does it do? It keeps hair strand on the and it keeps it. It keeps doing it. And the system keeps doing it. No external object.
01:42:13
Speaker
No crack found. Then they keep saying, your system is not working, sir. We send our boss to the mail. Sir, your technology is not working. This is a crack. Please approve.
01:42:26
Speaker
So we keep saying, okay, we work on the they keep saying, sir, the customer will take it. He's angry, sir. The customer will take it. Salit is saying, Right.
01:42:36
Speaker
So lot of these things, mean, just one nuance I'm saying. Yeah, yeah, yeah. Got it. So second is every component, I mean, brands like Apple, why there is so much to learn from them is Apple's product, canther display a serial number or a camera serial number or a motherboard serial number is linked to the IME of the product.
01:42:59
Speaker
So while you may have two exact same devices, but he's got this display is on the right, it will pop up that display is not belonging to this device. But they know this because they have worked below. So exactly the same or similar fundamentals we use on our system.
01:43:15
Speaker
if they say that they say, look, there is defective serial number, it's not just match, you haven't changed.
01:43:24
Speaker
Then that gets published to the brand saying, look, this is your service center. So we have something called as a confidence score, channel confidence
Operational Discipline and Final Reflections
01:43:30
Speaker
score. okay So everybody has to score above 80. It's below 80. Sometimes, I mean...
01:43:35
Speaker
i but sometimes i mean people run people business, right? The service center is going to be a brand service manager. They say, no, no, no, it's very good, sir, it's a good thing. Then we know, okay, you're the one. So, we give it to the system. Our auto-adjudication system is our dispatch system. They say, no, no,
01:44:04
Speaker
nuances of the business but i think Now again, this is a problem not just in India. So, you know, customers are not doing real fraud. It is your channel partners who do fraud. This is the same in the world. You will find service center in America. Now, the beauty is, you have a brand authorized service center, the percentage is very low. Because they also know that they can full of money.
01:44:32
Speaker
And with technology today, you can do a lot more.
01:44:37
Speaker
So it helps. And some parts you commercially price it. You know that it is not worth it. here So like coming back, lessons that you applied at Servify.
01:44:49
Speaker
What did you do differently at Servify? ah do differently. I would say, okay, one is, you know, knowing on-field operations. Second is technology. Third is foundational elements of running a company, I would say.
01:45:04
Speaker
Compliance. So, because you don't have to run overnight. You have to do it. Maybe you may not... you immediately make money, but in the long run you will if your practices are right.
01:45:17
Speaker
One example, which is in fact my consulting days slide, I tell you that effectiveness plays a image bigger role than efficiency.
01:45:28
Speaker
Now I'll give an example. People always say that we want to run an efficient operation. I tell you that efficiency is more effective than effectiveness. may focus grow Example, let's say you have 10 then service tickets that come to you, 10 repairs coming to you. And your promise is, I will solve every 2 hours every day.
01:45:47
Speaker
Any escalation. The first one you did it in 2 minutes, second one you did it in 3 minutes, next one you did it in 10 minutes, fourth one you did it in 2 minutes, fifth one you did it in 8 hours or 5 hours, sixth one you did it in 4 hours, then again you did everything else in 1 minute, 2 minute, 2 minute, 1 minute.
01:46:05
Speaker
Now, 10 average people, you are still within 2 hours. Right. That is an efficiency matrix. Turnaround time. But 20% of your customers, you didn't solve the problem in promised time.
01:46:17
Speaker
That's effectiveness. So, we see everything in everything. Is it effective or efficient? If it's not efficient, let's see first. Because same way, parts order.
01:46:27
Speaker
People say that I didn't know the alic would you i na oke which is a poor repair at co have So, your outcome is zero.
01:46:38
Speaker
right So, instead of saying being happy 90% orders fulfilled, what is the order you fulfill and in full? That is an effectiveness metrics. So lot of these elements, we are very finicky about identifying effectiveness metrics within the company. So this is a learning.
01:46:56
Speaker
See, today I can order more and be inefficient ineffective or inefficient, right? But we say that it's the conducive mindset. I mean, boss, why do we want to extra? How can we do it better? Because it's not about our bank or not, but you have to do it right.
01:47:11
Speaker
And I'll give you one recent example. So we we have Oracle implemented. to usma subkaak limiter So sometimes when you make certain, we in our business, we have to also purchase the inventory to solve a customer's problem, right?
01:47:28
Speaker
It's not our inventory, but it's our cash flow. but gasromare So we have a limit for each one. One smart lady she knew that the limit was $200,000. She ordered $2 million. to order $2 million for her.
01:47:46
Speaker
She had to order Because all the orders are within her limit, it didn't raise alarm.
01:48:00
Speaker
She to pass the order. Now,
01:48:05
Speaker
uo ye chi yo bugaki pea vikata bas wohamma finfa de kabo like average sammera e had suddenly cu do dollar a cutta america way ure flagreka o flagpaak take the butusmentas orderre ka ipucobo like ibi two years go just order the abi kawa ye buta cheltic and the thin in hungga just order the amarajo saerre mostly dispatchka theamal do milola now we can manage.
01:48:33
Speaker
But how do you set examples? right So it's very clear that person who ordered, because the person became smarter, right? uuma that yeah You have to now go and sit with that person or supplier, beg, borrow, do whatever you want. Say that my company will not back. That escalation has made me like that. You know, it is our commitment to the supplier. We have never done this. It will cause reputation issues.
01:49:01
Speaker
So I reply also, sorry, please tell the partner that you made a mistake. And if the supplier still says, I don't care for your mistake, but I hold your company responsible, then it's okay. Then we know that you've been managing that partner for five years and you don't have that much. So I have clear understanding of your capability. This is partner's intent. So I have to know what I have to I have to get the line. Now, these are some practices you have to do.
01:49:30
Speaker
Right. And by the way, in all of this, her supervisor requested me on top of that email. it's a mistake, let's accept, please us go don't take any action, we'll hold the inventory for some time, we'll try to optimize as much as possible. But why?
01:49:47
Speaker
Because it's not a pinch of $2 million. There's no pinch of money in the bank. But pinch is wrong. So I think that practice is what I'm talking about again importance.
01:49:58
Speaker
So I think this is another learning from our no paisa days. When you are constructing, you have but look your Your DNA is frugal. oh DNA is like no wastage. I am okay to spend. I mean, when it comes to our, you know, celebrations or people, salaries, I think we we don't do kanjusri at all.
01:50:19
Speaker
The idea is, jaha zarurot nahi, vaha zarurot nahi hai. Yeah. And this is what an Apple does. This is what an Amazon does. Amazing. Amazing. Thank you so much for your time, Sri. It was a real pleasure.