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Challenging the Ola-Uber duopoly | Anmol Jaggi @ BluSmart
515 Plays2 years ago
BluSmart is an innovative ride-hailing company that acquires vehicles instead of relying on drivers to buy them. Anmol, an accomplished entrepreneur, shares his insights on building sustainable businesses in India. He started his first business in college and took it to a public listing. Tune in to learn from Anmol's valuable lessons in his decade-plus entrepreneurial journey.
Additional links:-
1.ETtech In-depth: How BluSmart plans to fight the Uber, Ola onslaught in buzzy EV cab business
2.BluSmart plans EV route to take over Uber and Ola
3.Anmol Jaggi says ‘common-sensical stuff’ helped BluSmart crack the ride-hailing business
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Transcript
Introduction to Anmol Jaggi and Blue Smart
00:00:00
Speaker
My name is Anmol Jagi. I lead the team at Blue Smart and Jensen.
00:00:16
Speaker
I have always found the ride-hailing business to be one of the most fascinating businesses. Uber was the pioneer in the space and once had the same kind of respect that people today have for a company like Tesla. But this is one of the hardest businesses to build. Both Uber and Ola are yet to turn profitable, and they have exited from many countries.
Challenges in the Ride-Hailing Business
00:00:36
Speaker
Blue Smart is one of the most exciting new companies in this highly competitive market. Blue Smart's unique proposition is that they run an all-electric fleet and they acquire the vehicles instead of relying on drivers to buy and add vehicles to their platform. And this might be the winning formula to build a profitable ride-hailing business in India. In this episode of the Founder Thesis Podcast, your host Akshay Tath speaks to Anmol Jaghi, who is a serial entrepreneur and the founder of Blue Smart. Anmol has an enviable track record as an entrepreneur.
00:01:06
Speaker
He started his first business from his college dorm room and took it to a public listing and since listing their share price has increased manifold. In this conversation, Anmol talks about building sustainable business for India and his lessons from his decade plus journey as an entrepreneur. Stay tuned and subscribe to The Founder thesis podcast or any audio streaming platform to learn the secrets of growth from the most disruptive founders in India.
Anmol's Entrepreneurial Journey
00:01:37
Speaker
So the story is that I was the general engineering, which is the first business that we started, started in my third year of engineering. By the time I was graduating, we were already at, at a yearly run rate of about close to 70, 80 lakh rupees at that time in 2006 and seven. Amazing. Which will be inflation adjusted something like two crore plus for today. But, but yeah, it started off well, I think,
00:02:05
Speaker
But how did you like, you know, tell me that zero to one, how did that idea come in your mind? Instead of doing a job, I'll do something on my own. And I mean, you must have been like a 20 year old kid. How does a 20 year old kid build a business which is doing like that kind of top line?
00:02:23
Speaker
Yeah, so I was at college. I did three internships. First internship was with Indian Oil and Pipeline Divisions. Second internship was with Bharat Petroleum in retail pumps, selling of fuel. And the third was with Reliance Industries, where we were trying to sell gas. While we were trying to sell gas, I was given the areas of Madhya Pradesh and Orissa.
00:02:45
Speaker
both of these areas are very and setting gas means like who's the buyer of gas like are these like power plants who buy gas or are you trying to sell to paper mills event plants a large chemical industries etc. or net power plants not for power usage but for application usage.
00:03:02
Speaker
So cement plant, paper mills, they were the two major customers apart from anybody who had a furnace. So we're a heating application, essentially. So I was trying to do that and I was working in Madhya Pradesh and Odisha. At that time, I saw a presentation which said there is something known as carbon credits. Basically, if you can shift from
00:03:27
Speaker
high carbon-intensive fuel to a lower carbon-intensive fuel, you get carbon credits. This is Viva 2005. And I learned that and I thought, boss,
Carbon Credits and Renewable Energy Ventures
00:03:35
Speaker
this is very cool. If you can transition to lower carbon, you make money. How do you make money? I remember ITC was one of the pioneers of moving to low carbon. How would I make money on this? Let's say they replaced energy with solar power. How would that lead to money for them?
00:03:57
Speaker
So every amount, every ton of carbon dioxide that you save, you get a certificate from the United Nations that you've saved this carbon dioxide, which is a tradable. That certificate can be traded in Europe and US. So people there want emission reductions because they have emission reduction mandates there. Emission reduction happens anywhere in the world. It's the same way that we have a common atmosphere. So that's why any
00:04:23
Speaker
emission reduction that we were doing in India, the certificates were being bought over by Europeans. These European companies, this is like a regulation in Europe that they had to reduce. So for regulatory compliance, they had to buy cargo brackets.
00:04:41
Speaker
So they used to do that. And so I came back to Dehradun. I spoke to one of my professors, told him, this is a great idea. Why don't we do something on this? He said that there are a lot of hydropower plants in air in Uttarakhand. So why don't hydropower plants produce clean energy? Why don't we get them?
00:04:59
Speaker
So we started one project, second project, third project. He introduced me to a lot of hydro project owners. And work just started to happen. And then I was juggling between college assignments, traveling to meet my girlfriend and also work for clients. This would have been, I guess, a lot of
00:05:22
Speaker
paperwork. Like say, for example, you have these consultants who help you get an ISO certification, where they make your business ready, they take your documentation process, etc. So this would be very similar to that, I'm guessing, where you would have to follow the process. 80% was the process paperwork and 20% was physical activity. We just got, we built some great relationships in the renewable energy industry. So while I was graduating in 2015, what kind of physical activity?
00:05:53
Speaker
We had to do some stakeholder consultation that the project is not, so it's not just that the project should be only saving carbon dioxide. If you have taken away livelihood of people or something else, then there should be no negative impact of the project. So we used to always study that because carbon emission reduction is one part of sustainable living, but there are other elements to it also. So whether it has caused any submergence of land, for example, in case of hydro projects,
00:06:21
Speaker
Did it leave to loss of livelihood for anybody? Did tribal land get annexed for it? So these kinds of sustainable measures. And how would you charge them? Like you would charge them for a prior credit that they receive or you would be just doing like trading? I used to do both the things. I used to trade as well as provide consulting. So consulting was like bread and butter. Cheese and cake was traded.
00:06:44
Speaker
trading with season cakes. So like you would take a commission on the transaction value when you traded and for getting them the certification there would be like a fixed fees of based on number of hours that you need to prepare. Absolutely. I was doing a lot of it while I was still at college and made some good money in there. I got placed with British gas. I was day zero placed in British gas. So very happy to have got placed also.
00:07:14
Speaker
Basically, all Indian parents would want their kids to have a job and be very safe. So I did present it to my dad again. And my dad had posted only one condition that your business revenue should be greater than your CTC.
00:07:32
Speaker
And with the conditions that I will also write MBA exam, CAT exam, even if I decided to become an entrepreneur. So those were some conditions that I had, which I fulfilled. Business was greater than CTC. Yeah, obviously 60-70 lakhs. There's no way that salary could have matched that kind of...
00:07:51
Speaker
Yeah, especially in 2007, especially in 2007, today 60-70 lakhs is not much, but I think 2007 was slightly different, is almost 15 years back.
00:08:01
Speaker
So, money would have doubled twice, you know, it's eight years, money doubled. So, yeah, but yes, it was good. So, I started off right after graduation, then formally, the company had already got incorporated. So, I started recruiting after I left college, started to build Gensol into a good company on carbon credits. My brother graduated in 2010 from IIT Roorkee.
00:08:25
Speaker
So he also then joined the business. By that time, business was doing very well. In 2010, we got awarded. How did you learn to build an organization? How did you learn that I should hire someone in finance? I should hire someone to do sales. I should hire someone. How is that growth happening?
00:08:44
Speaker
So I would say that is all weed of the day, need of the hour. If you were, for example, you needed more projects, then of course you need marketing team. If you're not able to buy your tax returns in time, then you of course need a finance guy, et cetera. So all of those have been very organically, nobody told my family.
Shift to Solar Energy and Expansion
00:09:05
Speaker
We are first-generation entrepreneur, my dad's been an army officer, which is a service background. We've not learned it sitting on the dining table. But I think whatever was the need of the army used to just pick up that problem and solve for that problem. I think that's how all zero to one stories are like that.
00:09:25
Speaker
And your focus was on hiring people who would execute or hiring people who would get business. I was a good sales guy myself, so really not interested in getting more sales done. It was more about execution, which was there. And like I mentioned, in 2010, my brother joined. He graduated from IIT, don't he? At that time, we decided that... By the time your brother graduated? By 2010, we had crossed 10 crores, I think.
00:09:54
Speaker
Amazing. That's phenomenal growth. That's like more than 10X in just 2-3 years. Yeah, we crossed 10 crores by that time, I think. Otherwise, he had got placed with Shell. Right, I've tried. So, you were telling me you decided when your brother joined? What did you decide?
00:10:20
Speaker
We decided that we now focus on solar energy also, just because carbon damage, like you mentioned, was a paper pushing job. That's good. It's good money, but we need to build up some more technology. We need to learn more skills. And solar seemed to be very interesting at that time because we thought that prices of solar are going to fall, efficiency is going to increase. And we pretty much see the telecom revolution at that time. Telecom also the same thing happened. Your costs went
00:10:48
Speaker
costs were coming down and there was mass adoption, which was there. So we predicted that solar is going to go the same way. And that's why my brother did not focus on carbohydrates. He's from day one focused on solar. And that's how we started to build the solar vertical internally. So now you won't take up projects and construct solar power plants.
00:11:09
Speaker
We started with advisory services. We did not have capital to get into construction, etc. But we started with advisory services. We've been the largest design engineering company for solar power plants in the country, designed about 50% of all solar plants in the country, been designed at our office. So they did some very amazing cool work in solar.
00:11:32
Speaker
This is from almost 2010 till about 2017. In 2007, we shut our advisory service because then we had much larger fishes to fry. And by that time, we had accumulated significant capital to get into other forms of businesses. So we did that. It was quite interesting there, too, because
00:11:56
Speaker
Nobody in the country actually knew how to design projects. So when traveled across the globe, learned it from experience, came to India, built two plants, saw how those plants had been built, what are the goods and bags of design that we have done, go back to the drawing board again, design.
00:12:12
Speaker
So we did quite an iterative process. We had a beautiful team, very nice team, which was helping us with all of it. So good. I think at peak in the advisory services, we had more than 200 design engineers with us. So doing a fairly fair amount of work that we used to do. Like I mentioned, we used to do about close to 50% of all projects in the country were designed at our office. So good work that we were doing.
00:12:38
Speaker
So, essentially from 2010 to 2017, you became a design agency or a design house for anybody who wanted to do a solar project. Yes, yes, yes. A design house, project management, advisory services, strategy, so a lot of that.
00:12:55
Speaker
which was there. And in 2017, we decided that we'll get into, now we'll start getting into two more sectors, which is construction of power plants and maintenance of solar power plants. So we started both of those businesses. By then, you would have got capital because those are like more capital intensive businesses. So what kind of top line were you doing by 2017 when you reached this milestone?
00:13:18
Speaker
70, we would be doing 55, 60 crores. Wow. Amazing. And this, like you, you were the guy getting into business and your brother was the one who was executing it. Like between the two of you, that was
00:13:32
Speaker
More or less, I think both of us used to do both the things. So it used to be basically half of our clients used to be managed by him, half of the clients were managed by me. But if we got in a client, we used to go end to end, build out the relationship to the complete scope of service. If I needed his help, he was always available. If he needed my help, I was always available.
00:13:57
Speaker
Then in 2017, we started operation maintenance and construction of our plants. Since then, we've been doing that.
BlueSmart's Public Listing and Diversification into Electric Mobility
00:14:06
Speaker
Construction of power plants. How does this operate as a business? You bid for selling electricity to the government and then you construct a plant or you go to people who have land and tell them, how does it work?
00:14:23
Speaker
Our clients are people who have won the tenders to supply electricity. Okay. They want a solar power plant and we go and build it for them. So this would be like build operate transfers kind of a model. It's an EPC job. We do engineering, procurement, construction. So they pay us money and we do EPC and complete the project. We also do operation and maintenance of these assets that we have built and many other assets that we have not built.
00:14:52
Speaker
So, we got into these two. 2019 was again very momentous. 2019, we started BlueSmart and Presento. Presento is into data analytics and BlueSmart is into the electric ride-in. We entered electric mobility in 2019. 2019, we also did IPO of Gensol, which was another momentous
00:15:13
Speaker
good, good, good to get a public listed company. So, so, so all that, all that was 2019, 2019 was a, was a busy year. Yeah, I can imagine. Okay. So let's just break down each of these. So what was the reason to go for an IPO? Because you were, you would not have needed funds as such, or you needed funds for investing in expanse. No, it was, it was more of a dream to have a listed company to say that we,
00:15:41
Speaker
Basically, what happens is that in your own killer time, the company is not listed, you really don't know the value or you can keep saying, I'm doing this, I'm doing that, but it's only the public markets which actually ascribe any value to it.
00:15:53
Speaker
So, it was good to get some value. I'm very happy that we were able to get it to the public market. Shareholders have enjoyed our stock price went from 62 rupees to today it is 1350 rupees, but about one month back it was 1900 rupees.
00:16:20
Speaker
That's amazing appreciation. 60 rupees to 1900 in about less than three years was a good achievement. People made tons of money in the gentle stock. We made ourselves tons of money out there. So that was another kind of high point in the journey of entrepreneurship. Amazing.
00:16:47
Speaker
What's your advice to founders who are seeking to do IPO? What are the challenges that you overcame in that journey to do an IPO? Who should do an IPO? Do you have any advice at all?
00:17:03
Speaker
No, I would say we did an IPO as a very small company. Our listing market cap was just 100 crores. So we did it as a very small company, which is okay to do a small IPO also. And basically you have to be only ensure that you are very responsible because there is public money which is there.
00:17:19
Speaker
Now, so I don't, if you can, if you think, I would say I would like to keep my conscious clear that only if I know that the business is going to do great. Well, and because I don't want people, you know, people have made tons of money. They give you a lot of blessings. People lose a lot of money. Then in not those, those blessings, we live, you know,
00:17:39
Speaker
turn into curses. I don't want to lose money for anybody. Everybody's hard-earned money. So I think I would only do an IPO if I was very confident that the business is doing extremely well and it's going to create shareholder returns. Ultimately, we have to also imagine this, that in an IPO majority, you value 25%. So we value 25%. 75% is still held by us.
00:18:05
Speaker
No, anything wrong with happening more than the shareholders impacts you because you still hold 75% of the business. So I think I would say that only do an IPO issue can create the returns. If you cannot create returns, if your business is not going to do well, because it's a big pressure because people
00:18:26
Speaker
then start to draw an analogy if the share price is doing well, business is doing well, if the share price is not doing well. So you have to be very, very careful. You are, of course, scrutiny every day at 9 15 a.m. People are organizing you. They are voting, like the share price is like a daily voting mechanism or daily feedback.
00:18:50
Speaker
Absolutely. So you did this slight amount of pressure to it too, because, you know, why would you, you know, you could focus the same energy on managing that to look at your share price and look at what's happening to it. It's a bit of pressure moment. You know, you, you feel very happy when it goes from 60 rupees to 1900, but there is also pressure when it comes from 1900 to 1400.
BlueSmart's Unique Ride-Hailing Model
00:19:11
Speaker
So although, you know, people have made a lot of money, but you still don't like it when it comes down. Yeah.
00:19:16
Speaker
And this is due to factors beyond your control, like it's just a market scenario. Unbuddy in London decided we should raise interest rates and then in the stock market, nothing's happened to my business. My business is doing all the time best. September quarter, we have closed the best ever September quarter, but people will...
00:19:35
Speaker
There are many external factors, perceptions, thoughts, which govern the market. Okay. So from 100 crore market cap at time of IPO today, you're about 1600-1700 crores. Amazing. And what about the top line? What has that trajectory been like like used in September?
00:19:57
Speaker
Yeah. So September quarter, we are closing at 170, close to 200 crores of top line in six months. Wow. Amazing. So you'll do like maybe some 400 crore kind of annual turnover.
00:20:14
Speaker
And what is the breakup of this? How much comes from which part of the business? This is only the construction business. Blue Smart operates in the private domain. Even in Jensol, you have the design.
00:20:32
Speaker
In 17, we stopped design services. Instead of giving advice to others, you decided, let's build ourselves. So now let's talk about BlueSmart. So 2019, this was like the one major business that you launched.
00:20:51
Speaker
Is it a subsidiary of Jensen or is it a system company like this? It's nothing. Only the founders are the same. The founders are the same. No other relationship between the two companies. No cross shareholding, etc. But only the founders are the same. I think again the same thing.
00:21:08
Speaker
which was important for us to take decisions on solar, which was around efficiencies improving and prices going down. So we loved the way solar market operated and solar started to become adopted in masses. We thought electric mobility is also niche today, but battery efficiency is going to improve, prices are going to fall.
00:21:30
Speaker
electric mobility will also become a mass market product. And let's get into that. So that's how we started new and off later, we just acquired a company for manufacturing EV cars also. So, I mean, you know, ride hailing is a
00:21:46
Speaker
I mean, it's like a graveyard of companies who could not succeed. It needs so much of cash burn and compared to, you know, you build Densoll with zero fundraise, zero external funding. I mean, tell me what you thought about it before you started. You know, these concerns must have come up, right? Like there is so much
00:22:10
Speaker
which companies have done already to build up the business and so on. Did you feel that there is a gap here through which there is an opportunity for us to enter? I wouldn't understand your thinking.
00:22:22
Speaker
So, clearly it was a David versus Goliath kind of war or a battle which is there. There are two very large ride-hailing companies which operate in the country, Ola and Uber, and we are the smallest one which is there. But I think there were two, three major glaring gaps which were there. On the fuel side, we could see that in electric versus conventional fuel,
00:22:48
Speaker
The ratio is 5 is to 1, so fuel on conventional is 5 times more expensive than electric, which basically means that if we run an ORAN and all-electric fleet, our fuel cost will be very low. Second, we believe that in the case of Ola and Uber, our driver partners own the car.
00:23:09
Speaker
In our case, we own the cars. So, when driver partners own the car, they get it at an interest rate of 18%, 20%, they don't have sibling scores, etc. So, their cost of finance is very high. Whereas, our cost of finance is like 8%, 8.5%. So, we save about 10% point on the interest rates, which means that our lease costs are also very cheap when compared to driver partners.
00:23:39
Speaker
The third thing, which is the most important thing, was that I think the two companies forgot about customer service completely, whether it was around cancellation, search pricing, dirty cars, ill-mannered driver partners. I think all of us have heard enough of it and not just heard experience to talk slow.
00:23:58
Speaker
I think that was our right to win and right to acquire the market. Customers will not come to us because we are electric. Customers will come to us if we can give a no-cancellation, surge-free, clean car. And that's what we strive for and that's what we have been doing over the last two and a half years. So, they were meant.
00:24:15
Speaker
On the cost side, interest cost and fuel cost, which is like 80% of your cost, we were able to crash it down using electric cars.
00:24:31
Speaker
On the customer side, we were very happy by saying that we'll do no surge, no cancellation, clean cars, all electric cars. So I think customers came in because of that. And then our unit economics were much better. In fact, we had almost at the verge of breaking even, God should be kind. Perhaps by December, we should break even. Wow. Amazing. Okay.
00:24:58
Speaker
So what was the process through which you built up these different pieces? I think what's unique here in this model is that you're using EV now. That obviously, because of your experience in the renewable energy space, that would be an obvious choice. But the choice to own the cars, the choice to
00:25:19
Speaker
keep drivers on your payroll on a salary model instead of how typically it's a pay-per-write for Uber and NOLA. How did you reach these decisions? Did you have some data points which helped you decide, let's buy cars and keep drivers on our payroll?
00:25:40
Speaker
every VC loves asset-like business models and so you are now going the other direction. So I would not understand what made you take this very controversial
00:25:53
Speaker
Yeah. So actually, what people have been trying to do and ride hail is to create like an Airbnb or why did Uber actually start globally? Uber globally started with a premise that there are sufficient cars on the road. People have, everybody will have some spare time and in that spare time, they will drive a car, make some, or they build some good relationships, talk to people, et cetera, et cetera. That's the founding principle of how Uber started. Ola is a copy. So Uber is the,
00:26:22
Speaker
first ride-hailing company which came in. But basically in India, there is nothing known as there are enough number of cars because the car ownership is just 20 cars for a thousand people. More importantly, you cannot run a white number plate car on a ride-hail. So driver partners had to specifically buy yellow number plate cars to run on ride-hail platforms.
00:26:44
Speaker
Which meant that it was not the Airbnb. Airbnb was what happens in US. That I have a spare car. Everybody in US 950 people out of 1000 people have a car. So essentially that model is unutilized asset. You are utilizing it by matching it to a demand.
00:27:04
Speaker
Yes, but in India, that's not the case. Yeah, there's no unutilized asset in the air. Unutilized asset. So, driver partners were forced to buy these
Advantages of Owning Electric Vehicles
00:27:18
Speaker
cars. When driver partners were forced to buy these cars, they bought it at 18-20%. What did Ola overdo? Ola over said, they were making 60,000-80,000 rupees a month.
00:27:31
Speaker
Now driver partners are not supposed to make 60, 80,000 rupees a month. So they were burning that much of money, which was absolutely useless. Now, if you don't want to burn that much money and create a sustainable way of working.
00:27:48
Speaker
And anyways, you might say you are not asset heavy or you might be asset light, but if you're doling out 60-80,000 rupees per month to a driver partner, pretty much you are paying for the asset. You are only paying for the asset without actually owning the asset. Instead, you buy that asset for 6-7 lakh rupees, at least own the asset. So, that's why I think it made no sense for us to kind of give out these kind of crazy
00:28:13
Speaker
Like, you know, on a per car basis, for example, Ola and Ober in India have spent about $5 billion put together. Out of which two billion dollars would have gone to for driver incentives. Okay. That's an amazing way to look at it. Okay. Okay.
00:28:36
Speaker
So, you know, is this model like a model which needs a lot of capital investment or because you're taking cars on lease so you don't necessarily need heavy capital infusion?
00:28:51
Speaker
The ride hailing as a own only needs a lot of money. There is a lot of technology that we have to build. We require additional amount of money because we also build out our fuel. Now the good part about running ice engine ride hailing is that at least you have petrol because you don't even have that. So we have to build our own fuel. So there is a lot of capital which is required to build out an EV ride hailing business. The capital is like, what are the primary heads where the capital goes? So what is to build the charging infrastructure?
00:29:21
Speaker
Three places basically, one is the charging infrastructure, two is to get cards, and three is technology, building the app, the consumer facing front end of it, and some marketing, etc. And marketing also, I think you don't do very heavy marketing spend.
00:29:43
Speaker
Service speaks for itself. Word of mouth is very strong. Our cost to acquire a customer is just about 40 rupees to acquire one customer. People typically spend 1500 to 2000 rupees in acquiring a customer. We give zero discounts. There is no discount on BlueSmart. There is no cashback.
00:30:05
Speaker
We don't offer any of that. Because I think it is cheaper, right? I've used Blue Smart for airport rides and all, and I thought it was cheaper than Uber. We don't surge. So that's the big point. So if there is surge, we'll definitely be cheaper.
00:30:29
Speaker
So we should, because the whole premise is that we don't want to search price. We want to say that for an office-going person, you are salaried, 250 rupees is your daily commute budget. Because of a search, imagine if you are in Delhi, about 15 days back, it rained and poured very heavily. That 250 rupee trip became 1,000 rupee trip. Now what is the fault of the person who is going from his office to his home?
00:30:56
Speaker
You know, that guy might be earning 1 lakh rupee salary today for just going back to home. The person is spending 1000 rupees, which basically is, you know, profiteering, opportunistic profiteering on somebody's back situation.
00:31:14
Speaker
Which is not right. Customers don't like it. Customers don't. You're on the other side of the table than with the customers. You're not on the same side of the table with the customers. And we don't do search pricing. So if you have spent to go from your hotel or your office or your home to the airport at, for example, 450 rupees,
00:31:35
Speaker
Next time also you go, you'll see 450 rupees. It's not because today's, today's a heavy, today's the sharer day, there is heavy traffic. So you will get 600 rupees. So the basic principles of business need to be right, which is that, you know, you have to, first principles, customer comes first.
Driver Engagement and Service Quality
00:31:59
Speaker
I don't fully agree with your point of service pricing. I mean,
00:32:04
Speaker
Because Ola would have flexible supply. I mean, they can get more supply in by giving more price. So that's where they do search price. For them, their way of thinking is a customer doesn't get a cap. Instead of that, let me at least make sure that he gets a cap by getting more supply in. And the way to get more supply is to do search pricing.
00:32:24
Speaker
Let me know if you got some extra cards on the road. There is no data to support that necessarily. It may be happening, may not be happening. It has now just become a motive to profit here.
00:32:41
Speaker
If it starts to dissolve, the city manager just says that next put a surge. Surge pricing is in the hands of city managers. The city manager decides that if it is starting to dissolve, next we put a 50% surge.
00:32:58
Speaker
Okay. Tell me about some of the other decisions you made, you know, in terms of taking drivers on fixed salary. I think that's like an interesting decision. What made you decide? It's not a fixed salary model that we have with them. We sub-lease the cars to driver partners, but we do very bite-sized sub-leases, 6-6-hour leases.
00:33:21
Speaker
The fully charged car becomes discharged or partially discharged in about 6 hours. So they come back to the charging hub and they swap the car. So they take a new car and drive it on the road. So the driver partner does not waste any time in charging of the car.
00:33:37
Speaker
So they operate on a lease and they have to pay us the lease, but their earnings, in case the driver partner has put in the requisite number of hours, and for whatever business reason has not been able to make enough revenue, we just offer a minimum guarantee to the driver partner, which supports their livelihood.
00:34:01
Speaker
Now, what happens, for example, during COVID or any time when the demand is low, is that the driver partner has to pay the EMI of the car, like in the case of Ola and Uber, has to pay for the maintenance of the car, but there is no earning that way. What does the driver partner do?
00:34:18
Speaker
And then they have to also run their own homes, they have to pay for their kids, they have to pay for their food, they have to pay for the tuition fees, etc. So we just ensure that in bad days time, there is a kind of a security cover with the driver partner that you will make such and such money irrespective of business.
00:34:38
Speaker
But that is only if you follow the protocol of the platform, which is great customer service, which is no cancellation, which is about opening the door for your customer, offering them a sanitizer. If you only perform on the quality standards that the platform has mentioned and you are trained for, only if you maintain those standards will you get the, if I can use the word security cover, otherwise you don't get it.
00:35:08
Speaker
So what is the economics for a driver? How much does he pay for a lease? And then like, you know, what can a driver earn in that six hour period?
00:35:16
Speaker
So, NetOff's work-thought platform is doing today, the driver-partner, NetOff, all the needs and etc., and at least comes like a full lease, you know, it's for a fully charged, maintained, insured, electric car. Otherwise, driver-partners have to pay separately for fuel, separately for maintenance, separately for insurance, separately for the, separately for the lease of the car, EMI of the car. In our case, it just comes out one bundle thing, they just have to pay one thing.
00:35:40
Speaker
which is there. And so approximately driver partners, if they are working, two shifts of six hours each make about close to 20 to 23,000 rupees a month for 26 days of working. Amazing. This is very interesting. You have essentially
00:36:04
Speaker
like you know how there is that SaaS moment in which companies no longer need to buy software and keep maintaining it and upgrading it on their own. They can just subscribe to software. So you have made an electric car available as a subscription to a driver where he can get his car lease and then just for that period where he's using the car only that period he has to pay the lease about. If there is not enough business, he can choose not to or he can choose to take 10 days off if he wants to and it will
00:36:32
Speaker
because it will not affect his costs if he's not working for 10 days. That brings in a very high quality of talent pool for our driver partners because you can as a driver partner, you do not have any fixed cost. You do not have to pay the EMI, you do not have to pay the lease, you do not have to pay the maintenance.
00:36:52
Speaker
Now you can, this is where we have actually now brought in what originally was the Uber concept that if you have spare time, come and drive. Right. Yeah. Yeah. Yeah. Because in India, the unutilized asset is manpower. So, so this is actually, so, so you get that. So we have multiple hundreds of students who drive for us.
00:37:11
Speaker
And so if you sit in a blue smart car, you can pretty much find a very educated MBA going, graduate who's driving the car because the guy had some spare time, four hours in a day he could spare.
00:37:23
Speaker
And in that four hours, he could make 12,000-13,000 rupees. Amazing. So how do you acquire driver partners at scale? We have unutilized India's strength and weakness. Both are the huge manpower that we have.
00:37:47
Speaker
So I think people are looking forward to earning opportunities where they have to only bring their skill and low capital. In the case of our competition, people have to bring skill, which is the skill to drive and capital. In our case, you only have to bring skill. So if you have the ability to drive safely, start earning money.
00:38:15
Speaker
What is your driver onboarding process? How do they get trained on what is the requirement of the platform so that your service quality is maintained? How do you maintain service quality basically?
00:38:28
Speaker
Yeah, so I think on the driver onboarding side, it's a two-day training process. Now, if you can ask that competition how they onboard driver partners, all you need to do is to scan your radar, scan your driving license, upload it in a portal, your driver ID becomes okay and you can start driving. Nobody's ever physically met the driver partner.
00:38:48
Speaker
In our case, the driver partner has to clear a fitness test, has to clear the background verification, has to clear a driving test because all electric cars are also automatic. So they have to clear a test, driving test for an automatic car. Electric cars don't have gears. So after they have done that, they go through a two-day training program. On every weekly, they have to complete two hours of training, which can happen through videos or in person. So they have to do that and then only they can be fit to be retained on the platform.
00:39:17
Speaker
Plus, we take complaints extremely seriously because what happens is that in case of our competition, if you dehire a driver partner, one car also gets dehired. If you say that you will not drive, that means one car also becomes less. In our case, if we dehire a driver partner for quality, the driver partner is gone. There is a new driver partner which will drive their car tomorrow. The car is there.
00:39:41
Speaker
So people know that if they do not perform, there are 20 people standing in the queue to take their job. So that is like a pressure on them. If you know that, people on Ola and driver partners on Ola and Ruben know, how you figured out each of these solutions to fix.
00:40:09
Speaker
Do you also collect data to ensure service quality? Is there an IoT device on the vehicle? Tell me about all of those other initiatives to maintain service quality. Huge amount of data which is connected. Customer feedback is the best format. If you go on to the App Store, operating is 4.9 out of 5. We've been maintaining it for a very long time.
00:40:35
Speaker
which is the best for any ride-hailing app in the world is the best star rating which is there. After every trip, customers review it. We have mystery riders who take. We have a dedicated call center where you can call in and mention your feedback. Social media is such a big provider of feedback. All of that is pretty
00:40:59
Speaker
active modes of getting feedback. And I think just like our stock market tells you at every 9.15 AM how you have been performing, after every trip the customer tells you how you have been performing.
00:41:14
Speaker
We do thousands of trips every day now and and about seventy percent of the trip people give a star rating after the trip so that is enough data to be collected and then they also mention whether the issue was with the cleanness of the car or with the driver behavior or something else etc etc.
00:41:32
Speaker
So I think huge amount of data flows in from customer side onto our app. And I think all of it is very deeply analyzed because customer service is the only key to success. What about IoT-based data? Does that help? Because I'm sure EVs have a lot more data than they can generate as compared to an iSCAR.
00:41:56
Speaker
No, we get a lot of data. So we get a lot of data on how the brakes have been applied. We get a lot of data on the speed of the car, acceleration of the car. We get a lot of data on if the door of the car has been opened, door has been closed. So we get all of that data which is there, which basically helps us only to ensure that
00:42:19
Speaker
that things are going right. So for example, if there is a sudden acceleration or deceleration of a car, we get to know that. And if it is, let's say, across the 4G kind of a mark, there is an alarm which gets raised at our operations center. That means that something wrong is happening with the car. So we use maybe an accident, maybe somebody has hit it, or the driver is driving in ash, etc., etc.
00:42:42
Speaker
We get all of that data from the IoT device which is there. Most importantly, the IoT data is about location. How our competition gets your location is through the phone of the driver partner. But in our case, that's not the case. In our case, the location is coming.
00:43:04
Speaker
From the car, the location is coming from the customer's phone, the location is also coming from the driver's phone and all of them are triangulated to understand that it's not that the car is showing X location, the driver partner is showing Y location and the customer is showing Z location. That means there is a safety incident which is going to happen.
00:43:28
Speaker
So all of that needs to move at a certain speed.
Scaling and Supply Challenges
00:43:33
Speaker
They all need to be in a certain radius, one meter radius of each other. So those are some of the tech helps us to identify safety issues because today, if there was a driver partner who threw your phone off, the bad guy, he threw your phone out of the car, there is no way you can track anything.
00:43:56
Speaker
Right. But you would come to know because the car and the customer location is different. So something is wrong. Yeah, absolutely. So we would also know the driver partner's location. A lot of things I think we also know if the car is running or not. If battery percentage is coming down, the car is running. Battery percentage is not coming down. The car is not running. The car is stationary. Was the AC on or not? We can even know whether the windows were rolled up or rolled down.
00:44:24
Speaker
No, okay. Amazing. And you also took a decision to not be on demand. Like I think you need to book a thesis of 45 minutes in advance.
00:44:35
Speaker
We would want to be in Stahil, but we are slightly constrained. We have about 2,500 cars now in Delhi NCR. To go in Stahil for full Delhi NCR, we need about 40,000 cars. So Avita, we have to do the full geography and then we have to start reducing time.
00:44:57
Speaker
What is the constraint to growth? Like, why can't you do 40,000 in a few more months? Is it a supply of vehicle? Is it supply of charging infra? Is it supply of money? Please do a forecast with CEO of Tata Motors. Okay. Ask him this question and let me know the answer also. Why they are not manufacturing in a CV cars? So the constraint is only supply of EV. There's no money or charging infra. Both of those are sorted.
00:45:27
Speaker
You smart has more than enough money than it needs. Because you anyway are taking on lease so you don't need to really put in money to acquire more cars.
00:45:37
Speaker
We need some money, but that's not hell of a money that we need. So we are very adequately capitalized. I think we still just in our back, we have enough money to last us for the next three years. So we're not actually issues only if we break even by October, then then by December, then anyways, we don't need further money.
00:46:00
Speaker
So from a running perspective, I think we are more than suffering. The only constraint is on how many cars can we get. Okay. So is this why you acquired an EV manufacturer? Okay. Tell me about that. Which company did you acquire? Why did you select it out of all the options in front of you? And what's on the roadmap for that company?
00:46:27
Speaker
So we acquired this business. This was a US based startup. They were not able to raise funds. They had a very nice product. The founder was a very technical guy, not a commercial guy. So he raised two rounds of funding, but couldn't raise the next one. And we wanted to start.
00:46:47
Speaker
We've not named it, we've not disclosed what business we acquired. We sent it to Passengers EV space. Yeah, Passengers EV space. It's a car. So we wanted cars for new smart. Nice technology, nice people, nice team. They had a looking prototype in place and they had figured out manufacturing also there and started.
00:47:12
Speaker
No, no, they were, they only had prototypes. They only had prototypes and basically they were trying to raise funds for manufacturing. They would essentially be competing against Tesla in the US market. Like that was going to be the ambition. This was supposed to be a $10,000 mass market EV. So now that team is working to set up manufacturing in India.
00:47:38
Speaker
Yes, yes. In fact, today at their office only, the plant is being set up at Pune, at Chacon in Pune. With God's grace, we should start the tribe production in the month of January and commercial production should start from March. Wow, that's amazingly fast. And because you acquired, so you can do this fast because they had already figured out the technology and that product market trade, the vehicle design, prototyping, R&D, all of that, they had already done so. Yeah, cool.
00:48:08
Speaker
So when we got in, the design was at stage minus one in the sense that one stage lower than good to go, good for production kind of a design, which was there. I think the teams worked hard. We just acquired the business very recently in April. So it's just been like six or months since we acquired it. And in the next three, four months, we'll have the plant ready and production started.
00:48:33
Speaker
And this is purely for internal consumption? Or is this going to be a standalone EV business which you'll also sell? We are going to sell to consumers. Did you tweak the design for Indian conditions? Or was there a need to tweak it for Indian conditions, the car design?
00:48:52
Speaker
Yeah, of course, there were certain things which were needed. But the founder is the founder of this company is also an Indian. Okay. Of course, in the US means company, but the founder is also an Indian. So, so there was, he knew pretty well about Indian conditions. It wasn't a big challenge. Okay. Amazing. Amazing. Okay.
00:49:11
Speaker
And what's the plan for this EV business? What is the run you will do? How many cars a month? So roadmap for this. Right now we are constructing our first plant. The first plant is going to have a manufacturing capacity of 1200 cars, two shifts. We decide to add a third shift. We can take it up to 2,000 cars per month also.
00:49:36
Speaker
going to produce, I would say if we start to shift to 100 cars a month, it'll be a very good start. But even this is not fully meeting your need. Like if you want to hit 40,000 in Delhi, this is like, so what else are you doing to meet that supply gap?
00:49:55
Speaker
I'm sure Tata Motors is ramping up their production. Our prime purchase is still going to be Tata Motors. We are also in very advanced negotiation with the European supplier of cars. So we should be able to sign an agreement in the next one, one and a half month with them for supplying a few thousand cars.
00:50:15
Speaker
Tata Motors, we've already placed an order for 13,500 cars with them, order which we have received 2,000, 11,500, order is still pending with them. So between Tata Motors, European, large auto manufacturer, and our own gentlemen production, probably I think in about 12, 15 months, we should be able to hit the mark. Okay. So what's the roadmap in terms of geographical expansion? So right now you are Delhi NCR focused.
00:50:44
Speaker
We
Expansion Plans and Revenue Streams
00:50:45
Speaker
launched Bangalore about two weeks back. So that's been a good launch. We're liking how Bangalore is shaping up. Bangalore can also observe about 40-50,000 cars. So Bangalore is a very large market also. So I think we are happy to be in these two geographies for now, not really looking at any third geography for the time being. I mean, there's so much scope here that you don't even need to. It'll take you a year or two to fully meet the demand of these geographies only, I'm guessing.
00:51:14
Speaker
Absolutely. Absolutely. So what is like the kind of revenues that you're doing? I want to understand the revenue model also, like you earn from the amount that you visit out to the driver plus something fun, right? Or like, how do you earn?
00:51:30
Speaker
should be on three things. One, we take a take read of the customer revenue. So what 25% of customer revenue comes to us. Do we make revenue from lease to the driver partners? And three, we also make revenue from third party to users charging stations. So, so we also make revenue from there. So blue is today annual revenues in the run rate of about more than 200 crores. Amazing. And how many charging points do you have?
00:52:00
Speaker
Close to 600 fast charging points. What is the difference between fast charging and slow charging? Why would you invest in slow charging? Why not just invest in fast charging? Is there a benefit to get slow charging points?
00:52:17
Speaker
Yeah, so what happens is that in the night time we have enough time to charge our car slow. Fast chargers of course cost about at least 20 times more expensive than a slow charger. So a slow charger you can get for about 6500 rupees. Fast charger if it is CCS is about 4 lakh rupees.
00:52:39
Speaker
So what has been your fundraising journey so far? Who are the investors? Who backed you? There's this thinking a bit about that also. So we've raised 4 rounds of capital deal date. We did a 3 million seed round, then we did a 7 million pre-A, then we did a 25 million A and 25 million A1.
00:53:00
Speaker
So we've raised about close to 60.5 million dollars till date, which is about close to let's say 400 crore rupees that we have raised. And yes, British Petroleum has been our largest investor. So BP is a significant investor with us, British Petroleum. Then we have Mayfield, who's a very solid investor with us.
00:53:24
Speaker
Then we have some of the largest family offices in the country of Bhaktas. For example, Chumant Khan and Munjal's office, which is also part of hero family. So, they pick up other kinds of family offices, etc, etc. Few very famous family offices of Bhaktas. So, good set of investors that we have.
00:53:43
Speaker
I guess it could not have been a big challenge for you to raise funds because you had that credibility of gensols, like
Adapting to COVID and Future Growth
00:53:49
Speaker
building up. But we were, but we had COVID and COVID was zero. Oh, right. Okay. We had to raise money for a company whose revenue was zero and a company whose prime business was the worst thing that anybody wanted, which is travel and mobility. Yeah. Right. Right. How was the COVID period for you? Like.
00:54:10
Speaker
Was it like a high stress, high pressure situation for you? Or did you have enough money in the bank to last it up particularly?
00:54:19
Speaker
So money's never been a constraint for us in any of the business. So money, we've always had sufficient money with us. I think it was a fun time apart from the human tragedy which was happening. It was generally a fun time because we were in the very early days of starting Blue. We started Blue on 6th of December 2019 and 20th of March the lockdown happened. So we had about 100 days only which we had operated.
00:54:46
Speaker
And all through the three months of lockdown, we just sat and improved the technology. So we had 100 days of experience. We knew where this was feeling. We knew what we had to build. So I think we were on Zoom call just building out the tech. And then when it all started again in July, and then again, we got a lockdown in.
00:55:10
Speaker
in December and then in May again when wave 2, wave 3 happened. So yes, it's been start, stop, start, stop. But every time we used to get a lot of experience of what is working, what is not working. And in those off-peak kind of days, which were the lockdown days, we used to go and build out tech.
00:55:34
Speaker
Otherwise, it's very difficult to change an operating system when operations are running because there's so much pressure of operations. But if you're sitting at home, no car is running on the road, you can pretty much just focus all your energies in fixing the tech. It helps you mature your product in a much faster way than would have been possible. Amazing.
00:55:58
Speaker
Plus, I guess COVID would have also made people value customer service more. Like your core promise of customer service would have become more valuable post COVID.
00:56:12
Speaker
Yes, I think people did talk about sanitization. People did want to approve that the driver partners were vaccinated. Also, a lot of this was there, which is great. I think, yes, COVID generally after the anti on sanitization, cleanliness, etc. We have been big beneficiaries on the business because of COVID.
00:56:38
Speaker
Our competition suffered massively. They had 500,000 cars, but a lot of driver partners gave their cars back, etc. So competition size actually halved.
00:56:52
Speaker
In your case, the drivers are still protected, but in their case, if there's no money, then the driver was bankrupt. So that would have a huge amount of reposition of car. Amazing. Okay. Okay. I've had that you're raising about $250 million in your next round. That's correct. Amazing. That would be like a unicorn round I'm guessing.
00:57:15
Speaker
No comments on that. It's a good race. Yeah, it is. It is amazing. Absolutely amazing. More power to you.
00:57:23
Speaker
And that brings us to the end of this conversation. I want to ask you for a favor now. Did you like listening to the show? I'd love to hear your feedback about it. Do you have your own startup ideas? I'd love to hear them. Do you have questions for any of the guests that you heard about in the show? I'd love to get your questions and pass them on to the guests. Write to me at adatthepodium.in. That's adatthepodium.in.