Transcript
Speaker: We did not lose money in a single investment, so there is no fatality. The fear of diminution is overrated. Manup Bansal is the founder of Driven. Imagine a fleet operator who's running, say, a Delhi to Dehradun bus route.
Speaker: Instead of buying an electric bus, which can cost up to one and a half crore, he can just rent it from Driven. Nomura found this idea so good that they put $80 million dollars into Driven even before they bought a single vehicle. In this episode of the Founder Thesis podcast, Manup breaks down changing business of leasing assets using data. I'm your host, Takshya Dutt.
Speaker: Manav, you are the founder of Driven. Welcome to the Founder Thesis podcast. um We were just chatting that we we're both from the same B-School. So I will take liberty of maybe doing a little bit of reverse ragging to you. Let me start by asking you this. What's a question that you wish an interviewer would ask you?
Speaker: That's a super good question. I wonder where did you plagiarize it from? So to the listeners, I can tell you I told you exactly this, that this is my pet interview in an interview. ah the but yeah and and Like I was telling 90 out of 20 people really struggle to answer that question.
Speaker: um And I think the question that you could ask is that how well is it different from being corporate person for majority of your life and how is it different when you're a founder?
Speaker: i think that could be a good question to ask. I'm not sure whether you would ask that question or not, but that could be a good question to ask. I will come to this question. First, I think it's important for people to understand ah what is your corporate journey and what is your founder journey. ah First, tell me about Driven, the company that you founded. What is it that you're building at Driven?
Speaker: Okay, that's a good question. So at a very basic level, what we do is we buy electric trucks and electric buses. These are large trucks and large buses, not the smaller ones. These are the buses which are on intercity.
Speaker: and You know, that typically what your listeners would travel from Delhi to Bangalore, Delhi to Deiradoon, those kind of sit buses. um And large 55-tonot trucks. These are not trucks you would usually see on on roads.
Speaker: And we lease them. electric trucks and electric buses. And why do we do that? because Because these are expensive products, people find it difficult to buy, so they don't buy, and therefore the entire a transition towards electric vehicle gets stalled because these are the most, ah these form factors are the highest emission trucks and buses. So that's at a very basic level we do.
Speaker: But that's not the only thing that we do because in that case, we just become a typical financier or money lender. ah Given that fact that electric vehicles are born with data and we believe that today's businesses should not be run the way previous businesses should have been run,
Speaker: There's a lot of data products that we create, a whole lot of AI layer that we are creating. And we don't use the word AI just to throw word because everybody else does it.
Speaker: There is actually a significant amount of work that goes into that. And what does it do, actually? It actually makes the product more efficient, lasts longer, and therefore benefiting us, benefiting the guys who operate it, and you know eventually the environment and the country.
Speaker: that's what That's in short what we do, Akshay. And I'll dig in deeper on this. I have a lot of questions to ask about this. But again, staying with the broad corporate versus founder question, ah what was your corporate journey like? I think the answer to that is is twofold. One is what does it um what is it in on the CV? ah And secondly, what is it as a person?
Speaker: ah So CV question is easy to answer. got out of MDI are during the during the one of the worst Southeast Asian crisis ah and then you know got a job, multinational job. So one MNC to the other MNC to the third MNC to the fourth MNC to the fifth MNC.
Speaker: ah Got into the private equity fund management space way back in 2006, I guess, or 2007. Were you a finance professional? Yes, I was a finance professional. Or I thought I would want to be a finance professional, though I'm not sure how much finance you actually end up doing once you're mostly selling. Perfect.
Speaker: But yeah, so I was an investor. I've invested in a bunch of companies or I have led funds which have invested in a bunch of companies. My last position as a corporate person was as a as the MD and head of India for British International Investment, which is ah the development financial arm of the UK government, about $2.5 billion under management in India.
Speaker: So that was my last position. But I think The way that I actually like to answer that question is not how it was as a CV, ah but how is it as a person? So growing up in the middle class background in in India ah during Pash and Soviet era, ah I think you do a lot of things because...
Speaker: of the insecurity, your fear of failure is your biggest driver rather than reaching out to success. um And that in many ways inhibit you. um you You're not allowed to lose a job or at least during the times that I grew, you're not allowed to lose a job, you'll be branded a failure, you know, you have loans and EMRs and so on and so forth.
Speaker: um So that I think is ah is worth talking more a about rather than, you know, what did I do as ah as as a career? Which, Thanks a lot was not necessarily a ah bad career, but yeah, that is that is what defines me as a person.
Speaker: So you're saying like the aversion to risk was like a core part of your DNA. I'm just wondering, as an investor, you are, i mean, investment is essentially about risk taking, right? Yeah. Yes, and and therefore, you know, because you've been taught how to assess the risk, or at least you believe you know how to assess the risk, a lot a lot of that investment and people may not talk about is actually being at the right place at the right time.
Speaker: Did you catch the cycle at the right place at the right time? um But then more, ah ah lot of it actually is about assessing and pricing the risk. um I used to tell everybody that we don't get paid to solve ah problems. Any person with half decent intelligence can do that.
Speaker: What we actually get paid to is anticipate problems to be able to figure out what can go wrong. you know, what you spoke about risk and then to the extent possible, mitigate it.
Speaker: And finally, All things said and done, it's a lot about relationships. It's about winning the trust of your investing companies, for them to open up to you when there are problems.
Speaker: As Indians or as investor and investing communities, we tend to hide um And if you're able to create a culture of openly sharing, problems do tend to get socialized and solved rather than just keeping it up within yourself. So yeah, so that is, ah but that doesn't take away from the fact that the overriding motivation is, I should not fail.
Speaker: Give me some examples of deals you did at British International Investment in terms of how you evaluated the risk around the deal. You know, what's the investor lens which a PE has? And I'll give you a little bit more context before you answer. um So I have, ah I mean, my show is called Founder Thesis and I typically interview a lot of founders.
Speaker: um You don't have... PE founders as such who are really interviewable. So just by design or whatever, I've not really interviewed PE folks much. Most of my investor interviews have been VCs.
Speaker: With VCs, what I have learned over multiple interviews is that a typical VC thesis is invest in exceptional founders. um I am guessing that that's not how a PE thinks to invest in exceptional founders. So I'm super curious on the PE investment lens versus the typical VC investment lens. It's ah it's a very good question. And, and you know, I would ah extend the journey or a response to not only BII, but when I was actually a GP running NEF1 and 2,
Speaker: ah So I used to say that... was Some context of NIF fund as well. Like, what's the background? Okay. So that's so that's ah that's a private equity fund. So first fund was about 500 odd crores. Second fund was about 1200 odd crores.
Speaker: ah So at BII, because I was the head in MD, I was a couple of... steps removed from directly interacting and assessing deals myself. you know There'll be teams who will do that. But when I was running the fund, I was the fund manager and and therefore a lot more um hands-on decision making. Would it be fair to say you were like the founder of New Fund or what, I mean...
Speaker: in In a manner of speaking, though it was an institutional fund, but I was the CRO. And which institution? So it was a joint venture essentially between government of UK and a step down subsidiary of State Bank of India.
Speaker: The thesis was to invest in um in climate and and development sectors, ah which made it doubly and doubly difficult because you not only needed to find founders who who who would go on to do well, but also find founders who would be wedded to good governance um and wedded to actually doing good.
Speaker: um So the subset actually became tougher and tougher. ah But we did well. um Some of the, or many of the, we did not lose money in a single investment. So there is no fatality.
Speaker: ah um And that is perhaps where you started with the risk from. What are some of the flagship investments? So for example, we invested in ah in a company at a very early stage, which which was creating grain silos.
Speaker: ah These are these modern silos that store wheat. but ah And typically it was stored in those funny-duddy old concrete buildings where there were 5% to 10% grain loss. You had ah you had mice which were the size of cats.
Speaker: um And then obviously it made no sense for India to lose 5% of their grain and as based. So then these are modern grain silos. um Another investment, for example, we did is in a waste platform. ah This company is called Blue Planet.
Speaker: um When we invested, it was just ah just a paper company and being founded by three ah people with background in IT. And here they are coming and saying that we want to create a waste management platform doing municipal waste and industrial waste.
Speaker: um And it's one of the most successful business now valued close to a billion dollar across Asia and and other job offices as well. But these are like Indian founders. This fund was investing in Indian companies. Okay. Yeah, it was Indian companies. Another one where we invested in ah in a biofuel company.
Speaker: Again, young founders, you know, and and they were they were quite small when we invested in. ah Now much bigger. They're the market leaders and in, you know, in ways to energy projects, in you know in a lot of these urban projects.
Speaker: ah waste to energy and waste to gas kind of projects. um Yeah. Some of these that come to my mind straight up. ah So these don't sound like typical PE investments if you're investing in the idea stage pre-EMF. Yeah. So saying yes and no. So what we did is that ah being a risk, so it is partly VC and partly PE intersection of that. Yeah.
Speaker: the The constant does not change, however. ah so it's not always, so you ask me, what is the thinking behind just not investing in great founders? ah So there are essentially three or four things that that really work. The first one is obviously the team that you're backing in, and that could be a founder or that could be, you know, a set of people.
Speaker: ah But equally, you invest or I used to invest in beta, where is how's the market moving? So even if you have an average founder, if the market trend is secular and you are able to back that market trend, then you know that you will at least make some returns and you will not have the fatality.
Speaker: um yeah Another example of this is a company that was more like a PE company was a company called SunSource where they were doing rooftop solar. And these are early rooftop solar days ah wherein people were moving from a grid solar to commercial and industrial applications.
Speaker: um The second thing that you do on top of it is to um it' so you not only invest in the business, but you invest in yourself. So you say to yourself that,
Speaker: Worried that the team that you're investing in starts falling short. Do you have the capability and the wherewithal to stand by the founders and give them the backstop ah to be able to help grow the business?
Speaker: um And that's what I believe made us different from anybody else. And I do believe that that is a role that private equity investors need to play. And that is not limited to just trying to get them a better team. And, you know, sometimes when I used to run fund of funds, lot of private equity funds used to come and pitch to us. And they say, my standard question is that what do you do for your portfolio companies? And some of them would say that we help them find talent.
Speaker: ah We help them put policies together. But that's just not good enough. um You actually have to spend time with those teams, those founders, um helping thrash ideas, helping solve real world problems.
Speaker: And you are uniquely positioned to do that because you see problems across a portfolio of companies. And some of them are common and your ability to say, okay, in company A, we face this problem and therefore it it has an application in company B.
Speaker: And I can give you an example. You know, for example, what we found is that when the companies are relatively smaller, they don't necessarily go to a top tax firm or a law firm. because they find it prohibitively expensive to um to go to them. A very simple solution is that instead of them procuring so a top law firm, top three law firm, you do it as a fund.
Speaker: um And therefore, you make those services available to to your portfolio companies. The portfolio companies benefit because they get the benefit of the best lawyer, and you benefit because your portfolio company is getting the best advice.
Speaker: um And the bunch of such examples, you just said, is that you just have to work a bit harder. ah You have to work a bit closer. You have to have those relationships that ah the companies actually come to you and talk to you about the problems. I'll pause there.
Speaker: So VCs operate with what is known as the power law that out of 10 investments that a VC fund makes, they assume three or four will die. Three or four will be average and there will be one or two, which will be so exceptional that they will pay back the entire fund multiple times.
Speaker: and This is typically the formula for all successful VC funds. So from what I understand, you're saying that... ah this is not how a P fund operates in terms of being okay with one third of the portfolio failing.
Speaker: No, because i'm a tip i would actually, I mean, ah as a matter of principle, um I would take exception to this very premise because you are in building your risk. You are all already saying that, you know, I am presupposing a failure.
Speaker: And I would say, why give it in so easy? ah work harder and harder and harder and ensure that those failures actually are not a failure either. ah i mean, yes, and the market can turn. You thought that there would be a certain business and there is a regulatory discontinuity. Or for example, you know, you would assume that oil was 90 rupees and historically it was always 90 rupees and suddenly there is a war that changes things.
Speaker: um But things that are in your control, the question that you have to ask yourself every day, did you do everything in your power to help the portfolio company or did you just, because you had presupposed a fatality of 30-40%, you let it go?
Speaker: um I belong to the the former camp fairway so that, you know, each of those portfolio companies are important. I mean, you have 10 kids or you have five kids, right? You just don't say that somebody is not, will not do well and therefore you just let him, let him be and the person who's better in studying, you just, you know, back into how to study. You just try and give the best that you can for each of them.
Speaker: I wish I had one of my VC founder guests here to argue back with you because I am sure ah they would very strongly object to that characterization. i mean, they are operating in a different asset class, I guess. It is inherently ah trying to find...
Speaker: rocks which will get polished into diamonds. And some of those rocks will end up being only rocks. ah you're You're taking a bet. You're you're paying for 10 rocks, assuming some of them will be diamonds and you do your best to evaluate them, but there's only so much you can evaluate by looking at a rock.
Speaker: I mean, that's how, so i mean, it's a different asset class is what I would say in their defense. I don't disagree with the with the idea. If you were to say that our risk appetite is higher and ah what is the point of taking a risk appetite if some of it does not manifest?
Speaker: ah I do not have a problem with that part of the statement. ah Where do I have a problem is that if you're in incoming premise or you're going in premise itself is to say that, okay, you know, because I always believed somebody will fail, I let that fail. where So hoping that yeah your your VC founders are not belonging to the category who who accept failure easily.
Speaker: um I do hope that they're giving those founders who are struggling um enough and more support before they let them go. So just to take example of your rock, they did polish rock hard enough and long enough um and from each and every angle to see whether anything can be salvaged from the rock before they just let it, before they discarded it.
Speaker: Got it. Okay, okay, okay. So essentially the PE mindset is... ah Founder, yes, but also market. You are underwriting a market. So you have to look at broad secular trends ah and ah you do everything possible.
Speaker: Basically, ah a PE is not buying a ticket in a bus, which is typically the VC mindset that you're buying a ticket in a bus. yes A PE is the navigator of the bus to some extent. not the driver necessarily, but sitting next to the driver and navigating the bus. So so that mindset ah is completely different from a VC mindset.
Speaker: Yeah, true. I think it's very well articulated. And I think that's that's probably where we would think. Okay, interesting. So, you know, you must have ah seen some the something which made you feel that taking the plunge, quitting your job is not that risky as it may seem to somebody else.
Speaker: like Like you are an entrepreneur, but I feel like given your mindset, you have hedged your risks well.
Speaker: Like whatever you have selected, you are fairly confident that it will work. and and Yeah, I mean, I think it that is a very incisive way of coming to the point. um The answer is yes, though the way I like to articulate it is that i after a certain age, ah the risk of risks become a bit lower.
Speaker: um So, you know, the the the inherent insecurity, to say, goes away when when you reach a certain station in your life and therefore your ability to be able to take some risks ah become easier.
Speaker: ah Fear of failure is less bothersome when in some ways you've already had success. ah But yeah, but but it would then be disservice to 30 years of working if you're not thinking through the risks and whether you've assessed the risks and, you know, how you chose or how we chose what product to focus on, how to focus on, what scale, you know, all that.
Speaker: The whole business plan. um We do believe that it's fairly risk-free and we do believe that it's got, know, risk-return matrix is fairly favorable there.
Speaker: And which is also how you got $80 million dollars funding at the idea stage? like ah Yes, it's pretty much the idea stage. Which is unheard of, right? the the The only other company to get that kind of money would be someone building a large language model, you know, one of the foundational model AI companies. Perhaps you're right. ah But for me, it's actually quite obvious, right? um and The model that we have works only with large capital.
Speaker: um It does not work with with smaller capital. And then it was for us to be able to explain to the investing community ah what is the risk for them and how it's actually fairly mitigated.
Speaker: um And since the investment is essentially going into underlying assets, ah now we are what we have to now assess and and figure out is how are we managing and mitigating the risk on the underlying assets.
Speaker: um And I think that is perhaps where the years of experience that we've had, as it's not only me, but my other co-founders and senior team, um they come in and and put together a business plan, which we believe is fairly compelling. And anybody who spent some time would would come to a conclusion that, yeah, um it is worth backing.
Speaker: How much did you dilute for this 80 million? It's not an answer that we could give. But is it more than 50%? fifty percent I mean, 80 million is what we announced. There were investments beyond this as well. And dilution is something that we always look at because we will not be limiting ourselves to these fundraisers. There will be subsequent capital raises also.
Speaker: um So we will have to manage capital stack in a manner that that takes us longer distance. um I personally am not um ah I do not worry. And when I see some of the founders worry about dilution, etc., um i personally think that is overrated. The fear of dilution is overrated.
Speaker: i think if you have access to capital and you're able to build and take leadership, ah subsequent rounds actually even out. um So don't necessarily be worried about dilution so long as you are diluting or you're bringing on board the right kind of investor. I think that is far more important than than just worrying about dilute. I mean, I've met so many founders who think, well, we've diluted so much.
Speaker: ah Do we have control left, et cetera, et cetera. I mean, I think that's an overblown fear. I'll be a little blunt in my question. um Are you the CEO of a PE-owned business or are you a founder of a startup?
Speaker: if you If you understand the difference between, you know, what I'm getting at here. I'm totally years a founder of a startup or as a new business. um And, you know, we will subsequently be raising significantly large amounts of capital. But you have significant ownership still in the business.
Speaker: Yeah, yeah. We have significant partnerships in the business. I and my co-founders have significant, significant partnerships in the business. Okay. i Understood. Yeah. That's what I wanted to understand. um Okay. So ah ah talk to me about, you know, you thought about the risks and those shaped the strategic choices. Talk to me about the strategic choices that you made when you were forming a business plan.
Speaker: So we wanted to do it at large scale. Um, and, uh, we wanted to do it in electric mobility. ah Tell me why also for each, like why large scale, why electric mobility?
Speaker: ah Electric mobility, because what we spoke about as a secular trend, uh, When the cost economics of electric mobility is higher than the cost economics of diesel mobility, that clearly a is a secular trend that you need to ride. So even if you had a mediocre business plan, I think that would at least not lose money for anybody. I feel like this ah ah used to be a given truth that electric mobility is ah more economic, but I somehow feel like that sentiment has changed of late, especially after BlueSmart. And you are in a way doing BlueSmart for B2B. You're like a B2B version of BlueSmart in a way.
Speaker: oh God, my I hope never. um BlueSport was also like similar, right? Own the asset, right? Yeah, but own the, yeah. and so Electric, own the asset. I mean, what's the difference? You're you're like a B2B version, right? From that angle, if I look at those choices.
Speaker: So in many ways, that is what informed the choice of the product. um And I'll give an example that assuming you are doing a commercial three wheelers, ah that costs you about three lakh rupees.
Speaker: An electric bus costs you 1.5 crores. As opposed to what is the price for diesel bus? What's the difference? Say about half. Equivalent would be half. An intercity bus would be equivalent, would be half.
Speaker: So now effectively you have to do 50 three-wheelers for one bus. Now, typically when you're doing a commercial three-wheeler, electric three-wheeler, you would do with the driver directly.
Speaker: When you would do with a bus, you would do with ah an owner of 20, 30, 50 buses. A fleet company. Fleet company. So assuming it's 30 buses.
Speaker: So effectively 30 times 50. So instead clients, you have one client. ah So your ability to manage and and track and spread the asset becomes so much better and higher. And therefore your own operating costs become so much lower.
Speaker: And that really informed our business plan. And ah it is a known or accepted ah truth that the larger is the form factor but the bigger is the form factor or longer is the run, um the better is the cost economics because obviously you are able to amortize it over a period which is more favorable. And I can give an example.
Speaker: um when and When you run ah like a diesel bus within sit with within two so ah between the two cities, it costs you about 50 rupees per kilometer. And this is before an impending rise in diesel prices.
Speaker: ah Equivalent electric bus costs you 35 rupees. So that is 15 rupees per kilometer saving ah for running electric bus versus a diesel bus. A typical operator runs about 2 lakh kilometers a year. that's 30 lakh rupees, that is 2 lakh rupees times 15, 30 lakh rupees saving every year. and assuming it costs you 70 lakh rupees more or 75 lakh rupees more, that's two and a half years payback period.
Speaker: um So the total cost of ownership economics, as we call it, is so compelling. um And yet because... ah but but A bus is one and a half crores.
Speaker: So you need to have the scale and the capital at that level to be able to play in that market. yeah typical one One question I have about your calculation of economies, like the like the the economic ah benefit of electric. ah The resale value for electric vehicles is pretty poor, right? Because batteries die. and It depends on how strong the battery is. Does that factor into, like, does that change this calculation?
Speaker: ah No, it does not. I mean, the the the the answer, the perceived risk on the resale value of the bus is much higher. ah the When I talked about 35 rupees per kilometer, it includes amortization of battery.
Speaker: Okay, got it. A typical battery would cost you, let's say, 50 lakh rupees or 40 lakh rupees. And it will run, at least the warranty will be for, say, 6 lakh kilometers.
Speaker: So that's about 6 rupees or 7 rupees per kilometer of battery cost if you just amortize it. ah Let's say the old battery you can sell it for 15-20%. So effectively between 5 to 6 rupees per kilometer is the battery cost.
Speaker: About 10 rupees is the cost of charging. So effectively 15 rupees. A equivalent diesel will be about 27-28 rupees. How are you going to 35 rupees then?
Speaker: This 15 rupees is what you just told me. Yeah. So when I spoke about 35 rupees, includes the cost of battery amortization. Didn't you just tell me it's 15 rupees, 5 rupees for battery, 10 rupees for electricity?
Speaker: And less of the other costs. There are common costs also, no? So common costs of driver, toll, cleaning, everything. So total cost, when an operator runs a bus, it's all the costs included. 50 mint engines, for example, tires, for example. And the other costs are same across both?
Speaker: The only difference is the battery and power costs. The rest of the costs remain same. ah yeah Yes and no. um Sometimes the the maintenance cost for electric is higher because the number of number of people who provide that maintenance could be higher.
Speaker: ah The toll costs or the permit costs in electric are lower because there is a ah fee waiver. So that's about three lakh rupees a year. So about one and a half rupees will be the difference because of the...
Speaker: waiver in the permit. ah but But just ah you assume that there is no government subsidy, etc. Even then, um it is 13 rupees, maybe 13 and a half rupees, which is which is better for running an electric bus. Got it. Okay. So, why electric? You have answered. ah Let's go to the next question. You said large form factor also you have answered with a large form factor. The a a two and a half year payback period.
Speaker: yeah Am I right? Large form factor is what allows a two and a half year payback period, whereas on a three wheeler, the payback period would be longer. yeah but Yeah, I mean, life form factor allows you to have a clear visibility of scale.
Speaker: So one and half, and you know, you can maintain lower your own lower cost. I don't have to deal with, ah you know, 150 drivers or more. I just have to deal with one operator. And if I'm doing a lot, I can do a billion dollar book with about 5,000, 6,000 vehicles.
Speaker: And the other thing is that these buses and trucks last far longer. And every three wheeler, we will have to replace every three years. So not only have to replace, you know, you have to get those clients, you to replace them every three years. The cost is much higher. that's how we came electric trucks and electric buses.
Speaker: And why intercity and not within the city? Because within the city is mostly government, intercity is private. So you have an ability to play in the private market, run a profitable business.
Speaker: Okay. Okay. ah Are these the only three choices that you had in front of you? or Any other choices? I mean, largely these three, we could have looked at becoming, ah you know, taking some stake in the OEM market, where we become the manufacturer, etc ah But then, you know, lot of people believe that you can just ah you know import a chassis from China and put together something on it and, you know, brand it and you believe that you can actually become an OEM of some note.
Speaker: um The challenge there is that, you know, you you create it and then the incumbents can come and wipe you out. And we've seen that happen in in multiple other form factors where you try to become big and you you created the market and suddenly the old incumbent comes in and said, okay, thank you so much for creating the market. You're talking about here. look so And therefore you create a moat in this. So now the same question can apply to us. Why cannot a Shira of Transport or a State Bank of India come and wipe you out?
Speaker: And that's where the tech comes in. ah you you create that layer so strong. Estridium Transport is in NBFC? Yeah, they're in NBFC. NBFC, okay. They're one of the largest, ah you know, financiers of trucks in the country. Are you also in NBFC?
Speaker: No, we did not go the NBFC route. We are an Asset Core, which is asset holding company. ah For multiple multiple reasons. ah ah the Essentially, the final reason is the access to capital. ah We found it easier if we have if we remain an asset poor and not good than BFC Root.
Speaker: I'm surprised. I thought NBFC Root allows you access to debt as well. with the the We believe, and my experience suggests, that access to debt will be easier um wanted it to be an asset code because then the lender can look at an asset-backed financing rather than an unsecured financing which would come in an NBFC book. And then finally, it will take for you to be able to get competitive pricing on the banks and NBFC would require
Speaker: due to be rated fairly high, that means it is to balance sheet cycles. um As an asset co, you have an asset and your loan to value is fairly attractive for for a lender to take a view.
Speaker: Okay. So this was another decision on whether to AssetCo versus NVFC. So you went the AssetCo route. Yeah. Something like, say, I think there's Brookfield or something. I may be mixing up the name, which owns warehouses and that would be like an AssetCo example. like Something like that. Yes, absolutely.
Speaker: Okay. Okay. Got it. ah Okay. So any other choices, the the intercity, the form factor, the Yeah, largely. And because, you know, but so for example, just we said that ah for at least one client, you need a 50 crore capital, right? 30 buses or 30 trucks or whatever. Now, if that allows you to do capital as a moat also,
Speaker: um So if you were to be funded through C, danger, you know, 1 million, 5 million, 7 million, um you cannot. So anybody who has to do it either has to do it at scale or or they'll not be able to do it.
Speaker: So on day one, so to say, you start with a moat um that smaller players are or anybody who could be we want to start this market today will find it difficult. So only very serious players can actually play in this. This is essentially like...
Speaker: someone like a Brookfield might have someday entered India straight away with this playbook, which instead of them doing that, you are doing this as a startup, that infrastructure ah holding company kind of a playbook. Okay. Very interesting. So Brookfield sort of said, there comes our exit option in some ways.
Speaker: Right. Okay. Okay. Got it. Very interesting. So you were saying, how are you different than ah SBI or Sriram, these NBFCs, which ah you were, I guess, going to talk about the AI and the data layer.
Speaker: Yeah, so that is where a lot of ah data analytics and and comes in. wherein um Because EVs are built that way, the amount of investment we actually put in that business is almost actually $2 million dollars ah putting up that data and AI layer.
Speaker: What it allows us to do is to manage the asset. um in a manner that best optimizes its use. And in one of the examples I give it to everybody that when you go and buy a car, it says get your yourself serviced in 7,000 kilometers or one year, whichever is earlier.
Speaker: ah There is no thought, why should it be 10,000 kilometers? Your driving behavior may be much better than mine. So my car probably needed to get serviced at 7,000 kilometers and yours probably needed to get serviced at 12,000 kilometers.
Speaker: um because But since I did not do it at 7, my asset life is reduced. And because you did did it at 10 instead of 12, you actually wasted 2,000 kilometers of service period. um EV allows you to do that. It allows you to optimize and pinpoint because ah we collect about 700 data points and at any point in time, we know exactly the state of health of the vehicle. um So when should the preventive maintenance be done, when should the major overhauling be done, etc., is then managed ah to optimize the asset health. And this is on the cost side.
Speaker: Similarly, we've done a lot of analytical piece on the revenue end. ah Today, we can talk to you and tell you revenue, total revenue collected on 90 routes, which operate which which route is profitable, which route is not so profitable, what is the seasonality, where is an EV bus likely to do well, all that. So a lot of our clients find it useful to do their own route planning um and with us. It's not that in any way we are undermining their commercial sense because they've been in the market for much longer than we have, but we do get data.
Speaker: um And some of the elements they see is quite quite revealing to them also. And you know one of the examples that I keep giving is that it is a known um adage in the trucking world that you make money on the return load.
Speaker: So if you're carrying load at one end and you have to bring that truck empty, it's less profitable than to bring a load back. um But then we have a use case wherein a truck is running 280 kilometers one side loaded and they actually find it cheaper.
Speaker: to bring back the truck empty ah because it reduces the duty cycle. the The cost of operating the truck empty is much better than ah then loaded.
Speaker: and So you're able to optimize that both the duty cycle, which is the revenue side and the cost side. And all of it is possible through data. what what What is duty cycle? the the The duty cycle is the time it takes for truck to load, go to the place, unload, load again and come back.
Speaker: Okay, okay, okay, okay. So the four hour saving because you're coming back empty, um plus the fact that you're saving some time on, on some energy on running empty rather than loaded, actually is about 15% better than to have returned with a 30% load.
Speaker: um And you can measure it you can measure it because you have data. Would this be true for diesel trucks as well? Or in diesel trucks, the cost of running empty and the cost of running loaded is the same?
Speaker: it It will not be the same. Obviously, empty will be lower. But it's very difficult to make that assessment going in. Okay. It will be more, it will be, you know, after a few years, ah you may be able to make that assessment. But going in, can somebody make that assessment?
Speaker: A bit difficult. You know, they'll be doing the back of the envelope calculation. and um But the idea will be that if you have 30% load, just bring it, just bring it. um But in this case, you're optimizing. You're optimizing the fact that you don't have to you know wait for one hour for charging, et cetera, et cetera. A lot of that elements go in.
Speaker: So now, in imagineing this that this EV transporter is now competing with either another transporter who does not have this information or this analytics or with a diesel ah operator. So obviously, this this guy has an advantage.
Speaker: um And as a financier, Not many people think about this. And that's why we believe that we, on day one, when we envisaged it, um and perhaps this comes from the your original question, the the risk mitigation.
Speaker: um to We thought through what will be the risk, not today, but two years from now, when they will be, you know, just taking your example, a Brookfield consensus, I will do it at scale.
Speaker: And maybe I'm more competitive than these guys at scale, or I will buy the market share at scale. what will set us apart? What will set us apart is this huge amount of data and analytics that we would have built over two years. Okay. ah Correct me if I'm wrong. um The optimization on the cost side ah the hey would...
Speaker: And the optimization on the revenue side are basically ways to reduce NPA. Like the number, you're a finance guy you know, so so you must be looking at what number is this influencing? This is essentially influencing the NPA number or yeah yeah is there some other ah pricing metric which is linked to something? I don't know, like like like how how do you price it and what these two things which you're doing to optimize cost and revenue, what else are they impacting other than NPA? NPA means non-performing assets, which is essentially,
Speaker: a transporter going under because they were loss making? So two things, a obviously it, uh, it helps, uh, make stronger underwriting. Um, it also helps us create different underwriting product itself. So for example, can we look at, uh, seasonally varied rentals?
Speaker: Um, but for us to be able to do that, we need to be able to have a very strong data and historical background, uh, ah Does it allow us to do revenue share rentals?
Speaker: ah But for that, again, we needed to have a very strong view on what the revenue performance is likely to be. And finally, ah we believe or we have a plan to to to flip some of them into products.
Speaker: um Some of them free, which helps our lessees and partners to optimize, but some of them are going to be predictive in nature.
Speaker: um Accident predictions, ah fleet optimization, um driver ranking, um route optimization root optimization. So what if analysis, ah some of them will be paid services, which will also help us increase our revenue.
Speaker: We do believe that at about two years time, about 5% at least our revenue come will come from tech product than just plain vanilla rental model.
Speaker: I don't know if you read recently, there was this article about how I think maybe there's double digit revenue contribution at Ether from software subscriptions.
Speaker: safe. So I think electric form factor makes it possible. Like ah people, like if you want Google maps on the Ather scooter yeah screen, then then that's like a paid service and a significantly large number of Ather customers are paying for software subscription, not just the hardware.
Speaker: ah So that's pretty interesting that you are also thinking along those lines. Um, I won't understand what is your, so you said seasonal rental ah variation. ah Why would you give a discount on a certain season? Am i looking at it the right way or is the right way to look at it?
Speaker: I will charge a premium in some seasons. Yeah, both. So so supposing, you know, an operator comes and says, hey, if I were to be taking a normal financing product, I have to pay the EMI, but six months a year, I'm really under the water.
Speaker: um So can you peg yourself at ah at a level where I can make payments to you um during lean season? So summer and winter, so, you know. um and And the normal answer would be no, because you'll be taking significant risk because you'll be underpaid during the lean season for you to recover in the peak season.
Speaker: um But if you have the strength of data, you can actually sculpt your leases to meet the requirement of the person whos who wants this. but Suddenly your time becomes much much bigger.
Speaker: ah But you're not then um taking a risk on a hearsay. You're actually taking a risk on your own data that you've collected and and and tested. Your ah revenue is ah like a fixed monthly subscription.
Speaker: Right now, it's just fixed monthly subscription. Okay. So when you offer someone this kind of a custom but pricing, then you're making up for the discount in the low seasons with some premium on the... Big seasons. and Yeah. Okay.
Speaker: Yeah. okay But then you have to be sure that there will be a peak season. And you will like need to be sure what will that peak season be. ah whether Whether they will have the wherewithal to make up on the peak season.
Speaker: And this you would only know if you have peer-level data. Like other people who are doing a Delhi to Chandigarh intercity route, what is their revenue like? But how do you get access to revenue?
Speaker: ah Someone who's running a Delhi-Chandigarh bus service... ah How will you get to know how how many tickets he sold in every trip? So that that that in some ways is our secret sauce. There's a lot of lot of tech development that has happened behind it.
Speaker: i I'm not sure I can disclose all that, but but but yeah, we do have, ah currently we have um on a daily basis, 91 routes in the country for which we have the entirety of data. So if you are a four rated bus driver,
Speaker: um what would you be charging? And, you know, not going to the next level that, and what would you be charging if the tickets in enough in a bus which are higher rated than you are still vacant?
Speaker: And what you will be able to charge if it's already filled? And that allows the data. No, see, data is such a beautiful thing that once you have it, um then it is just limited by your imagination.
Speaker: um So we've we've actually, I mean, when I said we've spent $2 million dollars putting this together, um that's that's where it is. And it's just starting. This is, I mean, the I can only visualize two ways. One is if the fleet operators are consenting to have you do some API integration with their booking, like the red bus or whatever tools they use to sell tickets, or if you have some sensor which detects how many people are on a bus at any given point of time or something like that. I don't know. like so So let's say that um what you don't know, you don't know.
Speaker: yeah But I'm guessing it's more of the former than the latter. and So one of these days, actually, we will invite you to our office and, you know, we have this large our network operating center um and then you'll be able to see, wow, man, this looks like magic.
Speaker: ah Okay. Okay. Okay. Good stuff. Okay. Okay. So ah I guess one of the choices also then is that to invest in tech or not. And so which clearly you have done this investment in tech, which allows two things. One is lower NPA. Second is also the ability to convert more customers because you are able to do pricing which works for them and probably they will be a lot more sticky with you. I'm guessing there's not a business which sees any churn, right? Somebody who comes into you will stay with you. like I wouldn't see why they would ever churn, right?
Speaker: um mean Unless somebody comes and says, okay, you know I'll give you something which is far cheaper, you know, I have equity to burn. um So don't worry about my proper profitability. Look at... ah So yeah, i mean...
Speaker: and And we would always encourage those customers to say, no, why don't you try those guys out also? i mean and And then we will have our own exposure limit. We you know we know we we probably not be able to solve um financing need of every customer fully. And and we are pretty much okay with that. what What we want, we're very clear what profile of customers we want to work with.
Speaker: um What is the aspiration and ambition and and their own behaviors that we look at. So tell me about these choices, the choice of profile of customer. So for example, we're very clear that if somebody is saying that I will just run five buses to C, a we we we say that we're not those guys, you know, because we believe that if you are running five buses, you are inherently um taking a far greater risk than if if you're not running 20 or you want to run 20 because, you know, your ability to to redeploy across routes, assuming something goes wrong with one route, let's try two,
Speaker: flood, whatever, um it becomes inhibited. ah Two, that essentially means, you know, going back to the starting of the discussion that you're assuming that you and you may likely fail.
Speaker: You don't believe in the model, you're just trying to kind of dip and see because others are doing, are you doing out of FOMO? Are you willing to put in that effort down with us, find a solution to your particular problem?
Speaker: um So those are the kind of people we're looking at. and and And mind you, we don't necessarily these guys are not necessarily ah startups or founders. These could be legacy operators who've run buses for 40 years. And you know some of them could be 60, 70 year old people with with the modern outlook. Sometimes they understand winds of change far better than younger generations.
Speaker: um And it's actually always refreshing when you meet people like those who actually not only learn from what we're doing, but also teach you a lot in the process. And we learn a lot from them because they understand the nuances. They actually understand that, you know, my bus will stop at this particular place in that Choraha and typically this kind of family will get on.
Speaker: And this is where, you know, this Chorhi is where I may get harassed. um So they're very, very knowledgeable people. and And yet they understand that there is a change happening. um You know, without giving names, I can talk to you about a few operators in in South India. They came back and when we spoke to them, they said that, you know, we are worried that aggregators like Uber will come and and and wipe us out. And they said that we know so many taxi operators who said, oh, Uber and Ola are foreign phenomenon, they will not be able to successful be successful in India. We've run these taxi shops forever and suddenly they found themselves out of the job and then they have come together and they said that we cannot fight them alone.
Speaker: Let's come together, create an association ah because we want we know that the EVs have to be done at scale. um And, you know, we've been working with them for now four months.
Speaker: um I don't know whether we will get a single order or not, ah but it's been a fascinating journey. and where I think they learned from us and we in turn learned from them. Hopefully we will end up doing business, but when we've not, I mean, it's something that that's a very, very gratifying thing to see.
Speaker: How do you acquire customers? Three ways. One, a lot of manufacturers who have their own customers and who know they are looking at their customers moving towards CV, they refer their customers to us.
Speaker: Two, we have people um in on our books, on our roles who've been in this business. ah So they go out to the customers and and and explain to them either customers are already looking for solutions or we provide them a solution.
Speaker: This is what we call as boiling the ocean. It's a long list. We go to each of them. And third, there is a lot of inward inquiries which come because, ah you know, through podcasts like you or others who hear from ah about us, they they reach out to us and say that we are looking for a solution. you have one?
Speaker: Got it. ah Tell me about supply, supply of vehicle, supply of the asset. um Does India have OEMs who are able to supply? but Because I do believe that ah I had interviewed BlueSmart founder ah two years back. ah And one of the things he told me was that ah the big constraint in their growth is the fact that there's not enough supply of four wheelers that they can procure. And so they were planning to get into four wheeler manufacturing themselves. I don't know, you might be aware through Gensol, there was some sort of there was some ambition to set up a four wheeler manufacturing unit because the supply was not there.
Speaker: I'm just wondering, is there quality supply for trucks and buses? Yeah, so before I answer that question, and that you know that's where the and the beauty of form factor comes in, right? So for a billion dollar book, um how many vehicles we need? 6,000.
Speaker: six po
Speaker: that's so you know So what is the supply unit? 6,000. The entirety of the market needs in the next three years, what? 30,000 or 40,000. So, it's India. um The nuanced answer is that if you look at trucks and buses, it's different.
Speaker: um Trucks over the last... one year, we've seen the supply really come on board. So a year ago, when we were putting together but our own business plan, we were not sure whether ah there are enough truck OEMs of the size that we want in the 55 toners. But suddenly, there are at least eight OEMs that we are working with currently.
Speaker: So supply on the truck side is not a problem. And these are legacy companies or also startups? ah Legacy companies, I mean, there is there is a startup which is owned by a legacy company. So Morogappa Group has a has it truck manufacturing.
Speaker: um so I'm not sure whether you call it a startup or whether you call it a legacy. So they don't have a legacy of creating large format trucks. So in that sense, it is a startup, ah but it was bought by them, but they do have significant exposure in in mobility or electric mobility. So in that case, it's ah so it's a legacy company.
Speaker: ah So the legacy guys all have it. um There are a few startups also, but just to just to be with legacy, so you have about eight odd truck manufacturers. So truck supply is plenty.
Speaker: On the bus side, it is increasing um because a lot of bus supply currently is giving going towards intracity and not everybody has an intercity product.
Speaker: and not a product which has run enough kilometers for us to be comfortable with. ah Some of them have, um and it is increasing. Volvo Aisha just launched a product. Tata's have a product now, ah more geared towards intensity. You have bus bodybuilders who have now ventured into electric ah bus manufacturing, Azards of the world, the Veera's of the world.
Speaker: um So it is increasing. I would say on the truck side, it is perhaps a bit oversupplied today. And in the bus intercity side, perhaps a bit undersupplied today.
Speaker: ah Intercity form factor is different from intercity because of... Yeah, because passenger comfort... high And also design, intercity typically also has sleepers.
Speaker: um You know, so the number of seats within the city is you want to maximize. It could be 54, 60. Intercity typically 45, 42. You will have sleeper, you will have sleeper seater.
Speaker: um And even the design is a bit different because intercity buses need to run much longer. wind resistance, etc. is a bit different. Also, in within the city, we'll have lower floors because you have multiple lightning and lightning.
Speaker: Intercity product will be a bit different. So the specifications are a bit different. The batteries are also a bit different. Intercity need to run longer longer distances. They also need to have larger boot space, which is not the case when you're running within the city.
Speaker: So ah I guess we've covered most of the aspects of Driven, right? Is there anything that I have not touched upon? Yeah, there's one thing I haven't touched upon. um Another choice which you would have made is people choice, right? Do do you choose a co-founder? Are you the solo founder?
Speaker: what What kind of team have you built or what are those choices like? I think ah ah but when you said that, what is it that you had not covered, I was going to say about that only. um So yes, no, I'm not the only co-founder. I have two co-founders.
Speaker: um And what I also want to emphasize is that duh the last thing that people typically expect in ah in ah in a bus truck business are the number of women in leadership positions.
Speaker: um So um we are three co-founders. One of them is more of funding co-founder out of Singapore. So Alpna and I are co-founders here. So we have a woman co-founder. um Our head of credit is a woman. our head of ops woman.
Speaker: Um, is, is a, is a fantastic lady who's actually spent time in manufacturing across three continents. Um, to, uh, you know, um, our board member is, uh, an independent board member is a woman. She, she's, she's a Danish national,
Speaker: um So the the gender ratio that you typically would not find you know in a in any um any or most of the businesses in India and particularly in a in a business which is trucking and busing, um i think we're very, very fortunate to have um um that kind of talent come and work for us.
Speaker: It's just a very, very fascinating interesting thing to see. um you know When I was in Bay I, when I was in at Niamh, we used to speak about telling people domestic companies that, you know, look at gender ratios, look at look at diversity.
Speaker: um And here we are, not not even but by not even trying, we just got the best talent. And still we have so many women at leadership position. And how big is your team? ah Currently, we are about 15.
Speaker: um We are likely to go up to 25 to 30 by June. Amazing. Extremely lean. And what kind of revenue will you do this year? Or what's your monthly revenue run rate or...
Speaker: So ah we we obviously cash positive. We are also a bit dear positive. um We will be about ah about 180 odd crores revenue by December.
Speaker: and That ERR number you're saying. It's actually a deriv derivative of AUM. So you could probably take it at AUM level to about 10, basically the assets that we will have on our books ah between 1000 to 1200 crores by December.
Speaker: And about 10% of the AUM is what your monthly revenue is, something like that. but Let's say but closer to 15%. 15%. Okay. So ah about 100 to 150 CR monthly revenue by December. No, sorry, sorry. Yearly revenue.
Speaker: yeah really okay Okay, okay. So about 1-1.5% on a monthly basis. 1.5% on a monthly basis. Okay. So now let's come to ah the the funding part of it. You know, with most people, the question that how did you raise $80 million even before...
Speaker: ah like at the idea stage would give me some sort of a, like a hero's journey answer. But I feel like in your case, that's not going to be so. You would have probably ah had a very, very strong case for an investor, but but I still like to hear ah how you did this. Okay. So what what I say to myself and everybody around is first, you have to believe.
Speaker: um And that's where most of us fail. um we We tend to try and solve other person's problem or perceived problem rather than believe that there is a solution which exists.
Speaker: Now, if you believe in your business plan and you say that, you know, this business plan is so good or this business ah idea is so good that it will be attractive to an investor. ah Rather than tell yourself, you know, how would you get a funding of this size?
Speaker: You would say because it is so good, you would get funding. day um The first really is believe. And once you believe, then you plan. And you really plan. You go to a level of planning that...
Speaker: that does that should do yourself and and people who you're talking to proud. So the question that you're asking, you know, why this? Why not this? um What after this? Thrash it out. Thrash it out to the last detail. So, you know, we're very proud when you twin we say that, you know, our thesis has not moved an inch from where we were ah a year and a half ago when we had such little information with us.
Speaker: And then you execute. ah So first, and the most important part of this, in my opinion, is first beliefs. Believe that it will get done.
Speaker: ah And then you will find believers because you believed. so you're saying if I had interviewed you pre-fundraise, your answers would have been exactly the same as what you're giving me today. yeah My answers would have exactly been the same. Even before the investment committee approvals that came, we had signed the leases for offices um because we believe that it should come through. You know, we're going to go to the temple alone.
Speaker: noga or carba banta Amazing, come amazing. Some of your ah your history would have helped, right? You, as a PE investor yourself, would have brought credibility to the table.
Speaker: i'm assuming you would also know how to package this. ah Packaging is a big part of ah getting in an investor in, right? Or am I wrong in that about the importance of packaging?
Speaker: I think overrated. um i think it is, you know, honesty is better. um Yes, you should, you know, articulation is important, but articulation comes from planning rather than ad-libbing.
Speaker: um And, you know, Yes, I mean, my own history and my co-founder's histories were very important. My co-founder, MJ and Alpna, are both institutions in themselves.
Speaker: So obviously it does help. but But I would suggest to people that it's so much better to be honest and show the vulnerability but rather than just be short chatspa, you know, when some kids say that, you know, fake it till you make it ah you know, some of those phraseology.
Speaker: um i think perhaps a better way of doing it is to say that this is what we know and this is this knowledge makes us believe that we will be successful. and And in all fairness, this is something we do not know and we will we will figure out as we move forward.
Speaker: and But what we know believe makes us believe that it will be successful. um And I do hope that people on the on the other side of the table, the VCs and the investors and the private equity folks who are evaluating those business models and those pitches,
Speaker: Also, look at it from that perspective. You know everything does not have to be a shark tank ah kind of a packaged moment. just a um You just have an idea. yeah the ah Packaging differs based on the audience. That packaging of shark tank is for a different audience. But for a PE audience, packaging would mean, for example...
Speaker: Very, very detailed numbers, you know, in terms of your forecast, your projections, ah you know, and down to very micro level numbers, being able to provide them with everything. Or if someone says, what will be your NPA after three years? yeah And you have a number saying, this is our projected NPA after three years. And here are the assumptions we have taken. And here's what we feel. And here are our competitors NPA numbers. and ah Absolutely.
Speaker: Absolutely. There's a competition number. this and This is the closest industry numbers. And why do I believe this phone number will be this, higher than this, lower than this? And it's okay to say that higher than this. I mean, why not? I just say it could be higher than this.
Speaker: um And if it's higher than this, this is the return we make. And if it is lower than this, this is the return we make. how much of our focus should be on the NPA? And, you know, I remember this conversation.
Speaker: um as Somebody said that, you know, ah how focused are you on your NPAs? um I said, I'm more focused on my revenue today. And the reason I'm more focused on my revenue is that if I reduce my NPA, and, you know, I hope it's not taken been taken otherwise, I save 100 crores. But if I focus on that revenue with that additional risk, it's 1,000 crores of revenue.
Speaker: So the risk return matrix today is such that ah it allows me or it encourages me to take that risk ah for a thousand for a hundred crore NPA to for a thousand crore revenue. And it miss it may shift. And, you know, then at that point in time, I would be focused more on this and which we are today.
Speaker: um So, yeah. So yes, detailed, you know, the the second part of it, planning. So ah let me end with the question that we started with. What is the difference between the being in corporate world and being a founder? Like, ah what did you have to change? i think the the the the insecurity piece.
Speaker: um Now I do it because with with all joy, um i don't think of failure. um i just think of success. you know Again, we have a statement in our office that we don't see walls.
Speaker: We just don't see walls. We just see doors. um And that's what has changed. There's just opportunities and possibilities.
Speaker: it's up or It takes us to the three-day dialogue. You know, study for a while, success will be coming. Yeah, yeah, yeah, yeah. But ah wasn't there something which you miss about corporate world?
Speaker: Or it's all been positive? Frankly, no. Sometimes you miss ah the luxuries that you got, either slightly senior person in corporate world, you know, the the travel arrangements and the, ah you know, you come to office faith and for the IT services and everything is kind of, you do miss that.
Speaker: ah But believe me, ah they're so minute compared to the joy that you get of of of creating something and creating something which that's scale.
Speaker: Amazing. Thank you so much for your time, Manu. It was a real pleasure. Thank you, Akshay. You've been super good. Thank you.
