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The man with the Midas touch | Rishi Das @ Careernet & IndiQube
219 Plays1 year ago
Rishi's entrepreneurial success is built upon his remarkable ability to identify and make the most of opportunities. He first launched Careernet, a hiring business, and leveraged its profits to fuel subsequent ventures. His second venture centered around applying technology to the hiring process, while his most ambitious undertaking, IndiQube, involves shared office spaces for collaborative work.
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Read more about Careernet and IndiQube:-
2.Winning Stroke: Interview with Rishi Das, Co-founder, and Chairman, IndiQube
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Transcript
Introduction and Early Ventures
00:00:00
Speaker
Hi, I'm Rishi, co-founder and CEO of IndieQube.
00:00:15
Speaker
This episode of the Found a Thesis podcast features a conversation with a veteran entrepreneur with 25 years of experience in building businesses. Rashidas had just completed his engineering degree in the year 1999 when he started his first venture as an entrepreneur.
00:00:32
Speaker
In those days, it was unthinkable to build a business on external funding and he built up a profitable recruitment services business thanks to a combination of good timing and his ability to capitalize on the opportunities that present themselves. Rashi's ability to spot and capitalize opportunities is what led to the birth of his second and third businesses.
00:00:52
Speaker
The services business led to the birth of a recruitment technology business as a second business, and his thought business, which is by far the most ambitious undertaking, is the shared office space business, IndieCube. Stay tuned for Akshay's fascinating conversation with Rishina in which he attempts to learn his secret source of spotting opportunities and building large businesses.
Formation of CareerNet
00:01:23
Speaker
Can we start with a broad journey into entrepreneurship? What made you step into the world of entrepreneurship? The idea about entrepreneurship very vaguely was always in my head. When I went to IIT Roorkee, that is where I see that this whole thing got manifested purely because of some coincidence and some opportunities that came my way. So I can get an elective into entrepreneurship.
00:01:51
Speaker
while being there and those days entrepreneurship was not like something what it is today even people had a difficulty pronouncing the word entrepreneurship and then there was a science technology entrepreneurship park at IIT Roorkee and I happened to start the student chapter for that
00:02:09
Speaker
And as it happens to everyone on campus, I was lucky to get a job with Tata Unisys. I joined there and the very first day I realized that I'm back to kindergarten. And I just felt that I am too restless to actually go through this ladder.
00:02:27
Speaker
and pretty much that very day decided that job is not my piece of cake. I held on to the job for 68 months, wrote Kat and could not clear that. I decided to abruptly move out and head back home and first few days my parents thought that I'm here on vacation and all and sooner or later they realized that he's not going back and they said fine explore what you want to do and give yourself a couple of years and see that
00:02:56
Speaker
if things work out the way you want them to be. So, then started exploring and now being a small city, typically in the 90s was not the time, there were a lot of challenges, typically coalition politics and mafia and so many other things. Finally, I decided to start CareerNet along with my brother Anshuman.
00:03:18
Speaker
Okay. Interesting. So, you spent a year experimenting before deciding to start CareerNet. Yeah. Okay. So, you know, today when people think of doing entrepreneurship, they will evaluate how big is the market? What's the total addressable market? Is there a founder market? Am I the right person to build this business and so on? What was the process like for you? You know, like, when did you feel that, yes, this is the right business for me to do? And I have found like a
00:03:48
Speaker
fit in terms of my skill sets, how big the opportunity is and so on. So, I think most of the things that you said, I think that all inventions or creations in the last 5 or 10 years, but when we were starting, nothing of that type of honesty crossed our minds.
00:04:08
Speaker
I think why we narrowed down on this opportunity of starting career there, three, four things we looked at. One was that what is our core competence? We realized our core competence was that we came from a good pedigree and had a brief stint with IT, understood IT to some extent. And those were the early days of IT. That was one thing which we could see as was also core competence. The second aspect was that why choose recruitment?
00:04:38
Speaker
Whatever opportunity we were looking at, one thing was very clear that we cannot afford any capital capital. Because my father was an honest government servant, upright servant. So we never had the capital, so to say. So one thing was very clear that the business should not require a lot of capital. That was a big requirement.
00:04:57
Speaker
And while we were at college, both me and my brother, my brother is my co-founder in CareerNet. So both of us were very active into our alumni activities, as well as basically the campus activities. So we had, I will say, a very fulfilling four years stint, both of us at our campuses. So I think networking came very naturally to us. So that's a big plus we were having.
00:05:25
Speaker
And what we found at that point of time was listening was that IT industry was just starting. If you see when my brother joined in 98 from IT Delhi and when his employee IT was about 2000. So you can imagine Infosys good bad all combined was 2000 people. And the industry was doing quite well growing because the ITP problem had already started coming in.
00:05:49
Speaker
So we found that whatever people who were providing manpower or recruitment services for the IT industry were all essentially coming from FMCG and pharma. Because those were the two sectors which got liberalized even before the IT boom started. And those people were having a lot of difficulty understanding the technology, the skill sets and all
CareerNet's Growth and Adaptation
00:06:15
Speaker
of that.
00:06:15
Speaker
So we found that was our USP, that we came from a technology background. We had as a team strength with technology as careers. So we found that was a USP, capital requirement was low. Those days were different, like knockery was just there.
00:06:31
Speaker
And there was technically no job portal, so to say. The social media obviously was absent. The outgoing calls were 16 rupees a minute. I think that was the time when communication was very low. So we believe that people who have to do well in this kind of business have to survive and thrive on their natural networks. Typically which they bring from their schools or campuses and all that.
00:06:54
Speaker
So, I think all that pretty much fitted well, the low capital requirements, core competence, USP and the gap that we saw in the market is where we narrow down that this is an area where we should focus and explore further.
00:07:13
Speaker
Okay, amazing. How did the revenue numbers stack up? Like first year when you started this, what kind of revenue did you do? How many employees did you have? How did that progress over the next couple of years? Like rough numbers, I'm sure you don't remember exactly.
00:07:30
Speaker
So, if you see, the first year was 2019-2000 financial year and we had just three employees other than me and Anshuman and with five of us, we did a revenue of about 85 lakhs. So, that was a lot of money. Typically, as you can imagine, when the salary in IT industry was about close to 2 lakh rupees for a fresher.
00:07:55
Speaker
So it's that kind of a salary number for five of us generating and pretty much everything was margin as you can imagine because hardly any overhead we're operating from a home office and we're living in the same house and a couple of rooms in Port Amargala we have allocated for office so that was our office home kind of a thing and the best part I must say this all the three people who joined us then in the first year of our business are still with us
00:08:23
Speaker
So that's a very heartening thing. They must all be completing 25 years now in the year 5. Amazing. How did it proceed from this? 85 lakhs first year, 3 employees next year? Yes, obviously it gave us a lot of confidence that we have hit something big and we started building on that.
00:08:44
Speaker
and then subsequent year we did about 1.4 crores of revenue. This was in 2000-2001 financial year and then year 3 was a tough one because by that time the dot-com bust had happened.
00:09:01
Speaker
9-11 happened and then this whole recent bankruptcy happened. India normally takes a while or there is always a lag when something explodes in the US. It takes at least two quarters to four quarters to hit India. So I think we could see that what happened with 9-11. I think India hit around the middle of 2002.
00:09:25
Speaker
is 2002 was a tough year, we had a flat year but lot of I will say capability building happened during that period because before that we were all focused on mostly the vanilla hiring skills typically the C++, Visual C++ those days and all those kind of things.
00:09:43
Speaker
But what we found at that point of time, the semiconductor, the electronics, those industries were continuing to do well because they were not affected by the dot com. So we started working with textile instruments around that time kind of companies. Plus other areas of technology which were more, I will say, core engineering kind of skill sets is where we ventured into.
00:10:08
Speaker
And we started expanding into other domains also like banking and financial services and all that. So and when 2003 came in, by the time this whole door thumb bust problem had gone over, I think we saw a very good growth because by that time the MNCs have started coming to India.
00:10:26
Speaker
Typically, it was no longer just the startup-startup thing. And being one of the early movers, pretty much most of the MNCs at that time starting from Microsoft to Intel, but not almost all leading MNCs, we were able to handle and work.
00:10:43
Speaker
So between 2003 and eight, a large part of our growth happened to MNCs, the offshore development centers. Startups were not too prolific as they are now. The startup thing started much later. But those were the years where a lot of it. Then we started Geographical Expansion. We opened up our offices in Delhi and Hyderabad in addition to Bangalore. Yeah, and then also started getting a lot of business functionality and Pune as well. So yes, that's how it started building up.
00:11:12
Speaker
By 2008, what was your top line? 2008, we were doing about close to 20 crores of top line. Amazing. About 20 crores of top line we were doing. And what was your employee count? Employee count will be about close to 200 people by that time.
00:11:35
Speaker
Wow. Recruitment is a very, very people-dependent business. Your core asset is your people. I mean, there's no IP asset. It's just people. How did you scale up that asset of people, like managing 200 recruiters or 200 people, making sure everybody's profitable product? And I'm sure you would not have
00:12:05
Speaker
had like a ready talent, you must have had to hire people and train them to be recruiters. Just tell me about the journey of organization building, capability building. What all did you do there? What did you learn? You know, some of your insights.
00:12:20
Speaker
Sure. So I think the first thing we followed the first principles approach to hiring and the first few people that we hired, obviously you don't have any brand equity as a startup. So people who join you somewhere know you.
00:12:35
Speaker
directly or indirectly. So I think our first three hires were like that. The first employee to join us came through my brother's school friend's reference. The second employee was my schoolmate. Her was his batchmate at MBA like that. And then we brought in a good number of people from IIT Delhi and IIT Roorkee who were our juniors from those campuses. And that was quite, I will say, a disruptive thing at that point of time.
00:13:01
Speaker
because it was completely unheard of engineers from premier campuses joining the recruitment industry. And those people were obviously very loyal, very cohesive. And it was Friends company. There was no concept of stop option option at that point of time, much in P&L and started doing it, but it was not like what it is today.
00:13:24
Speaker
I think the biggest reason people stayed back was they felt that they are in the company of friends. There was a lot of mutual respect. There is a high amount of trust amongst people and we will typically work, start our day around 10-11 in the morning and go to do in the night.
00:13:41
Speaker
and then we will head out a lot of times to ISC to have an omelette pretty much and a few of our senior employees initially when they came to Bangalore they stayed in the same house where we were staying so we shared the rooms and all of that I think that was the biggest thing and where that culture got built up of sense of belongingness over there I will say that up to first 20-25 employees never even got an offer letter
00:14:11
Speaker
There was no concept to offer letter for those people. And there are people of that lot who have stayed back with us, where we have not done any appraisal discussion in the last 20 years. There have been good years, bad years, whatever we could afford or give it to them, they have been more than happy with that.
00:14:31
Speaker
Second thing was, in 2000 itself, when our database was crossing 1000 employees, we realized that the Excel sheets are not going to work any further. So that's where we realized that we need to make investments into technology.
00:14:46
Speaker
And I'll ensure that because we realized early on that data is a database at that point of time when lockery and monster was still just coming in. Database was a big IP intellectual property in this business. So, so if you are quite clear on that, that whatever history of interaction we have with any candidates will be documented.
00:15:07
Speaker
And there was no concept of private database. Typically, all the employees can log in and see a particular candidate's case where it is being taken up and all of that. So we could reduce a lot of duplication of effort, a lot of silos approach over there. And if somebody's case has not worked out in company X, then we know we can try in a company which might be looking at a 90% fit instead of 100% fit and all of that.
00:15:33
Speaker
So technology was another big area of investment from the beginning and obviously we could not afford to hire full-time technologists. So most of our technology initial technology got built by our friends who were who did moonlighting for us. Typically they were working in day jobs over the weekend or evening they were coding and helping us get our initial code out.
00:15:57
Speaker
The third thing I will say what helped us was we realized early on that recruitment is not just a matchmaking business, recruitment is a supply chain business.
Innovation and Employee Strategy
00:16:07
Speaker
And there is a lot more to recruiting than just finding the right candidate. If you look at the whole life cycle, the screening, scheduling, assessments, background check, and then the whole application processing is a lot of work.
00:16:24
Speaker
So with that thought we started HirePro typically. So that ensured that we no longer remained a firm which was just supplying CVs. We were able to capture the whole life cycle of hiring and effectively differentiate from our competition. Plus, we were able to build a lot of stickiness with our clients because since we were covering much larger, for example, pre-assess candidates, we were providing to the companies.
00:16:53
Speaker
And unlike today, at that point of time, the engineering colleges were far and few. So companies wanted pre-trained people. That was a big requirement. And campus hiring used to be a really big thing at that point of time. So we came up with the concept of pre-assess candidates, because companies were finding it difficult to go to every possible campus. So basically, so how do you pre-assess the candidates, curate their database, and make them available? So we started doing that in 2002-03.
00:17:22
Speaker
So those are the pioneering efforts that we did which allowed us to remain ahead of the others and also because we came from technology background we always resonated with the business folks and the technology folks better than compared to the HR folks.
00:17:38
Speaker
So that way we were able to cut down a lot of bureaucracy. Because when we started working with MNCs, we realized that there is a good amount of bureaucracy. But since we were very closely working with the technology folks, the bureaucracy never came in our way.
00:17:55
Speaker
Okay, firstly, I want to kind of zoom in a little bit more. In my experience, the recruitment firms, which are profitable, tend to have a very high focus on productivity, on tracking recruiters out over time.
00:18:10
Speaker
So you're saying that in your case it was more of a trust-based environment and so you did not need that level of a stick approach. It was more of creating trust environment. You'll be surprised till date other than for the executive search, which is a team of 20 people, we do not have any concept of incentives basically which are paid out on closures. Not a single rupee gets paid out on closures.
00:18:37
Speaker
because we never wanted people. Which is industry norms, right? Yeah. So the culture was more like software culture. It was very collaborative because of that. So people were not operating in silos. They were not operating like shops within themselves. They were much more confident to share information. If they are talking over Ajay, then they were happy to say, why don't you try this candidate? This might work better in this position and all of that. So there was a lot of collaboration actually.
00:19:07
Speaker
and on the floor. So that was a very conscious decision because we could see that the nemesis of this industry was this that there are 80 people but everybody is operating as 80 shops. So we completely demonstrate from that, from the beginning. How do you align incentives that? From the beginning have a 10 to 15% variable fee component in the salary and that is mostly paid out on the team's performance.
00:19:31
Speaker
So for a particular business unit of 25-30 people, how their team has done as a whole and what productivity level they have been able to achieve, closures, conversions and all that. Against that, most of the bonuses have been paid. So bonuses were not a very large component ever. Typically 85% salary and most of the people used to get, I will say maybe 5% people will get less than 100% promise bonuses. Most of the people used to get more than that.
00:19:59
Speaker
So we kept deliberately the boluses low. That was the risk we took. But in the hindsight, it allowed us to ensure collaboration and comradery on the floor.
00:20:12
Speaker
opposite to today's mindset. I mean, today's mindset is gig economy. You get paid per piece of work you do, you don't work, you don't. So you feel that this approach of giving job security, giving financial security gives you better results than a gig economy approach of paper output.
00:20:33
Speaker
You have to decide that what do you want to create. If you want to create an organization or a long-lasting organization, I don't think the silo approach is going to work. So for example, if you see in CareerNet, we don't have a concept of work from home.
00:20:49
Speaker
Fine, if you require you take it, there's no problem. Because we want people to meet up, interact. And I always used to tell people that look, whatever enforces Vipro or a mind tree kind of company can give to their employees. We will try to give you better than that. But if you compare us with a captive center of a large MNC bank or a very high tech startup running in US kind of a company, then we are a profit center and that's not the benchmark.
00:21:17
Speaker
For example, right from 99, we have been providing food to all our employees. Food subsidy was always there. We provide transport to our employees. 50% of the transport cost of people who want to avail the company transport is paid out by us. So those went in the health benefits and all that. Even when we are startup, we provided that. And even before me and Anshuman decided to make our homes as our first few employees at houses, we were quite liberal in giving them even housing loans.
00:21:43
Speaker
to our initial set of people. We are quite little with personal loans. We don't have a concept of traveling and dearness allowance. It is purely on trust of what is required. So we always operated the way a family will operate typically and look at things. For example, we never kept booze as part of the office. If there is any booze in any party, you have to pay for it.
00:22:08
Speaker
And that is the reason you see that we never took any debt, any equity in the career net business, built it from scratch, we printed computer. I still remember the first computer that we took on rent was 2500 rupees monthly rent that was there in 99.
00:22:26
Speaker
So started with that and built it. I think that's the right way, according to me, to build the business, unlike what we saw happen in the last 10 years. I'm happy that correction is happening now. I just love the approach you took of creating a second home, which would have also helped you hire better quality and retain.
00:22:55
Speaker
So most of our hiring was from campus. We always preferred to hire freshers. We had basically concept of career, career net academy for recruiting excellence. And everybody undergoes a three-month training. It's a full-time training, which everybody has to undergo. Because what we realized when we were going to campuses, there was no concept of recruitment as a career.
00:23:19
Speaker
There were MBA, HR and all that. Repatment had best was elective. So to have a professional who is a full-blown Repatment professional, there was no training or no program as such. So we said that let's go to the drawing board and create our own programs over there. And like for example, in India, if you see when people make an offer and a lot of them don't join,
00:23:44
Speaker
Now, this is a very India specific problem. Unless until you understand the cultural nuances that why people don't take offers, don't join and they know the right probing skills, it's very hard to improve your conversion. So we have a program called Pofu like post-op or follow-up.
00:24:03
Speaker
Now there are three levels of competencies we have in that. So one has to take certifications to click across one level of competency. So there are powerful experts in the company whose only job is to see the conversions that are happening and all of that. So like that, then the domain specialization because the amount of hiring we do in so many industries. So we expect our recruiters to be able to resonate with the hiring managers.
00:24:29
Speaker
So domain training is very important, whether it is banking, whether it is pharma, building technology is so deep, semiconductor, telecom, byness, like that. So domain expertise is our key focus of area. And a lot of people are engineers who join us, that is then MBA with but a lot of technical background. So we always believe that building our own carter is the right way, rather than importing too much of talent here, there and all that.
00:24:58
Speaker
And you would typically hire MBAs or engineers like from campus. So it was a mix. It was a mix of hiring. And one thing we were very paranoid in hiring was diversity, especially the regional diversity. So we never picked up people too many people from a region.
00:25:15
Speaker
Because that again we realized in India was a big challenge that once you have too many people from one region, then people start using the same language in their conference rooms and all of that because very difficult for subsequent freshers or young people to survive in the company. So regional diversity was very critical. So as a result, we used to go far slang event to places like Lucknow or Bihar or
00:25:38
Speaker
Bengal to recruit even though most of the people we required were in Bangalore and Bangalore also wherever we went we always preferred the colleges which had a lot of diversity of students over there and within that I will say 70% were engineers in the beginning but engineers as technology started becoming more and more lucrative it was becoming hard to attract and retain engineers then we moved a fair bit to MBAs as well
00:26:06
Speaker
Over a period of time, we found that a lot of people who are not societies or with not great pedigree, they were doing equally good or better. So I think that is where we were corrected and we started looking at the more attitude of people rather than just looking at their pedigrees. Also from a retention perspective, we came up with a lot of career paths.
00:26:29
Speaker
For example, suppose somebody is a headhunter at heart, he wants to only do headhunting, then we know that the person wants to be an individual contributor. That person can go on to be into executive search, where they can handle only high value placements and be high touch and all that. Then there are people who want to be more of managers, so they can go on to become delivery managers. Typically, managing a team of 30-40 people, a large project,
00:26:59
Speaker
the people process technology part of it, handling it very well. Then the concept of practice managers came in, where people required domain knowledge, people who wanted to be more into client facing roles, who can do consulting, who can advise companies how to set up their indie operations and all of that, like that. So a lot of career paths came in and as a result, we were able to retain a lot of people and grow them.
00:27:23
Speaker
eventually. Otherwise, recruitment tends to be a very flat organization and then people start leaving and getting on their own and all of that. So that also came very handy in retaining people. Did you have a lot of centralized functions to handle? One approach is with an agency, you have one person who's end-to-end responsible from sourcing all the joining and invoicing. Or the second approach is you could
00:27:52
Speaker
break this up and they could be a team which is only sourcing everything like you mentioned your post offers follow-up you have a separate team so did you go with that approach like functional splits yeah functional split is the approach we picked up because we realized that see when you do not hire people with very
00:28:10
Speaker
I will say high level of intellect. It is always easier to give the same person more of the same work to do rather than giving 10 different things to do. You give five times more things of the same type, the people do better over there. So at one point of time, if somebody is focusing a lot on headhunting, we allow them to just focus on headhunting.
00:28:32
Speaker
The client relations was handled by somebody else, in terms of follow-up, and post-offer follow-up, as you rightly said, was a separate team, which came into there, and then the billing, invoicing, collections was separate. And then we always encourage people to do employee rotation, so not put people in just one role for a long time, because they're career developers. But at one point of time, we always focus that they do one part. So that again allowed us to scale up.
00:29:01
Speaker
Fascinating. You mentioned a couple of other initiatives, like you spoke of pre-assessed candidates. How do you monetize that? I'm assuming the core recruitment business would be like 8.63% of the salary offered. Yeah, basically anywhere starting from there going up to say two months, depending upon the hierarchy as well as the rarity of the skill set.
00:29:27
Speaker
is what used to be our fee model. So this was the model when it came to sourcing of profiles. Then we have assessment as a service. So there we were developing the content for companies and providing them the platform to run that test and all.
00:29:43
Speaker
So, there it is charged on Paris. That would be an alternative to metal. Yes, exactly. Metal, very track kind of business. So, there we were doing that. So, that business is doing well, continues to grow. So, there the pricing is... That would be like a SaaS business. It's a SaaS business. It's a SaaS business. Yeah, like pay as you use model, kind of a thing. Yeah, any number you consume, you pay.
00:30:10
Speaker
and then what has happened because over years we now have data so we have tried to blend both hiring as well as assessment where we are saying that we will give you pre-assess talent and we will promise you a service level we are say if you need two candidates you should be able to make one offer
00:30:26
Speaker
So bring it down to that level. So organizations are willing to pay us more. Instead of say 8.33, they don't wind being 10%, 11%, purely because it saves a lot of time at the end. So that is a value addition we were able to bring in because of the amount of data that we had on the candidates. And this model worked very well in the entry-level hiring.
00:30:49
Speaker
So what was happening if you see 2003 to 2007 kind of a time frame or even now to a large extent that the bigger companies like Infi, Wipro were going to possibly every campus and hiring. But companies which were looking at hiring say 100 people, 200 people and were not paying like a Google or a Microsoft kind of a very high salary, those companies were actually missing out.
00:31:13
Speaker
They did not have the numbers to justify going to say 100 colleges over there. They were paying well. The quality of work they were doing was also very good. The candidates were also interested. But what we found the real thing lacking was that how do you connect the two? So for such companies, we came up with the concept of a PEP program. This is a preliminary exam for placement, physically PEP, as we used to call it. And then we used to go to all these campuses and do the PEP.
00:31:42
Speaker
And then using that database, the companies were able to refer it. And now the placement officers or heads initially had a lot of resistance because they felt that we are maybe violating their hiring process. But when over a period of time they realized that it's not the case, these people are adding a set of companies which otherwise we are not getting on the campus.
00:32:05
Speaker
lot of people want to go into domain but suddenly they realize that one big mass electrical truck comes in and everybody has to one way or the other forcefully apply there and get in. So they also wanted people who were very keen into electronics or instrumentation and all should get those kind of jobs.
00:32:24
Speaker
So that program was a very pioneering effort and that allowed smaller companies to have the same kind of reach what a bigger company was having without having to spread themselves too thin over there. So that was a good pioneering effort. This whole higher-pro thing, we pretty much pioneered the concept of RPO and NDR equipment process outsourcing. We did our first RPOs in 2003-04.
00:32:48
Speaker
Because we were finding that there was a lot of leakage in the hiring system. Like you send a CV today, right? And now all interviews, even if you are taking 3 or 4 interviews, the whole process can get completed in 4-5 hours. But you are taking 30 days to make an offer. So where is the 29 days going? And that was all back and forth.
00:33:13
Speaker
or that the hiring manager is not there, the interview, the candidate is not there, the disk feedback has not come in, that has not come in and all of that. So that is where we said that the net smart just focus on sourcing. Let's heart our teams also go and sit next to the hiring managers and outsource the recruitment process. So RPO was a concept that got built in and equipment being a supply chain business, technology investment was always very significant.
00:33:40
Speaker
Even if you look at today, we will have about 150 people in the technology team and such a large team and a lot of technology we license.
Technology and Expansion
00:33:50
Speaker
Today, if you look at a company like Accenture, they hire about 30,000 people from campus and the entire hiring for Accenture campus hiring runs on our platform.
00:34:00
Speaker
and they made an exception for that worldwide. They were using a global platform, but looking at the complexity of hiring in India, they made an exception. We call it the TERM, which is technology in a world remotely managed. So that is our belief that we should enable it in technology and remotely manage it.
00:34:20
Speaker
So that the personalization, the effectiveness doesn't go down. At the same time, we have better control to that system centrally and all that. Like today, if you see, we support a lot of hiring for company in US. This is US-US hiring. But the whole thing is run from India.
00:34:38
Speaker
So, this is all possible because of technology. Fascinating. Just to zoom in a little bit more, RPO, how is that monetized? How is the fee structure there different from regular sourcing fees? So, RPO, we have a process management fee and that is separate from the sourcing fee. Because suppose a company is hiring 1000 people, then obviously, if we take up an RPO, our commitment to them is to get the 1000 hires in a given cost point.
00:35:07
Speaker
with the right turnaround time and right quality. Quality we measure from certain parameters like conversion ratios, early attrition and all of that, all that goes into the SLA. So, it's like a multi-year contract that we sign up that whatever the SAP 1000 hires you are doing over year round year, for next 5 years, we will run the RPO engagement for you.
00:35:27
Speaker
and we manage it through an on-site, off-site team with whatever technology they have, balanced technology we bring in as an operator or do that. So here we have two fee structures. One fee structure is basically as a processing fee.
00:35:43
Speaker
Because I can't go and say that if you are hiring 1000 people, all 1000 will come from CareerNet. Because the company will have employee referrals, they will have job boards, they will have other equipment vendors working in and all that. So there is a clear line where we draw that all RPO engagements are managed by HirePro, they are not managed by CareerNet. And CareerNet happens to be one sourcing source.
00:36:07
Speaker
typically for them there are other vendors like today if you see we have more than 2000 equipment firms which we work with now these are firms like career net and the amount of transparency trust we have they are comfortable working because we are essentially a regulator player
00:36:24
Speaker
So there is a conflict. A career net is a player, whereas hyper is a regulator. So we have been able to draw that kind of service level, transparency and all that, that a lot of recruitment firms are willing to work with hypero, apart with their data, and they trust that data is not getting leaked or mismanaged and all that.
00:36:42
Speaker
So that is how the RPU engagement works that we get a fee for every higher like say 5000 going up to 15000 rupee kind of a fee for every 1000 placement. Whereas suppose 100 people out of this 1000 came from career net, there the sourcing fee will be applicable at 8.33 or 12 over 10 like that.
00:37:02
Speaker
Okay, got it. Fascinating. So higher pro is essentially your regulatory and technology business. Like one is like an RPO plus tech. So your assessment product is in higher pro the PEP that for pre-evaluated candidate hiring that is also in higher pro. So anything minus editing is all part of higher pro.
00:37:33
Speaker
How is PEP price? Do you still run that? Yeah, so we run the PEP. We don't run it as a PEP PEP any longer because the last 15 years, things have evolved a lot, but we have reassessed candidates, which we provide.
00:37:47
Speaker
And again, nobody now is willing to pay it by 10% and all that. So those normally work at a flat fee of say anywhere from 5,000 going up to say 40 to 50,000 rupees, depending upon basically the reality of the skill set, the niche and all that.
00:38:08
Speaker
But it is still a success fees. It's not like a paper profile fees. Because one thing we have registered is basically that we don't see us as an Okri.com. We never wanted to sell our database because we always believe the databases are IP.
00:38:24
Speaker
you're comfortable taking on risk. And that by virtue of taking on risk, your margins are better, essentially. Like the low risk option would be to just say for every assist profile that you access, I will charge you 1000 rupees, for example, but then the margin there would be very poor. You would not, probably retention would also be poor, I'm saying, because if a company doesn't convert, they will not buy the product again.
00:38:51
Speaker
Okay. Amazing. Amazing. Okay. Okay. HirePro one part is the SS profiles. The other part is RPO. What about the core technology? Like, do you have like a SaaS product? Yes, we have a SaaS product. And so through that product, one, if a company is looking at running or automating their entire equipment department, that is what we are able to take up, which is that is one. Then more often than not, we have found that companies come to us for quite problem points.
00:39:21
Speaker
Like for example, we have a very strong platform for self-proctored assessments.
00:39:26
Speaker
And then during COVID and even later on, now when you are giving written test to someone remotely, how do you know that the test has been fairly done? We have a very, very strong platform, a lot of AI built in around that. And a lot of companies use that, probably like Amazon uses a practicing platform, Pearson uses a practicing platform. So that we have realized has become a product by itself, actually.
00:39:52
Speaker
over there, then interviewing as a service is doing very well, where people they want high quality technology managers or interviewers, complete Ola Uber of interviewing. So suppose you have 100 hires to do and you need to do 500 interviews, but you don't have the bandwidth, you have the bandwidth to say 100 final interviews. So the 400 interviews that have to be done are outsourced.
00:40:17
Speaker
And so because we develop a curated database of interviewers from which the companies can choose from. So right from the time they say that this candidate has to be interviewed till the candidate interviews transcripts are shared with the company, the whole thing runs on our platform.
00:40:33
Speaker
So the scheduling, the feedback, the interactions, the proctoring part of it, everything is done on our platform. So this is a highly scalable service. Any company can reach out for any kind of interviews is there. Then now what we are finding because when you do volume hiring,
00:40:55
Speaker
you have a very different challenge. For example, if a company comes to us and says that I want to recruit 2 sales people in 600 districts of India.
00:41:04
Speaker
We can complete that kind of hiring in a matter of three to four days. And that too supporting 24 vernacular languages. Because in a lot of... How do you do that? How did you build that? So what happens is that a lot of these jobs, the issue is not about the competence, the issue is about intent.
00:41:25
Speaker
And intent also requires understanding the socio-economic profile of the individual. It's very, very important. For example, if you want to hire people for insurance, nobody wants to do that job. Essentially, in India, everybody wants a desk job in an AC kind of environment. And the the brutal reality is that most of the jobs are free-to-speed jobs or they are the shop floor jobs.
00:41:52
Speaker
So those kind of jobs, how do you ensure that you are able to reach out to a very large number of people without any human intervention and get to those people who are actually interested. So like, for example, we have automate outward dialers, like whatever database we have. So if there is a job opening, then we can run campaigns. We are in a matter of few hours. We know that if you are interested, dial one, if you want to talk to a candidate, I do.
00:42:19
Speaker
If you want to apply DAIS 3 like that kind of a thing. So that allows us to actually reach out and shift very large number of peak. Then once you have found somebody who's interested, then we do a lot of asynchronous assessments where there is a video that they record.
00:42:36
Speaker
a minute long video. Tell me something about yourself, right? That's a very common question. Now, most of these jobs, those are important things. Then what does this job entail? What this job is not all about? Orientation about the job. So a lot of these activities we are able to do without actually by any human intervention over there. Then this whole document collection. Now you need to acquire their 10th marksheets, 12th, this, that, all that. So everything is on the app.
00:43:03
Speaker
Especially when you hire for banks, the KYC is huge for employees. So the entire document submission, if you have to take your photograph, you just take a selfie and upload. You just keep on scanning your document, you keep uploading. So your doc collection becomes highly DIY.
00:43:21
Speaker
And technically, the company can send out an offer letter in a matter of 2-3 days. Plus, we map the socio-economic profile. Now, somebody says, okay, in Delhi, I want to hire graduates for a very low and fitter street job. I don't think you will be able to hire. You have to look at 12 past people. You have to look at people in the socio-economic profile where their parents or their household incomes
00:43:43
Speaker
less than 40-50,000 rupees in a Delhi kind of place. So there is a lot of socio-economic data that you require on these profiles. So we have been able to crack that kind of hiring as well, where anybody in a 15,000-20,000 rupees salary bracket also requires to be hired in a vernacular language. We are able to do that.
00:44:05
Speaker
Then the kind of postings that you need to do, you can't be posting on a nakri.com, you need to do in the regional vernacular newspapers and publications and so much of that. So that's the whole thing that we have been able to create because that is a Bharat hiring, right? That's not India. So I always say that when we started the business, we were doing five star business, five city demand, five city supply.
00:44:30
Speaker
But now if you want to, what our Prime Minister says, $5 trillion economy, now the focus is that can I hire in 100 cities or 100 towns across India? And when you hire that skill, the problem statement is very, very different.
00:44:46
Speaker
So over years, we have been able to develop that kind of engine where we have brought all this together, the assessment knowledge, the hiring, sourcing, documentation and everything together. And anytime, anywhere recruiting, basically, that's the thing that we are talking about. And one more thing I will say that we as a company have always believed that the issue in this country is not about talent development. The issue is about talent connectivity.
00:45:13
Speaker
There is always a candidate somewhere available with the right skin set, right compensation, right attitude available. How do you reach out to that candidate and can you in a cost-effective, viable manner find that individual and bring it to the well.
00:45:35
Speaker
I think it's the challenge and the opportunity. We do a lot of work for non-profit also now. Look at people retiring from the armed forces. Typically, how do you get those people back to the job? A lot of women who take break because of marriage and family expansion want to come back. Now, you can't expect that individual to suddenly come back and write an aptitude test.
00:45:57
Speaker
and get into a company. So we run programs in collaboration with companies where such women with their sponsorship support runs boot camps, where for a month time, one and a half months, these women professionals are able to basically warm up their skills and come back to the mainstream programs are there. Then people with different kinds of disability is where focus is happening now.
00:46:23
Speaker
So, all of this is at the higher pro, the Bharat hiring piece, gig interviews, okay. So, between the two, which is a bigger contributor to your group? Group can do that. CareerNet is a bigger contributor because the fee is very, very significant. And we also have an executive search business, long house consulting.
00:46:46
Speaker
average price or transaction or the average in voice value is much higher. And that is a more established business, typically much bigger business. So, yeah. What is your group turnover or what do you estimate? Group turnover will be about 300 crores plus that turnover we have and I approve will be about close to one third of that revenue and the word will be sourcing.
00:47:14
Speaker
A higher pro is doing a lot. So like say the Bharat hiring piece, you would be competing with someone like say Apna, which is a unicorn. In your gig interview piece, there are a couple of startups which have raised funding also in that piece. Three SS candidates, please, you have someone like say aspiring minds.
00:47:32
Speaker
I don't know if they are still around the right one's point of time. They were attempting to do this like three SS candidates. Then you have a poor applicant tracking system where you are competing with both global and domestic, where like say a lever or a bull heart at the level would be offering a similar hiring suit you are offering in HirePro.
00:47:54
Speaker
And in assessments you're competing with say metal, you know, like the proctor has similar offering and all of these are like well-funded competitors. What's your take on this, like doing so many things at the same time?
00:48:09
Speaker
So actually look at our industry has possibly every possible kind of disruption. And I always say that the industry can get disrupted in say six or seven days. One is that the technology, the digital part of it, which was I will say that nopply.com, the job portals, that was possibly the first disruption that the industry saw.
00:48:30
Speaker
The second disruption was in terms of the social media coming in, the WhatsApp and LinkedIn and other qualified platforms coming in. A lot of hiring happens through WhatsApp and all as well. Then you look at the advent of MNCs in many areas.
00:48:46
Speaker
In our business, we saw manpower at a core instead and likes of them coming to India. This was mostly between 2003 to 2009 is when most of the MNCs came to India and when obviously MNCs come to India, they come with bigger
00:49:03
Speaker
and they try to acquire Indian companies, go to the small pad, whatever it is, or be there. Then you have startups which are there and the startups get funded as you are talking about some of those guys which raise money. Then you have COVID kind of events, you have the subprime prices kind of events, right? So I see that with a lot of humidity and that our industry has seen all possible destruction.
00:49:33
Speaker
And I must say that we are the largest when it comes to full-time hiring. And we have seen all of that. Now, if I go more specific to your point about that specialized firms that have come in, I think the nemesis has been that recruitment in the supply chain business. And you try solving a part of the problem, mostly the client problem is not just that. Client problem is poor quality input.
00:50:02
Speaker
and what they do with your output. Invariably, if those two are not good, they've named you that, okay, your solution was not good. You might be doing a good job of assessment, but if that assessment is not being properly utilized into your intimate hiring, the blame comes on you over there. Similarly with the input, like if you build anything on AI, if the input data is not at all curated, you may have a great parsing engine, it doesn't work.
00:50:31
Speaker
Then you look at technology. Now, if you are not managing data and technology properly, then what can technology do for you? And then you will blame it on automation. So I think this is a big challenge over here. And that is where we realize that in our country, we are not a DIY economy, first of all. So expecting people to actually use technology on their own is very limited, unfortunately.
00:50:59
Speaker
We are an assisted economy. That is where this whole term of technology they will remotely manage. We would love people to use technology purely, but we know that they will require remote management. They will require that kind of support. So assisted services is clearly. And over a period of time as the market matures, you can keep producing your human part of it and expect more DIY to happen.
00:51:24
Speaker
over there. Plus you cannot unless until you capture the entire data flow. It is very difficult to make intervention. For example, I have done a good assessment. But if I don't know what the final hiring has been and who has got retained, who has performed well in the company, then my ability to I'm missing out on that feedback.
00:51:45
Speaker
I use it as an input to improve my assessments over there. So those are the places where as part of a career at Hyapurong, we said that let's look at the whole thing in the supply chain. And as I said that we are happy to support companies for point problem point solution.
00:52:05
Speaker
also what happens is that when you have such a large diverse supply chain now in every aspect somebody may say okay in assessment there is a top three top five but as a large incumbent I may be say the top player in say three or four categories but the rest of the categories I'm happy to be when they talk three right and we are not in the feature board
00:52:31
Speaker
Take the example of housing.com and 99 acres. Now, housing.com, the amount of money they burn to basically develop, try out new things. And as a large incumbent, 99 acres were smart enough to be two quarters behind. But they do those things with one tenth the cost.
00:52:53
Speaker
So I think what we have done is as a large incumbent, we have not burned those disproportionate amount of money, we have not played existential games, but we have been always alert and on our toes and whatever good we have seen that something disruptive is coming in, we have tried to do that.
00:53:11
Speaker
May not be with 9 on 10, maybe with 7 on 10. Because most of the time we have seen that as a large incumbent, if you are 7 on 10 is also good enough. Rather than a new kid on the block trying to 9 on 10 kind of a thing. So those are the places where we have
00:53:30
Speaker
try to play it smartly, we have not diluted any equity in the business and we have not taken any existential bets into our business. Brick by brick approach kept on building it and that is where you see in our industry the exits have not been good.
00:53:48
Speaker
Typically like if you look at whatever some of the names that you mentioned and you look at the valuation that which they were sold to large companies and the amount of money there is and the valuations they went out. I don't think that the investors made any good monies in those kind of deals over there.
00:54:08
Speaker
And for you, your customer acquisition cost would be much lower, right? Like somebody who's starting fresh, you have to spend a lot on signing up customers, but you already have distribution, you already have relationships. It'll be a lot easier for you to acquire customers at scale if you launch a new product.
00:54:26
Speaker
And also we have a lot of alumni now. But as I said that we have been hiding from campus, training people from scratch and all. And we have maintained excellent relationship with our alumni being running things transparently. So mostly we have seen wherever our alumni has gone, they are today heading to my HR. They are giving us business. And in our business, you can't say one thing and do another thing. It's an open book. So they know that how we operate.
00:54:56
Speaker
So that comes very handy if you look at we do so much of work with the startup world and why because a lot of people who we place between 2004 and 10 in startups from IITs and all when these guys were doing their ventures we were the first port of port like click card kind of company we started working with them when they were operating from a 10 by 20 size office in Kora Mangala
00:55:25
Speaker
Amazing. This career net business must be extremely profitable because you have high retention rates, you don't have much client acquisition cost because your client acquisition is all organic. I guess you would only be spending money on higher pro business to build out technology. Higher pro also, I will say technology has become self-sustainable now. Whatever licensing revenues are all being made, we are profitable on that as well.
00:55:51
Speaker
What kind of gross margin as a group do you? We will do about close to 30% kind of gross margin. So this sounds like a good IPO ready kind of a business right with this kind of gross margin and I am assuming you would be growing by 20-30% each year.
00:56:15
Speaker
Covid of course was a very, very big positive bummer because you know, especially in technology, the hiring madness was unprecedented. So Covid, three years easily, the company grew almost two and a half times. The last 12 months have been slightly tough because as you know, the job markets are not doing so well. But I think we have covered a lot of ground in Covid.
00:56:40
Speaker
and we are quite able to defend that over there. So this year is more of a consolidation because of all the madness, three-year madness starting from 2020, which has happened, two-year madness I will say. But yeah, overall we are on a good trajectory. What was your talk line in 1920?
00:57:03
Speaker
1920 might be, I'm not remembering exactly, but maybe 130, 140 kilos. So you've doubled the last three years. Amazing. So as I was saying, there's like a perfect for IPO kind of a business, right? Like growing 20, 30%, 30% gross margin.
00:57:26
Speaker
So basically one thing which I have always believed in and this is what a new line some I told some friend investor 20 years back and he reminded me last year that you remember you told me this line I always believe the best companies are bought they are never sold we are definitely ready for an IPO but the larger question is what do you want to do with the money because we do not see at least as of now a lot of inorganic growth happening
00:57:52
Speaker
But I guess if you want to go from 300 crores to, let's say, 1,500 crores, an IPO would be the way forward, right? You would have to look at inorganic opportunities, like what info edges that is, you know, like the info is continuously incubated in a way.
00:58:11
Speaker
So you are right. So we are now looking at doing a lot of prolific investments because we have good surplus. And since we work with a lot of these companies, we have a good idea about the health and growth of these companies. I think that that side has started in quite a significant way.
00:58:28
Speaker
and the work Indicube venture is where already 125 pros we have put in from career debt. So that money has already happened. So that's a substantial investment. It's a group company we have done in this. We are also seeing a lot of international expansion happening now. Because what has happened after COVID, the talent has become borderless. Companies are happy if somebody is sitting in Bangalore and working for a company in Vietnam.
00:58:57
Speaker
So, we are now getting a lot of business from Korea, Vietnam, Mexico, Indonesia, these kinds of countries also, where they are not expecting these individuals to actually go there and work.
00:59:08
Speaker
they will be working sitting out of India and essentially we believe that our biggest strength is the Indian talent and wherever the Indian talent is required or is going I think a career that should go to those places and higher pro technology being there we are able to deliver a lot of those projects remotely otherwise if we have to set up hundred people team in each of these countries it's a challenge but we can do a lot of stuff remotely over there
00:59:34
Speaker
So, so interesting expansion is clearly the focus. The part of the story is a clear focus. The TR2, TR3 growth domain expansion is also happening. And more and more focus on automation.
00:59:49
Speaker
Okay. Interesting. So you said you started doing investments. So you have like an investment team now within CareerNet which evolves. And do you do like angel investment or like series A or like what's your investment thesis? So basically we don't have a team team. The advantage we have because of our hiring and doing senior hires.
01:00:11
Speaker
in a lot of startups, we are privy to a lot of information. So I think we are able to actually get a lot of screened, good quality companies coming our way. So mostly it has been, I will say a piggyback approach. If you have seen something good, somebody known to us putting in money, then we have been doing that.
01:00:32
Speaker
and we have been investing anywhere from about 50 lakhs going up to 2 parods in each of these companies so normal ticket size is around that and then we are now also coming in as a LP in different funds so as newer funds are coming in people are keen to have us also as a LP so 40-45 funds we are now LP in that businesses over there.
01:00:56
Speaker
So mostly that's the way we are doing as of now. But yeah, over the next two years, we definitely see that we will require our family office or a full-blessed team just managing this. But we are trying to basically put our handkerchief beyond as many tables as possible at this point of time, then scale it up from there.
01:01:20
Speaker
And what stage do you invest in? Early stage? Series A? What level? Basically series A kind of stage. We are trying to put money into real businesses typically rather than the last match, turning businesses or winner takes it all kind of businesses.
01:01:35
Speaker
All our post taxpayer money. Amazing. Let's talk about IndieCube now. What was the origin of the idea, the birth of it? And you have invested a lot of your personal funds in it. So just tell me about that journey of conceptualizing, building up IndieCube. Yeah.
01:01:55
Speaker
But our idea was I will say more incremental into our career net journey.
The Birth of IndieCube
01:02:00
Speaker
So what was happening was career net things were going very well. So every two years, three years, we're changing office. And we were fed up with that because when you take a new office, you do the interiors and a lot of money. And if you have to get out of it in three years, you lose a lot of them. And then the whole, you know, relocation and all that.
01:02:20
Speaker
So in 2011, we thought that why don't we pick up a larger office space? We required about 50,000 square feet for our growth at that time. We were about 500, 600 people at that time. So with that intent, we thought that let's sign up our 100,000 square feet building.
01:02:39
Speaker
and 50,000 career net will occupy. Other 50,000, we will give it to different companies. And first career net background at Hypero, we were having a lot of clients who might be happy to pull up gate with us, not MNCs, but a lot of offshore development centers, startups, and all might be with us in the same office.
01:02:59
Speaker
So, with that intent, we signed up a building in 2011, this was a build too soon, we signed up and 2013 that building got ready, we moved it in that building around April of 2013 and as planned 50% of the space we gave to other companies.
01:03:17
Speaker
Now, once we had those companies in that building, those companies started asking that, can I use your port room once a month, the training room that we have created for us using that, the phone, the transport, the IT infrastructure. So many things that we created for our own requirement, those companies being smaller companies, they wanted to leverage all of that.
01:03:42
Speaker
And we found it a very prudent business decision also to give them the thing. Because we had better economies of scale, more people are using by internet, by internet pause goes down and all that. So we happily did that. And within six, eight months, by the end of 2013, we realized that there is a big gap in the market.
01:04:02
Speaker
At one end, you have Tech Park kind of things, which are mostly on the periphery of the cities. And then you have very squanky buildings like your Vanarizan Tower in Gurgaon, or you have India Bull Centre in Bombay, or Yubi City in Bangalore, and all that.
01:04:19
Speaker
But those buildings are not affordably by anyone and everyone over there. So then if you get out of these properties, you realize that you have individual landlords and the whole market is very, very unbranded.
01:04:35
Speaker
You really don't know that the building has compliances with the landlord pay the property taxes on time will they be maintaining the list properly than the run when the power is not there and all that so that was a gap you could see that the concept of services the concept of brand reliability.
01:04:53
Speaker
All that is non-existent over here. So this is something which we started figuring out. Then our current expansion was happening and when these guys were there, we asked them, why don't you get? Because we require more space for career net. Then a few of these companies prompted us and why are you asking us to go? Can you take some space nearby and give us space there?
01:05:16
Speaker
So that was our prompt to start NDQ. So I think this idea was brewing in our minds in the 23 year period and 2015 is when this whole thing actually shaped up.
01:05:31
Speaker
So at that point of time, me and my brother both were very actively focused on the career net side of the business. So my better half Meghana and my father, they both ventured into this and full time. And of course we were supporting them in this whole thing. And we signed up our first property around March of 2015.
01:05:56
Speaker
an altering road of about 150,000 square feet. And within six months, we could fill up the whole space. And we had no background into real estate. You are always told that real estate is for local people, it is not for migrants, and it's a dirty business, political connection, this, that, all that was there. But on the contrary, we found that nothing of that type truly came in our way. And very smoothly, we could fill it up.
01:06:22
Speaker
Then it boosted our confidence. We picked up another property in 2015 and KPMG came and took their property because they were doing a large campus for themselves. So that was taking almost two and a half years more. So they needed a transit space. So within 2015, we almost had more than 200,000 square feet of space. How many seats?
01:06:45
Speaker
This will be about 4000 seats. So basically that gave us a lot of confidence that okay, we have hit something big and let's now go whole hog into this business. The way we started CareerNet to be honest with you, we started in a very similar way. There was no business plan as such. There was no time or any of those things. We found an opportunity and we said, okay, let's go for it.
01:07:11
Speaker
From the beginning, our thesis was that this is a B2B business. This is enterprise business. Because of our recruiting background, we were very clear that why companies invest in good quality spaces. See, the biggest consumer of spaces in India is IT industry, followed by startups and all now. And when I'm saying IT industry, I'm including all possible verticals and all of that in IT, IT ESB.
01:07:39
Speaker
Now in most of these companies, the customer never comes to their office. Customer is in US or somewhere else. Why companies are creating these good offices? The primary idea is to attract and retain employees. So the hero of the story for all these companies is the employee.
01:08:00
Speaker
Now and since we have been dealing with the employees for over two decades, we knew that what IT industry is looking for, what is their pain point and when companies were hiring, you always will worry about where the office should be there and not there and all that. Location selection and all that was always a question we used to wish city to go with location to go and all that.
01:08:22
Speaker
So, we had good clarity that what is required and we figured out that the hero of the story is employee and not anybody else and let's see that what is required by the employee. So, employee after work or good quality place to work, they require affordable food, they require affordable transport to commute, they require recreation, some amount of wellness. These are the things which the employee is looking for. In 100 rupees in India, people want to have a full meal.
01:09:03
Speaker
We don't have urban transport like Delhi of course now with metro being there. But if you look at most of the other Indian cities, the urban transport is very very weak.
01:09:13
Speaker
We said that okay, let's just focus on the core. Whatever improves the life of the employee will be our focus number one. Second is basically the ease of doing business. That okay, how can we ensure that the complete employees are more productive and how can we ensure that the company is also more productive.
01:09:32
Speaker
Like, for example, we knew that IT industry, most of the companies will have servers, they will have labs. Now, you can't say that discontinuity of power is a clear law. It's a clear red light for any software company. Like, maintenance, for example. Now, if you do interiors today, you have 10 to 15 different vendors maintaining or different things. And no company wants that. Every company wants one vendor where they can call up a single window kind of a thing.
01:10:00
Speaker
So ease of doing business is very, very important. Productivity is very, very important. The employee delight is very important. And then the accessibility to these office spaces. You can't tell everybody to go to a Vanessar in Burghar and operate, right? Kind of. So these were the central themes. And also one more thing that I will highlight is that every company wants to be in their own office. Suppose I'm a company with 200 employees. Now I want my company culture to be promoted.
01:10:30
Speaker
I want my employees to know my logo colors. I want my branding and signage to be visible in my own house. I am okay as a company to share the washrooms, the cafeteria and stuff like that. But within the four walls, I want my stuff. Second, the link to that is that every company has a different way to look at benefits. Like in career net case, for example, we decided to give food to every employee.
01:10:55
Speaker
Somebody may like not to spend so much on food, but may like to spend more on transport for their employees, or they might like to do both of them. Now, companies may say that I am not comfortable offering a 30 rupee cup.
01:11:09
Speaker
I am okay with 5 rupee cup coffee but I don't mind giving employees biscuits or fruits in the office. Every company has a different new unemployed benefits over there. So one size does not fit all. You can't tell that there is a 5 star buffet, take it or leave it.
01:11:27
Speaker
You need to have a $1.99 pizza and then say that there are toppings and within those toppings you can make your own pizza kind of a thing. That personalization is the expectation and India is the price-conscious market. So people invariably if you give them three choices, they will go with the middle choice.
01:11:47
Speaker
like Paris when we buy, we don't buy the top end, we don't buy the western model, we buy the middle one with some accessories. That's the general mindset with most of the products which we have. So office is no different from that. So I think those were the things which came very handy to us and we were clear from the beginning. And of course, the struggle in NDQ was very different. To be very honest, there was no struggle, so to say.
01:12:13
Speaker
Because by the time career and business was doing well, we had built our own reputation in the market. All that was there. So we did not have any bootstrapping moments as such. But the core principles of being through well, getting the unit economics right, basically building a good culture in the team, being cognizant about upstream downstream opportunities.
01:12:37
Speaker
Like in say when we did HirePro, we looked at all the upstream downstream opportunities in the requirements supply chain. So very similarly when we have got here, what is upstream downstream has to be looked into when we can do in house or partner and all that. Has been the driving force and that is how the journey of IDQ started shaping up in 2015-16.
01:13:01
Speaker
Okay, so I want to zoom into some of the things that you said. First of all, I believe there are two models of shared workspaces. One is like a vWork model, where vWork has built it out, and then they find people who will take seats in it.
01:13:19
Speaker
Second is I guess Smartworx is kind of a model where they build ASPR specifications. So if a company says I want a place for 50 employees and they will build ASPR the company specifications and then lease it out. I guess that would more be like a leasing as what we work does is more of co-working.
01:13:40
Speaker
What is the indiecubes model? This is where the thing started. Typically, one was the WeWork School of Power, which was more the typical regus, if you call it, the business centers used to be the older version of it. And then from there, the newer version came in, which is the COVID.
01:13:58
Speaker
essentially what working means is short size and short stay or short stay. The companies will go to that place because if they have 5, 10, 20 employees they are okay or if they know that they are starting an India center and they don't know what will happen after one year then they will go into a short stay kind of a location. So short size, short stay define that business centers and to a large extent the co-work.
01:14:19
Speaker
Now once people started, enterprises started latching onto it, is where this whole concept of long stay, large size, personalization and all that started coming in. And I think both the schools of thought, the personalized as well as not personalized at all, the business centre model has started converging. And today I can say that everybody in the market is doing both.
01:14:42
Speaker
That's a fair assessment of the thing. Now for most companies the pivot would be for some still it might be the co-working for some it might be the enterprise. I think for a company like us our pivot is the enterprise like for example 90% of the business that we do.
01:15:00
Speaker
is all enterprise business where we provide personalized offices. About 10% is co-working for us. And co-working is very important to us, even though the number is small, because that is the place where a lot of younger companies come to us. Some of those co-working clients end up becoming enterprise clients.
01:15:23
Speaker
lot of them actually because the real estate by nature is very sticky if you see once you get into an office and your employees get used to that whole thing then unless until there is a big push people do not change offices because a lot of your employees take their residences around the office and stuff like that and uprooting offices is not easy you have to change all addresses your internet connection has to be changed and then the whole relocation
01:15:51
Speaker
All that is there. So, and that is where you see a DLF or a prestige in Bangalore or Embassy have developed. Most of these guys started 20 years back into the pilots and then they gave some small space to a large MNC and said, okay, give me a commitment of five years, which we call as a lock-in term.
01:16:11
Speaker
and that lock-in never got over, they knew, required more space, more space and today you see that relationship started 5,000 square feet, has become a 5 million square feet relationship. So there is a huge stickiness in this business for all these reasons and so it is very important to catch companies young and be with them in their growth and build out from there on.
01:16:35
Speaker
So today, if you look at the market, the market has gone bad about 300 years. It's quite a fragmented business. And why it is fragmented to that extent? Because most of the developers which have office risk, as well as the developers, I'm not talking about the big one. There are lots of them which have one building, two buildings. Now, if their younger generation is interested in starting something, they will put out something out and then say that we are over.
01:17:01
Speaker
So there are a lot of, I will say, one center or one city company, a very large number of them. But if you look at a Pile India, multi-city, really large players, 5 million square feet plus, I will say the market is between 5 to 7 players.
01:17:19
Speaker
Who are those five to seven players? So like you look at us, we were smartworks, AWFIS, tablespace, some extent simply works. These will be the five players which will be among the largest over there. Then there will be people like 91 springboard and few smaller ones. And then a few players were done well in given cities like red brick and like that kind of players. Kudar in Gurgaon has done very well.
01:17:48
Speaker
So if you look at about 10 players will be there and out of which about 5 will be the pan-india larger players and you have raised institutional capital as well because in this business it's not easy to raise institutional capital because capital tends to not go beyond the top 5 in any category.
01:18:09
Speaker
because they always try to put their money behind the top one or two. This being a large category, maybe the upper limit is five players. So I think increasingly and real estate is on a lot about location also. So as a result of that, it is wrong to say that the market will be with five players only.
01:18:28
Speaker
There will always be landlords who will have great buildings, great locations and those buildings will do well just because they happen to be at the great location and all that. So, it will be fair to say that 50-60% of the market is and will consolidate in the favor of top 5-6 players and the consolidation will be more driven by the demand
IndieCube's Market and Growth
01:18:50
Speaker
side.
01:18:50
Speaker
Then the supply side, because the demand side will be more and more discerning. Typically, for the reasons obvious of doing business, business continuity, credibility, and then this whole focus on ESG is going to come in, where companies will like to be in low carbon emission companies, green buildings and all that.
01:19:11
Speaker
So I think that is where the men and boys will start getting differentiated. And since it's a B2B business, corporates invariably will ask for compliances, would like to go with better quality players and all that. I think demand side is what is going to push more and more consolidation.
01:19:27
Speaker
Can you just help me understand what you mean when you say consolidation will be on demand side rather than supply side? What is the difference? So basically, supply side consolidation would mean you sign up. Supply side means basically that more people start the business. I don't see that there is going to be any dearth of supply or buildings. But the customer is going to say, I don't want to go, we are talked by. Because I am going to run my business. So I want to only go with players which have high credibility.
01:19:55
Speaker
So basically the customer is going to demand more and more and that will push the consolidation. So what is the profitability metrics or what drives profitability here? Like let's say you have one space, one campus, one building, whatever. What are the economics of it? At what percentage occupancy does it become profitable? And so on. Just help me understand the economics of this business.
01:20:25
Speaker
So before the economics, I will start with that why the customer looks at us. Because when you deal with enterprise clients, invariably the decisions are taken by the CFO organizations, recruitment and all that. And these are all hardened, tough folks, why they should come to a managed office. And traditional understanding has been that if you go to a business center, it's expensive.
01:20:51
Speaker
But where the business centers are different from managed offices is that they are long stay large size. And the moment you get into long stay large size, the customer invariably is going to look at a you versus me kind of a computation. Now, multiple things make this cheaper than the end customer decision to go on their own. One is the way we procure the real estate. So for example, when we go and take up a building, we take up a full building.
01:21:20
Speaker
and we take up a building on a 20 year lease. Now if any customer were to go, they will take for 5 years, they may say I will take a floor. So obviously the landlord will be more excited about giving a better commercial if you are taking for 20 years in the whole building. It solves a bigger problem for him or her.
01:21:37
Speaker
Then you look at the interiors. Now, a customer may come and at best they may advertise their interior for five years. But when we do interiors, then our air conditioning, electrical, a lot of our interiors are amortized over eight, nine years. Our carpets and shears may last lesser, but a lot of them last longer over there. Then you look at the services. When we deploy manpower, they also do common area of interest, they do the office bid.
01:22:05
Speaker
When somebody else deploys the manpower, they will only do their office maintenance. We have one security for the entire building, for example. Now, if you have a small office also, you still require a security guard or in three shifts, kind of. So, there is a then same thing applies to chai, coffee, internet, anything that you can think of. So, there is a huge economies of scale that we are able to build in. There is a much better utilization that we bring in.
01:22:33
Speaker
There is a clear case of 30 to 40% price reduction. What the customer will be spending, customer is going to spend 100 rupees, then this whole cost comes down to 60, 65, 70 rupees depending upon the scale, it comes down. Now that 30 rupees is a big arbitrage that has got created, which is what gets shared between the customer and us.
01:22:57
Speaker
So now after COVID, we are finding that a lot of these companies are taking up space. HDFC bank has taken up space like that. Federal bank has taken up space. So I think this is the way I see that this is a 2.2 of commercial real estate. You look at 20 years back, every builder thought that they can make a hotel and run it, or they can create a mall and run it.
01:23:22
Speaker
But when one operator like Phoenix came in, Windows realized that owning a mall or owning a hotel is a different game, but running it is a different game. So the operators and the ownership has got decoupled. And I think commercial real estate is seeing the same kind of decoupling.
01:23:39
Speaker
between ownership and management. Pricing range like a per seat pricing? Pricing range starts anywhere small. I will say about 7000 was up to about 12-13000.
01:23:55
Speaker
So most of our spaces are given between 8 to 10,000 rupees a seat typically. This is for the core service, not for the other upstream downstream opportunities. You mentioned that there are upstream and downstream monetization opportunities here. Those are add-ons to this. What are those? Just help me understand some of the
01:24:19
Speaker
So basically like this 8 to 10,000 or a typical seat comes with a basic amount of internet that is promised. It comes with tea coffee is included as part of that and the normal working hours are covered like say 9 to 7 kind of working hours, 5 days a week are part of this whole thing with some basically optimal level of parking.
01:24:44
Speaker
What are the drivers for growing this? Is it about being able to acquire premium locations, good properties, or is it about being able to acquire good customers?
01:24:57
Speaker
For example, if you take the case of Gurgaon, if you talk about God Force Road, for example, or you talk about Buddha City Centre, those are very good performing markets. So there the key thing is about acquiring good quality real estate. But if you go to Sonar Road or if you go to Manesar, it's the other way. It is about having the customer. Or Noida, for example. Large parts of Noida are the consumers.
01:25:23
Speaker
It's a tenant's market. It's not a landlord's market. So wherever it's a tenant's market, supply will tend to be larger over there. And landlord's market is where the supply is in short. So those places will have premier. So I think that is how the power balance moves between the two of us.
01:25:43
Speaker
And what is your customer acquisition approach? Is it through existing relationship? Because CareerNet obviously would have a lot of relationships that you can leverage. So if you look at, we are quite unique in this industry because most of the players we have in our industry, they all happen to be from real estate background or happen to be from different background.
01:26:04
Speaker
but we are quite unique. So our one-third of the business comes from restaurants. These are essentially companies who have taken up space in Korea. It was Korea, and if you see, last year we built 1,600 different enterprises in India. So imagine 1,600 enterprises in India, we have a first hand relationship. And India, good, bad, will have 10,000 meaningful enterprises over there. So our coverage is very, very high over here.
01:26:31
Speaker
and first thing when somebody comes in India or starts operation in India will say that I need people that's a big reason people come here and so obviously among when they talk about people we are among the top three firms in India where you pick up anybody in big four and if these companies go and ask for a recommendation invariably they will recommend Karyanit in the top work week.
01:26:52
Speaker
So when our guys go, obviously they ask that where are you looking at setting up. So we have a huge advantage over there of that. So one third of our business comes from that. One third comes from our growth of existing clients who are already with us. I talked about the stickiness bit in this. Another third comes from our brokers.
01:27:12
Speaker
Within that, almost 20% comes from the IPCs, which are the larger local, like CBRE, J.L.Kushman. About 12-13% comes from the smaller group, the local group that's over there. Amazing. What scale is IndieCube at currently? How many seats? How many cities? How many campuses?
01:27:33
Speaker
So, we have 6 million square feet of space now and 6 million square feet will mean about 120,000 odd seats. We are present in 12 cities. So, if you compare NCR, we have Maida and Gurgaon, then Bombay, Chennai, Hyderabad, Bangalore, Pune.
01:27:51
Speaker
We have a good presence found here, Jaipur, Kochi, Coimbatore, left now. These are the tier two locations, Badrai, we have now. And we are adding tier two locations over there. And we have close to 80 properties, 80 centers are there across India. So yeah, so that's the broad break up. And how much revenue will you close this year, right? For IndieQ?
01:28:18
Speaker
This year, we will go about close to about 900 crores stock line. Wow. This has already overtaken the core business, like 3X of the core business. This is a much bigger business. The time, as you say, the time is much, much larger. This is the ocean. The estate is real. Amazing. And what do you think? Will more growth come from tier one and tier two? Like what trends are you seeing in terms of where demand is coming from?
01:28:49
Speaker
So, Tier 1 we continue to be a very dominant force when it comes to the absorption. So, if you look at India absorbs about 45 million square feet of net absorption of commercial real estate. This is a very day absorption that happens in India.
01:29:07
Speaker
And this is predominantly in the DR1 as of now. DR2 number will be... This is annual absorption like 45 billion per year. So total stock of grade A real estate in India is about 750 million square feet. And we are adding about 45 to 50 million year on year. And within this 45 million Bangalore is 13 million. 12 to 13 million. Bombay is 4 to 5 million. NCR is 5 million.
01:29:35
Speaker
Hyderabad is 7 million. So just imagine the power of Bangalore typically when it comes to new addition. Of course Bombay, the existing base of real estate is very large. Bombay has 2 million square feet, 200 million square feet of space which is already there. Bangalore is about 160 million but Bangalore is growing much faster than both.
01:29:55
Speaker
So tier 2s are coming up and tier 2 we are finding that cities like Coimbatore, Indore will do well, Ahmedabad will do very well. Because cities, see the way Pune and Bangalore came up 25 years back, I think in a lot of ways that same story will get repeated over the next 15-20 years.
01:30:16
Speaker
They happen to be very strong educational basis. They happen to be good manufacturing centers. So the average work culture in those cities is good. Climate is good. Over there, talent availability is quite good. And there is a lot of diaspora from these cities which has gone and worked in different places.
01:30:38
Speaker
So, they are okay to relocate. Like you talk to average guy in May, half of them will say that I came here for education and never went back. But definitely like when we talk about a 5 or a 10 trillion dollar economy, definitely this can't be a sick city phenomenon. We definitely see 15, 20 more growth increases getting added. And as in the cube, our focus is that there are 50 cities in India which have a population of 1 million plus. So we want to be in all the 50 cities.
01:31:08
Speaker
presence is given. Now comes, okay, we want to be at scale. So that is the function of opportunity. Presence wise you will be everywhere, scale wise you will see as just things mature.
01:31:21
Speaker
I'm guessing one of your secret sources is your decision making on where to set up your next center. Like that could be like a very key thing. Very key term. Because if you set up in a wrong place and you don't get occupancy, you start making losses. Absolutely. So is there a science behind this? Like where you. There is science. There is here science. And science and art both to be honest.
01:31:46
Speaker
At the end of the day, in India, the disparity in real estate is such that the two buildings next to each other might have a different bed. But there might be a pawn shop outside, one of them, or a pawn shop next to it. So in India, the standardization in real estate is just not there. Every building, every milk, every corner is unique to that extent. But there is science. So what we always say is that we don't look at the city as a city.
01:32:16
Speaker
We look them as micro markets. So, for us called sports road is a different market. The Malisa is a different market. Udo VR is a different market. Sohra road is a different market. Noida again within Noida Expressway is different. 62-63 is different. So, there are at least 10 different micro markets in NCR over there. And if you start adding in that way, India will have like 50-60 sizable large micro market where there is good office activity.
01:32:45
Speaker
So, each micro market we have to look at that as I said in the beginning there is a tenants market or it's a land north.
01:32:54
Speaker
There are evergreen markets like our fourth road. No brainer. Any storm you throw will hit the target over there. But when you go to other locations, you have to be careful. I always say that Delhi changed its business high speed five times in 30 years. Started with Nirulaz when we were all growing up. Then it moved to Priya. Then it moved to Sakhir. Then it moved to MG Road in Gurgaon. Now it is a aerospace.
01:33:22
Speaker
So five times Delhi has changed its high street in 30 years. And I think a lot of Indian cities will see that kind of a transition happen. Over there India will keep surprising us on the positive and negative side. But you are so right on that that I will give you the data that before COVID we had 50 properties. And we left just one property of 30,000 speciality. So till then we have not closed any center. And all our centers are profitable.
01:33:49
Speaker
Amazing.
Funding and Future Plans
01:33:50
Speaker
Do you plan to raise external funds for NDQ? So in NDQ we have raised two rounds. There is a large private equity fund for Westbridge capital. There are eight billion dollar fund now and a very bulky respectable fund and most of their LPs are university endowments like Stanford, Princeton and all in US.
01:34:12
Speaker
So, they decided to make an exception by putting 100 crores. This was in 2018 and the last round we did was last year, March, where 225 crores we raised, 100 crores came from them and 125 crores was put in by us. So, we led the round.
01:34:32
Speaker
We are playing with our own money and basically so totally if you see we have now almost 325 crores of D capital, 200 has come, bridge 125 has come.
01:34:46
Speaker
We have 70% plus shareholding in the company. We want to keep the business. We don't want to sell the business. And definitely this business is IPO business. And at some stage, we'll have to give exit to investors. So I think this business might see IPO or we are then career there.
01:35:08
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.