ENTERPRISE
INTERVIEW
'We
have the advantage of starting early'
- Dinesh Agarwal
In our interview series with India's new
economy entrepreneurs, Vikram Goyal speaks to Dinesh Agarwal, CEO of New
Delhi-based Indiamart.com. The former software development engineer worked
with HCL for three years in the US, before he returned to India in 1996.
Yours is among the
handful of Indian dotcoms that made profit, let alone survived. How have
you succeeded while others failed?
We started in 1996, well before the dotcom
hype. So our whole business model was to earn money and thereby create a
portal, earn more money and create a stronger portal. It was built up on
the fact that only a certain percentage of revenues would be spent on
making the portal. During the dotcom hype, everyone was playing the
valuation game, and with emphasis on eyeballs and expectations. Business
models were being based on advertising or transactions. There was a lot of
rush in creating dotcoms without having a sustainable revenue or profit
model. If things had been perceived as an old economy situation, I don't
think the failure rate would have been this high.
What is the core
business of IndiaMART?
Promoting the business of Indian suppliers:
manufacturers, distributors, exporters, etc. on the Net. We make Indiamart
a business market place; create business catalogs for companies; promote
their catalogs on various search engines and use promotional techniques on
the Net.
What is your revenue
model?
For the business catalog development for
Indian suppliers, we charge a fee of about Rs 5,000 per page of listing.
After the initial listing, these companies pay an annual fee for our
services. Now we are moving to a second level where we will be going into
a transaction based system and we will be a party to the transactions. We
will provide our clients with a platform where they can negotiate pricing
with buyers.
Who are your target
audience and how many users do you have?
The target audience would be mainly Indian
exporters, of which there are over 50,000. We currently have approximately
1,100 clients. Our client base has been growing by about 100-150% per
annum. As internet penetration grows, our target audience will also grow
beyond exporters to large domestic traders.
India is a small player
in the global trade market. Isn't that limiting?
Even for a small trading partner there are
no nodal agencies providing trade facilitation. Export promotion agencies,
etc are hardly doing anything that directly benefit the supplier. There is
significant scope for several companies such as ours.
What has been your profit?
Our turnover for 2000-01 is Rs 2.87 crore,
with a profit of Rs 35 to 40 lakh in terms of EBIT and Rs 14 to 15 lakh
profit after tax.
For a company in
operation for five years, the profit is not huge. Is that suggestive of
the limitations of the Internet?
No. We are doing a lot of investments for
the future. We are investing in our portal; we are developing pricing
models, etc. so profits are low. We could very well have profit of 35-40%
of turnover, which would be decent by old economy standards.
You have no VC funding.
What have been the pros and cons?
I think there is a greater role for VCs once
you have established yourself and you have a successful model. VC funding
can help scale up your model very quickly and create an entry barrier. We
did not have that and have had to expand slowly. On the other hand, as VC
money is considered to be easy money, people tend to spend it very easily.
So that would have been a problem had we been part of the valuation hype.
Overall, I think it was good that so far we have not had VC funding.
You spend no money on
advertising. How do you get the word around?
On the importer side, search engines are the
main thing. We have a strong position on the search engines. Surveys have
indicated that more than 40% of traffic to any site is due to search
engines. On the exporter front, we have been a strong direct marketing
company with a sales team of about 60 people.
Who are your closest
competitors and how do you plan to stay ahead of them given that some are
backed by VC funding and some have tied up with foreign companies?
For four years we had a complete monopoly.
Beginning in 1999, some B2B outfits have been set up. But they have a long
way to go before they can catch us.
Vikram Goyal was a VP with Morgan
Stanley Dean Witter in New York and Hong Kong.
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