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Turning the game upside down


At the other end of the chain, there are benefits for FMCGs as well. Thanks to India’s three-tier retail structure—where brands sell to distributors, who, in turn, sell to retailers—FMCGs end up with no direct visibility of buyer behavior at the Kirana level. Companies like SnapBizz let the PoS become a pair of eyes for the FMCG companies, serving as a window to buyer behavior in Kirana stores.

The simplest way that SnapBizz allows this is by giving FMCGs an aggregation of all the store data collected through the PoS. The companies, in return, pay them for it.

But SnapBizz can also help brands increase their own visibility. It does this through its Snap Vision program. The company installs TV screens in stores, which allows brands to push specific campaigns and promotions to customers. “Usually brands have about 50-80 promotions happening at any moment, but because Kirana stores don’t have the place to display it, they go unnoticed, and the brand and Kirana store lose sales,” says SnapBizz CEO Prem Kumar. He also says that this medium is particularly effective at increasing the sales of new products.

This combination of Snap Vision and PoS, Kumar claims, increases sales for kiranas by 18%. He wants to improve this to 25%.

Finding value

In all of this, SnapBizz earns from the Kirana store (who pay Rs 45,000 or $657 for the PoS and display) as well as the brand. It seems like a winning formula until you consider its scale. All the PoS companies put together don’t amount to more than 7,000 stores. SnapBizz only has a presence in about 3,000 stores in Mumbai, Pune, Gujarat, and Delhi combined. While Kumar believes that one million of India’s Kirana stores can afford this solution (both in terms of cost and space available), the sheer lack of scale has left FMCGs largely indifferent to the idea.

At least for now, FMCG companies’ engagement with PoS startups is, at best, a half-hearted experiment. At top FMCG companies, innovation budgets account for about 5% of the overall promotional expenses. When you consider that Hindustan Unilever spent Rs 4,105 crore ($599 million) on advertising and promotion in FY18, their confidence in PoS startups is summed up by the fact that they are not spending more than a few lakhs on working with PoS startups.

“We have fairly granular sales data from every store. And this is a good surrogate for what is being bought. So there is no real value in the real-time data PoS-based startups want to bring, for now,” says the senior executive of a multinational FMCG. Additionally, he doesn’t believe that there’s much scope to influence consumers at Kirana stores.

For other FMCG companies like Reckitt Benckiser (the maker of Harpic and Dettol), working with startups is also about priorities. “We have a limited budget. Am I going to spend it on startups working with Kirana stores moving the needle only slightly, or work with e-commerce where we are seeing a 400-500% growth year-on-year,” asks a senior executive from Reckitt Benckiser.

A way for the PoS startups

However, there is a way for PoS startups to become valuable to FMCGs. “Instead of wooing us, they should focus on adding value to the retailer,” says the multinational FMCG executive. The minute lakhs of Kirana stores adopt PoS, FMCG companies will automatically want insight into this data. SnapBizz is targeting expanding to 100,000 stores by 2019.

None of this, however, is to say that FMCG companies are completely ignoring startups. In fact, they are wary about a few startup offerings which have the potential to cause havoc.

Apart from the PoS group, there’s a class of startups that are looking at far greater change. They believe that the best way to make kiranas efficient is to help them source better from distributors. Bengaluru-based StoreKing is the largest in this space, servicing nearly 40,000 retailers in rural areas across 10 states.

Zopper buy takes PhonePe to PoS pay


Payments company PhonePe, all of two years old, is stepping out of the Unified Payments Interface (UPI) app box. Having made payments easy, it is now looking to spend more time with merchants. The company, e-commerce retailer Flipkart’s payment arm, acquired Zopper Retail, a point of sale (PoS) platform, in an all-cash deal worth about $6 million, earlier this week.

Billing details of the customers

Zopper’s PoS helps retailers capture the billing details of their customers, and, in turn, helps them manage inventory. The investment gives PhonePe access to Zopper’s 10,000 stores and their engineering team, including its founder Neeraj Jain who will head the offline business for PhonePe. In an interview, PhonePe’s CEO Sameer Nigam clarified that it bought over the IP (Intellectual Property) associated with the product and the team involved with it, but not the shares of the company.

Being a payments app, so far, limited PhonePe to a one-sided view of how transactions were being processed—how much a customer spent and where she spent. It didn’t have insight into what customers bought. Beyond being consumer-oriented, Zopper’s PoS business now gives PhonePe the chance to interact closely with merchants.

Not just that, between owning the consumer-facing part of a merchant relationship and helping merchants manage their business, this is a $2 trillion opportunity in India. (The first $1 trillion is the payment opportunity and the second is the offline commerce opportunity). But taking payments to offline merchants is not a trivial matter. Zopper’s Jain, who dreamt of taking the company to an IPO someday, sold out for a reason, and it is not an uncommon reason.

Still, for PhonePe getting a better foothold into the offline business is mission-critical as nearly 93% of the commerce happens in the offline space. And in a world that has more digital payment systems than users are aware of, PhonePe needs more than just payments to find takers among merchants.

Long live the PoS

Of the 50 million transactions PhonePe claims in a month, nearly 65% of transactions are made to merchants, says Nigam. And currently, only under 5% of the payments are from offline merchants. One of the reasons for the slow take off among offline merchants is the fatigue over yet another payment solution. There were wallets from at least 10 different companies who were all trying to acquire merchants in addition to debit and credit cards, even before PhonePe entered the market in August 2016.

“On a sustainable basis, why would any merchant integrate 30 different wallets? The argument gets diluted over time. In the offline world, merchants are most interested in two things. Can you drive footfall into the store and can you convert those footfalls into sales and provide upselling opportunities,” says Nigam. So they are looking at adding a suite of value-added services for offline merchants. From billing and reconciliation, inventory management to marketing solutions and lending options. Barring the top-tier merchants, most merchants traditionally, have not looked at adopt tech to manage their business.

And over the last five-six months, PhonePe has slowly been morphing into a platform that enables transactions across different merchants. “We want to be an open transaction platform for all merchants,” says Nigam. It allows its users to use Ola and RedBus within its app.

Offline Retail

And as for offline retail, it wants to enable the discovery of hyperlocal merchants. This way, PhonePe becomes a platform that points customers towards merchants who sell anything from airline tickets to coffee to the grocery on its app.

And it has a three-tiered plan for this. The first part of the plan is to get accepted as a payment method in organized chains like KFC, McDonald’s, Metro Cash and Carry, Mother Dairy, Apollo Pharmacy and Cafe Coffee Day. It is currently present across 500 stores. The second step is to bring on board large retail chains in different cities, and then, to finally target the Kirana stores.

Enough of disappointments, and moving ahead


Both partners have successfully exited Ola and they currently run a CNG-based taxi-hailing startup in partnership with two other ex-Ola fleet owners. This pivot was a backup plan which most individual drivers simply don’t have. And these drivers had to make a choice between continuing to pay lease installments or exiting the business abruptly. As it turns out, many chose the latter.

Discontinuation with the product

Most recently, Capital Float discontinued its taxi finance product which was aimed at Ola and Uber drivers. Just two years after it launched the product (in 2015), the company has stopped all cab financing operations. A Capital Float spokesperson confirmed that it has stopped lending to Ola and Uber drivers, but refused to share any further information.

State Bank of India, which tied-up with Ola in 2015 to provide daily repayment car loans for drivers, reportedly seized 300 vehicles from both Ola and Uber in just two years in March 2017. At the time, SBI’s vehicle financing portfolio for cab operators was worth around Rs 120 crore (17.5 million). It had seen mass defaulting among Ola drivers, totaling Rs 16 crore ($2.3 million). At the time of publishing, SBI still hadn’t responded to a questionnaire sent by The Ken.

And as drivers defaulted, used cars began to pile up with Ola. According to an automotive industry executive who has dealt with both Uber and Ola, Ola currently has a growing inventory of used Datsun Gos and Maruti Suzuki Dzires thanks to drivers opting out of the leasing program. Ola is telling newer drivers to take these cars, he adds, but the drivers are suspicious of taking used vehicles.

As the used cars pile up and find fewer and fewer takers, Ola’s problem only gets worse.

Other programs introduced

To be fair to Ola, it wasn’t the only player who saw the sense in a leasing program. Uber, which had run similar operations abroad, was planning to do the same in India. By the time Uber finally set-up its own leasing unit—Xchange Leasing India—in December 2015, Ola’s Fleet Technologies was already four months old. Uber’s logic was similar to Ola—build supply. The fallout was also similar. But both companies reacted very differently.

By late 2016, scarcely a year into its leasing operations, when Uber saw drivers defaulting and returning vehicles, the company hit the brakes. According to the automotive industry insider, Uber had originally placed an order with a leading Indian automobile manufacturer for a large shipment of cars for its buy-to-lease program in November 2016. By the following month, it had canceled the order. This is around the same time that Uber began to reduce incentives.

Uber has also learned from its experiences abroad. In January this year, Uber exited its American car leasing unit by selling it to San Francisco-based car leasing startup Fair for an undisclosed amount. Media reports suggested that Uber was losing up to $9,000 per car, forcing its hand in the matter.

Uber refused to comment on the specifics of Xchange Leasing India. However, in response to a detailed questionnaire from The Ken, an Uber India spokesperson stated that “(leased cars) represent a small proportion of the cars driven using the Uber app”. Uber currently claims to have over 450,000 drivers in India, a distant second to Ola which claims to have a million drivers.

When a large competitor with a global presence like Uber has gone cold on the cab-leasing model, one would expect Ola to follow suit. One would also be wrong.

Going for broke

Despite multiple warning signs about the sustainability of the car leasing model, Ola remains bullish on it*. In 2017, it even partnered with automobile manufacturer Mahindra for a pilot project using electric vehicles. However, after committing $8 million to the venture, the project has fared abysmally.

No driver is willing to drive those cars, says the automotive industry insider. He adds that the whole electric vehicle project is mostly for show. An expensive show, indeed.



Bike-sharing in India is missing wheels


When navigating an Indian city street, especially as a pedestrian, there’s a simple order one must follow. Avoid that bus. Then that car. Jump past that auto and the motorbike whizzing past it. You’re almost there. Now, look out for that bicycle!

Bicycles may be seeing a revolution.

Around a dozen bicycle-sharing startups have established themselves across urban India in recent months. Their survival will depend on the ability to navigate issues both hyperlocal and international. They’ll need to convince city governments to improve the sometimes dire condition of roads on which they hope customers will soon ride while holding off billion-dollar Chinese rivals that already know much about the business and see India as another country to dominate.

On the road

Amit Gupta is best known as the co-founder of the mobile advertising firm InMobi, destined to be forever known as India’s first unicorn. When I asked for him in the lobby of the company’s Bengaluru tech park office on a recent July afternoon, the man behind the desk looked at me as though I’d demanded all his cash.

Gupta still works ensconced in the familiarity of his most successful startup, but toward the end of 2017, he turned his attention to Yulu, a cycle-sharing company with roots in Bengaluru and Pune, of which he is also a co-founder. He quickly found himself outside the confines of the tech park and on the streets of Bengaluru, trying to track down company cycles that hadn’t been returned.

These search-and-rescue missions are just one part of the business that, when it launched, he says he hadn’t considered. Now, Yulu has a team of “bike screeners” whose job is a combination of retrieving, cleaning, and maintaining the rides.

Use of the Smart Locks

Mobike, the giant Chinese cycle-sharing company that recently launched its first India branch in Pune, has a similar team that retrieves and re-allocates its cycles, using smart locks to trace rides that have wound up in a side street or a tree.

Neither company would comment on the size of its retrieval teams nor what they pay those employees, though Gupta said it’s been hard to find people who fit this multifaceted bill. Yulu also has a contract with a security firm they call upon when getting a cycle back is “difficult,” and the company files police complaints hoping to “deter repeat behavior.”

Cycle-sharing executives talk more about trial and error than they do about rushing the market. They’re placing relatively small numbers of cycles on the streets of just a few cities and seeing how people respond. They’re figuring out how to ensure cycles end up in designated parking zones instead of ditches or inside someone’s home, and they’re learning how to talk to governments about the infrastructure and policies they’d like to see.

They say they know large investments can lead to intense pressure to expand, and while it’s still possible that one company tries to raise enough money to bully out its competitors, executives are talking about measured growth and trying to bury the idea that their survival depends on locking downloads of cash right now. It’s hard to know what problems might crop up, and how those problems will warp other plans, but despite the enormity of China’s cycling behemoths, this business doesn’t necessarily demand startups get huge to become sustainable.

“First of all, India doesn’t have that level of infrastructure ready,” Gupta said. “So even if I have $500 million, I can’t put one million bikes on the road tomorrow. It’s just not possible.”

Hindi-Chini get by

For now, there is speculation around bicycle-sharing companies in India, and China is to blame. The Chinese market is just a few years old but is expected to reach $3.8 billion by 2019, and companies trying to ride the wave have popped up and crashed by the dozens. Two of them—Mobike and Ofo—ballooned to billion-dollar international giants within just a few years.

India is often compared with China. But the comparison, in this case, is for naught.


Chandni Chowk to China: Can OYO go from Ponzi to profit?


Let’s start today’s story with a question.

What is the easiest and sure-shot way for a startup to enter the exalted “Unicorn” club consisting of companies valued at over a billion dollars?

Why, raise a billion dollars, of course.

What do the reports explain?

According to reports, OYO Rooms, the SoftBank-backed hospitality startup, is poised to do exactly that in a new funding round of up to $1 billion that may value the company at a mind-boggling sum of over $4 billion.

If that isn’t enough, now that SoftBank has exited Flipkart and written off Snapdeal, OYO seems to have emerged as the behemoth’s favorite child in India. A considerable part of SoftBank’s recent earnings call was dedicated to OYO. Masayoshi Son, SoftBank’s mercurial founder, made the following statements on it (lightly paraphrased for easy reading):

  • OYO is a completely new type of hotel, a next-generation type of hotel management. It is not a travel agent but manages hotels comprehensively with its own management, IT, booking technology and quality control method. It’s like a franchise.
  • Taj Hotels is the biggest hotel chain in India with 15,000 rooms. In just two years, OYO grew the number of rooms from 1,000 to 100,000. By the end of the year, it will add 150,000 to 200,000, which will be 10x more than the Taj group’s rooms.
  • OYO started in China as well and in less than 12 months, 25,000 rooms were created every month.
    The world’s biggest hotel chain in the world is the Marriott, and they added 8,000 net rooms in the last three months. In contrast, OYO grew 10x faster, adding 81,000 rooms in the same period —34,000 in India and 47,000 in China.
  • With OYO, the occupancy grew from 30% to 78%. So from a hotel owner’s perspective, the occupancy rate grew dramatically with OYO. In return, the profit will be shared with OYO and hotel owners.
  • OYO’s business and management are being more efficient through AI. They use heat maps with AI for demand prediction and to dynamically decide to price. 43 million micro-optimization takes place per day by looking at the weather, looking at day or week, looking at what kind of campaign is ongoing. Without AI, you can’t do such micro-optimization.
  • Son also claimed that OYO is already profitable at a unit level, and would become profitable at the company level as it scales further. “The cost of acquisition and development are considered early proactive investments, but since the volumes are huge, the growth margin should exceed such fixed costs. Once it exceeds, you will see a dramatic improvement in profitability, similar to what Google, Microsoft, and Facebook have proven”.

If Son’s bullishness and an impending unicorn tag weren’t enough, OYO was also recently anointed as “Startup of the year” by a leading publication.

It made the fact clear

It is quite clear that OYO is, without a doubt, an important company and one to watch out for. What is still not clear is what exactly is it that it does.

Is OYO a hotel chain?

Is it an aggregator of hotel rooms?

Is it a managed marketplace for hotel rooms?

How does OYO make money?

Does it actually make money?

Let’s try to answer these questions.

OYO launched as a managed marketplace for budget hotels, which was, at that point, a largely underserved market. The idea was to curate and aggregate hotel rooms in budget hotels, standardize key feature offerings such as the quality of toiletries, linen, air-conditioning, and WiFi. An idea that a brand could itself be its own distributor where consumers know what to expect when they check into a hotel that otherwise had no brand to speak of.

The problem was that they originally chose a partial inventory model wherein OYO took over the responsibility of a portion of a hotel’s room inventory and paid hotel owners a minimum guarantee upfront. Predictably, this led to perverse incentives where a Ponzi-like scheme emerged with OYO reporting progressively higher “room bookings” but operated in a model where it essentially had negative revenue.


In gambling, the many must lose in order that the few may win


In 2015, Ed Miller, author of numerous books on poker strategy, and Daniel Singer, senior adviser of the McKinsey & Company Global Sports and Gaming Practice, published a report which said that in the first half of the 2015 Major League Baseball (MLB) season, 91% of daily fantasy sport player profits were won by just 1.3% of players.

These 1.3% players also accounted for 40% of fees and the bulk of this top-tier spent an average of $9,100 on fees, on which they realized profits of $2,400 while accounting for 23% of all fees and 77% of the profits.

Learning the art of taking calculated risks

“I know a person who left his investing job after playing fantasy football for some time. He felt that he could statistically model a number of variables and keep on winning. It worked for him and he made some $600,000 in a year,” Sharma says.

But not all can afford to take such a risk in order to win.

Players on Dream11 seem to face the same problem. Both Somani and Chawla, who play mostly during the IPL season and place small bets which go up to Rs 100 ($1.39) per match, concur. They barely win, and on a net basis, their bets have resulted in losses.

When asked how much time they spend on selecting their teams, they say that they pick players based on recommendations given on various forums and sites.

And yet, losses mount. Why do only 1.3% make it?

The product manager explains that similar to poker, fantasy sport has a ‘fish and shark funda’. A fish is a player who does not know how to play poker too well. A shark, of course, is a pro. The shark not only knows the risk and ratios of various card combinations but is also skilled enough to read the opponents’ physical gestures to predict their next move.

“In fantasy sport, a fish is someone who will make one team, bet Rs 10 (~$0.14) on one match in the hope of winning Rs 1 lakh (~$1397). Whereas, a shark would make six teams—the maximum number of team combinations one can have for one single game—bet Rs 600 ($8.39) in the hope of winning Rs 900 ($12.58),” he says.

Impact of the Digital Platform

Unlike the real world, where sharks and fish don’t usually sit at the same table, in fantasy sport, the digital platform brings them together. This leaves the fish at a massive disadvantage.

I, an obvious fish, tried the app for a week. I participated in 12 matches. Barring two practice matches, the rest were for money. At times, I picked a team at random, and at other times, I used the recommendations from the sites Somani and Chawla mentioned. I lost every single match. It was fortunate that I was betting to experiment with Rs 20-25 ($0.28-0.35), unlike other players on the platform.

The Nielsen study mentioned above reports that 89% of the people who’ve ever played fantasy sport continue to play it. This means that even if they abandon a platform they tend to find themselves trying their luck on another. HalaPlay and others are trying to capitalize on this to snatch some market share from Dream11, Sharma says.

“Even I have played 10-odd games on Dream11 and I have never won,” Bhattacharya says.

“The universe of people who have actually won is very small,” he adds. “This came out as a huge pain point in this market.”

Variable structures of the platform

HalaPlay’s early adoption and traction came from people who were not winning on Dream11. The platform has different structures for risk-averse players. For example, they have a 2X league where 40% of the players get a guaranteed payout and a 5X league where 18% get a guaranteed payout.

Then there is also the problem of seasonality. “IPL is Dream11’s earning time. Rest of the year, they try to earn some money from tournaments like KPL [Karnataka Premier League] and they don’t add much to their revenue,” the product manager says.

“The year-round cricket and diversifying into other sports like football and kabaddi has given them the answer to the question, ‘What do we do for the rest of the year?’ but it has not solved their profitability or seasonality problem.”


Anatomy of the delivery personnel


Roshan has seen this play out amongst his fellow riders. Many riders who were previously at Swiggy, he says, are now joining either Zomato or UberEats since they seem to pay higher salaries. Some even work for multiple platforms, switching between them as they please.

Making a quick buck

A Zomato delivery executive who didn’t want to be named said that he left his delivery job at FedEx to join Zomato after he heard that the company pays more than what his manager at FedEx was earning. Unlike Roshan, who is a college student looking to make a quick buck, the Zomato delivery personnel is looking at the delivery job as a means to support himself in the long run. As such, when the incentives drop and the payout’s level off, people like him would be the first to shift allegiances.

This is a major dilemma for food delivery players in India—they want to retain precisely the sort of employees who see a future in delivery, yet these are the ones most likely to move on the moment financial incentives drop.

Today, the average life cycle of delivery personnel is just around 4-6 months, according to delivery startup employees and experts that The Ken spoke to. According to Rituparna Chakraborty of staffing and job services company TeamLease, the current attrition among food delivery companies is around 25% to 30% per month. Only around 30-35% of riders remain loyal to the company, typically staying for between 2-3 years. Companies need to figure out how to stop this constant churn, but even as they look for solutions, they’re protecting themselves.


Despite the fickle nature of the gig economy, platforms still have similar costs to what they would incur in a more traditional employer-employee set-up. The costs of staffing, training, and managing tens of thousands of delivery personnel.

To mitigate this risk, delivery startups like Swiggy, Dunzo, Foodpanda, and Zomato largely outsource the staffing of their delivery fleets. According to two sources in the know, the percentage of delivery personnel actually on the payrolls of companies is as low as 2% of their overall fleets.

Anything else would be a nightmare for these startups, believes Sachin Bharadwaj, co-founder of TastyKhana. TastyKhana was bought by FoodPanda in 2016. Bharadwaj adds that delivery personnel is paid on a weekly, bi-weekly, or even tri-weekly basis. Outsourcing makes a lot of sense here, he says, because having some 50,000 delivery guys on the payroll is going to be a nightmare.

Other advantages included

Payroll management isn’t the only advantage. “If Zomato or Swiggy starts hiring people on their payrolls, then they have to manage multiple things like efficiency, unions, wages, and liabilities,” explains Anshuman Das, managing partner at staffing company Longhouse Consulting.

By outsourcing these responsibilities, companies are able to scale rapidly and easily. In exchange, these third-parties take a cut of about Rs 400-500 ($5-$7) from each delivery person’s salary each month, adds Das. In addition, third-party agents earn a one-time fee from delivery companies for each hire.

But for all its advantages, outsourcing throws up its own share of problems. At the root of these problems is one inescapable truth—companies lose direct oversight and control over their labor force.

Conversely, the riders are less vested in the fortunes of the company or their growth within it, which opens the system up to being gamed. Roshan says that he has seen delivery personnel trying to dupe the system by placing fake orders. “They ask their friends or use a different phone number to place an order. They then wait next to the restaurant hoping they get the order,” he says.

Ultimately, the only draw for delivery personnel seems to be the financial incentive. “Delivery persons are typically hired on the lure of money rather than a full-fledged career. And most candidates applying for the delivery profile are doing so with the consideration that it would fetch them short-term earnings, enabling them to support their immediate financial and family needs,” says Chakraborty. To combat this, food delivery companies need to find a way to add value to these jobs.


How has Droom achieved higher GMV?


Chew on this for a moment. Is Aggarwal saying this is possible? Or not possible? Hold on, what exactly is he trying to say?

But there’s more. On the subject of dealer incentives, Aggarwal said that Droom acquires both buyers and sellers. “At any given point of time, we run dozens of buyer-focused and dozens of seller-focused marketing programs to acquire buyers and sellers,” he said.

Where does the automobile industry stand?

“Given that we have low online penetration of the automobile industry in India, we try to bring more and more buyers and sellers online with various programs. These programs are no different than how Uber, Ola, Amazon, Flipkart or Alibaba have built large Internet businesses by brining[sic] businesses online, which were for century’s[sic] offline.”

Again, another moment to stop and chew. Is acquiring transactions in the offline world by paying out incentives really how Amazon and Uber have built their business? I’ll let you be the judge.

Still, what about a transaction originating on another classifieds website, like CarDekho, and the sale eventually being recorded by Droom? Aggarwal categorically says this is not possible. Please bear with me because this bit from Aggarwal’s reply must be examined extensively.

“Once you have a large scalable platform such as YouTube, Google, Amazon, Uber, etc. people will always find ways to game the system,” he said. “The scenario you mentioned above is not allowed with the kind of systems we have in place.

So a dealer can only sell the car that is listed on Droom. He cannot sell a car on Droom that was not previously listed on Droom. Moreover, most of the promotional money is paid out only after the vehicle has been transferred to the buyer’s name.

What is in the mind of the dealers?

Hence, what you mentioned is not accurate. However, we do not ask dealers for exclusivity, and they can list the same vehicles on multiple sites. Many times, it is also possible that a buyer comes and pays 2.5% as a token amount and later on learns that the seller has sold the vehicle offline or online but not on Droom.

And vice versa is possible too. However, if a dealer has an active listing and a buyer pays a token amount, we will charge a seller penalty if the dealer says that the vehicle is no longer available after the fact. But a dealer can change the status of any of his listings from active to deactivate [sic] or no longer available before any token amount is paid against it by any buyer.”

Are you chewing yet? What exactly is Aggarwal trying to say? Okay, another question, has he actually answered the question?

Now, in case you were wondering, no, this isn’t the only story of its kind.

Across India, across dealerships, stories abound of similar transactions. And then, worse.

For that, let’s quickly take a detour to Gurugram, Haryana.

It is at about 3 PM. Hot and dusty. Gurugram is a city where used car dealerships abound. And of the many, there’s one tucked away in an inner road; in a compound of sorts. A few cars are parked outside.

Inside the room, it is humid. The car dealer is stooped over his sales register, looking up vehicles that he has sold through Droom. He is moving his finger over the pages, sliding it from top to bottom. After some time, he finally looks up. “I’ve sold both kinds of cars,” he says in Hindi.

What both kinds?

“Okay. So, I had bought a listing package from the company. I forget how much it was, but I think Rs 40,000 ($550) or thereabouts. So, say I would get a call from a buyer, and he was willing to pay only Rs 2,50,000 ($3,440) for the car, and I have posted Rs 3,00,000 ($4,130). Droom would make the transaction happen, and pay me the difference as an incentive. That’s one way, and the other is offline cars.”

Did you sell a lot of cars online, where a buyer would call and be interested?

“Maybe two or three in the last year, but no, not a lot.”


Two, not four: India’s riding pillion into an electric future


It is small. It has two wheels instead of four.

Millions of them already scurrying around. Across the length and breadth of the country. In 2018 alone, 23 million of them were lapped up by buyers. In more numbers than in any other country.

Now, imagine, if not all, a good chunk of them are electric. Not now but sometime in the near future. Sometime soon.

Electric Mobility

Unlike cars. Unlike Tesla. Or the Mahindra Reva. Or anything else that’s on offer in India or around the corner, with the hope of electric mobility written all over it. In green. Or perhaps, in grey.

The humble two-wheeler is best poised for an electric disruption. And it has been a long time coming. Their first wave, circa 2015, was disappointing—low-speed, low-performance, totally unreliable. But manufacturers like Ather Energy, Tork, Hero Electric, Ampere, just to name a few, have forged a second attempt.

The big opportunity is to completely replace the petrol-driven two-wheeler with their electric counterparts. By making them highly viable. To push wider adoption, they’re pulling out all stops—charging grids, super-chargers, swappable batteries. “People can now see the potential of what electric two-wheelers can do. This is a huge change in perception that’s helped us,” says Tarun Mehta, co-founder of Ather Energy.

Mehta should know. He’s gone all-in on Ather. After years of tinkering and fixing, the company finally has an electric two-wheeler on the road. How well it sells will determine Ather’s fate.

Tucked away in the corner

Meanwhile, cars are sputtering. “You just don’t see enough electric cars on the road,” says Sohinder Gill, CEO of Hero Electric. “It’s important that buyers see them, or else how will they decide if they want one.” That’s probably because they’re all tucked away in a corner of the parking lot of the government’s policy think tank Niti Aayog.

It’s one of the few places in Delhi you can actually charge an electric car. “I have to wait another five hours for this to fully charge up. I’m on my way to Gurugram, and there are no chargers there,” says a driver in Niti’s parking lot.

This driver’s predicament is a good snapshot of how the government’s indecisiveness has blunted any advantage that the car industry might’ve had in going electric. A National Electric Mobility Plan in 2013. A FAME-I policy in 2015. An almost implausible mission to achieve 100% electric mobility by 2030.

A serious about-turn in 2018, when the idea of even bringing out a policy was dropped, and adoption targets were cut from 100% to 40%. “This policymaking has gone sideways. There is no plan other than to extend the subsidy deadline,” says a member of a Delhi-based electric vehicle lobby group.

Away from this flip-flop, electric two-wheelers are noiselessly charging ahead.

Grid is Good

It’s fair to say that Ather has brought fresh skin into the electric two-wheeler game. Charging grids across Bengaluru and every other city they launch in, like Chennai. Even though it took them three long years to get off the ground, within two months of launching, Ather’s managed to pre-sell its Ather 340 and Ather 450 e-scooters for the next six months.

Creating a charging grid says Ather’s Mehta, wasn’t a diversion for them. It was part of a holistic strategy to reduce the anxiety of running out of charge mid-ride.

Athergrid is a futuristic business proposition. Build the vehicle. Build the infrastructure. Earn revenue from both. Make them inextricable from each other, so that your customer never has to think twice about charging. Just like owning a mobile phone.

Through Athergird, Ather’s team has set up a network of 25 connected charging stations across Bengaluru. “The reason why we’re setting up a grid is that we have the most understanding and knowledge about how this business is going to play out.

We know how far our scooters will go and also what their density is in a particular area. For independent charging infrastructure providers, the problem is to predict the number of vehicles on the road. For Ather, it’s a better bet because we know the number,” says Mehta.


Moving back to the basics


Tall with square shoulders and a receding hairline, Sanjay Sharma, the co-founder of Aye, stands out in any fintech crowd for being among the oldest founders. At 57 years old, he is a veteran banker who has worked in retail lending and microfinance institutions for three decades.

Undeserved Clusters

And the grey hair wisdom helped Sharma and his 47-year-old co-founder, Vikram Jetley, zero in on a sliver of underserved clusters to lend to—a shoemaking cluster in Agra, a garment manufacturing cluster in Delhi, a textile-spinning cluster in Bengaluru.

A cluster is typically spread over an area of 5-10 sq km, with enterprises jostling with each other for space. Sharma says that almost every city has a cluster focused on a particular activity. They hone in on clusters based on size. Ideally, Sharma says, they go to clusters that have at least 5,000 enterprises.

“Only then we will find at least 400 people to lend to,” he explains. In addition, Aye spends time understanding the sort of delinquencies each cluster is famous for. “Analysing their behavior with microfinance institutions help give us an idea,” Sharma adds. Armed with this information, Aye makes its move.

Banks to care

Importantly, while these clusters offer up enough business to whet Aye’s appetite, they are too small for banks to care about as the companies that inhabit these clusters earn less than Rs 50 lakh ($68,590) annually. As such, their ability to absorb credit is no more than Rs 1 to Rs 5 lakh ($1,371 to $6,859).

Loose change for big banks. At the same time, they were too complex to serve for online digital lenders on the lookout for scale and newer segments to lend to as these businesses had no digital footprint. Though they have bank accounts, they have no bank balance since they collect in cash and make their payments in cash.

In the absence of banks and digital lenders, these enterprises have traditionally been served by money lenders and chit funds, who charge interest rates of 50-70% on a reducing balance system. Long exposed to this hostile lending environment, these segments were ready to pay annual interest rates of up to 30%.

As such, Aye’s offer of loans at just 15.6% interest is one that few of these businesses can refuse. And just like that, Aye has a captive market.

But at a cost.

Lessons for lending

There’s no way for Aye to do cater to these clusters except by setting up physical branches. Typically located in the peripheries of these clusters, Aye’s branches are only about 800 sq ft in size. All told, Aye operates 103 branches in 70 clusters across 11 states including Tamil Nadu, Karnataka, and Uttar Pradesh, among others.

These branches don’t see any footfall. Instead, they act as the local headquarters for 8-12 staff who are tasked with aggressively acquiring customers. With the additional costs of staffing and real estate, the only way Aye can maintain operating expenses is by making sure that each employee procures more loans than what a bank employee would. “We do 8-11 loans per person while a bank does 2-4 per person,” says Sharma.

The worry with these high targets, though, is that it opens up the door for poor lending choices. ­­Sharma says they have sidestepped this problem by stripping the process down to its basics.

They sell only one kind of loan. Then they assess companies using a wide range of metrics (the number of employees, the production per person, the electricity or raw material they consume to manufacture, etc.). Once they have thoroughly assessed one type of company in a cluster, that creates a baseline for comparison with other businesses in the same cluster.

While their loan origination is a physical process, the underwriting, disbursal and even collection are tech-enabled. Their document collection is paperless. The data collected is analyzed centrally in Gurugram using analytics, and the disbursal and collection are done electronically.