Verghis Chandy
R Narayan is an evangelist. His self-assumed mission: to help India by helping its small and medium-sized enterprises. The Kolkata-born and brought up Tam Brahm came to Delhi with his mission through a circuitous route?taking turns at ICI India, Tata Unisys and Microsoft and then his own venture called Deneve. At Microsoft, as head of the distribution channel, his mission was to develop 3,500 dealers in two years?an opportunity that has embedded in him a fascination for small things in business.
He quit Microsoft and launched Deneve to develop sales channels for big companies and introduce small businesses to the technology products of big companies. Reading up on the SME sector, he came across data that SMEs are India’s second largest job-givers after the farm sector and that they have a 36% share in exports and 45% share in manufacturing. Still they are treated like orphans while the big corporations enjoy media glare, policy favours and bank credit. From experience, he noticed another thing. Large companies get very favourable business terms?or volume discounts?from suppliers while SMEs survive on paltry discounts, and still have to compete with the big companies. He felt that he should ?step in and do something? for the SMEs. His extensive contacts with small businesses gave him the courage to take the plunge. That’s how the idea of Power2sme?his current outfit?came into being.
What Power2sme does is to aggregate small orders from SMEs to build a bulk volume, and then negotiate with large producers for discounts. Power2sme then passes on this discount to the small buyers. The idea is not new?many such aggregators are there in India and abroad?but Narayan has added a new dimension to it, in keeping with his mission: transformation of a company through consultations. Narayan gains access to an SME with his discount offer, promising 4-12% upfront discount and eventual 2-5% difference in the annual Ebitda margin. Once a deal is struck, he will move on to other aspects of the business, convincing the entrepreneur of the need to adopt best practices and the ways to go about it. ?Unless I work on the whole, I cannot create the eco-system?, he reasons.
All the services of Power2sme are free for its SME clients, though he gets a cut from the suppliers and service providers. Narayan says he works on very thin margins and keeps costs to the bare minimum, ?then only I can cut the costs for SMEs.? (I believe him, for he wanted to meet me in my office to save on costs). ?In the last one year, I have hardly spent R2 lakh on advertising and publicity?, he confesses.
Despite wafer-thin margins, Power2sme is on a robust business model. Last year it did business worth R20 crore. This year, the target is R125 crore, and for the next, it’s aiming at R400 crore. Venture capitalists have invested over $200 million in his business, and a few have started similar ventures to give him competition.
Narayan isn’t worried about payments for his supplies. He has arrangements with a few NBFCs (non-banking finance companies) to finance his supplies. Power2sme and NBFC together will set a credit limit (inventory financing) for each SME, and orders are accepted within that limit. And technology has been used extensively to track every order, from placement to delivery.
But the strongest point of the business model is its focus on raw material supplies. While working for technology companies, Narayan realised that the technology cost of an SME is just about 3%, while nearly 65% of the cost is incurred on raw material. So, why not try for a slice of the 65% than of 3%? So, money is certainly on Narayan’s mind, though he swears by evangelisation and patriotism. Then, how one makes money also matters. Doesn’t it?