We know Edenred as the ?Ticket Restaurant? company with its popular red and blue logo stickers visible on the doors of many a restaurant. After its demerger with Accor Hospitality, Edenred (formerly Accor Services) has come out bigger and stronger with volumes of 14 billion euros globally. Edenred runs four businesses globally, of which India has three?employee benefit business, rewards and loyalty business, and public social programmes. Part of a consortium that won the contract from the Madhya Pradesh government to implement the public distribution system in the state, Edenred is all set to enter the public social business space in the country in a big way. Jacques Stern, chairman and global CEO, Edenred, and Sandeep Banerjee, MD and CEO, Edenred India, talk to FE?s Sukalp Sharma about their plans for India, and how their implementation of PDS would be different.
How is life after the demerger from Accor Hospitality? What sort of a relationship do you share with it now?
We just celebrated our first anniversary as Edenred and the demerger has been a success for us. We now see that over 65% of the shareholders have changed. I think it shows that these are two very different businesses and attract different types of shareholders. So, I would say that we still have a lot of friends in the two companies, but no more than that.
How important is the Indian market for you, considering the global slowdown?
We are not looking at India for 4-5 years, but for the next 20-25 years. We have four types of businesses?employee benefits or meal and food vouchers, gift vouchers, expense management, and public social programmes. All are meant for the middle class in India. We still don?t have the expense management business in India but we will start it very soon. Right now, we are at a point where we are investing in our India operations. We have already built a great platform, with around 500 employees in 15 locations in 10 cities, which is 8% of all the people we have globally.
A huge, emerging middle class in India suits your benefit business vertical well. But is there an opportunity in the social programme space as well and how are you looking at this opportunity?
The employee benefit business, from a top line point of view, is contributing to about 60% of our total turnover, while the rewards and loyalty business contributes to about 40% of our turnover in India. The public social programme business is small but, having said that, we have received the mandate from one of the largest states in the country, MP, to manage the entire PDS through our smart coupons. We are talking about 5mn BPL families and a potential 8mn APL families and reaching approximately 30mn beneficiaries, which makes this one of the largest voucher programmes in the world. Also, this is the first project in the country that is applying UID guidelines to delivering a social programme and tangible benefits to the beneficiary.
In the public social programme space, we are focusing on food, education and health to begin with. We hope that in the next 3-5 years, the contribution of the public social programme business could potentially be higher than 50% of our total business in India, which means it is likely to emerge as the largest business for us in India.
PDS has been marred by corruption, pilferage, etc. How do you address these issues and what?s the new element you bring to the table for PDS consumers?
This is a mandate given by the state of MP to a consortium of three entities, one of which is Edenred India. They have individual roles and responsibilities carved out, but are integrated to deliver one comprehensive solution to the MP government. PDS in most parts of the country is essentially plagued with two kinds of problems. The first problem is in the identification of the beneficiary right at the source and the other problem is leaks at the fair price shop (FPS). What we do here is that we look at plugging the leaks at both ends. Right at the outset, you have a targeted enrolment of the beneficiary as per UID guidelines. So there is biometrics, there is iris scanning, digitisation of data and UID numbers, and identity cards are being generated. Ghost beneficiaries are significantly reduced. Then you have the final leg of delivering the benefit through a smart coupon, against which the beneficiary will get the commodity according to his entitlement from the FPS. The beauty in this entire project is that these smart coupons have a whole lot of contemporary security features, they have all data in the local language, they are colour-coded for different commodities, and the FPS number is on the coupon.
The FPS owner has to send the coupons back to us. We read, redeem and scan those coupons, and then provide very specific details to the state, which tells at the FPS level, at an item level, at a taluka level, at a district level what kind of consumption has happened. So the state would know about the offtake of items at a particular FPS and only on the basis of that can the FPS owner go and indent for his next month?s offtake. What was happening was that no one knew how much the FPS owner was actually consuming in the month as there was no instrument to track that.
Now if the FPS is not delivering the benefit to the beneficiary, that means the FPS owner won?t get the coupons from the beneficiary. This, in turn, means that he would not be able to indent for the next month as much as he would have ideally indented. Also, he can fool the beneficiary once, but not over and over again, because the coupons are as good as cash.
What is the status of the project on the ground?
The enrolment activities commenced late last year and the first set of vouchers may be issued any time now. Because this is the first project with the UID, syncing issues with the UID were also taking time. But this is much more streamlined now.
We hope to cover about half a million families by this year, which would progressively scale up to 5mn families by early 2013.
We hear that you?re in touch with other state governments as well for PDS projects like the one in MP? Any progress?
These are long gestation projects. So there is a lot of advocacy that we are doing with various stakeholders in the states.
The states that we find progressive are Rajasthan, Bihar, West Bengal, Gujarat, Uttarakhand, Tamil Nadu, Andhra Pradesh and Punjab. We also see an opportunity in the Northeast. A few states have already seen the solutions that we have created for MP and they are quite enthused. Discussions with these states have gone beyond an informal stage; we have made presentations and submitted concept notes.
What are the tangible projections for the next five years in the public social programme space for Edenred India?
Despite a number of areas available, we have identified food and civil supplies, education and health. To begin with, we want to run a large programme in each of these spaces in the next three years? time and thereafter add one large programme each year. Large for us would typically mean that we are able to reach out to more than 2mn families every year through the duration of the contract.
What sort of a growth strategy are you looking at for India?
We have a clear roadmap for India. We have identified a few strategic levers of growth and what we are essentially saying is that we will drive organic growth very hard. We will focus on innovation, new initiatives and development. We will look at strategic alliances, collaborations and, if required, acquisitions. We would be focusing on enhancing the equity of the new Edenred brand and human capital.
