Hardware start-ups warm up to Make in India

Photo: Ramesh Pathania/Mint

Photo: Ramesh Pathania/Mint

When Prime Minister Narendra Modi exhorted entrepreneurs to make in India in his 2014 Independence Day speech, it was touted as a watershed moment for the manufacturing sector, which accounted for 17.3% of the country’s gross domestic product in 2013-14. The corresponding number for China stood at 36%, according to the World Bank.

The announcement was met with cheers across the country which, until 2013-14, had 48.85 million small and medium enterprises supporting 111.43 million jobs. A fillip to the manufacturing sector, experts reasoned, would translate into more jobs. Although the campaign was directed at boosting small and medium enterprises and encouraging large enterprises to manufacture in India, hardware-led technology start-ups that barely considered manufacturing in India, are also warming up to the initiative, though with caution.

“In some sense, it encouraged a lot of people to consider manufacturing here. Before the campaign, nobody was even considering it. Everybody would say we have to do the prototyping and go to China or Taiwan,” said Nihal Kashinath, founder of IoTBLR, an association which promotes Internet of things through events and workshops.

One of the most well-capitalized hardware start-ups, Grey Orange, which develops robots for warehouse automation, manufactures them in India. It has so far raised $30 million from venture capital firms Blume Ventures and Tiger Global.

According to Tracxn, a start-up tracker, at least 122 hardware-led tech start-ups were founded in 2014 and 85 last year. Out of them, 16 got funded in 2014 and 28 attracted investors in 2015. Total funding in hardware-led start-ups in the last two years added up to about $140 million, according to Tracxn data. Make in India has a host of initiatives such as allowing full or partial foreign direct investment in 25 sectors including automobiles, aviation, biotechnology, defence manufacturing and electronic systems. But the three important announcements that were relevant to start-ups were manufacturing incentives, focus on skilling labour and a simplified intellectual property regime.

However, stakeholders believe it is a little too early to celebrate the initiative as tangible benefits will only start showing in the next three to four years. There are infrastructural challenges to be met around connectivity and supply of skilled manpower.

“You need to give it two to three years to see the kind of traction that you are looking at. If you look at the likes of Micromax, Karbonn and Lava, if these big players are coming in a big way, the entire ecosystem will get a major fillip. Make in India covers both venture capital-funded start-ups and small and medium enterprises. It also covers large enterprises. Start-ups can join hands with a partner and such a move will help in branding as well,” said M.N. Vidyashankar, president, India Electronics and Semiconductor Association. A major fillip came in August last year when Foxconn Technology Co. Ltd, the world’s largest contract electronics maker, announced a $5 billion investment to set up manufacturing units in Maharashtra over the next five years.

A re-entry into India by the Taiwanese company has spurred other electronics makers to set up shop here and start the process of building a comprehensive, ground-up electronics supply chain that is essential for the Make in India push.

Over the last year, several international businesses and home-grown phone makers, who otherwise sourced from China, have set up shop in India.

China’s Lenovo Group Ltd started assembling smartphones in its 40,000 sq. ft facility in Chennai run by Singapore-based contract manufacturer Flextronics International Ltd. The same month, China’s Meizu Technology Co. Ltd, in which e-commerce giant Alibaba Group Holding Ltd is a minority stakeholder, entered the Indian market and said it plans to make handsets in the country. The company is in talks with Foxconn. Karbonn Mobile India Pvt. Ltd set up a 150,000 sq. ft plant with an investment of Rs.50 crore in Noida in partnership with mobile phone designer, manufacturer and supplier Water World Technology Co. Smartphone brands Xiaomi Corp., InFocus and Oneplus have also partnered with Foxconn to manufacture devices in the country.

Chinese smartphone vendor Gionee said it has tied up with Foxconn and Dixon Technologies (India) Pvt. Ltd to start manufacturing mobile devices in India, and said it planned to invest $50 million in India over the next three years.

Micromax, which sources devices from China with Foxconn’s help, has now started making phones in India at its plant in Rudrapur. Rising labour costs in China, which dominates manufacturing, and an eagerness to reduce dependence on that country are pushing manufacturers to new destinations. One such place could be India, which last February raised customs duty on imported phones and handed out larger benefits for domestic producers of these phones and tablets to encourage local manufacturing.

“In a country of 1.2 billion, I see manufacturing not as a choice, but as a compulsion. From addressing the supply side of products to catering the needs of consumers to creating employment to adding to India’s GDP, I see a great viability. And as far as electronics manufacturing is concerned, it is a big opportunity. After China, we are the second largest consumer country today. So as far as viability (goes), I see tremendous opportunity here,” said Rajesh Agarwal, co-founder of Micromax Informatics Ltd.

“We are very strong on the software side, and simultaneously, we are also getting stronger on the hardware side also. Other thing is easy availability of labour. After China, we see the highest availability of labour in India and at much cheaper price than China,” he added. Indian start-ups such as CREO (Motiveprime Consumer Electronics Pvt. Ltd), which makes an Android-based smartphone brand that is currently designed in India but assembled in China, hopes to make use of the spillover benefits from phone makers assembling here.

“In terms of hardware, the most important thing that is currently not there is skilled labour. But with companies like Foxconn coming in, that will automatically change. When I heard of Make in India what I was expecting is that in three-four years we will have a skilled workforce. The second thing which I expected was some kind of benefits which I think the Startup India programme has announced in terms of taxation and in terms of simplification,” said Sai Srinivas, chief executive officer of CREO.

It is not just phone makers, but also start-ups in the defence sector who claim to have benefited.

For ideaForge which counts the armed forces and multiple state enforcement agencies as its clients, two announcements—shifting the FDI limit in the defence sector from 24% to 49% and considering non-repatriable investments by non-resident Indians and persons of Indian origin on par with Indian investment—proved to be key.

“These are very enabling moves for start-ups because a lot of investments in the high technology space and hardware category is likely to come only from people outside the country because a lot of Indian investors do not yet appreciate hardware technology based start-ups,” said Ankit Mehta, CEO at ideaForge.

Mehta said he is hoping more will be done.

“There are a lot of other issues as well, and I’m yet to see any action on them. Make in India is yet to carve out a niche for Indian designed and developed technologies. There should be some additional incentives for our start-ups and they should be given an advantage in terms of procurement,” he said.

However, experts said the Make in India initiative is directed more at small and medium enterprises than venture capital-backed start-ups.

“I would agree that Make in India is more inclined towards small and medium enterprises though it talks about innovation and products,” said Savan Godiawala, senior director, Deloitte.

Godiawala pointed out that despite the favourable technological climate, issues around connectivity and infrastructure need to be sorted out before people fully buy into the campaign. Last month, the government announced measures to boost start-ups including a Rs.2,500 crore annual fund for the next four years, exemption from capital gains tax on investments via this fund, self-assessment for three years and faster patent applications, initiatives which are likely to encourage entrepreneurship in India.

[“source-Livemint”]

Ratan Tata invests in retail tech start-up Snapbizz

SnapBizz had earlier raised $7.2 million in an investment round led by venture capital firms Jungle Ventures, Taurus Value Creation, Konly Venture and Blume Ventures in January. Photo: Pradeep Gaur/MintSnapBizz had earlier raised $7.2 million in an investment round led by venture capital firms Jungle Ventures, Taurus Value Creation, Konly Venture and Blume Ventures in January. Photo: Pradeep Gaur/Mint

Bengaluru: SnapBizz Cloudtech Pvt. Ltd, which devises technology for grocery stores, said it raised an undisclosed amount of funding from Ratan Tata, chairman emeritus of Tata Sons Ltd.

The news was first reported by Economic Times.

SnapBizz had earlier raised $7.2 million in an investment round led by venture capital firms Jungle Ventures, Taurus Value Creation, Konly Venture and Blume Ventures in January.

The Bengaluru-based company, which started in 2013, had earlier received seed funding of $1.7 million from Qualcomm, Jungle Ventures, National Research Foundation of Singapore, Taurus Value Creation and Blume Ventures.

SnapBizz provides grocery stores an Android-based, cloud-connected business platform in the form of a tablet, barcode scanner, printer and a consumer-facing LED display, and the technology enables merchants to manage their billing, inventory and customer engagement.

SnapBizz is one of a small but growing number of start-ups like IPay Tech India Pvt. and StoreKing that aim to help small businesses like grocery stores to bridge the digital gap by targeting specific uses like payments or enabling e-commerce.

“We are privileged to have Mr. Tata as an investor at SnapBizz. As one of the most respected names in corporate India, Mr. Tata brings a rich legacy of doing business with a human touch,” said Prem Kumar, chief executive officer, Snapbizz, in a statement.

[“source-Livemint”]

Amazon’s Jeff Bezos has the best hand in India’s e-commerce game

A file photo of Jeff Bezos. Bezos is piling up his chips while counting aloud, so his opponents can watch and hear clearly. Photo: AFP

A file photo of Jeff Bezos. Bezos is piling up his chips while counting aloud, so his opponents can watch and hear clearly. Photo: AFP

There are four rounds of betting in poker—pocket, flop, turn and river. In my bookThe Golden Tap— The inside story of hyper-funded Indian startups, I write about the Indian e-commerce wars as a game of poker between Amazon.com’s Jeff Bezos, Tiger Global Management’s Lee Fixel and SoftBank’s Masayoshi Son.

The first round of betting on pocket hands happened in the summer of 2013, when Bezos launched Amazon India, Fixel brought $300 million into Flipkart to counter, and Son entered Snapdeal by equalling eBay’s investment.

The second round of betting on the flop happened in the summer of 2014—when Fixel invested a billion dollars into Flipkart on the back of JD’s initial public offering (IPO) on Nasdaq, Bezos raised the bet by writing a two billion dollar cheque with much fanfare and Son made a decisive investment in Snapdeal on the back of Alibaba’s IPO on the Nasdaq.

The third round of betting on the turn happened in the summer of 2015, when Flipkart’s roadshow on Wall Street made an IPO look distant, Bezos stacked up his chips as Amazon’s market cap grew handsomely, and Son brought in investments from Alibaba and Foxconn into Snapdeal to strengthen his hand.

We are now in 2016. The last round of betting on the river is about to begin. There is much anticipation of the ensuing drama. If the last six months since the Chinese market meltdown are anything to go by, Fixel is not going to make the first move. Tiger has taken a back seat in its Indian investments and hedged its bets by investing in Amazon. It is unlikely that Son will make the first move either, what with Alibaba’s hedge between Snapdeal and Paytm. In hindsight, Fixel and Son’s bets come across as calculated bluffs to make Bezos fold while waiting to hit a big card.

Bezos called the bluffs, did not fold, stayed in the game and his hand looks the strongest now. Since the last round of betting, JD and Alibaba stock have fallen 40% while Amazon is up over 50%. In this last round of betting, Bezos is likely to make the first big move.

If I were a betting man, which I clearly am by the tone of this write-up, this is how it plays out.

Bezos is piling up his chips while counting aloud, so his opponents can watch and hear clearly. It adds up to billions of dollars, perhaps nearing double digits, as much as is needed to get the other two all-in even if they were to combine their stacks and play as one. The bet will quietly be placed on the table. As a large public company and the most valuable e-commerce company of the world, Amazon has to neither boast about its valuation nor signal its commitment to India through the press. The bet will quietly be placed on the table.

The quantum of the bet will be too large for Fixel or Son to bet their funds on and they will have to look for support. The supporting funds who were drinking the Kool-Aid of valuation hyper-growth in 2014 and 2015—India is the next China, there is a small window of opportunity, it is a winner-take-all network-effects market, be the last man standing and the profits will come, etc.—now know better. Alibaba is probably the only company in the world that could stand up in support to call the bet. What will Alibaba do?

Alibaba could continue minding its own business in China and the rest of the world that wants to buy Chinese products. Alibaba could continue experimenting with strategic interests in India through its subsidiary Paytm that seems to be fully indoctrinated in the Alibaba playbook by now. Alibaba could quietly continue selling Chinese products to Indian consumers directly through AliExpress and indirectly through Snapdeal and Paytm. Alibaba could do all of this without losing anything. With the volatile global markets and slowing consumption in China, it would make sense to be capital efficient now and grow to new territories later.

On the other hand, Alibaba could take Amazon head-on in India. This is a war of the West versus the East, consumption versus production, developed versus emerging, US versus China. The prize is to be the largest e-commerce company of the world at the end of this decade. Will Alibaba call?

[“Source-Livemint”]

Lenovo Looking to Expand Offline Sales and Support in India

Lenovo Looking to Expand Offline Sales and Support in India

Lenovo seems to be on a launching spree as the company has launched five smartphones in the last two days, namely the Lenovo A1000, the Lenovo A6000 Shot, the Lenovo K3 Note Music, the Lenovo Vibe P1, and the Vibe P1m. Considering all these devices have been launched in the price range between Rs. 4,999 to Rs. 15,999, the company is definitely trying to position itself in the minds of the budget conscious buyer given the ongoing festive season in India.

At the Lenovo Vibe P1 and Vibe P1m launch event on Wednesday, Lenovo India also announced plans to have 50 exclusive Lenovo and Motorola service centres by Diwali, which is on November 11. The company also revealed plans to expand the number to 100 by mid next year.

Head of Product and Marketing at Lenovo Smartphones in India, Anuj Sharma explained the need of a strong after sales channel and said, “From a service perspective, we have grown rapidly adding more number of devices and overall service cost in India is a lot high but then it is part of the buying experience. Although, in the recent past people have been ignoring it but somewhere down the line it does play a role.”

“It’s not just buying the product but life of the product and there it makes sense to have proper service centres, spread out service centres, and if you combine the Lenovo and Motorola stores you get a better reach,” added Sharma.

The Chinese company will be selling the Lenovo A1000, the A6000 Shot, and the K3 Note Music through retail outlets in the country starting last week of October. The Lenovo Vibe P1 and P1m, on the other hand, are exclusive to Flipkart and both will go on sale this month.

Sharma detailed one of the reasons the company chose to go offline was giving users the chance to experience the devices.

“The Lenovo K3 Note Music will come at a higher price than the K3 Note. So the first question would be why they are charging us more. Now, they can see it for themselves. They can play around with the device and then probably buy it based on experience,” he explained.

Further adding, Sharma pointed out that Lenovo India chose to sell the Lenovo Vibe Shot offline because “you can’t really gauge the camera on the device till you have taken a shot. So there’s something you can trust easily but few things require experience.”

On being asked why the company chose to sell its budget Lenovo Vibe P1m, priced at Rs. 7,999, through flash sales while the Vibe P1, priced at Rs. 15,999, through regular sale, Sharma explained, “P1m is little more aggressively priced and secondly we are also slightly tight on the stocks. So, the way we work is we look at the demand and supply. Ideal is the estimated demand we have on day one and for which the supply should match.”

[“Source-Gadgets”]