Value Creation in the Downturn TiECON 2002, New Delhi January 12, 2002

The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy. - Martin Luthur King, Jr.

Where is the downturn ? Sensex at 3400; NASDAQ at /11, Afghanistan, Indo-Pak tensions, Dot com bust, Cut in tech spends IPO drought The current market conditions are not conducive to Raise funds Monetise the investments But… The challenge is to use the “downturn” to create enterprise value

An Example : Subhiksha Chain of discount retail stores selling grocery, promoted by Shri. R. Subramanian in 1997 Network of 100 discount retail stores across 20 towns in Tamil Nadu Leader in Chennai with 12% market share Clear price leadership in the grocery and medicines market Database of 85,000 customers ICICI Venture took a 10% stake in July 2000

Subhiksha The economic downtrend impacted overall consumer spending in the retail markets. But Subhiksha … reinforced its proposition as a discount store offering the “best prices in town”. leveraged the increased sales turnover to negotiate better terms with suppliers Bucking the “downtrend”, Subhiksha has grown from Rs. 80 crore to Rs. 280 crore in 2001

Subhiksha Today, Subhiksha is controlling costs by : Rationalising its range of stocks Optimising work-flow at customer interface Using IT to manage inventory controls Simultaneously, it is using the depressed market conditions to: Acquire other retail chains Increase outlets and expand to other cities Invest in warehouse & logistics

An Example : EasyBuyMusic Multi-channel retailer of music through telephone and Internet media Incubated by Arthur Andersen's e-Business Incubation Advisory Services Distribution network in 8 cities across India Back end logistics supplier of music for all major online shopping portals in India (Rediff, Indya, Sify, etc.) Customer database of over 1 million users and 1.2 million cell phone users ICICI Venture invested in the company in October 2000

EasyBuyMusic EasyBuyMusic reacted to the dotcom bust by leveraging its strengths in logistics and redefining its business. Expansion of product range beyond music items - EasyBuyStore Distribution backend for all products for online shopping portals like Sify and Indya Fulfillment of orders on phone for Nestle, Cadbury’s, Jet Mall, Outlook, BPL Mobile, etc. Expansion of its music business to distribute Indian music in international markets

EasyBuyMusic Today, EasyBuyMusic has successfully redefined its business and has: Reinforced its position as a multi-channel music retailer Leveraged its logistics network to sell other products and provide the backend to other players Built a database for effective cross-selling and CRM activity

An Example: RelQ An IT company providing software verification and validation services RelQ is an independent testing agency for software and has its own facility and software tools Company has a longstanding clients like Wells Fargo, PingTel, Citibank (Brussels), Hitachi (Europe), etc. Inspite of IT downturn, RelQ is registering 25% growth in current year ICICI Venture invested Rs. 5 crore in September 2000

RelQ The IT downturn could have meant the end of the road for a fledgling company like RelQ. However, the company has taken up the challenge by : entering new markets like Ireland, Belgium, Netherlands, Singapore, etc. focussing on domain skills in areas like real- time embedded systems, EDA, Avionics etc entering into strategic partnerships with some of the high value customers to establish a stable revenue stream developing frameworks and tools to reduce cost of service delivery

RelQ Today, RelQ is successfully addressing the depressed IT market and registering growth in revenues and profitability. It has increased focus on Europe and Japan It has started a new division to focus on testing of avionics software It has acquired a small testing services company in Europe and is planning more acquisitions in future It has plans to set up offshore facilities in low cost centers like Philippines, China and Vietnam

In Conclusion Today, the only real value lies in the ability of a company to : adapt to a rapidly changing environment identify and leverage its strengths be willing to change path and redefine business strategies