Call With Paresh Rajde, MD-CEO of Suvidhaa InfoServe

Here’s the call I had with Paresh Rajde, MD-CEO of Suvidhaa InfoServe Pvt. Ltd. – which got the second round from IFC yesterday.

KT: Hello Sir, Nice talking to you, congratulations on this new round of ..etc etc

PR: Thank you etc.

KT: Coming to the point, I’ve recently met somebody in the payment space, ZipCash after which this transaction comes, so would like to understand few things.

PR: Go ahead, I’m headed out of an Airport. Got around 30 mins to talk.

KT: What is the physical infra required on the vendor end and who pays for it?

PR: A PC and related paraphernalia. Now we’ve ported the application on mobile, so entry cost is done away with..

KT: You mean the vendor pays..

PR: Currently..but mobile has reduced his cost.

KT: Can you describe the process of going about empanelling a new vendor. Is there a sales team that does this work? How large? Which geographical areas are focus areas?

PR: We have a large team of 325 people. Of this around 200 are sales people. They empanel the vendor on the ‘Aggregation of Services’ platform. Extending all across India in more then 600 towns and cities. No particular focus area. Pan India ambition.

KT: So how does you team sell the idea to vendor

PR: Incremental revenue, Incremental footfall. Typically people earn 3000-6000 extra, though some are known to earn 50,000+ due to suvidha point. Incremental footfall is the greatest benefit though. The local guys know how it will benefit them. The customer who walks in for paying electricity bill or mobile recharge ends up buying other things also, so incidental advantages.

KT: I buy that. But then (and here I start taking out my pessimism) why not Mobile payments. Like mCheck, ZipCash etc offer digital currency on the phone, and they offer the same services bouquet as you do

PR: (Seems this objection is often heard, and responding passionately) But we cater to a different segment. Our orientation is below Tier I. We are an aggregator of services and not a payment gateway. Our users are not tech savvy, they don’t want the hassle of owning and operating technology. We carry physical cash back to the service provider. We are operating with people of different mentality.

KT: I agree sir, but companies like ZipCash, offer a cashless environment but same set of services as you do. (I launch into explanation of how ZipCash works)

PR: I agree but this is a recent phenomenon. We’ve been at it longer and by the time user mindset accept digital cash, we would have created channels for physical cash payments through bouquet of services. That’s our platform and area of competence.

KT: Let me summarize your activity then in different terms: There were some with the idea of setting up semi-urban and rural ‘Shopping Complexes’. What you have created is interlinking the already existing infrastructure of shopkeepers and neighborhood stores through your tech platform, to deliver essentially a ‘Shopping Complex’ of services..can I say this…

PR: Exactly…..Perfectly…You’ve got it….

KT: Thank you sir, it’s a great idea.

KT: Now, sorry to talk like an analyst, but your 2008-09 figures show that for a 91Cr worth of transactions, you managed a revenue of 5.5 Cr, so are you saying that you have spread of 5%+?

PR: Not really. The margins are paid by the service providers. They are the usual 1-2%. In certain services there’s a fixed slab per payment, so average is dragged lower. But there’s a fixed fees charged from the vendor who empanels. That’s income too…

KT: Ahh.. correct. Otherwise it will be safe to say revenue is in the range of 1-1.5% of the transactions that pass through…

PR: Yeah, that would be fair. Though we cannt be looked like a pure payment firm. This will fit them more.

KT: (As an afterthought, I should have said at this point: If you become a distributor of services instead of payment facilitator I suppose you’ll enjoy a higher margin. But maybe you’ll have to carry risk of those services. I would like to understand this)

KT: So at some future date, when both mobile payment and Suvidha’s systems fall in place, would you consider acquiring a mobile payment firm. That would make it complete.

PR: (Disturbance, another call etc. The question got skipped)

KT: With 8 cr. Cumulative sales, and 16Cr cumulative loss on networth of around 25Cr. When do you expect a breakeven..

PR: 2012..

KT: And since we are in the transaction information business, when are we expecting an IPO

PR: 2014.

KT: Thank you sir, it was nice talking to you. Congratulations again on this round of funding..etc etc…

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