One97 Communications' Vijay Shekhar Sharma On Mobile Internet Growth
Vijay Shekhar Sharma, founder and managing director of One97 Communications, can be called an early starter. A child prodigy, he passed Class XII at the age of 14 and started his first business venture in his third year at engineering college. But in 1999, his company, Xs! Corporations, was sold to Lotus Interworks. After working with Lotus for a year, Sharma founded One97 in December 2000, a company which provides a platform for delivering mobile value-added services (VAS). Sharma, however, likes to position One97 as a mobile Internet company that is sitting on Rs 100 crore of cash and is looking to raise around Rs 100 crore more via private equity after dropping plans for an Indian public listing. In an exclusive video interview with VCCircle, he talks about his entrepreneurial journey, the highs and lows of starting up and valuations in the e-commerce space. Edited excerpts:
You have seen how the telecom industry has evolved in this country. How would you characterise the interplay of the Internet and mobile in India?
India has definitely matured in terms of telecom growth, but Internet penetration is still primitive and one can hardly appreciate the Indian websites as they are not even user-friendly. Incidentally, Internet in India is somewhat primitive, but it will change. As expected, most Internet companies in India are still pushing the Internet-first policy. So I was surprised when Google said that it would be going mobile-first as many Indian companies don't have mobile apps. They don't even have mobile Internet applications on the sites.
What do you make of the burst of digital content and an all-sweeping e-commerce wave?
Let us remember one fundamental thing â€“ in a digitally connected world, what you can do as a business. For one, you can deliver content online. But monetising the content is quite difficult and the paid model has not worked out well anywhere in the world. Even The New York Times and The Wall Street Journal are grappling with this issue.
When there is a lot of content, you look at advertising as one of the ways to monetise it. Advertising in India is a subset of a very small advertising business overall. If the Indian advertising business is to be looked at, I would say it's just apple-sized while the rest of the world's advertising business is huge as a watermelon. The problem is that only a certain percentage of that small business will come online and just a tiny portion of that will be on mobile space. I don't know why the brands haven't learnt that yet. Of course, with education spreading far and wide, there will be a growing primary audience. Nevertheless, mobile advertising has a small market in India.
So, what is left in the connected world is that you charge the end-customer and offer him something. That is exactly where commerce comes in. So there is a fundamental requirement of commerce to be the first preference in a Net-connected world. And early leadership in e-commerce will help build some long-term businesses. Of course, it may sound a bit euphoric but it is undoubtedly an opportunity.
Everyone is surprised by the valuations in the e-commerce space but most people won't call it a bubble as the general feeling is â€“ this time it's different. What's your opinion?
Well, there are two things here. One is the billion-dollar milestone and I am glad that somebody has touched that. I still remember what Deep Kalra (founder and CEO of NASDAQ-listed MakeMyTrip) once said about this billion-dollar hurdle. Deep said that when his company did a billion-dollar IPO, it changed everything. I asked him what he would think if he ever heard of billion-dollar private fundraising. He said it would change everything again. So a billion dollar is not bad if you can pull it off. If you have a long-term vision as an entrepreneur and a long-term story to build up, what's wrong with it?
But the bubble has nothing do with those billion dollars. The bubble is there when fundamentals are discarded. If I put a billion dollar in a company with no fundamentals, that is simply speculation. In fact, companies like Groupon, Amazon and Apple are now undervalued because of the 'bubble' we are talking about. The stock market undervalues technology companies, but private companies understand it a little better.
But ours (One97 Communications) is a totally different story and it has nothing to do with the bubble. We have always been possessively focused on revenues and profitability. This year, we will generate something upwards of Rs 100 crore of cash and we may actually touch Rs 120 crore this year. Our PAT stood at Rs 40 crore last year. For an industry which is supposedly not doing well and whose future is not rosy, I hope our results speak for themselves; it shows that hard work delivers critical results. I have been in this business for 10 years. And I honestly don't know how I can keep building a speculative business for 10 years.
What are your fundraising plans?
I don't think we will go ahead with an Indian IPO. We believe that the company and its market interpretation are slightly mismatched. Also, the market is going through many fluctuations. We don't believe that we need public money yet. So we would do a private round. In fact, we can do a better job of fundraising in a private round with respect to the company's appreciation.
The problem in the public round is that you are slotted with anybody else. How on earth can you have control on that person? You have control on your own destiny, on your own hard work, revenues and business verticals. But you can't possibly control the revenues, profitability and stock price of someone else.
Somebody does gold mining, somebody does diamond mining and somebody does bauxite mining. They are very differently valued. What you make, how it is produced, and how it is valued in the market place "they are all different. However, the stock market only values or understands sectors. But it doesn't understand individual companies.
A private equity guy can talk to you, look at your people, look at your business, look at your expansion plans. But in the public market, who has the time to bother about all these? It's just a slot, a sector and then it's all over. I want to raise money so that I have enough money in the bank and need not bother about anything when I grow, and grow aggressively.
You are sitting on cash and looking at raising more money. But where would you make strategic investments?
Right now we are in three businesses â€“ content, commerce and advertising. In the content space, we want to focus further on videos, gaming, general content or even smartphone-centric content. So we don't mind investing in and acquiring such companies. We are building the advertising business based on massive analytics and expect to make more announcements regarding that. Commerce, I think, is a nascent business but actually, it's most precious to me.
When you go vertically deeper into content, it's quite likely that many people might not want to pay the kind of money they are paying now. But gaming will definitely be that kind of content for which end-users will pay. We don't have game developers and I don't have a gaming DNA. Therefore, we are looking at companies in that business. I wish we can fund 20 of those companies.
What are the defining trends of mobile Internet in India?
We believe that there is a large opportunity if you can convert 500 million consumers into digital currency users. Converting this country's traditional currency into digital currency may take a long time but it will win in the long run. And that's the mission based on which we have built PayTM.
What was the high point and the low point in your entrepreneurial career?
I had taken a loan of Rs 8 lakh which was later converted into equity and I sold 40 per cent of my company. I had found many doors shut at that point but I got the money. I chose to take a lifeline and it was truly angel money for me. That was the bright point in my life as things started moving on track. My low point was that my family believed I should not be into this business.
(Transcribed by Bhawna Gupta)