Shares of IndiaMART, an online business-to-business marketplace, surged nearly 40% on its BSE debut on July 4. For the firm’s co-founder and CEO, Dinesh Agarwal, 50, the momentous event arrived after a wait of 23 years.
Agarwal, who started the firm in 1996, spoke to TOI about the ups and downs he experienced over the years. From borrowing money from a friend so he could register the the domain name in the US to facing business disruptions after 9/11, Agarwal’s journey is a rare startup story that survived the internet boom and bust.
He now plans to bring fintech and software-as-a-service products on IndiaMART’s platform. Excerpts from the interview:
Internet was an alien concept in the 1990s. How did the journey begin?
I come from a small business family in UP’s Napara district, close to the Nepal border. I studied in a sarkari (government) Hindi medium school and later went to Lucknow to complete class 12. I lived with my grandfather. In 1990, I was lucky enough to be one of the early BTech computer science graduates from HBTI, Kanpur. I landed a job at CMC Ltd, where I worked on software for Indian Railways’ reservation system, and later joined Sam Pitroda and his team at the Centre for Development of Telematics to develop an indigenous digital telephone exchange for India.
I remember, in 1990-91, I had access to an email ID, about four years before internet was officially launched in India. In 1992, I moved to HCL in the US, setting up offices on the East Coast. I saw the birth of internet in America — it was a new world for me.
As I am from a business family, I always wanted to return to India and do something on my own. On August 15, 1995, the PM [PV Narasimha Rao] announced that BSNL would provide internet connectivity in India. The next day, I put in my papers at HCL and within 45 days, I had returned to India with my wife and kid. I started looking for internet related opportunities.
How did you come up with the idea of IndiaMART?
Initially, we wanted to build the website here, but there weren’t enough computers or internet infrastructure. We thought about building a site covering Indian businesses for clients in the West. I believed it would help exporters and remove price disparity of Indian products in developed countries. That’s how IndiaMART was born. Our first tagline was: ‘The global gateway to Indian marketplace’. We looked up ‘marketplace’ in the dictionary because it wasn’t a popular term then (laughs).
At the time, there were only a handful of websites. Getting a domain name was challenging; I borrowed money. It was expensive to maintain the domain name — $135. It’s $5-$7 now. I realised my business model was not sustainable. I’d started with export-focused sites, so I thought, why not put a directory of exporters online. I asked relatives to send free listing forms for consent to publish exporters’ details. My first customer was Nirula’s, which had an export house. In the first year, we operated from our house in Patparganj, clocking revenue of ₹6 lakh with 40-50 clients.
How did the dot-com boom and bust affect your firm?
There was a massive boom in India; we couldn’t understand what was happening. We got funding offers, but we didn’t take them. While things were peaking here, the dot-com bubble collapsed in the US. That was the best thing that happened to us. Flyby-night operators had to shut shop. We expanded and became aggressive, but 9/11 happened.
How severe was the impact?
We sold a piece of land and took a bank loan of ₹50 lakh to fund expansion. We were booming. On September 10, 2001, we performed the ground-breaking ceremony for our office. The next day, the attacks occurred. Business dropped by 50%. That was our toughest phase. My cofounder, Brijesh Agarwal, and staff were very supportive. There were salary delays, but employees stayed.
How did IndiaMART move from being an export-focused business to an India-focused one?
In 2007-08, the rupee became strong, affecting exports. Then a recession hit the US and demand dropped. China took advantage and India lost out. Alibaba did their IPO and Apple launched the iPhone. We decided India would be the hub, pivoted to the India-focused B2B market and raised $10 million from Intel Capital.
Why did you wait for over a decade before raising external capital?
We didn’t need that much capital for the US market. India was a different ball game. We were expanding, so we needed capital. We opened 52 offices in 52 weeks, and our sales grew 10 times in a year. We spent a lot of money. By 2012, we faced another downturn as the economy slowed. We reported a loss for the first time in 15 years; we lost everybody’s trust and I was scared to even leave home. We scaled back and stopped hiring. We made big changes in 2012-13, but we became fearless in the process and we found a new product-market fit.
What did you do right in 2014?
There was an e-commerce wave, with Flipkart emerging as a large company. We launched Tolexo, a platform for industrial products. While we were trying to turn IndiaMART around and scale up Tolexo, we realised the latter won’t be profitable. We merged the platforms, which worked wonders for us. We stuck to it and have gone public now. IndiaMART doesn’t look like a classifieds website anymore. It’s like Amazon for B2B products.
Would you have considered issuing differential voting rights, or DVR shares, had Sebi approval come before the IPO?
We wouldn’t have needed that. Brijesh and I will sell about 5% and retain 52% of shares after IPO. So, we don’t need DVR structure to maintain control.