I watched the bartender wiping the wine glass, rubbing away the tiniest of grease marks and carefully investigating it again against the light before placing it in the cabinet. I was sitting on the barstool at a luxury hotel waiting for my auditor. He was late.
I heard a loud baritone voice from the other end of the counter say “It is brutal. I have no clue how to match up with the Goddamn Chinese. They are killing me with their prices,”
I turned around and saw a man with gold plated glasses in his forties with a Goatee and an older woman with a boyish haircut sitting beside him. The badges of the ongoing conference on Indian Economy hung loosely from their necks.
“Don’t lose heart Shailesh, you will surely come up with something.” the respectable lady said softly getting off the high chair.
“I bet our government will sign up the RCEP trade deal,” said the man morosely. Ge got up, signalled to the bartender, and they both headed for the conference hall.
I picked up my drink, and my mind went back to my own experience as an entrepreneur 35 years ago with cheap imports.
It was sometime during the late 80’s. An organic chemist who was also a family friend of ours had returned from the U.S. and was looking for an investing partner to put up a manufacturing facility to produce and sell Tetramisole Hcl, a pharmaceutical bulk drug that no company was making in India. All the big Pharmaceutical Companies making Tetramisole tablets in India were importing the bulk drug from Europe at high prices. Our selling price would be half of the cost imported Tetramisole.
We teamed up and set up a manufacturing facility within nine months.
A customer from Baroda who had been importing large quantities of Tetramisole from Europe camped in Mysore since he needed our material immediately for a Government contract.
The first batch of 60 Kgs of our Tetramisole Hcl, came out in May 1988. The super white crystals were humdingers to my eyes. India had produced its own commercial Tetramisole for the first time. I was on top of the world, just married, free and independent with a family of my own and a business that made peoples’ lives better by curing them.
Just as my team and I were celebrating, a shock wave hit us. The Baroda Customer who had returned to Baroda with his consignment sent a telex cancelling his standing order of 250 Kgs/month for the rest of the year. Within a week, all the prospective customers called cancelling their requirements. I rushed to Mumbai to find out the reason.
I was shocked. The Chinese had suddenly started manufacturing and dumping Tetramisole into the Indian market in large quantities at half of our raw material cost. Half of our raw material cost, mind you, not half of our selling price!
It was cataclysmic and spelt doom. I could think of only one way out. Make the commerce ministry to either ban import of Tetramisole or levy a hefty anti-dumping duty. It was the policy of the Government at that time to focus on import substitution and encourage local industries to make the country less dependent on imports.
My father-in-law had a politician friend in Bangalore who happened to be close to the then Deputy Chairman of Planning Commission, Ramakrishna Hegde. He gave me a sealed letter addressed to him.
I went to New Delhi. Yojana Building on Sansad Marg in Ned Delhi houses the planning commission, and I was granted a few minutes with Mr Hegde to explain my situation to him. Being very sharp, he understood my plight immediately and instructed his P.A. to discuss with me and to prepare a note of recommendation to the commerce ministry. The P.A. did not give any note but asked me to contact the undersecretary of Commerce Ministry.
I went to Udyog Bhavan the next day.
“Why should the government deprive its citizens of getting cheaper drugs just because they are made outside India?” the handsome bureaucrat secretary asked me point-blank. Noticing that my face fell, he said a little apologetically, “look, you are here to discuss your problem which runs into a few Crores, while the ministry has not looked into cases running into hundreds of Crores”.
“Sir, doesn’t import substitution form a key economic policy of the new government?” I asked him.
“Yes, but we are talking of medicines here, not cosmetics. Why should Indians pay more for it while the imported medicine is far cheaper?” the bureaucrat asked with his quick and razor-sharp logic. “I suggest that you come through your local Chamber of Commerce” he pressed the calling button hinting that my time was up.
My heart sank. The bureaucrat was right. I returned home crestfallen but put up a brave front.
The company’s lending bankers started pressing me to infuse more capital. After I defaulted on a few interest payments, they warned me about legal recourse if I did not regularise the account. One of my co-investors and guarantors for the term loan from the bank started to pressurise me to get his guarantee released at once.
“You put your head in Shit and call it a challenge. I want no more of it” he told me.
“You have to stop putting good money on bad money. You have to know when to call it quits and exit your business Mohan”, my auditor advised me.
The society will always perceive misfortune as your fault and mistake. The whole world then calls you a fool and causes many talented people to walk away from their ventures prematurely. But I was made of sterner stuff.
My strengths were the idle modern manufacturing facility and a workforce without work. They were also only avenues of opportunities to do work for other companies. I contacted a large U.S based Pharmaceutical Company that had a manufacturing Unit at Mysore. We started doing job work for them. Though smelly and dirty, for Rs.50 per Kg and a product that reeked of Sulphur the plant was occupied. The conversion cost barely met our salary and wages, let alone bank interest. But money started trickling in, and I clung on. I pulled on for two more years. I put everything I had into the Company hoping for a miracle product from our R&D to bail us out. But they, on the other hand, left the Company high and dry.
I developed a good rapport with the plant manager and technical staff of our customer and learnt a great deal about how the bulk drug industry functioned. I recognised that the only way forward for a small pharmaceutical company was to specialise and create a niche for itself. That was the only sure way to occupy a permanent position in the industry. I shifted the Company’s focus from Products to process specialisation. We created differentiation in the industry through specialised processes like Grignard reactions and high-pressure hydrogenation with Palladium and Platinum catalysts.
Within a year, our Company became well known for pilot hydrogenation, and many large firms came to us. Some even made us their exclusive and preferred vendor. We signed up a contract with a U.S. Company, and with the commencement of exports, our sales steadily increased from 20 M.T. per year to over 140 MT in three years. Within the next two years, we became debt-free.
An entrepreneurial journey is not always smooth. It carries challenges and failures and demands the entrepreneur’s passion, patience and courage and the will to push ahead. If the challenges also include external factors like cheaper imports, trust me, it as a blessing in disguise that will compel you to transform your business. To a passionate entrepreneur, adversities will force him to innovate and seek out competitive and comparative advantages. When an external factor like Government or Competition becomes your nemesis and an inhibitor, make your entrepreneurial spirit your Catalyst for success.
“Good Evening”, a hand reached out from behind and picked up a fistful of peanuts from the bar counter. It was my young and stocky auditor.
I ordered my favourite kind of spirit, a drink of imported single malt, made in Scotland.