From automobiles to IT, it has been a successful run for PK Krishnaprasad,
Chief Executive, SES Technologies. After spending 11 long years with the parent
company, Sai Services, which is known for its business in automobiles,
Krishnaprasad moved to SES three years ago. He used his experience in finance
and marketing to put the company on the fast track of growth. A Rs 55
crore company three years ago, it today has notched up a turnover of Rs 250
crore. Krishnaprasad shares with DQCI what SES is doing to maintain the growth
momentum.
SES was the only distributor in the DQCI Silver Club to record a
three-digit growth during last fiscal. What growth do you expect this year?
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We are planning for a growth of 35-40 percent. The market slowdown is putting
pressure on everybody. We do not know ultimately what growth we will achieve. We
don't want to be over-enthusiastic or over-optimistic. But certainly, the growth
will be much lower compared to last year.
What are some of the innovative measures that you have done to beat the
market slowdown?
We never do sales through tele-marketing, but go out and meet
people. We have all technically qualified people in our marketing team. In fact
99 percent of our executives are technically qualified. We somehow convince
customers to buy our products.
However, right now the market sentiment is down and no one
can say how it will behave in the short term. Vendors, of course, are
optimistic. Ask Intel, for instance, who say they would grow 20 to to 30 percent
in the current year.
One can't deny that growth is not there. But the economy is
in such a mess and because of the war people are really worried.
Sales in homes and institutions are happening. But corporate
buying has slowed down. Earlier, for corporates, there was the attraction of
depreciation which is no more there. Since profitability of corporates is under
pressure, they are deferring their purchases.
Everybody has become conscious about saving costs. When
things go very smoothly, everyone is in high spirits and people tend to ignore
negative signals and overstock goods. Overstocking spoils the market.
Do you think overstocking at the channel end gives a
feeling to vendors that sales are happening just fine?
There is more to it than just overstocking. There are several
things happening in the local IT industry which in the past has been growing at
the rate of 30-40 percent. This is a very healthy growth which no other industry
is experiencing. Many of the industries are not in a position to expect even a
two-digit growth. But this high growth in IT industry has brought about wrong
expectations from market players who want to grow by 100 percent overnight.
With these expectations, people tend to over-stock and
over-load themselves with material. People do not look at the limitations of
their working capital and stretch themselves beyond their capacity. If somebody
has a capacity of Rs 1 crore and goes for a Rs 4 crore transaction and defaults
on payment, the market gets killed.
Overtrading and big and aggressive schemes have done a lot of
damage to market players. As a result, distributors have actually lost control
over the channel.
What role does greed play in channel business?
It is a fact that everyone is greedy to make more money. But
when people allow their greed to control their business transactions, it shows
their immaturity. There is nothing wrong if small players of today have
ambitions to become big tomorrow with aggressive strategies. But they can't
allow greed to overcome them because greed beyond limit, kills business.
People with greed are not in a position to sustain their
business because they do not have other important elements with them that are
critical for the success of their business. For instance, every partner has to
think in terms of working capital, manpower and reach.
On the other hand, over-ambition tends to ruin business,
since these people fail to adhere to principles. These people should first think
about working capital and other matters that can contribute to successful
business.
How good or bad is the payment situation today?
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SES has minimum outstandings because we take proper
precautions to safeguard our interests. One does not find too many defaulters
among known people because they have a image to protect.
In an effort to protect one's credibility, some people sell
on discount showing their willingness to suffer losses but not wanting to lose
face in terms of defaulting on payments. But with discounting other problems
come up.
For instance, sometimes the prices at the channel end are
less than what the distributor is selling. So margins take a terrible beating
and business suffers.
There is a growth correction that is happening in the
industry right now. Whoever grew more than 100 percent in recent times, they are
looking at one-tenth of this growth. Whoever grew substantially is coming down
proportionately as well.
Meanwhile, regular business keeps happening because consumers
from new segments keep buying products. What happens is that if demand is slack
in one segment, it picks up in another. For instance, demand is very sluggish in
the manufacturing segment right now. But buying is happening in the financial
segment where lot of new insurance companies have come up and they need IT
infrastructure.
From the channel perspective, what do you think are the
strengths of SES?
We have created a niche for ourselves among our partners.
When we started business, partners started comparing us with major distributors
and they liked our response when it came to support matters.
We started doing business with Intel products which were
highly competitive. They were a sort of monopoly products with no major
competition around. No major value addition was required with these products.
What counted was the relationship with partners. We gave a lot of importance in
building up these relationships.
Today, people are with us for the last three years and have
been continuously doing business with us. We look for consistent business from
our partners. We don't believe in dumping products on our partners. We stock
goods based on the information that we receive from our partners.
During the last three years, we have established a channel
network of 2,000 partners. This has been made possible because we look at adding
value to our business. Also, we are in a position to respond quickly to the
market needs of partners compared to other distributors.
SYLVESTER LOBO in Mumbai