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Profiteering in the scarce resources of the community


All choices matter greatly, for this is a low-cost, high volume game. The differential in manufacturing costs between the most and least expensive syringe may be just a few paise. The paise can be saved in a few ways: by achieving economies of scale; or by choosing sub-par material, cutting corners in manufacturing or quality control, or not investing in post-market surveillance.

Compromising With The Quality

The way to find companies that have good quality products is to look at the market share, Das said. “Medical devices is a reputation business; it’s a trust business more than technology business, so it’s difficult to be untrustworthy and survive a long time,” he said.

On the metric of reputation, four companies are doing well: HMD has nearly 60% of the market. And three foreign companies—BD, Germany’s B Braun Melsungen AG, and the Japanese company Nipro—have a reputation for particularly sharp needles. Where HMD supplies all kinds of hospitals and pharmacies across the country, foreign companies mostly sell to expensive corporate hospitals in tier 1 cities.

At this end on the spectrum of excellence, there is little difference in quality. HMD supplies to WHO and UNICEF, while the other companies are from nations with stringent medical device rules. And yet, the MRP of syringes can vary greatly, depending on the brand. A 5-mL syringe from HMD costs Rs 6.50 ($0.09), while a similar one from BD costs Rs 14.50 ($0.20) and one from LifeLong, a syringe-maker in Gurugram, costs Rs 23 ($0.31). A hospital that sells HMD would earn a 376% profit, while a hospital that chooses Lifelong would earn three times as much—a 1,011% profit.

High profit margins in business are not unusual. The pain relief cream Moov retails at Rs 120 ($1.63) but costs just Rs 12 ($0.16) for the company to manufacture it, according to wholesalers. Reckitt Benckiser Group PLC, the owner of Moov, spends twice as much on advertising on TV and radio. A similar cream, Zandu Balm, owned by the Emami group, sells at Rs 35 ($0.48) but costs a small fraction to the company. A Louis Vuitton handbag definitely costs much less than its price tag of $1,500 (Rs 1.10 lakh).

But a syringe is not like these products because it is an indispensable part of most treatments. And where in the case of Moov or a handbag, the consumer can exercise her right to choose an expensive product, the decision of syringe is usually thrust upon her by the hospital or diagnostic lab.

That means the consumer of the syringe in the competitive marketplace is not you or me. Rather, it is hospitals, pharmacies and diagnostic labs. And it is to satisfy their needs and bottom lines that the medical device industry has evolved.

Sale! Sale!

There is immense competition, which means manufacturers will do whatever is needed to increase the volume of sales. One strategy is printing a higher MRP and giving hospitals a reason other than quality to choose their brand. The hospital would procure the product at a heavily discounted price (“price to trade”) but sell to patients at a high MRP, earning significant profits. The difference between the price to trade and MRP is known as the trade margin. The higher the margin, the bigger the potential markup on a product.

In south Bengaluru’s crowded medical market, a litter-strewn, paan-painted staircase leads to a one-room dingy wholesale shop. Metal shelves are stocked with medical supplies in cardboard packaging, 100 pieces to a box. If Prabha Distributors is cashing in on the immense profit margins available in the medical device sector, it certainly is not reflected in proprietor Venkatesh’s dingy premises or his dated desktop PC. When a day labourer steps in to ask for a day off on Sunday for a family get-together, Venkatesh turns him down brusquely. He himself works Sundays.

Venkatesh is the last guy but one in HMD’s supply chain, which might have as many as seven layers or as few as two. Venkatesh gets HMD’s “Dispovan” brand 2 mL-syringe for Rs 1.38 ($0.019) per piece from his supplier. He is willing to sell at Rs 1.55 ($0.021) per piece, which is a 12% markup. If Venkatesh didn’t price the syringe competitively, the hospital would go to other wholesalers in Sultanpet and get a better deal. It’s a free market.

The hospital would sell the syringe at MRP of Rs 4.50 ($0.06), earning a 200% profit.

Inside the tangled world of syringe-making


In 2015, Vivek Sharma walked into Max Super Speciality Hospital in Gurugram and launched a trade war.

Three years later, the social worker’s actions have resulted in a wide-ranging inquiry into sales practices at super-specialty hospitals in New Delhi, particularly as they relate to medical devices.

Sharma, whom The Ken could not reach, bought a 10-mL disposable syringe made by the American manufacturer Becton Dickinson and Company (BD) from the hospital pharmacy at the maximum retail price (MRP) of Rs 19.50 ($0.27). The syringe had a green stopper and the brand name “Emerald”. Then, Sharma went to a medical shop outside the hospital and asked for a BD Emerald syringe, 10-mL. The MRP was Rs 11.50 ($0.16); Sharma got a discount and paid Rs 10 ($0.14).

Sharma’s next stop was the Competition Commission of India (CCI), the competition regulator, where he lodged a complaint against the hospital and the syringe-maker. The two were colluding to fleece customers by setting a higher MRP for a product that is available more cheaply in the open market, he alleged. CCI referred the case to the Director General (DG), and on 31 August, the DG ruled there was no specific collusion between BD and the hospital. Further, the DG ruled the syringe Sharma had bought at the hospital was different than the one he had bought at the medical shop.

The Scenario

What gives? Isn’t a 10-mL syringe of a company, bought from any shop, still a 10-mL syringe of the same company? And how does a hospital get off charging Rs 19.50 on a syringe that costs much less elsewhere?

If you’re an average Indian, chances are you get three needle pricks every year. In 2012, some 3 billion injections were administered nationwide, according to the World Health Organisation. At an average MRP of Rs 6 ($0.08) a syringe, that conservatively makes a Rs 1,800 crore ($245 million) market. So it’s unsurprising that what began as a crusade by a social worker for consumer rights has morphed into a fierce fight between manufacturers to protect and increase their business. On one side are predominantly Indian companies, and on the other are foreign companies.

They are ostensibly fighting over how much medical consumables—the syringe, in specific—cost to you, the consumer. But in reality, this is about market share, profit margins and bottom lines.

The Indian government is deciding whether it should play referee. If it does, its regulations could determine which heart implant, syringe, and other such devices a patient receives in a hospital. This, in turn, would shape the Indian medical device sector, which is expected to reach Rs 60,200 crore ($8 billion) by 2020.

“The problem is not only in syringes, the problem is universal in all medical disposables, consumables and implants,” said Rajiv Nath, joint managing director of Hindustan Syringe & Medical Devices Ltd (HMD), one of India’s oldest syringe companies. “You, as a consumer – have you gained in the last five years? The prices of many medical disposables have come down because customs duties came down, the [manufacturing] price came down because of competition—did you gain from this?”

The syringe, deconstructed

The syringe begins as a choice of polymer granules and stainless steel in factories in Haryana, which is the locus of low-tech medical device manufacturing in India. Workers pour molten polypropylene, a medical grade plastic, into moulds to make the barrel and plunger. They gently heat up rubber, place it in a heated mould and compress it to make the rubber piston. Stainless steel is stretched into tubes called cannula to make fine needles, with bevelled tips sharp enough to pierce the skin. The tip can be ground or cut. Sometimes, lubrication is added to the needle. The pain of a needle prick comes from the puncture as well as how smoothly the needle enters the tissue.

“One of the biggest determinants is the quality of the needle. At the end of the day, that’s something that hits the patient. You would rather pay a little more for a needle that doesn’t make a patient scream every time you stick it in him or her,” said Probir Das, chairman of the Federation of Indian Chambers of Commerce and Industry (FICCI) and a former executive at BD.


Winter is shrinking. So is the need for winter wear


The last 10 years have witnessed the warmest winters in the recorded history of India; globally, 15 of the 16 warmest years on record have occurred since 2001. And businesses all across the world have been scrambling to get a handle on how weather changes have been impacting what consumers eat, drink, drive and entertain themselves with. One sector that’s really been feeling the heat is apparel.

Impacts On The Startups

Winters are getting shorter and warmer, hitting winter wear makers hard, particularly in the key markets of north and north-east India. Over the last two years, winter wear sales in India are estimated to have fallen by at least 10-12%, as per the Clothing Manufacturers Association of India (CMAI).

The collections are getting smaller and fabrics lighter. Woollens are increasingly being ousted from winter wear collections. Logistics are getting disrupted, as is production. There is leftover stock, price-cuts and clearance sales. Margins are under-pressure and revenues are plummeting. But, “there is no record of all this,” says Rahul Mehta, president at CMAI. “No consulting firm or research agency has been tracking winter apparel, let alone the impact of climate change on its sales.”

Of course, India isn’t the only country with shrinking winters. There’s the United Kingdom, where unseasonably warm weather can cost non-food retailers $51.3 million per week for each degree rise in temperature, according to an analysis by Met Office and the British Retail Consortium (BRC). In New Zealand, winter has gotten shorter by a month over the last 100 years, while unseasonably warm European weather has led to the decline in the sales of one of the largest fast-fashion brands Hennes & Mauritz AB, better known as H&M.

All of this impacts business. The Ken spoke to more than half a dozen apparel companies to look into the changes such brands have gone through and the challenges that await these businesses in the near future.

Out with the woollens, in with the linens

The year was 2015, the fifth-warmest year in India since the early 1900s and the first one when distributors of Ludhiana-based apparel brand Monte Carlo saw a drop in sales of woollen sweaters. A first in the company’s 34-year history. While the impact was small, its ripples continued to be felt in 2016; distributors were left with the previous year’s stock. In fact, 2016 was the warmest year in the recorded history of India, and 2017, the fourth-warmest. “The winters in India are down from a five-month period to just two months. Winter temperatures in November are above normal and post-January start rising again,” said Mahesh Palawat, chief meteorologist at weather services firm Skymet.

In the process, outerwear retailers such as Blackberrys, Woodland, Numero Uno and Kapsons have struggled to keep up with the warmer temperatures. While overall winter sales have continued to grow for most brands on account of the high value of winter apparel—a common estimate says that the value of four summer t-shirts equals one sweater—Monte Carlo said that fabrics have undergone a change after 2015. “There are cotton jackets and full-sleeved t-shirts that are being increasingly sold. We have introduced cotton sweaters and now, we are adding linen sweaters to our collection as well,” said Rishabh Oswal, executive director at Monte Carlo.

This fabric phenomenon is not limited to Monte Carlo. Over the last two years, at least 15% of heavy woollens in Numero Uno’s collections have been replaced with lighter ones like cotton and linen, which have been excessively in demand. For instance, sleeveless jackets, an old product of Numero Uno, has seen a sudden rise in demand in recent years, “following which, the company has expanded the product line to accommodate multiple lighter fabrics (such as cotton, linen, and denim),” says Narinder Singh Dhingra, chairman and managing director at Numero Uno Clothing Ltd.

In the case of Bengaluru based-Arvind Lifestyle Brands, 70% of the new fabric is light. Even the heavy cotton jackets are being replaced with some gentler fibres. “There is a higher width of light warm clothes, rather than a wider selection of heavy winter wear,” said Alok Dubey, chief executive officer-lifestyle brands division at Arvind Lifestyle Brands Limited. The company operates five apparel brands—USPA, Ed Hardy, Flying Machine, True Blue and The Children’s Place.

While a lot of this has to do with the weather, the business also has to contend with other changes.

Info Edge tends to invest in 3-4 companies each year


The gains aren’t all paper gains either. In Zomato’s previous funding round, Info Edge made Rs 330 crore ($45 million) by selling a 6% stake. It’s done something similar with Policybazaar too, progressively cashing out some of its gains by selling shares to newer investors, while seeing the value of unsold shares continue to balloon.

“The thinking [behind these investments] was very simple. We had cash on our books and we felt that there are many opportunities out there; many good entrepreneurs trying to do stuff, a lot of which can’t be done internally. Our hands are full with four business units. We thought we can create value for our shareholders by investing in quality companies”, says Bikhchandani.

Success In The Investment

But to (mis)quote Benjamin Parker, with great investment successes come great valuation expectations. Many stock brokerages now value Info Edge as a VC firm, by valuing its standalone business and investments separately.

Motilal Oswal, for example, values Zomato’s contribution to Info Edge’s stock value at Rs 193 ($2.64) per share and Policybazaar’s at Rs 85 ($1.16). These two constitute the largest portion in its sum of the parts valuation of the company. Their contribution to Info Edge’s current valuation is estimated to be Rs 2,350 crore ($320 million) and Rs 1,040 crore ($142 million) respectively. That’s higher than the contribution from Info Edge’s own #2 and #3 group companies—99 Acres and Jeevansathi. (The former’s contribution to Info Edge’s stock is valued at Rs 131 per share ($1.79), while the latter’s contribution is valued at just Rs 25 ($0.34)).

Put differently, Info Edge’s startup investments are now the (unicorn) tails wagging the dog.

Even so, Bikhchandani isn’t really looking to create an Indian equivalent of GV. GV—formerly Google Ventures—is the venture capital arm of search giant Google’s parent company, Alphabet. It invests in early-stage tech businesses. Bikhchandani prefers to keep things in-house. This has led to Info Edge becoming only the second Indian tech company to make investment bets through an existing company (Travel company MakeMyTrip being the other).

Since it doesn’t invest through a VC fund, Info Edge is also free of a major restriction that hampers typical VCs—exit timelines. “VCs generally have timelines in place. They have to return money to LPs (Limited Partners) after 8-10 years. We have got permanent capital and there are no exit timelines. In Policybazaar, we first invested in 2008. 10 years later, we are still investing,” says a member from Info Edge’s investment team.

But not being a typical VC fund also has its drawbacks, and these drawbacks are becoming increasingly evident.

Changing times

To find its next Zomato or Policybazaar, Info Edge has a team of five people whose sole focus is scouting for potential businesses to invest in. The team is headed by founder Sanjeev Bikhchandani himself, with additional support provided by Info Edge’s legal and finance teams. Each month, the team meets with 150-200 startups, according to Info Edge.

150-200 startup meetings in a month is a significant number for most VC firms, much less a listed internet business that does this as a sort of side gig. The number also doesn’t square with the actual investments that Info Edge finally makes—roughly four a year. Thus, to a casual observer, either Info Edge seems to be meeting too many startups or making too few investments.

While this setup has served Info Edge well thus far, it doesn’t stack up to most VC funds. VC funds typically have an investment team of 10-15 people who help with sourcing and making deals. The quality of this team determines the quality of investments the fund gets. With more hands on deck, it does seem that deal flow at any decent VC fund would be greater than Info Edge, and the firm would face severe competition, especially on important deals.

And then there’s the issue with Info Edge’s investment approach. The company is only interested in early-stage investment. “Our first cheques are usually in the range of $1-3 million. The strategy is to get into companies early with a small amount of money, and as the company delivers, keep doubling down”, says a member of Info Edge’s investment team.

Apart from its unicorns, the classifieds company has invested in a host of small start-ups ranging from real estate, education, B2B marketplace to agri-tech. In each of these companies, Info Edge, as an early investor, has a significant minority stake.

It’s an internet platform. It’s a holding company. It’s a VC fund. It’s Info Edge!


It was a demo that led Sanjeev Bikhchandani, the founder of online classifieds giant Info Edge, to buy into the vision of Policybazaar. The year was 2008. At the time, insurance policy comparison in India was a fledgeling concept, and Yashish Dahiya, Policybazaar’s founder, was looking for someone to back his insurance comparison platform. At a meeting with the Info Edge founder, he made a bold claim. Dahiya, despite zero knowledge of Bikhchandani’s insurance purchases, told him that he was paying 60% too much for his car insurance. Sure enough, he proved this claim using his policy comparison platform. This piqued Bikhchandani’s interest, and shortly thereafter, Info Edge became the first company to invest in Policybazaar.

That bet—Rs 20 crore ($2.73 million) for 49% of Policybazaar’s parent company ETech Aces—has yielded tremendous value for Info Edge. Today, even after multiple venture funding rounds in Policybazaar have seen that stake reduce from 49% to 13.6%, Info Edge’s stake is valued at Rs 402 crore ($54.8 million). (To be sure, Info Edge invested another $50 million in the latest round.)

With Policybazaar entering the hallowed unicorn club (startups valued north of a billion dollars), Info Edge has found itself in a unique position. The company, India’s oldest listed consumer internet firm, suddenly had two unicorns in its investment kitty—food discovery platform Zomato being the other. Most venture capitalists would kill to have two early unicorn bets in their portfolio.

But Info Edge is not a VC firm.

The Investments

Nonetheless, with investments like these, it has found a unique way to create value for its shareholders. They’ve provided a huge boost to the company’s valuation, and it wouldn’t be wrong to call Info Edge one of the darlings of the stock market. In the last three months alone, its stock price has surged more than 14%, while it has seen a close to 46% jump over the past year. As of 26 October, its stock was trading at Rs 1,595 ($21.81).

Unlike VCs, who need to return most of their investment gains back to their own investors—Limited Partners (LPs)—Info Edge has no such compulsion. Because its bets are funded by cash generated by its own businesses. Prominent among them being its recruitment platform, Naukri.com, in addition to other platforms like 99Acres (real estate) and Jeevansathi (matrimonials).

But as Info Edge’s flagship vertical, Naukri’s leadership in the recruitment business is the engine that has powered the company’s investments. Cash on the company’s (Info Edge’s) books has gone up from Rs 478 crore ($65.2 million) in FY14 to Rs 1,606 crore ($219.8 million) in the first quarter of FY19, primarily driven by Naukri. Since FY14, Info Edge has clocked a 16% year-on-year (YoY) revenue growth, with its operating margin now standing at a healthy 33%.

Sure, the situation might seem rosy at first glance. But Info Edge is actually at a crossroads. Even as it remained rooted to its tried and tested practices, the ground has shifted beneath it. Info Edge’s own properties are coming under challenge. Naukri especially. As the HR landscape evolves, hirings are increasingly automated, companies are getting into data-driven recruitment, and candidates’ expectations of job platforms are increasing. And while it continues to be a market leader, Naukri hasn’t kept pace with progress.

The startup investment space, where once there existed enough opportunities for Info Edge to pick rough diamonds early on, is now crowded with cash-laden investors spraying and praying. Potential unicorns are not an endangered species, but unlike in 2008, they have many suitors to choose from.

So where does Info Edge go from here? Can it afford to continue its reliance on high returns from its investments? Or must it double down on its core businesses to remain the market’s darling?

Unicorns Wag The Dog

For Info Edge’s part, it might be tempting to stick to the status quo it has established. After all, it’s what led to Info Edge being the only non-venture fund investor in the country with two unicorns in its stable.

These unicorns are gifts that keep on giving. Take its investment in Zomato, for example. After Zomato’s latest funding round led by China’s Alipay, Info Edge has seen its stake come down from 30.9% to 27.68%. But at a $2 billion valuation for Zomato, this round provided Info Edge with a huge valuation boost.

A grand ambition


In India, Envirofit began operations in 2007 after it became Shell Foundation’s partner in Breathing Space. They got their stoves into retail shops in Indian villages. They didn’t sell. The cookstove, it turned out, is a “push” product.

Women didn’t understand why their chulhas needed replacing. Improved health is not an attractive sales proposition; if it were, no one would eat junk food. Women also did not know the Envirofit brand. And they did not control the household’s purse strings, so men, who didn’t care much about kitchen problems, had to be convinced, too.

In four months, Envirofit spent Rs 4 crore ($540,796) on TV and radio advertisements. Roadshows, billboards and demo agents were all used. The result? 20,000 units sold by end-2008, according to a Shell Foundation report.

Regulating The Money Flow

It was a bump, but the company could not burn money at this rate. It pivoted to selling to factories and cooperatives, who have ready consumers in their employees, and had greater success. Envirofit currently does not make claims about health benefits of their wood stoves, since studies are still ongoing, but the stoves improve “the cooking environment (cleaning time, cooking time, time spent gathering fuel) for the women using them,” said Jessica Alderman, communications director at Envirofit.

Still, Envirofit India sustained losses every year until 2017, according to Paper.vc records and the company.

Luckily, the company had a deep-pocketed mentor. Shell Foundation has invested $26 million in the company, according to Gary Almond, communications manager at the Foundation. The company has raised at least $49.2 million in investments, according to a 2018 Shell Foundation report. Shell has also helped Envirofit sell carbon credits and secure subsidies in the form of grants, prizes, and investors who do not expect market-rate returns (“patient capital”).

Envirofit is a strong investment candidate and has successfully attracted growth and impact oriented investors, said Alderman of Envirofit.

In 2012, Envirofit raised $3 million in debt financing from Maryland-based Calvert Social Investment Foundation Inc. It was underwritten by a seven-year $1.5 million financial guarantee by Shell Foundation and Barr Foundation. The guarantee was meant to “unlock debt to further mature the commercial model and build the creditworthiness of Envirofit,” said Almond of Shell Foundation.

The same year, Envirofit sold $2 million of carbon credits to the Swedish Energy Agency in a deal facilitated by the Shell Foundation, according to financial documents.

Envirofit isn’t Shell Foundation’s only beneficiary in the cookstove sector. In 2016, Shell offered a $2 million loan guarantee to the Calvert Foundation. Calvert, in turn, gave $2 million to Cardecho BV. Cardecho is a finance vehicle set up by BIX Capital, which is a collaboration by Shell Foundation, Cardano Development and Goodwill Advisory to fund cookstove ventures. Yes, Shell Foundation underwrote funding to its own initiative.

The loan guarantee allowed BIX Capital to raise capital from other investors like the International Finance Corporation, the Dutch Development Bank, and others, Almond of Shell Foundation said. Money from BIX has flowed into American advanced cookstove companies such as BioLite, The Paradigm Project and C-Quest Capital.

It’s like Shell Foundation moving its money into various pockets to make it appear that the cookstove sector has legs, and companies can raise debt and investments all on their own.

Shell Foundation doesn’t agree with this assessment. “Shell Foundation’s approach is to create a supportive ecosystem for access to energy by identifying barriers and market-based solutions for them,” said Almond. “As such, it works with multiple partners that address blockers in the broader clean cooking space and that help grow the sector.”

Making It Simple

So why not simply give away the money? Because the prevailing dogma in the cookstove space is that it’s possible to make money and do good at the same time. This preserves the expectation that investors will one day get their money back.

“We do expect to recoup the equity investment fully since Envirofit has successfully fundraised multiple times,” Almond of Shell Foundation said.

Some experts say American companies like Envirofit have benefited disproportionately from the philanthropic largesse. In fact, much of the seven funds created by GACC to support the sector has gone to US-originating companies.

Take, for instance, the GACC’s Working Capital Fund. Set up in 2015, it was to provide up to $500,000 of loans to credit-worthy companies. Only two cookstove companies were found credit-worthy—Envirofit and New York City-based startup BioLite. The fund shuttered in 2017. The fund manager had expected the cookstove market to grow rapidly—“a forecast that ultimately did not come true,” an internal analysis later found.

Air pollution caused by open cooking fires causes 3.8 million deaths every year


And yet, cookstove companies have held on. Despite meagre sales; despite long-term losses; despite a steady drumbeat of scientific studies showing their products don’t protect the poor from the worst effects of indoor air pollution.


Out of the frying pan

Since the 1950s, engineers have made a number of advanced biomass cookstoves. Indian women have rejected most of them.

That did not dissuade oil major Shell Group, which, in 2000, set up an independent UK-based philanthropic foundation to right wrongs related to energy and poverty. The Shell Foundation.

Two years after its inception, Shell Foundation launched project “Breathing Space”. It would spend $50 million to distribute 20 million advanced cookstoves by 2012. But it wouldn’t simply give away stoves. Instead, it would create a marketplace for businesses to sell to women.

In 2010, Shell Foundation, the US government and the UN Foundation—a philanthropy that supports UN activities— launched the Global Alliance for Clean Cookstoves (GACC) at the Clinton Global Initiative, inaugurated by the then Secretary of State Hillary Clinton. They wanted to raise $1 billion to distribute 100 million cookstoves by 2020. And just like Breathing Space, they would look for a market-oriented solution.

“They had this focus on small business development, like somehow indoor air pollution is going to be solved by guys selling stoves in village shops,” Smith of Berkeley said. “So, they worked a lot on developing the industry.”

GACC preferred improved cookstoves for their fuel efficiency—less wood gets burned compared to open fires. Additionally, there’s less black carbon, a component of soot that is a potent short-lived greenhouse gas. Companies could earn an alternate stream of revenue by selling carbon credits to industry.

GACC did not promote LPG stoves in the early days.

“Fossil-based fuels were frowned upon as they’re not great for the climate,” said Fiona Lambe, a research fellow at the Stockholm Environment Institute. “So they were left out of the picture, even though some studies came out showing that even if everybody using a traditional stove suddenly switched to an LPG stove, the global warming impact would be negligible.”

There were other problems with the initiative, Smith of Berkeley said. The alliance did not define what a clean cookstove is in the early days because, back then, no one knew.

The World Health Organisation only came up with indoor air pollution guidelines in 2014, and using that metric, most biomass stoves failed to protect health.

GACC did not respond to The Ken’s request for comment by the time of publishing.


Into the fire

As cookstove projects dragged on, the evidence against their benefits mounted.

In 2012, scientists published a study that tracked an improved cookstove project in Odisha for four years and found that use had declined over time. By the third year, women cooked less than two meals a week on the stove. Their lung health did not improve.

In 2016, scientists working in rural Malawi found that the cleanest improved cookstove did not cut pneumonia incidence in kids under five. They also broke down repeatedly. Other studies have come to similar conclusions. Some cookstove companies that The Ken spoke to said they no longer make claims about health benefits, given these results.

When Sailesh Rao, the founder of Climate Healers, a non-profit cookstove venture, went to the Mewar region of Rajasthan, he found that villagers were not using improved stoves donated by non-profits. The women said the flames were narrow, burning rotis in the middle and leaving the sides uncooked. They also broke down within six months.

When the United Nations gave away $50 advanced cookstoves—very clean, top-end ones—in its refugee camps globally, the refugees sold it to buy chicken and beer, said Fabio Parigi, executive director of Sustainable Grill, an Italian cookstove company.

Charity begins at home

By the time these studies hit headlines, foundations had already poured millions into the cookstove sector.

“There are a lot of people who have money at stake in this business,” Rao said. “All of them are going to lose out, that’s the problem they face. There are non-profits, who’ve [each] employed 10 to 15 people, working on this, there are also for-profit companies who are making [cookstoves].”

To understand the scale of the interventions, consider Envirofit. An American for-profit B-Corp social enterprise, it is the most successful cookstove company today and has benefited immensely from philanthropic largesse and impact investments.


Shell, UN foundations and USA spent millions on cookstoves. Where’d the money go?


Every winter, smog settles across North India, burning people’s eyes, making them cough, and increasing hospital visits. The pollution comes from vehicles, burning landfills, crop stubble fires, and other sources.

About 25% of these fumes are from indoor open cooking fires.

The World Health Organisation is hosting its first conference this week to figure out how to protect people from toxic air—including emissions from open cooking fires.

This is a story about global efforts to cut down indoor air pollution—which kills over 3.8 million people annually—and how things got a little twisted along the way.

Start Of The Journey

Dotted with chrysanthemum and rose farms, the tiny hamlet of Parvathapura on the outskirts of Bengaluru, is where we begin our journey, in the cheerful yellow house of M. Anjalidevi. Anjalidevi is the head of the local women’s self-help group, helping its members secure loans for entrepreneurial ventures.

Anjalidevi also facilitates the sale of products that’ll improve women’s lives. “We sell solar lights, gobar gas setups, and the Green stove,” she says. The stove is the reason for our visit, so Anjalidevi sends her son to fetch one from a neighbour’s house. It’s basically a metal cylinder that burns less wood and emits less smoke than the closest alternative, the traditional mud stove, or chulha.

Parvathapura’s women are low-to-middle-income, smack-dab in the key demographic of Greenway Appliances—the stove’s manufacturer. They can afford the Rs 60 ($0.81) weekly payments until the Rs 1,360 ($18) stove is paid off. In fact, they are wealthy enough to switch to a modern stove that burns liquefied petroleum gas (LPG).

So why buy a wood-burning stove? A few reasons. It’s portable and can be used outdoors. Also, Ragi mudde—a local delicacy—tastes better on firewood. It is an ancillary cooking device for them, much like the microwave is for city dwellers.

At the other end of the country, Julie Devi lives in an urban slum of migrants on the outskirts of Patna. She sits outside her dingy single-room house, a 5-month old infant, eyes ringed with kohl, at her breast. She points at her cookstove—a chulha. The awning above it is blackened with soot.

But that isn’t what we’re here to see. We’re here for her advanced cookstove. She points at a black cylinder, brand name “Envirofit”, donated by a local non-profit. The Rs 1,800-stove ($25) broke a year ago, she said. Perhaps she didn’t use it as it was meant to be used.

Greenway and Envirofit are two of hundreds of companies selling advanced stoves that burn wood, animal dung, agricultural byproducts and other biomass. The companies have been groomed by international philanthropic interests, from the Shell Foundation to the US government to Swedish furniture maker IKEA, who have spent hundreds of millions of dollars to solve a major environmental problem: indoor air pollution.

Globally, about 3 billion people cook on open fires or traditional stoves. More than a quarter of them are in India. The emissions have been linked to pneumonia, stroke, heart and respiratory disease and cancer. In India alone, an estimated one million lives are lost prematurely each year due to indoor air pollution.

Replacing the stoves with advanced biomass stoves, development organisations thought, would cut toxic emissions, reduce fuel use, and help mitigate climate change. Beginning in 2010, they wanted to distribute 100 million cookstoves by the end of the decade.

But studies have not borne this out.

The Research

“These cookstoves, they are still a lot better than the open fire—they are improved, but they are not close to what we consider important for health,” said Kirk Smith, a public health scientist with the University of California, Berkeley. “I just haven’t found a biomass-using cookstove that is clean enough to be termed a health intervention.”

There is a cleaner alternative available—LPG stoves, which are slowly but steadily expanding their reach across India. With the writing on the wall, some development organisations have recently pivoted toward an acceptance of LPG. Under India’s Pradhan Mantri Ujjwala Yojana (PMUY) government scheme, the poorest households get a free LPG connection but have to buy their gas stove, which can cost upwards of Rs 1000 ($13.50). With government subsidies, people can refill their cylinders for about Rs 500 ($6.75).

Nestaway isn’t afraid of Oyo


He smiles and waves us away.

“No, man. I am not really worried. You can’t really think too much about these things”

It’s a warm afternoon in Bengaluru. His office isn’t air-conditioned. Occasionally, people pop in to give him updates or to remind him about meetings. With a smile on his face, Nestaway CEO Amarendra Sahu remains unflappable.

If you were the incumbent market leader in the fragmented shared rental business in India, and a giant competitor with far more funds and a solid brand was planning to enter it, chances are you would be a little hassled. But not Sahu.

Keeping Calm

There are good reasons to remain cool. You may not have heard much about it, but Nestaway Technologies, a property management service company, is one that’s done something fairly special. It’s one of the few tech companies that has made significant inroads into the real-estate sector. Several tried and either failed or struggled, and finally merged with larger entities. Housing. Common Floor. Grabhouse. The rental business is a tough business. But Nestaway broke through. Through a combination of smart services, the right value proposition, and careful, targeted expansion, the company now sits at the top of the shared rentals business in India with 25,000 homes on its platform across eight cities, with a revenue of Rs 25 crore ($3.39 million) last year. Where many floundered, Nestaway succeeded.

Market sizing is more art than science, but the 2011 census states that nearly 31.56 million people rent homes in urban India. Most of them served by brokers and middle-men, fragmented all over.

That gives Nestaway a little less than 0.08% market share. And, until very recently, there was little competition from a monolithic player. It looks like Nestaway is one of those companies that has found itself in the rare position of being in the right place at the right time, with a huge potential upside ahead of them.

Others seemed to think so, too. Last year, investors pumped in Rs 329.45 crore ($44.9 million) into the company. The message seemed to be, ‘Go and get the rest’. Nestaway set out to do exactly that. Double down, execute, grow, and start taking more and more of the pie. No hurry. No tension.

That’s changing though.

For starters, Nestaway is taking time to break into other lucrative markets such as Delhi and Mumbai. Their expenses are going up, and profitability isn’t in sight. It probably won’t be for a while. There are reports that Nestaway’s investors are taking a hands-on approach. Then the big one. Seeing the scope of scale in the shared rentals space, Oyo, which raised nearly $1 billion from Softbank in September, is stepping up to the plate, with its investment into a vertical called Oyo Living. There is a large need for affordable housing in Indian cities and the shared living model is something other players are betting on as well. Could the entry of a well-capitalised company in this space upset Nestaway’s plans?

“I am really not too concerned,” insists Sahu.

He’s still smiling

Nestaway and its pot of golden porcelain
Sahu calls Nestaway the Kotak Mahindra Bank for property owners. He’s used it as a shorthand for a company which moved nimbly, focused on the right areas and kneecapped the larger, better-funded incumbents. The bank analogy doesn’t stop there.

“Imagine we are a bank,” he says. “You are a homeowner. You come deposit your house with me. ‘Please start renting, manage all the headache. Deposit the rent at the end of the month in my account.’” Right from finding the tenant, furnishing the home, if required, depositing the rent payments in the owner’s account; Nestaway does everything.

It then goes further. It adds services. Some of which are quite creative. This includes providing insurance to the house owner against damage. Or provide for arbitration services. Or against tenant squatting. Or other hassles. If there’s a problem, a Nestaway executive is just a call away.

This is what makes Nestaway an attractive option for house owners.

All these services have a very important effect – they bring down the security deposit that tenants ordinarily need to pay. Nestaway started its operations in Bengaluru, the city which still constitutes 50% of the homes on its platform, and where homeowners usually charge around 10 months of the monthly rent as security deposit.


T-Series and the splitting of YouTube rankings


Sometime this month, an almost five-year-old YouTube record will come crashing down. YouTuber Felix Kjellberg, popularly known as PewDiePie, will no longer be the king of YouTube. His vast legions of subscribers, no longer the video streaming platform’s largest subscriber base. The usurper to the throne is an unlikely one—Indian music label T-Series.

T-Series’ impending ascent to the top has sparked something of a mock feud, albeit mostly on Kjellberg’s part. In multiple video uploads, he’s taken potshots at T-Series, its content, and even the legitimacy of its subscribers. He even dropped a diss track. The battle for top spot has gotten so fierce that one YouTuber even bought out billboards across an entire US town telling people to subscribe to PewDiePie. There’s also a live stream of T-Series and PewDiePie’s subscriber counts to track the event in real time.

Being The Largest In The Market

The emergence of T-Series as YouTube’s single largest player is something that could scarcely have been predicted at the start of 2018. Back then, T-Series had a subscriber count of around 30 million; a far cry from the 68 million+ it boasts today. But, in hindsight, its rise seems like a no-brainer given India’s data revolution over the past few years.

The entry of Mukesh Ambani-led telecom company Reliance Jio in September 2016 sparked off a tariff war in the sector, sending data prices plummeting. In what has since been called the ‘Jio Effect’, the average price of mobile data in India has dropped from Rs 152 ($2) to Rs 10 ($0.14) since Jio’s entry, according to a report by the Institute of Competitiveness. On the back of this, says the report, Indian mobile data usage surged by up to five-fold, making India the highest user of mobile data in the world.

Unsurprisingly, as evidenced by T-Series’ rapid growth on YouTube, a large chunk of this data is being used on video streaming services. In an emailed response to The Ken, Gautam Anand, head of the Asia Pacific region for YouTube, says as much. According to him, there are 245 million unique users from India and daily active viewers are growing at 100% year-on-year (YoY).

With more users coming online, India has finally arrived on YouTube, with T-Series being merely the tip of the spear. Other music labels and intellectual property aggregators such as SaReGaMa, Times Music, and Shemaroo have also seen their view and subscriber counts grow as Indians look to sate their appetite for more Bollywood and regional content.

All of this makes for excellent optics, but there’s a catch. Even as YouTube video consumption explodes, these companies are not making nearly enough advertising money from the platform.

Ad revenue from YouTube is entirely dependent on Google’s AdSense, the company’s monetisation programme for various forms of content. And with AdSense, the cost per thousand impressions (CPMs)—a unit used for digital advertising—in India is abysmal. According to T-Series president Neeraj Kalyan, even for T-Series, soon to be the largest channel on YouTube, their CPMs are less than a dollar. As a result, reveals Kalyan, a million views amounts to little more than Rs 25,000 ($346).

To make matters worse, this revenue doesn’t go solely to the channels. Instead, YouTube and music labels also have to work with collecting agencies such as the Indian Performing Rights Society (IPRS) to distribute royalties from music streaming to composers, music directors, song authors and lyricists.

Location, Location, Location

To answer that question, let’s rewind to the PewDiePie and T-Series situation and compare the two. According to analytics website Social Blade, T-Series had close to 2.4 billion views this past month, while the PewDiePie channel clocked a little under 224 million views. In theory, T-Series should earn a little more than 10X the ad revenue of PewDiePie. However, in reality, this gap is likely to be much smaller, because CPMs—which determine ad revenue earnings—are dependent on where the views come from.

There are several estimates on the value of CPMs around the globe. However, they all concur on one thing—CPMs in India are markedly lower than in most more developed countries.

And on top of that, there’s a 45:55 split of the ad revenue. Sort of a platform fee. YouTube gets to keep 45% of the ad revenue, with the rest going to content creators. Given all of this, is YouTube really moving the digital revenue needle for Indian music labels?