[Reader-list] Stories of Entrepreneurship

[prasad shetty]

Hello Everybody,
My second posting to the reader list including some of the cases of Entrepreneurship in the City of Mumbai. These are some of the raw data which interestingly are fairly close to Bollywood scripts. 


CASE 1: A SOAP RETAILER

This is a case of a soap manufacturer within the industrial city of Mumbai. This large migrant joint family of around sixteen members manufactured soap since late 1960s in their house in Mazgaon by acquiring raw materials from the wholesale market in Bhindi Bazaar. These soaps were sold to the industrial labour in the area. The family head acquired a small shop front (2 m X 0.5 m) from the adjoining restaurant in the early 1970s. The agreement with the restaurant owner was informal and a meagre rent was charged. The shop and the restaurant were located in a dense industrial housing area opposite a cotton textile mill. By the late 1980s the mill closed down. The labour got scattered. The restaurant shut and in its place came a bank. The family head retired and the soap manufacturing was taken over by the eldest son. The son soon realised that the family was growing and the sales of the soap were decreasing. By the nineties, a large number of branded, highly advertised soaps, which were at the same time cheap, had entered the market. The soap manufacturer was unable to advertise or compete with these new brands of soaps. The new consumers of soap had no image of his soap in their memory. 

The eldest son decided to shift from the manufacturing business to retailing business. He would buy branded soap from the wholesale market and sell them in his shop. This required lesser number of people. The remaining members of the family either became occupied with other jobs or remained jobless. The family was breaking. The elders had retired to their native place. The eldest son was the only real earning member. He was able to acquire a new shop adjacent to the old restaurant (now a bank). This was not through the profits, but through taking advantage of a distress sale of the shop. This new shop was earlier a tailor’s shop. Again with the advent of branded cheap clothes, the tailor lost his business. The immense loans and borrowings forced this tailor to commit suicide. The wife of the tailor preferred to sell the shop and return to her native place. Our soap manufacturer took advantage of this situation and bought the shop at a very cheap price. He was able to also maintain the old shop because the law of the municipality gives the occupier of the place a right to stay if he/she has been using the premises for more than twenty years. Hence, though the restaurant (now the bank landlord) owner tried her best to vacate the soap manufacturer through elaborate legal processes, it wasn’t possible. Today, the brother of our soap manufacturer who repairs electronic/mechanical household objects occupies this old shop. His elder brother sells soap in their nearby shop. 

A year ago the bank moved as the old restaurant premise was too small for the increasing banking activity. The restaurant owner tried to sell the premises, but the property price was too low for her expectations. The mill had closed and remains closed even today. The area has become run down with no large-scale business opportunities. On the other hand, the building condition had become very poor, as there was no investment on maintaining the building the landowner whose rents were fixed by the Rent Control Act in the 1940’s. The other tenants of the building along with our soap manufacturer and restaurant owner have jointly agreed with the landlord to demolish the building and develop a new high-rise in its place. The additional real estate made available on account of the new high-rise would compensate the redevelopment. But since the property prices are low, no developer is interested in investing. Our soap manufacturer has now realised that the new shopping malls and supermarkets are eating away his business as a soap retailer. He is not able to compete with them. He has decided to shift his occupation again. He has entered into an informal agreement with the restaurant owner to amalgamate the two premises (his shop and the restaurant) and rent the larger premises to another bank. 


CASE 2: CHIT FUND OPERATOR

The second case is that of a family headed by a worker employed in a tyre company. The family lives in the fringe of the city where the development control regulations of the city do not apply. Due to this, the area has seen extremely dense development (about 1.5 m space between two buildings that are four to seven stories high) with low infrastructure (the road condition is poor and the water supply is occasional) The area still harbours a huge population of labourers due to the proximity to work places in the city and cheap accommodation available in this area. The family consists of three members, a migrant father, his wife (the mother) and a daughter. The tyre company shut down in the beginning of the nineties. There was absolutely no saving in the family. The mother’s relatives helped the family to survive for a short period. There was a condition of indefiniteness regarding the restarting of the company. The labour believed that the company would start again. In such a condition of insecurity, the father would take up occasional informal jobs, as fresh jobs were not available because of his age. 

The family struggled to survive with a young daughter who was getting educated. The mother, being uneducated, found it difficult to procure work. The family started a chit fund. This is a kind of saving system where around twenty people contribute a small amount every month. This amount is then auctioned to the lowest bidder for that amount. The remaining amount would then be redistributed amongst the members. All members continue to pay for around twenty months. The person who has already been given the auctioned amount cannot bid again, but has to keep paying the amount. The last person gets the entire amount. But the advantage is that the organiser of the fund keeps the first amount in the first month for him/herself, as he/she is also one of the members. 

Hence if there are twenty persons and the fund is worth 20,000, then each person pays 1000 each. Then this 20,000 is auctioned and the lowest bidder gets the amount. Suppose the lowest bid is for 10,000, then the remaining 10,000 is redistributed amongst all the members. That is their profit. The bidder gets money when he needs it but has to pay a big price. This is the kind of chit fund that is very popular amongst the business communities in the western coast of south India. 

The family operated such a fund and would invest the first month’s amount with a private financier and acquire some profits as interest on this amount. The family came from a community of businessmen (restaurant owners) who required quick money without any collateral. Hence, there were lots of businessmen who became members of such a scheme. The scheme operated with informal networks and trust without a single written document. The businessmen could afford the high price of money, and in return the family benefited. Both the mother and the father were completely involved in this enterprise. The family was then able to invest in another house outside the city very soon. This house was rented for some time and the rents added to the family income. 

But the family went through a lot of hardships, especially when a member involved in the chit fund fled. At such times, the entire burden of that member would come on the fund organiser. There was another serious crisis. The niece of the father was getting married. And as a community custom, if the bride’s family is poor, then the relatives contribute for the marriage. Marriages in India are a very expensive deal. The father of our family decided to sell the newly bought house to contribute to the wedding of the niece. The daughter was growing up and university education required much more money. The mother then decided to run tuition classes for very young children. The house was converted into a coaching class with ten students. The mother and daughter now run tuition classes while the father is employed as a supervisor of an industrial canteen. The most recent venture that the family has entered into is selling cosmetics for a multinational company, Orion. One large cosmetic manufacturing multinational industry has come up with a scheme employing housewives as sales agents. The industry would sell the products to these housewives and the housewives would use their networks to resell these products. Some feeble advantages are floated by the industry to lure the housewives. The most recent worry of the family is their daughter’s marriage.


Case 3: TRANSPORTER

This is a case of a young lad of 26 years who owns a truck and works in the transportation business in the city of Mumbai. 

After completing his twelfth grade he joined a correspondence course in computer hardware at one of the computer institutes sprawling all over the suburbs in the 1990s. He worked alongside in a wholesaler’s agency selling electronic products and the easy money attracted him to early jobs rather than the completion of his education.
 
He then worked at the age of seventeen with Research International, an agency that conducted elite field operations for various agencies. The company shut down as the employer turned out to be fraud, so he joined the Indian Market Research Bureau for two years, which hired part timers and college students to conduct their field surveys.

He rose to the position of a Supervisor for Corporate Studies, and earned 30% of the project fee. However, with the advent of computers and international outsourcing into the city, interviewers sought employment in the ubiquitous call centres leading to a huge paucity of English speaking recruits required for the research team. 

While on one such project that involved 1000 interviewers of transporters, the idea of an inter-state transport business germinated. With a friend of four years from the same company, they decided to start a partnership business in intra-national transportation in March, 2002 – and finalised the venture in November, as it took six months to research the practices in the industry and organise finance.  His parents, pensioners in Central Bank of India and United India Insurance Company respectively, made the down payment of Rs. 2 lakhs and lent two more lakhs for the registration. With the truck costing Rs. 12 lakhs, Kotak Mahindra bank loaned the remaining money and one of his business friends signed as the guarantor. In 3 months his partner friend couldn’t repay the money, so he left.

Research for the venture took him to Goa and Karnataka, as the requirement of trucks was minimal in Mumbai – there were more trucks available than required. He met an agent in Jogeshwari through an ad in the newspaper and was introduced to a book that contained all the names of all the registered transporters in the country. He also learnt of some trucks that were required to transport 4500 tons of coal required for Met Coke furnaces from Vasco to Hospet every day. For a new truck, it is a 15 hours journey, while it takes 3-4 days for a six-month-old truck for the entire to and fro journey including loading, refreshment breaks and unloading. Each round earns a profit of Rs. 10,000/-, while the number of rounds decreases, as the truck gets older. Also, the Met Coke pollution at the Vasco port led to numerous complaints and the overloading of trucks was restricted. The limit allowed is 16.5 T, while trucks were overloaded upto 30-35 T, which earned the real profit. A special unofficial pass is issued by the RTO employees at various tollbooths for varying rates as per location. (For e.g.  Rs. 100 / T / overload at the Goa-Karnataka border.)

While staying in Goa with three other transporters, one friend who had networks in Mumbai suggested Nagpur as a prospective site for business. With parents aging in Mumbai, he decided to come back to Mumbai and work along the Nagpur – Mumbai route as the transport business would require him to be present in one of the two cargo destinations.

For two years now, he has been working as a sub-transporter on the Nagpur – Mumbai route transporting metal balls for coils. He earns Rs. 15,000 per round and manages 3 rounds per month. A sub transporter is not a registered transporter and supplies to the transporter who procures contracts through bidding for tenders. The transporter usually has lesser trucks than required for the contract and sublets the contract to such sub transporters and charges a commission of Rs. 500 / - per truck which becomes his main source of income. He networks through his cell phone and all his agreements are done by word of mouth and no paperwork at all. 

A typical work day would be the day the truck halts in Mumbai (Vikhroli, as parking is easy and his transporter is based there) and would involve him enquiring about events with his driver whom he has hired at Rs. 3500 / month (average market rate – Rs. 2000 / month) and cleaner at Rs. 150 / day (average market rate – Rs.100 / day) for maintenance and cleaning of truck, checking of tyres for next round, etc. 

He feels that he’s not been able to succeed in this business for he does not have enough cash rolling. He’s currently looking for a personal loan of Rs. 8 lakhs and has not received any response from any bank. Banks usually give loans for purchase of trucks but not personal loans – transporters are blacklisted in their diaries. He plans to sell his truck if no loan materialises in two months. If he manages to get the loan, then as diesel is his only major expenditure he will be able to start earning well and once his dues are cleared he will be able to roll money through purchase and sale of assets.

He surely thinks that the industry now is in a major low, for the price of diesel has increased to Rs. 18 per litre while the transportation rates haven’t moved above Rs. 650 per ton. Besides there are more trucks than their demand. He hopes one day to become a transporter with his own contracts. That would require him to be able to pay a deposit of Rs. 5, 00,000/- with the company and his direct earnings would be Rs. 950 / T for his own trucks and Rs. 300 / T from the sub transporters as commission.

He has begun paying income tax from this year on, so that he becomes eligible for the personal loan.


CASE 4: STATIONER

After passing Secondary School Certificate Examination in 1974 from Parel (an industrial district in Mumbai), he joined a workshop for tools as an apprentice at Rs. 50/- a month. However, the metal dust began to cause health problems so he switched to a clerical job on leave vacancy in a Navy office. He worked there for 4-5 months at Rs. 400 - 600/- (1976).

At that time he lived in a joint family of parents, with a father who worked as a clerk in Fort, and four brothers, so his salary was absorbed for household expenses. The family was a landlord of a chawl (industrial housing) in Parel, but due to the Rent Control Act, they received only Rs. 10/- as rent per room, so that didn’t help much with a high household expenditure. 

In the mid eighties early twenties, his father met with an accident in the bathroom and couldn’t go to work for some time. So his mother approached the managing director of his father’s company to hire him on the job. After much pleading he inherited his father’s job of a clerk. He began with filing work and moved on to typing and then accounts – He worked as an accounts clerk for six years. At that time, the Labour union of the company was dissatisfied with the wages, as they were getting paid lower than their counterparts in Gujarat where the company’s factory (for engineering spare parts, etc. supplied to Tata, Telco, etc.) was located. He joined the union and his intense involvement led to payment of worker’s dues (he got RS. 4000 – 5000/- for his 6 year service) and shutting down of office in Mumbai.

When on strike, he got a call from the Employment Exchange confirming his job at Trade Fair Authority of India. However, he fell sick and couldn’t pursue the job. While working as an accounts clerk he had begun along side a part time business in small items like shirt – pant pieces, small stationery. He would buy material from Mangaldas Market in Crawford street and sell it among neighbours, friends etc. He began to get familiar with the market procedures. Through a friend he acquired know-how about book binding and also started taking orders for rubber stamps, etc. 

He had learnt that every department in the BMC requires book binding regularly, so he started taking orders for small time stationery (the BMC usually gets its stationery by means of inviting tenders and signing contracts, but when in need of excess they are allowed purchase up to Rs. 500 / - per month).

A drafting-slider manufacturer, who was also his relative, learnt of his growing networks. So he approached him for sales and marketing of his sliders in Mumbai. As he got involved he learnt more about architect’s implements, and decided to fill a tender at the BMC for architect’s implements. He got the contract for some items and had to supply to BMC departments all over the city. Due to lack of rolling money and resources, he couldn’t manage and stopped.

However, he continued door-to-door sales of stationery in the BMC departments, architects’ offices, etc. The earnings were low, so he also had to look for a job – worked as a printing press manager in an industrial estate in Lower Parel itself. This job paid low, too. In 6 years, his salary rose from Rs. 900 to only Rs. 2400.

His part time business of supplying stationery and repairs of sliders continued. While visiting architects (on the slider manufacturer’s list) to supply sliders, he met an architect who was also the director of a school for architecture in Juhu. Pleased with the sliders supplied to his office, he appointed him to supply and service sliders for all the students in the school. While doing so, he got talking to a few students through whom he learnt that quick stationery was a huge requirement in the school. He contacted senior members in the school and the director immediately agreed to let him set shop within school. The deal was that he would provide subsidised stationery, and in return he would not pay any rent or other charges to the school. For the first month he took leave from his printing press job to make sure it was business enough and when sure, he left that job completely in 1998.

For the first three years, he collected material from Abdul Rehman Street and came to the school. He supplied stationery to students at discounted rates and also gave it on credit.  He had a little corner in one of the wings in the school building. Over time, he was allowed to use a bigger cubicle for his supplies needed more space. Now he has established networks with wholesale stationers across the city and for most of the items they send their own salesmen. International stationery companies like Staedtler, Maped, Edding, etc. also directly contact him and offer him stationery at wholesale rates. 

He has hired an assistant since two years – a young boy from his own residential building. The assistant goes to the market to pick up the material that is bought directly from the market. He also sits at the shop. He pays him Rs. 2000/-

By this time the Housing Board had approached them (1968) to demolish the old and build a new building in which they would be allotted 8 rooms as compensation. Since they were four brothers, each got two rooms of 160 and 180 sq. ft. each. Parents had expired by then. It was a non-cess building. Now he pays rent of Rs. 200/- per month.

This job earns him enough to lead a ‘basic’ life. Although he also supplies some stationery to architects’ offices occasionally, he’s also looking for better chances for business. His problem is Finance, which he has not been able to generate due to the credit system in the school, which has stalled most of his money. He shares a great rapport with all his suppliers, so he pays them as and when he gets paid. For a rainy day he has kept aside an outstanding sum of Rs. 30,000/- which he rolls in case of an emergency.

He doesn’t pay any taxes, as he hasn’t been authorised on paper as part of the deal. He also doesn’t have a license –and due to these reasons, he has not been able to get a loan from any bank. So as and when required he borrows from friends.

His is a family of four, with a housewife (married in 1991) and two children, both of whom go to a Marathi medium school in Lower Parel itself. On holidays, they go for movies or watch Marathi plays at Shivaji Mandir, which his favourite theatre. While doing business in 1985, his interest in theatre got him enrolled at the Hattangady workshop, and he also participated in many Marathi plays. Though that didn’t earn him anything he loved theatre and pursued it till he took the job at the printing press.


CASE 5: FOOD STALL OWNER

Originally from Varanasi, this man came to Mumbai in 1985 in search of livelihood. He applied for a job at a real estate consultancy firm in Worli, but was denied a job for not knowing English. So he bought a ‘Learn English in 30 days’ got help from some friends too, but couldn’t manage. He also learnt typing but because his English wasn’t good enough, it didn’t come of any use. Then he worked as a delivery boy for a courier company in Tardeo for about two years where he earned Rs. 300/- a month. Dissatisfied with the remuneration, he sought another job with a restaurant owner through a friend where he began to earn Rs. 500/- per month. He also worked part time with a chemist - Mamta Medicals in Naigaon, Dadar, for Rs. 300/- a month and stayed in a room in B.D.D. chawls in Worli (the room was owned by his father who worked in the Piramal mills in Worli. The mills having shut down, he had let his friends stay there and gone back to his hometown where he resumed small scale farming of his small portion of land).

Addicted to movies, once he bunked work and went for a movie. When his employer found out, he sacked him. So he joined his aunt in Kurla who owned a provision store. She suggested that he should start a business, and that small time jobs would get him nowhere in Mumbai. Having seen a sandwich stall outside the medical store in Dadar, he decided to start a business in sandwiches. With the Rs. 720/- he had saved up from his previous job he began looking for a site and spent some time in finding out what he would need for a sandwich stall. He bought a box for Rs. 40/- and reworked on it to suit his needs for Rs. 250/-. Having been in the courier service he was familiar with various parts of the city, so looking for a site to set shop didn’t take too long. He installed his shop in Worli close to an engineering college, however about 300 metres away from an existing sandwich stall to make sure he didn’t hamper the stall owner’s business. He earned a good profit of Rs. 70/- the first day, and the response to his sandwiches kept growing, so he stayed on for a whole year. He bought his vegetables from Dadar at a wholesale price every morning and made chutney at home. When work load increased, he even hired a maid at Rs. 150/- to do the cleaning at home and grind the masala for the chutney. He didn’t have a license but paid a BMC hafta of Rs. 120/- per month, which took care of his existence.

Soon another sandwich stall got set up very close to his own and began to hamper his business. The other sandwich stall owner had support from a lot of people including the police. So he shifted to Malad east, where he resumed the sandwich business, but wasn’t able to earn as much as he was earning in Worli.

Meanwhile, his father sold the room in BDD chawl to a taxidriver for Rs. 1.62 lakhs and had lent a lakh to his friend, Gupta, who got stuck in a case during the 1992 riots. Gupta ran a chit fund society that included Hindus and Muslims. During the riots everyone dispersed, and a lot of people had to be repaid. 

Gupta, highly indebted to his father, brought him home and suggested that he should set up shop in Juhu. Gupta also knew a local goon and the Corporator, which ensured that he would have no trouble from any third party. 

He had heard once ‘thoda khaana par shehar mein hi rehna’ (Eat Less but Live in the City). So he decided to settle down in the city itself. He acquired a license for his stall but he thinks that the BMC hafta of Rs. 220/- and the police hafta of Rs. 440/- is what works as security for him. His business flourished and he moved out to his own place in Khajurwadi, Andheri (W) and got his family of his wife and three kids from his hometown too. All three of them go to a school in Vile Parle (W). He also got his brothers to the city for whom he invested and set up shop. Gradually, he hired more staff (7, now) from his hometown for his stall and built another house for Rs. 1, 70,000/- in the same vicinity as his own to accommodate them. He also feeds them and pays them an average salary of Rs. 1750/- p.m. and a Diwali bonus. He ensures that all their problems are taken care of including yearly visits to their hometown.

Now he only manages his stall and his staff does all the work. He has expanded his stall to juice, samosas, dosas and Chinese food too. He owns two freezers and now visits Dadar only once in 10 days for the chutney and vegetables remain unspoilt in the freezers. 

Once he met a doctor for his thyroid problem and through one his discussions he acquired a network with the hospital for tea and coffee. He also acquired the same with his bank – Allahabad bank. He now also supplies about 28 – 30 litres of tea and coffee daily. He has bought himself a first hand bike (Boxer) at Rs. 41,000/- without any loan and takes his family for outings on holidays. He has also been able to help a lot of his native family members with their expenses like his brother’s wedding (Rs. 1,24,000/-), investments, etc. He also sent Rs.1,65,000 for his father’s medical expenses.

He aspires to run a fast food centre one day. It will require an investment of Rs. 12 lakhs for which he isn’t ready yet. He hopes to rent a place first which would cost him about a lakh as deposit and RS. 4000 – 5000/- p.m. He doesn’t want to invest on the main road for he thinks eventually he will get evicted. He invests Rs. 10,000/- every month in Allahabad Bank as Reserve Deposit and pays Income Tax every year of Rs. 1, 15,000/- so that he becomes eligible for a loan. He has also opened an account in ICICI bank, so that he can withdraw money from anywhere in the country including from when he is in his hometown.



Prasad Shetty
Residence: 501, Marigold, Opposite Shakti Motors, New Link Road, Malad (W),
Mumbai 400 064 INDIA
Phone: +91-9820912744
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