Business Today

Missionary zeal

After signing on half a million rickshawpullers, Irfan Alam's SammaaN moves to a for-profit model.

twitter-logo Taslima Khan        Print Edition: Feb 20, 2011

Irfan Alam doesn't like to be branded a social entrepreneur but his SammaaN Foundation is improving the lot of half a million rickshaw-pullers in the country. "I am often termed a social entrepreneur but actually I want to be seen running a professionally managed, profit-oriented enterprise," he says.

A SammaaN Swasthya medical camp
A SammaaN Swasthya medical camp
To understand Alam's point here one needs to go back to 2007 when it all began. Alam, an MBA from Pondicherry, devised an innovative plan that would not just help transform the lives of rickshaw-pullers in Patna but would also be profitable for his outfit. Then, two members of his small team, an IIT Kanpur alumnus and a professor at the Delhi School of Architecture, designed spacious and comfortable rickshaws, which were sold or given on rent to rickshawpullers.

These rickshaws peddled other services such as soft drinks, mineral water, newspapers, mobile recharge, courier collection and first aid to their customers, carried advertisements of local brands on the side, front and back panels, and offered pre-paid service as well.

What started as a small venture with a hundred rickshaw-pullers in Patna has now spread across 30 cities in Bihar, Uttar Pradesh, Madhya Pradesh and Jharkhand. Rickshawpullers enlisted with the foundation claim their standards of living have improved. "Earlier, I could hardly make Rs 150-200 per day. I joined SammaaN three years ago, and now earn twice as much. I can now conveniently pay the EMI for the rickshaw loan," says Rajiv Kumar, a Patnabased rickshaw-puller in his early 40s, who has enrolled his ten-yearold son in a private school. Besides, Alam points out, many of these rickshaw-pullers now live in one-room rented tenements instead of night shelters, have bank accounts, and accident and medical insurance.

Alam, on a SammaaN rickshaw
Alam, on a SammaaN rickshaw
"You will soon find them approaching banks for loans to finance television sets, refrigerators and other products," he adds. Encouraged by the response to his foundation's initiatives, Alam launched a for-profit company, SammaaN Ventures Ltd (SVL), in August 2010 to spearhead the projects. SVL will also serve as an alternative distribution channel for FMCG, pharma and housing finance companies, among others. These companies will now be able to sell their products to an entire community of rickshaw-pullers through SVL. The rickshaw-pullers, in return, will get products and services at a discounted rate. SVL will initially focus on Patna and gradually spread to other cities where SammaaN has a presence. "I haven't created this market, it already existed. Just as America existed even before Columbus discovered it," grins Alam.

Already, SVL has launched SammaaN Swasthya - a project to deliver quality health services at an affordable cost to its members. "We will work as aggregators of services from doctors, pharma companies and test labs, and sell to this community at less-than-market price," says Alam.

So how does it really work? A volunteer from Patna Science College identifies neighbourhoods in Patna that are inhabited by the rickshaw-pullers, and health camps are organised in these areas for them and their families. SammaaN charges Rs 10 to 20 per person as registration fee for health checkups at the camps. So far SammaaN Swasthya has organised 20 health camps for rickshaw-pullers and enrolled over 30 doctors, with the majority coming from private hospitals or being private practitioners. The average cost of organising these camps is easily recovered from the registration fee.

SammaaN rickshaws in Patna
SammaaN rickshaws in Patna
SammaaN Swasthya has so far confined its services only to Patna. It sources medicines for the health camps from doctors who are asked to give away their free samples and also from pharma companies like Astelead Life Sciences, Alchem, Sol Pharma. But knowing well that it cannot depend on the donations of medicine companies for long, SammaaN has plans in place to make it an attractive business proposition for the doctors and the pharma companies. When a doctor enlists with SammaaN Swasthya, he renders his services at a 20 per cent discount, but, in return, is compensated by the sheer number of patients.

At each health camp, the three or four doctors on duty get to see 30 to 40 patients each. Pharma companies, too, may find the proposition viable. They can sell their medicines to SammaaN at the same rates they give their distributors and also reap the benefits of volume. In fact, Alam says SVL gives pharma companies an opportunity to do away with intermediaries like medical representatives, thus saving costs. SVL can sell these medicines at less than the maximum retail price and make a small profit in the process.

Says Ashok Chaudhary, Astelead Pharma's Area Manager in Patna: "We look at it as a sales promotion strategy and increased consumption across a large base. SammaaN is just another dealer for us, yet increases our reach manifold. I believe the free samples we give to doctors should rather be given to SammaaN."

 The story so far …

  • Irfan Alam launches SammaaN Foundation to help poor rickshaw-pullers
  • Redesigns rickshaws with help from an IIT alumnus and a Delhi School of Architecture professor
  • Gets rickshaw-pullers to offer other services such as newspapers and mobile recharge
  • The foundation takes a small cut from the income of rickshaw-pullers as its profit
  • SammaaN now has operations in 30 cities across India Over 500,000 rickshawpullers now enlisted with it
… and the road ahead
  • Alam launches for-profi t company SammaaN Ventures to spearhead projects
  • It now offers cheap healthcare services and housing fi nance to rickshaw- pullers at a nominal fee
  • Alam hopes to spread operations to 50 more cities
  • SammaaN Ventures is planning to raise funds from VCs and high-net-worth individuals
  • Alam plans a similar venture for autorickshaw-drivers

Though SammaaN Swasthya is yet to make profits, Alam is optimistic. "We are self-sustainable without any outside help like grants," he says, adding: "We are operating on a low scale right now. But once we are able to replicate the model across 30 more cities (planned for 2011) with at least 10 health camps a day, we will make profits." SammaaN Swasthya hopes to turn profitable by the end of this financial year.

Low-cost housing is also on SVL's agenda. It is exploring tie-ups with local builders to develop houses priced at Rs 2 lakh for SammaaN members, having already identified land in places like Patna and Gaya. SammaaN will assist members in getting credit from banks and sell houses to the rickshaw-wallas for a nominal profit. SVL also proposes to help the banks in loan recoveries. Already, daily installments towards repayments of rickshaw loans are collected by SammaaN and deposited with the banks. A similar model can be worked out with the banks for repayment of housing loans.

How SammaaN ventures makes profits

Manufacturing rickshaws
Sells at a margin of 8 to 10 per cent

Advertisements on rickshaw panels
Takes a cut of 50 per cent

Value-added services
A 10 to 15 per cent profi t share

From banks
A nominal fee for the knowyour-customer process
Vineet Rai, Founder, Aavishkaar Venture Capital
Vineet Rai
Funding these projects until they become commercially viable remains a big challenge for Alam. Debt is costly and equity funding has also been hard to come by with venture capitalists looking the other way. Vineet Rai, Founder of Aavishkaar Venture Capital, says, "Before signing the cheque we like to check for a strong management in place and scalability of the business model. It is good if 500,000 rickshaw-pullers have registered with SammaaN Ventures but here we would do our due diligence."

Alam concedes that it is not a hugely profitable business model with quick returns. "I am looking at some high-net-worth individuals instead for equity funding," he says. Still, Alam is upbeat about the future and is getting ready to launch his new project for autorickshawdrivers.

SammaaN has about 3,000 autorickshaw-drivers in Pune, Mumbai and Chennai enrolled with it and plans to extend the model it has put in place for rickshaw-pullers. It certainly looks like it is going to be a long haul for Alam, but that should not deter this man on a mission.

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