Q&A: Debtosh Chatterjee, CEO of Chatterjee Cleaning Arts
Anik Basu February 1, 2012Debtosh Chatterjee, MD & CEO of Chatterjee Cleaning Arts, spoke to Anik Basu on how he started the business and its future plans.
Your website says you started business as a college student.
I started my business when I was just out of college. When I was in class 10 (I went to BD School in Salt Lake, I lived in Gouribari), I used to see the boys in my neighbourhood idling away their time…no job pressure, nothing. My father was with GIC, insurance job, we were a middle-class Bengali family. I told myself, 'I must earn Rs 1,000, enough to run a family.'
So how did you start?
I started many things, I cultured mushrooms, sold batteries, low-priced paper batteries, very low-end. Later I supplied sand, cement to contractors. We had a vacuum cleaner at home, it was lying idle. I read an article about how they rented vacuum cleaners abroad, so I went from house to house, I was in college then, this was '91-'92, I used to tell people, 'You can hire my vacuum cleaner for the whole day for Rs 50, or Rs 100 if you want me to operate it.' It actually clicked… many people didn't know how to operate a vacuum cleaner, so they hired me too. My father had seen some pest control people in his office, so he said, 'Why don't you start pest control?' So I added pest control (services). This was till about 1994, I was operating out of my bedroom. Slowly, people started asking, 'Why don't you clean my toilet, clean my fan, clean my walls…?' I used to put my hand right inside the toilet pans to clean them. Then people started looking at 'packages'…two-three jobs together, Rs 100 (fees) became Rs 500. I was earning Rs 20,000 a month by 1994… by now I had two-three labourers working for me, I had a team, a labour team.
Then came Manmohan (Manmohan Singh, then Finance Minister in the Narasimha Rao Cabinet and architect of India's open economy). Did you know India's first cellular phone was launched in Kolkata, 1994-95? It was Modi Telstra. When Telstra came, a big team came from Australia, they were very finicky, I walked up to their office and introduced myself. There I was, speaking English, saying "I'll clean your toilet." Their CEO liked me, I was retained. The CEO, I forget the name, showed me how he wanted the toilets cleaned. They were paying me Rs 20,000 a month. My earnings became Rs 50,000.
This was the first corporate contract?
Yes, Telstra was the first corporate client. But had I got my first commercial client earlier, in 1992-93, a restaurant, Honey Da Dhaba … I had slowly begun to shift to commercial clients, they were the future (for me), they are there for the whole year, residential work is one-time, there you have to sell the concept; with a commercial client, this problem is not there. I still have a few individual clients, but very few, HNIs mostly, there is Ness Wadia, my company cleans his house in Bombay (Mumbai). I had a few jewellery showrooms by then, the shops had these huge glass panes, they needed someone to clean the glass. They are jewellers, I earned their trust, I used to be present when my boys were there cleaning.
You studied business administration, right?
In 1995, I thought to myself, 'I need an MBA degree.' I had set up a business, but had no formal learning as such. So I joined IFIM (Institute of Finance and International Management) in Bangalore. My father began looking after the business. But by 1997, earnings had fallen from Rs 50,000 to Rs 5,000, the cost of business was Rs 8,000. I was in no mood for business, so I joined Bank of America. I had a PhD offer from Melbourne University but I refused. My salary was Rs 20,000. With incentives, it used to be around Rs 30,000. I was with Bank of America for three months, then I left.
Only three months? Why did you quit?
I quit because of an ego clash with my boss. I had already run a business, I wanted to do things in a certain way; he thought he knew better. I thought then, why not revive my business? So I quit. Most clients had left by then. My father couldn't give the time that was required. Modi Telstra had gone, others too.
I opened a small office in Gouribari. Then I got a very good break with TCG (Purnendu Chatterjee's The Chatterjee Group). They had an office in Sector V (Salt Lake's IT neighbourhood). It was a big contract; my revenues jumped to Rs 2-3 lakh. Then in mid-'98, they told me, 'We are opening an office in Bombay, can you help us (there), support us?' And my Bombay branch was opened, I sent a man from here to head it. He's still with me, he's a HoD now. After TCG, there were others… ICRA, Mainland China came in Bangalore…
By 1999-2000, the retail sector was opening up. The big break came from Pantaloons and Westside, the showrooms were side-by-side, these were big-volume orders…Rs 1.5 crore together. Retailing took me to places.
You were still operating from your one-room office?
I had shifted to these premises (in Salt Lake). Actually, I was more or less established by 2001, the company became private limited in 2004 (Chatterjee Cleaning Arts Pvt Ltd). In 2004, I also got the ISO certification. Lots of companies pay bribes to get ISO ratings. I went to the best, KPMG … they rated me (ISO 9001:2008).
In 2009, I faced another setback. The downturn happened towards the end of 2008, clients took the hit all over India, they started cutting expenses, FM companies were the first to go, our orders fell dramatically, one company lost (contracts for) 800 locations, I lost huge business. The retail sector's growth was arrested, my own growth fell from 40% (annually) to 10%. But one thing good came out of this, (my) competition died. Their fixed costs were very high, they couldn't take it.
But your employee strength is 6,500…isn't this a huge expense too?
It wasn't, because of these 6,500 people, only 70 are non-billable; that is, the work they do cannot be billed…HODs, senior managers, accountants, basically the (back) office people... The remaining are all billable, they bring revenue.
The competition, most have PE (private equity) investors. These guys want their revenue. In this business, gross margin is around 10%, net margin 3%. Maximum. If the investor takes their cut, what is left? I don't believe in top line, I'm only interested in bottom line. My only funding is a working capital loan of Rs 4.25 crore from Yes Bank. My debt-equity is negligible, below 1%, very little. From the beginning, I've been very strict about one thing, recovery period. My clients cannot keep payment period more than 45 days, or else I drop them. No matter how big.
Tell me about Mrinmoyee Supply Pvt Ltd.
After 2008 (meltdown), I said, 'I need other avenues.' So I set up Mrinmaoyee. Mrinmoyee imports cleaning materials. This was in 2010. It's named after my daughter. Earlier, I sourced materials, in huge amounts, from distributors in India, who in turn imported from China. Now I import directly from China. This way I cut out distributors. I also supply to my former distributors, I became kind of super-stockist. Chatterjee Cleaning Arts now buys from Mrinmoyee.
Actually I had started making foreign trips much earlier, in 2005, to study world markets. In China, I saw them making these cleaning materials in small houses, not factories, people's residences…someday I hope to manufacture in India as well. It doesn't have to be in Bengal. Manufacturing, yes, maybe someday I'll go into manufacturing. I want to be on top of the pyramid. This is why I am making foreign trips, I am trying to develop a world market… then I will have volumes that will justify investments. China has cost advantage because China has volumes.
Mrinmoyee isn't my only company (other than Chatterjee Cleaning)…I have gone into a partnership in Qatar. I needed a partnership because in Qatar, law says you need a local partner. This company is called Instashine. I hold 49%, my local partner has 51%. This company buys from Mrinmoyee, and sells in Qatar and the rest of the Gulf region under the "Mrinmoyee" brand. Gulf is like India, no manufacturing there. Instashine has very high margins, about 32%, very high. I want to sell in South East Asia, Europe… China has a problem in Europe. China is still on their (Europeans') blacklist.
I have just set up another company, about six months ago… Rishik Gomdel, it will sell my ideas, sell IPR. I have developed many processes in my line, it will sell these. Rishik will act as a consultancy, it can either supply trained labour, trained by us, or offer management assistance, it'll teach clients the work processes. Do you know, temples are asking for assistance, some big schools…they hire cleaning people, we assist them. Why shouldn't I make money from the processes, manuals I have developed? I am unlocking my value.
Your FY10 revenue was Rs 30 crore. What's it like now?
Well, this is December (2011), right? My (Chatterjee Cleaning's) billing has already crossed Rs 37 crore, so I think I may cross Rs 42-43 crore in 2011-12. Last year, it was Rs 37 crore, results were not that good. The market was down, basically because of the downturn in 2008. But I tell you, Mrinmoyee's profitability is 10 times that of Chatterjee.
What do you see as your major challenges and how will you face these?
My biggest challenge is the sluggish economy. I told you, after the (2008) downturn, I set up Mrinmoyee, entered the Gulf, I am trying to build an international client base. Then I set up Rishik Gomdel, it is looking for franchises. Then, just recently (November 2011), I launched six sector-specific 'brands'. Like one for malls, one for retail, then hotels etc etc…These are basically add-on services…you have the regular, vanilla services, then the add-ons. Then I've also come up with 'combo-services'…client can say, "I want this but not that"…I am offering a combination of a thousand skills…I will always be one step ahead of the competition.
I am also depending big on the retail sector. Fresh investment means the sector will expand. Premium category stores will come up. Retailing took me to places once. FDI will help me grow further. But now everything will depend on Parliament.