Ebixcash | Robin Raina: Not growth for the sake of growth, we want profitable growth: EbixCash CEO
Can you talk about EbixCash?
Before EbixCash became what it is today, we had the brand Ebix in the US. I joined the heavily loss-making company in the US in 1999. The stock was trading at around 31 cents. The company had not made money in 23 years and since 1999 to now, I have a record of 22 years of sequential growth, quarter after quarter of profitability. So when I stepped into India, I had this simple dream. One, I am a very patriotic Indian. I wanted to do something which connected me with India. I also felt Mr Modi was talking about Make in India at that time and I felt I needed to play a role and then I started looking at what was happening in India in the financial sector.
It occurred to me that everybody was functioning in silos, that there were different functionalities being driven in the area of finance and insurance and I thought what if we can bring all these functionalities together? What if we can converge them and create an airport of sorts? The thing I like to always say is that you do not choose your airports, you choose your airline and airline is a product, airport is infrastructure. I am in the business of creating airports.
Now it takes time to create an airport. It does not happen overnight in three years. So how do I build this story up and how do I organically keep growing it up? I started thinking like a capital allocator or private equity and I said what if I can buy many of these licensed regulated businesses in finance and assimilate them together, centralise all the functionalities, the bank end stuff and ultimately create a cohesive EbixCash and that is what I did.
We ended up buying 26 companies, invested upwards of $750 million in India and centralise virtually everything at the core and created what is now called EbixCash — all the functionalities of finance, insurance, fintech, B2C, travel all put together have created a story which was profitable from day one and has continued to be profitable and has consistently kept growing.
Is profitability the obvious and perhaps the most important aspect for you? Unlike a lot of tech entrepreneurs who believe in growth and are judged by consumer acquisition, you believe in profitable growth, why?
That is absolutely true. If I had to choose between profitability and growth, I would choose profitability. I have always been like that. You do not make money just by imagining you are going to make money. You have to have a system. You have to have a process. You have to have discipline and you need to have it in the DNA of each and every employee in your company, especially your senior managers. So we came up with a simple mantra.
My mantra to my India senior management was if you are not doing 30% EBITDA in your division, then you are not really successful. Wr started focussing on this 30%. I did the same thing in the US in the early days and then grew it to 40% over a period of time and that mantra has stayed. I always say there is no shame in making money.
Sometimes people forget that business is as simple as the selling price being a lot more than the cost price and if we can do that and after that just create the system, the processes and discipline around it and that is what we did. Look growth is always required and we have done quite well in terms of our CAGR growth. At the same time if I had to choose and there was a problem on growth, still we would not subsidise consumers. A lot of people are subsidising consumers today in India. We refuse to do that. We do not want growth for the sake of growth. I want profitable growth.
There are those who are burning cash and are saying look this is necessary to build the business because this is customer acquisition. How come that thought never occurred to you?
I actually feel they are doing a heavy disservice to our younger entrepreneurs. When I am talking in front of younger entrepreneurs, I try to tell them that business is not about looking for instant fame. What has happened in recent times is that people have discovered instant fame, instant valuation and people forget that that is not going to stay for long.
Ultimately you need to show sustained value. If you cannot do that, you are going to fall flat on your face at some point. Cows do not fly. You cannot keep saying cows will fly one day and if they do not have wings, then they would not fly and are going to fall flat. So having said that, today I feel the younger entrepreneurs are in so much of a hurry at times! They think that since they have got private equity, they will get a big bank backing and can show growth. He thinks he can subsidise the consumer or can go into a business, lose money and grow and then finally valuation will come in and one day, will start making money.
How can they suddenly make money if they do not have a business model? If the consumer was coming only because they are selling below the cost price, what happens when prices are normal? Some of these players have tried it and their business has collapsed. I do not think that is real business. If you are in real business, you need to first know that you need to make money. I can understand some entrepreneurs who say that they may lose money for two years but they have a plan to make money in the third year. Talk about that plan. Let people understand it.
I do not see that sometimes. To me, who talk for years and just do not see any way of making money, are not great stories.
You are number one in whatever businesses you are in. Is that a conscious strategy that you want to be in a commanding position?
Look, we would like to be in a commanding position and it sometimes happens and sometimes it does not happen. There are areas in India where we are not in a commanding position. I will admit it openly. There is B2C travel in India, in consumer travel where we saw a phenomenon where competitors wanted to subsidise the consumer in travel and lose money.
But those are market share challenges. In terms of profitability, whether it is the travel business or the forex business, are you the most profitable company?
Clearly we are. Clearly we are.
That is more important…
Absolutely. We are absolutely focussed on profitability but we have actually done very well in the market share also. Most of the businesses that we have entered done very well.
You have filed for a DRHP. I know others who already have got clearance from SEBI but have decided to delay their IPO. You are not worried about market conditions?
I am a very pragmatic person. I am a big believer in one simple thing that profitability always works. And I have a consistent profitable story and to that extent, I thought that in the current time more than any other time, people need to see how Ebix Cash has differentiated itself and it is not a story that was prepared for an IPO. There is no secondary in this. It is a pure fresh offering, it is a primary. And it is a story of consistent profitability from day one. At whatever time period you want to pick, you are going to see consistent profitability. So we just felt that it is a story which differentiates itself and maybe we will have more takers just because of the diversity of our business and the profitability of our business, maybe this is a good time for people to actually look at that story.
Ebix Cash is a network company or it believes in creating network effect. It is not a product company, nor a B2B company or a B2C company. It believes in the magic of network effect?
That is absolutely correct. That is what I like to say about building airports. When you create networks, it becomes a catch-22 position and the networks feed into each other and that is what we like to do.
There is a DRHP which you have filed which means that we cannot talk about forward numbers but just to get an indication, 2020 was all about survival, 2021 was about revival and now it is about thriving. Have you reached the thriving part of the business cycle?
We are definitely in a growth cycle. There is always a phase of survival, then you get into the phase of consolidation and then you get into the phase of growth. We are past the first two phases, we are definitely into the phase of growth right now.
Can I say that going forward growth will be automatic because business will start normalising? It is not a forward guidance but that is how the nature of the cycle would move?
That is the nature of the business. I will give you a very simple example. Take forex business, we are sitting at 20 different airports, we are sitting at 12 ports, we are sitting in a majority of the five stars in the country and three of the top religious institutions in the country, the duty free shops and 1,000 plus corporates and so on.
As travel opens up, exchange of foreign currencies will happen automatically and we are there at all the right places– whether it is educational remittance going out, the tie-ups that we have and so on. So as Covid becomes a thing of the past, business has to automatically come to us; it is how we read it.
What is the next growth frontier? The traditional IT companies have not grown by acquiring businesses, they have grown organically. Would you see a scope for both inorganic and organic growth?
Absolutely. I actually feel that Indian companies have not done as much as buying companies abroad. I would like Ebix Cash to be one of the larger MNCs emanating out of India and spreading its wings across the world. Now what I want to do is to create an intellectual property. Indian companies have done very well at creating consulting businesses in the software arena. Very few companies have created intellectual property out of India that they are trans selling abroad.
What I mean is that nobody has created a Microsoft or an Oracle kind of a player out of India. We might have created large size companies in India but those are software consulting companies. My dream is to create IP out of India and take it across the world; enter the French market for example, and make a local acquisition first so that I have local French contacts with local banks, insurers and then bring in the Ebix Cash portfolio product and smuggle that in through that French relationship. It is a mix of organic and inorganic is how we look at it.
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