Connect the dots book by Rashmi Bansal
Book - connect the dots
King of pop.
It looks like a thermacol ball.
And feels like one too.
A product with no smell, no taste, no particular reason to be on your dinner plate.
Can you really make a Rs 50 crore business out of it?
Well, Satyajit Singh has done exactly that. And that too in the industrial wasteland of Bihar.
Satyajit is breathing new life into the makhana as well as the farmers who harvest it from the shallow ponds of north Bihar. He has organized the trade, networked the farmers, introduced new technologies - and it all started with a chance conversation on a flight.
A conversation that ultimately led him to shut down a pakka business as distributor for BPL, and take dirt path - into makhana country.
I sit in Satyajit’s office in Patna, surrounded by makhana.
Makhana posters, makhana polypacks, makhana snack food.
I see his machines with grade and separate 16 varieties of makhana
I savour some lightly roasted makhana ‘pop’ - it’s delicious!
And I think to myself, something might appear to be bland, or boring. But when you add to it the tadka of passion, of enthusiasm, of ‘karna hai at any cost’….
That project can be the most exciting thing in the world; that person is truly blessed.
Shakti Sudha industries, Patna
Satyajit Singh was born in Jamui but moved to Patna after completing class 10.
“. I studied MA (History) and I was the University topper. At that time there was a craze for joining IAS, so I too appeared for the examination.”
Satyajit cleared the ‘Mains’ twice but not the interview. So what was the next best option? For decided to get into business.
It was an unusual decision for the son of an advocate and public prosecutor. The family had land and property but Satyajit was the first to ‘go out’ and start a business.
“I took up an agency for BPL products in Bihar and quickly understood what is marketing, what is sales and distribution”.
The business was flourishing - by 2002, the agency was clocking an annual turnover of Rs 9 crores. Life was good, life was comfortable, but then a strange thing happened.
Satyajit was traveling from Delhi to Patna. The gentleman seated next to him on the flight was one Dr Janardhan.
Dr Janardhan was working with ICAR (Indian Council for Agricultural Research). He was in fact the director of the National Research Centre for ‘makhana’. A plant peculiar to north Bihar, cultivated in shallow ponds *.
Dr Janardhan remarked,”For the last 3 years I have been searching for an entrepreneur who will do something in the area of makhana”
Satyajit was intrigued.
He said, “What is this makhana crop all about- can you explain to me?”
Over the next three months, Satyajit traveled to villages in Darbhanga and Madhubani, and saw for himself how makhana was grown, and harvested.
“I saw how much pains farmers had to take in cultivation but how little they got in return.
The entire market was dominated by middlemen.”
Satyajit told Dr Janardhan, “You want someone to set up an industry? Or do social service??”
Because clearly, you could not set up plant and machinery and simply start processing raw material. Much would have to be done to make such a project commercially viable.
But the idea excited Satyajit.
“Overnight, I took a bold decision. I shut down my distribution business and started work on the makhana project.”
Bana banaya setup, good income, 10 to 6 routine - why leave it all to venture into the unknown, the uncharted? Because. Something inside you has been stirred and shaken.
You are being beckoned, to boldly go where no one has gone before!
That meant two years in the wilderness; getting a feel of the market and the supply chain in agriculture.
“I visited roamed the mandis across India, understanding how the business works. I also spent a lot of time in the villages where makhana is produced.”
Makhana - or foxnut - is grown in ponds. It is actually a fruit, similar to pomegranate. When ripe, this fruit bursts and its seeds are scattered on the base of the pond.
These black seeds are collected, roasted and then hammered open. The end product is spongy and white. A very labour intensive process, and mostly done by women.
“It’s a very difficult process. Jisne isey puraane zamaane mein ijaad kiya wo mastermind hoga,” he exclaims..
Now in any other state, Satyajit could simply have gone to the mandi and picked up as many tons of produce as he desired. And set up a processing plant.
But Bihar has no mandi system at all *. Satyajit quickly realised that his work would have to start at the very first point in the supply chain - the farmers.
"I decided we should approach the panchayats and ask them to identify the makahana farmers in their area.”
The idea was to train and network the farmers; improve their livelihood. You build a relationship with the farmers, you build the supply chain. Makes perfect sense, doesn’t it?
Bankers were not convinced.
“In 2004, firstly, there was no investment climate in Bihar. No industry, no support from government. No one had ever done a project in makhana before. So the question always came up ki bhai, how will you do it?”
It’s a question that brings out the best in an entrepreneur.
After a careful study of all project parameters, Satyajit’s heart and head were both saying: you are on to something big. Big enough to warrant a project cost of Rs 70 crores over 5 years.
And he started by putting in Rs 1.5 crores of his own money - surplus from his earlier business - to kickstart the project. He used the capital to set up a small R & D unit.
“For two years we only tested the product, sent it to CFTRI Mysore and did trial marketing all over India”.
It was in mid 2005 - in the midst of this trial phase - that Zee TV launched the much hyped ‘Business Baazigar’. The show promised a platform, as well as venture capital, to the best ideas from entrepreneurs across India.
Satyajit applied, was accepted and even made it to the top 10 finalists. But at that point, doubts set in.
He said, “I have put in my own money and one and a half years of my time into R & D for this project. I want to understand what exactly is venture capital.. how will you make my project happen?”
They said, “We will only help the top 3 finalists and then their projects will become our projects. You will work as a CEO.”
“The moment they said this maine ticket kata liya hai. Itold them, “You have only one option: please eliminate me”!”
In fact, Satyajit was in a hurry to get back home because finally, the state Industrial Development Corporation had allotted land for his project.
“Mr S Vijayaraghavan was the Industrial Development Commissioner then, is project ko aage badhane mein unka bahut bada haath hai.”
Licensing, documentation, dealing with local mafia - areas where any entreprenenur could use a bit of help. And more so in a state like Bihar.
“My Vijayraghavan is a very positive frame of mind person…His objective was that there should be some industry in Bihar. Because only when we who live in Bihar are successful will we attract outsiders to come and invest here!”
R & D done, land allotted, factory coming up - great. But the first and foremost task remained - procurement of makhana.
“The problem started with ‘resource mapping’. We could not trust the government statistics.”
The state agriculture department would show 200 hectares in a certain area under makhana cultivation; the ground reality would be 35 or 40 hectares. You simply had to go to the grassroots level and work from the bottom-up.
“First thing we did was approach the panchayats and ask them to identify for us the makhana farmers in their village.”
These farmers are ‘registered’, given photo ID cards and a bank account. This involves documentation, transportation, complications.
”In rural areas the internet is down most of the day, so bank operates only two hours,” adds Satyajit.
So why go through all this trouble?
The first reason: Banks do not provide working capital based on cash transactions.
The second and equally important: To empower marginal farmers, 80% of them angoothachhaap.
“I had read about Verghese Kurien and the white revolution he brought about. He gave his entire life to that cause… With makhana I saw an opportunity to so something like that. Something that would make a difference”.
In 2004 farmers were selling makhana for Rs 40/ kg to middlemen, with no guarantee of when they would actually get the cash in hand.
Today, the procurement price of makhana fixed by Shakti Sudha stands at Rs 130 /kg and as soon as the produce is weighed, the money is transferred to the farmer’s account.
“We have registered 7000 makhana farmers, so we touch the lives of 35-40,000 people directly.” says Satyajit. “But even those farmers who still sell to the middleman benefit from the benchmark price set by us”.
And how does Shakti Sudha decide on this price? It depends on the ‘cost of production’.
Let’s say there was a drought, or a flood last year - Satyajit will factor this in and offer Rs 15 more per kg.
“The cost can easily be absorbed by the end consumer, but for that farmer the extra money can make all the difference,” he says.
It helps, of course, that 90% of the world’s makhana production happens to be in north Bihar!
Another intriguing strategy - increasing the procurement price by Rs 5 every month. Starting from Rs 125 per kg in the month of September going up to Rs 170 by April, when the ‘season’ ends.
“We did this to motivate the farmer to keep up production, make more effort.”
So far so good, but not enough. Satyajit soon realized that farmers were reluctant to travel outside their village to sell their produce. So Shakti Sudha would have to set up local collection centres catering to 250-500 farmers.
Each centre would offer the facility of a raised platform and a common chulha. In addition, the panchayat would provide a common godown.
Every centre is manned by 4 employees of Shakti Sudha who are known as ‘makhana mitras’. Tasks are neatly divided; while one person looks after the training, procurement and opening of bank accounts, the other manages the computer, the accounting on the spot and dispatch of goods to Patna.
There is of course, a centre ‘in charge’.
“I am also a frequent visitor, in fact 70% of my time still goes in the supply chain management.”
Today Shakti Sudha has 17 centres, with plans to put up another 24 in the next 1 year. The cost of setting up each centre is Rs 10-12 lakhs and it is an investment banks refuse to fund.
Satyajit has therefore hit upon the idea of public-private partnership.
“Our biggest concern is how to reduce the cost of identifying and registering the farmers. We are working with agencies like World Bank and RBH in 7 blocks.”
Satyajit also wants the Ministry of Agriculture to share with him some of the funds allocated to ATMA (Agricultural Technology Management Agency)
“ATMA spends Rs 40 crores a year but is yet to create even 100 FIGs (Farmer Interest Groups) in Bihar. I said, “Give us the project on pilot basis for 5 blocks. I will put up 100 FIGs in each block!”
And it’s no empty boast.
“Jitney log baahar se aate hain - World Bank, IFC, ADB - all are sent to see the model of Shakti Sudha which is a success. Ki kaise humne contradictions ko negotiate karke develop kiya practical taur pe.”
And Satyajit enjoys sharing his experience, his knowledge, with anyone who wants to learn from him. To see how enterprise can bloom, even in an industrial desert.
“I am not from the makhana producing part of Bihar, nor from business community. Mera door door tak makhane se koi rishta nahin lekin phir bhi main is field main aaya”.
Aur apna raasta banaya.
Take the Rs 70 crore project outlay - Satyajit certainly did not have the 25% required by the bank as his ‘contribution’. But he found a working solution.
He said, “I will take funding from the marketing phase - gestation period is not required. So the project itself will be generating revenue from day 1 and taking care of my 25%”.
So for example in in year 1, Shakti Sudha took Rs 6 crores from the bank and also posted revenues of Rs 8 crores. The surplus * took care of the promoter contribution; and thus the cycle continues year on year.
In 2007-8, Shakti Sudha achieved a turnover of Rs 22 crores and the following year this figure shot up to Rs 50 crores.
“This year I believe we will do Rs 100 crores, but it all depends on procurement. I can sell as much makhana as I can get to the factory - that is hardly the problem!”
In season, at any given time, you won’t see more than 10 tons of makhana at the Shakti Sudha factory. Everyday the produce comes in, it is graded, processed and dispatched *.
If Satyajit’s first battle was the supply chain, his second was with the mandis. High quality standards and excellent packaging made Shakti Sudha a force to reckon with - in no time.
“90% of the makhana in India sells in boras or jute bags. We are the only ones who provide poly packagaing and in different sizes like 8 kgs, 10 kgs etc”
Another recent coup was an order for 1400 tons of makhana from the Vaishnodevi shrine board *. They had been searching for a supplier for the last 3 years - in vain.
Conquering the wholesale market might have been good enough for most, but not Satyajit. He could see the next big opportunity - making a commodity into a brand - by reaching out to the end consumer.
This means selling makhana under the Shakti Sudha name directly to consumers. And not just plain makhana, but a slew of value added products.
“When we studied makhana at CFTRI Mysore we found that the protein component and macronutrients are v high. This crop has medicinal value; definitely our ancestors who made it part of puja rituals were aware of this value.”
With health becoming so important to the urban consumers, here was a market waiting to be tapped. With help from the Indian Institute of Packaging in Mumbai and Flex industries in Noida, Shakti Sudha mastered the nuances of snack food packaging.
And after much experimentation in the ‘taste’ department, Shakti Sudha has produced a range of ‘ready to eat’ makhana products. This includes roasted snack food (‘makhana pop’), kheer and even an ‘atta mix’.
“Put 500 grams of our mix into 5 kgs of atta and you have a great source of protein. I have it everyday, myself!”
Shakti Sudha is targeting 100 towns across 15 states *. And here, the BPL experience is coming in very handy.
“I know that how to track my salesman, how to get the distributor to work for me, how to take advance payment… what should be the reporting format.”
As well as how to enter a new market, which newspapers to advertise, what advertisement will work on TV. As is evident from the simple but effective Shakti Sudha campaign. Created by Oberoi multimedia, but based on Satyajit’s idea.
“Our proposition is makhana - ‘natural healthy and tasty’. Saare desh ki mummiyan ise hi recommend kar rahi hain.. hamein kisi celebrity ki zaroorat nahin hai!”
The tagline is “makhana.. apna desh, apna khana”.
“Because it is somewhat associated with our religion and culture I have given it that slogan, that this is our ‘national product’.”
With a modest budget of Rs 5.5 crores, Shakti Sudha will also have to focus on trade promotions. Here Satyajit has a simple idea - with every packet of Shakti Sudha makhana, the kheer or snack food will be given free.
Despite all this, there is resistance.
“Retailers in urban market want to work on % margin whereas we work on per kg margin,” he explains.
In simple terms it means that if the cost per kg is Rs 180 (including procurement, handling, grading, wastage, packing, transport & tax), the company will add on another Rs 10 per kg as profit.
In the mandi system people buy makhana in bulk, repackage and sell it locally, at the price they choose. With Shakti Sudha selling directly, consumers get far better prices.
100 gms of Shakti Sudha makhana retails for Rs 30 while Big Bazaar retails the same for Rs 41 and Reliance for Rs 55. And Shakti Sudha is visibly superior.
“Reliance did ask us for 100 tons but they wanted 90 days credit. I refused.”
Since Shakti Sudha pays farmers upfront, the company operates only on cash and carry basis - no matter who the buyer.
It is clarity of vision and determination, which has brought Shakti Sudha thus far. And will take it many miles further.
“My objective is to work with small and marginal farmers,” says Satyajit. “Improving their lives helps me expand the market further.”
This could mean negotiating with the government to lease out ponds for 7 years, instead of just 11 months. Or bringing the benefits of numerous horticulture schemes which they are unaware of.
From next year Shakti Sudha will also train makhana farmers to grow herbal plants in the same ponds - during the ‘off season’.
And in what will be a major change, the company will start using a machine to actually ‘pop’ the makhanas. The machine is far more efficient than the manual process * but it will put 10-12,000 families out of a job.
However Satyajit has planned out their alternate livelihood.
“In north Bihar there is something called as ‘chornet’ - this is land which is 2-3 feet under water and not used by anyone. There is 15-17,000 hectare like that and we are asking the government to lease out four acre parcels to landless and affected farmers.”
Thus more makhana will actually be cultivated. And the raw seed will simply be sold to Shakti Sudha who will process it into makhana.
What might look like a tasteless white foodstuff to some, is a life’s work for Satyajit Singh.
“I was always looking for something which I could devote my life to. Ek aisa kaam hai jisme mein zindagi ke pachchees tees baras daal sakta hoon…”
Looking back, it was the right decision.
“I knew that this project would yield me nothing in the first two years but in time to come it will give me ‘everything’.It will give me the identity and prestige which I wanted through IAS. The chance to do something good for the people.”
In villages across Bihar, there is love and respect for Satyajit - which means the world to him. And there is recognition - from no less than the Chief Minister. Nitish Kumar inaugurated the Shakti Sudha factory in 2006 - making it the first ‘success story’ for the of Bihar state Industrial Promotion Board.
Satyajit is also Chairman of CII in the state, which means he ‘sells’ Bihar to potential investors at roadshows around the country. Where does he find the time?
“Time nikaalna padta hai.”
And there is never enough of it, is there? Certainly not for his wife Sudha and their two schoolgoing kids.
“I must thank my wife for her support, especially in those first two years. When the income flow stops and savings are getting diverted - even her FDs are getting broken - the family feels some tension…”
She did not waver, or interfere.
“Shakti is Ma Durga and Sudha is my wife’s name - that’s how I came up with the name ‘Shakti Sudha’.”
There is shakti within each of us, around us, enough for all of us to be like Satyajit.
To make the impossible possible; to power our dreams.
Advice to young entrepreneurs
I have one simple advice: There is no shortcut in life, go for details
If you understand what you are doing and plan it in detail, you will definitely be successful.
But these days I see most people don’t want to get into details.. they don’t want to work at micro level. They want shortcuts.
If you take the shortcut you cannot achieve a major goal or big vision.
When you start something new, initially resistance will be high
Like in our case, middlemen did not want us to go to villages and train farmers
But then we won over the resistors and made them our partners.
If you study Bihar society closely you will see that when someone does something new people first laught at him.
If you persist, they they will criticize you.
But when they see you are undeterred- and you are succeeding - aapke saath aakar khade ho jayenge.
So focus on your project, your mission - not what people will say.
Lead the way and others will follow!
* including Jharkhand
* also known as foxnut, or ‘eurayle ferox’.
* the APMC act was abolished by Laloo Prasad Yadav when he came to power in XXX
* By the first week of October there are 70 odd workers in two shifts
* since most of the surplus is reinvested, actual ‘profit’ is very modest. In 2008-9, profit eas Rs 1.5 crores on a turnover of Rs 50 crores.
* makhana plays an important part in most Hindu religious ceremonies.
* all of northern and western India; selected states in cities in rest of India. The company also exports some product to Pakistan & the Middle East
* when manually processed 30 seeds yield just 1-2 makhanas while the machine extracts makhana in 99% of the seeds
Managing the supply chain - or getting the crop from the farmer to the factory was the biggest challenge.
Do kaam side by side hoga nahin, is liye maine distribution line band kar di aur makhane project mein full time lag gaya
Agar Bihar mein Chankaya aur Chandragupta ki jodi hoti hai to main kehta hoon ki Dr Janardhan mere liye Chanakya hain. He is the one who motivated me to take up this project
I wanted to first understand the supply chain - where would the intervention be required and what would it cost? I could not jump in on faith alone - I did a thorough assessment.
Turnover is not the problem - problem is supply chain ko durust karna hai. If I can procure makhana worth Rs 100 crores I can sell it all…
World Bank has recently made us a partner in their Rural Livelihood project in Bihar. They accept that the private sector is doing the work that the government was supposed to do!
Today our model is an example. Anyone working in commodities is asked to come and first study our operations, copy it and then seek funding
Logistics is a major cost. If a truck can carry 18 tons of sugar, it will take only 3 tons of makhana - it is that bulky
With every plain makhana we are giving one processed product free. This makes it more attractive than locally packed pouches with no company name, bar code, ISO etc