Satish Kumar agarwal - Kamdhenu Ispat, A Steel company

Kamdhenu Ispat Limited, established in the year 1994, is one of the largest manufacturer of international quality Steel Bars in India. Listed on BSE and NSE with annual turnover of Rs. 375 crores and a brand turnover of Rs. 3000 crores. The company’s product portfolio comprises reinforcement Steel Bar (TMT/HSD), structural steel (angle, beam, channel and flat), binding wire (Kamdhenu Wirebond), plywood, housing projects (Kamdhenu Homez) and UPVC windows and doors and the recently added product portfolio of Kamdhenu paints—Color Dreamz

How did Kamdhenu Ispat come about?

I am a mechanical engineer from IT-BHU. My father was a small businessman operating in the steel industry in the 1990s. We had a very small manufacturing unit in UP which catered to the needs of sugar industry manufacturers.

I always believed that the steel industry has a lot of potential for business. At that point in time, our country started seeing a lot of construction and development activities. While this was happening, there were not many companies which offered good quality products. The only good and big players in the industry were TATA Steel and SAIL. It is during this period that I thought of getting into this business of providing best quality products at reasonable pricing and thus Kamdhenu Ispat got floated in 1994.

Hence we began our journey in 1995 in Rajasthan, with a small unit and a production capacity of just 2000 metric tons per month. We started converting this commodity into a consumer driven product – as a branded product. We had started with a small capital of Rs 5 crore but with a dream of becoming a national player.

Due to our various consumer awareness campaign, our product was very well accepted by the consumer. So much so that I noticed that we were not able to meet the growing demand. I knew that we will not be able to cater to this surge in demand with our own manufacturing unit. It is then that I got this idea of outsourcing material from various other manufacturers – which I call as the franchisee model. In this model of business, our company works as a service provider for the steel industry.

We have three known concepts in this franchisee business model. We provide 100% technological support to our franchising units, wherein we provide the complete quality management systems, quality teams. We also provide 100% marketing support. And thirdly, we also allow them to use our brand name – Kamdhenu, in their products. Whatever proceeds come from this affiliation, the manufacturers get to keep 80%, while passing on 20% to our company as royalty. Now, from that one single unit, we now have 59 units in total — 57 in India and 2 in Nepal. The construction industry is growing at 12-15% annually. Kamdhenu aims to become one-stop solution provider in infrastructure and construction sector of India.

We focus mainly on construction sector having different products, but we are looking forward to make it into FMCG model starting with cow-milk, butter and then moving to mineral water also.

What are the benefits of the franchisee model?

For Kamdhenu, more franchisee units means increase in market share. It also helps in improvement of brand equity without investing in manufacturing activity. Since we have these units located in different parts of the country, we save on transportation costs and time. Inventory control for construction sector is also very important – and these units makes it easier to provide quick delivery of products to the consumers. Also in the future, services will be in major demand, and these units will surely come in handy. The sheer volume generated by all units put together gives us more bargaining power.

For our franchisee units, the most important benefit is in the form of expertise and experience that we provide for running their business efficiently. They also benefit by getting a ready platform in the niche market by affiliating with us. The franchisee units get to leverage the brand Kamdhenu for the manufactured products, which in turn gives them access to the already in place nationwide Kamdhenu marketing network. These are some of the many benefits that franchisee units reap by being affiliated to Kamdhenu.

How does Kamdhenu differentiate itself from other similar players in the industry?

Besides SAIL & TATA Steel, Kamdhenu is the only brand with a strong presence nationwide. While there are regional players across the country, who manufacture local brands; none of them can match the quality of products that come from the house of Kamdhenu. We always strive to provide best quality at a very reasonable price. So the quality of our products is as good as TATA Steel, and we keep our prices Rs 5000-6000 a ton than them.

We have all types of customers – starting from single home-builder, professional builders, corporate builders like DLF, GMR, Ansals, etc, as well as government authorities such as NHAI, Railways, Airports, etc.

What, in your opinion, can curb the cartels and illegal activities in this industry?

Yes, it is true that to some extent there are cartels of the big developers. There is no legal body to handle all this. The best method is education of consumers and making the process transparent. While engaging in building processes, consumers should take care of some legal formalities.

How does Kamdhenu Paints plan to gain market-share in a market already dominated by established players?

We are concentrating on eco-friendly lead-free paints and our products have longer life than the existing products available in the market today. The main focus is to provide best quality with most reasonable price. Even though we are facing resistance from a lot of segments, we are rapidly gaining good customer faith in our brand of paints – Color Dreamz.

What were the challenges faced when starting the company?

Back in 1994, I did not have much capital to start the business. Thankfully, our banker, State Bank of Bikaner supported me. Besides this, in the beginning of our business, we did a lot to promote our products in the market. These promotions worked for us, and brought about a limitation of us not being able to meet the production capacity required to meet the demand. Of course, this barrier was met and dealt with by introducing the franchisee business model. Just to give a better perspective – right now we have a production capacity of 15 lakh tonnes which requires more than 6000 crore rupees. We did not have that kind of money to invest, and this is where the franchisee model really helped us.

What, according to you, is the next big thing in the construction sector?

The construction sector in itself is a very big sector. House is a basic requirement of every person; yet only 20% population have their own homes. That said, low-cost housing is one area that can be focused on. Low cost housing is going to generate a huge demand in the future. Hence players with quality products at reasonable prices have a huge potential to tap in this sector.

Article was earlier published in one of the reputed Entrepreneurship magazine