Vinati Saraf Mutreja's Journey: Resilience, Leadership, and making chemistry cool

For the latest episode of the Blume Podcast, Vinati Saraf Mutreja of Vinati Organics takes us through her journey of growth, innovation, and resilience, leading one of India’s most respected chemical manufacturing companies that she joined all the way back in 2006. In conversation with Blume Ventures’ Karthik Reddy, Vinati spoke about the importance backward-integration in a heavily commoditised business like chemicals, why equity is the important source of capital, and some hidden insights around India’s misunderstood manufacturing industry. Later on in the episode, Vinati speaks about the changing landscape of women leadership in the corporate world and why staying healthy is more important than being successful. 

Karthik: My guest today is Vinati Saraf Mutreja. She's the CEO and MD of a 2000 Crore plus specialty chemicals and pharmaceutical-ingredients company based out of Bombay. A lot of that wealth creation and the scale which Vinati has built has come after she joined the company in 2006. Of course, the name of the company and her are synonymous, so when I say Vinati's interchangeable.

Karthik: While you may not have used their products directly, if you've ever been unwell and taken medicines like Ibuprofen, to relieve body aches, her company Vinati Organics may have touched your life. Recently, Vinati was named Business Leader of the Year by Economic Times in the E. T. Prime Women Leadership Awards 2023, and I had the fortune of being on the jury.

Karthik: And that's how I was introduced to her. She's also been featured as a young global leader by the World Economic Forum and Forbes listed her as one of Asia's most powerful Business Women in 2020. She's also a practitioner of yoga. She's a board director at Make-A-Wish India and she's been known as someone who is a business leader and who has struck a balance between working hard on both the business and herself.

Vinthi, welcome to the Blume podcast and thanks for this time today. So Vinati, basically we'll try and talk to the audience on three different subjects. One is, of course, the story of your journey at Vinati Organics. What the business itself is? What are business challenges in manufacturing? It's not very often that we get a manufacturing leader on our podcast. And the third is the theme for this year's podcast has been the power of compounding. So how do you put a whole bunch of levers in place suddenly that magic starts happening after a decade or a decade and a half. And so people think that's easy. That's the toughest part. And for that, a decade has to pass, and jokes apart when some of the people who we considered inside of our consideration set came by, we said, if they've not spent 10 years building the business, they probably don't qualify for this year's podcast.

And clearly you, Vinati, the organics company story and your personal story are testament to this. So maybe we can roll the clock back a little. We'd love to hear the origins of the company. I know your father started it. What made you coming out of your education in the U. S. think of coming back to India?

Why do you join the business? It was a very different India, I came back also, by the way, in 2006 after seven years in the U. S. and people kept asking me, "Why are you back? Why don't you stay back in the U. S.." Yes, there was an export growth story always in India, but I don't know if you foresaw that, but it would be wonderful to go back and replay some of that history.

Vinati: Thanks, Karthik for having me. I think you rightly said that the seeds of tremendous success are laid much earlier on. And in that sense, I would say I've had it easier compared to a lot of entrepreneurs because the company was started in 1990 when I was six years old by my father, 

Karthik: which explains why he named it after you.

Vinati: I would never give that name ,if I left it to me. It would be a completely different.... different name, but anyways.. So he's the one who took a lot of risk. He had a good job at Aditya Birla before... when he left and he's the first generation entrepreneur. Now growing up going to the factory was very normal.

Vinati: My father doesn't have a chemistry background. So he would, as when I was a teenager, he would talk to me about chemistry, trying to get answers out of my chemistry textbook. He was trying to understand. How does the mass balance work? And that's how my interest in chemistry developed. So by the time I was 17-18 I knew I wanted to do engineering in chemistry and also have a business background because I was interested in his business. So I went abroad, I did a dual bachelor's in business and engineering. And even then my father would visit me and take me to meet customers around the east coast. 

Vinati: And so my exposure to my business started really in 2002-2003, while at college.

Vinati: After graduation, also I worked for a summer, you can call it an internship in the company and I saw a lot of potential then, but I did go back to New York to work just for seven months simply because I wanted to live in Manhattan and it was a consulting job, but I always knew I would come back and join this business because I saw I could make more of an impact, even in the position I was in, I could, make more of a difference.

Karthik: Very similar emotions when I came back. 

Vinati: So then I moved back in 2006, but we were still a very small company, even though we were a 15, 16 year old company. 

Karthik: That was the pace of growth back then. 

Vinati: Yeah. And if I remember, our revenues were 60 crores. If you take volumes, you know, because we look at volume growth, not just revenue growth, because revenue means price and inflation, et cetera.

Vinati: So it was 2000... I think we were doing about total as a company, we may be doing 8,000 tons or less. Today we do over one lakh tons. And in revenue growth, it is, like you said, from 60 crores to 2000 crores plus. Now valuation and stock price is a different story. That's a different story. 

Karthik: We come to that all together.

Vinati: Yeah. let's not touch upon that yet.  

Karthik: But so 12 times in tonnage and maybe 30 times in revenue. 

Vinati: Yeah. Approximately. That's inflation or price. I know a lot of our volumes is also ..we backward integrated. So there's more tonnage, but that doesn't get added in our sales volume as such.

Karthik: But it does improve your...

Vinati: It does improve our margins and it does help us overall.

Karthik: Fascinating. By the way I don't know about which audiences you're nervous around, but I can name one person who will be super interested in the podcast, which is my daughter to bring a personal touch. She's 15, loves STEM to the chagrin of her artist mother and wants to pursue chemistry.

Karthik: So there you go. So you might hopefully be a role model to at least one, one girl I know. The growth, when you said it kicked in at 60 crores, what do you think was happening? In the first 16 years other than the fact that it does take time. So why did it take 16 years to get to 60 crores and then what transforms... I mean you almost have seen two more subsets of journeys, something like 2006 to 14, and then the 10 years from there, and there's different types of compounding happening.

Karthik: So can you walk us through what you learned when you came in? 

Vinati: Yeah. So when I joined in 2006-7, we were mostly selling domestically. Our exports percentage was very less. Today, we do more than 60- 65% exports. And there are multiple reasons for it. I remember meeting a large U.S. MNC customer and they wouldn't.... again, these are niche products, I should specify, we make niche... We make specialty chemicals. 

Karthik: Primary applications  would be? 

Vinati: So you said ibuprofen. Now that's the product we started with in 1990. We make the ingredient for that, IBB.

Vinati: Back then that was 100% of our portfolio. Today it is 15%. Less than 20%. And then we diversified into ATBS that's used in oil and gas. It's used in water treatment. Then today we make products for flavors and fragrances... we make for phenol, for resins, plastics, various industries. But let me give you an example of the challenge ..the customers said they didn't want to rely on an Indian supplier because they were worried about the geopolitical situation in India.

Vinati: They said if there's a war with India & Pakistan, then my supply will get disrupted. Today, India is much more visible. 

Karthik: We're talking about the 90s...

Vinati: Yeah, this is in 2006-7. So bagging that first large contract ....and so these products also work on long term contracts. Because once you get a contract, you are in it for 10 years.

Vinati: These are formula based pricing. Your margins are almost secured. Dollar per kg. So bagging that first one or two contracts, that was really key to us and then when you get the first two, with these MNCs, then more follow on. 

Vinati: Exactly. You're referenceable. 

Karthik: And so when you joined, you think what the export... The number was very low? 

Vinati: Yes, absolutely. It was not even 10% of our sales. 

Karthik: So your dad was trying to break through. How did Vinati come and change that in some sense? 

Vinati: No, I think it was a joint effort. We would go together, meet customers.

Vinati: He of course had the knowledge, the experience. I was learning, I was more of a translator and I think that could have also been for these customers to see, okay, now there is a next generation in this business. We have this foreign educated, second generation coming and that might have... of course, we also had built the scale and we were offering the most competitive, price quality in a manufacturing business.

Vinati: You have to be the most competitive. Your quality has to be at par. And to give you an example... these products they were paying 50% higher than what we were offering. So once they got convinced of our organisation and our ability to deliver and to service them over a long term, that's how we got these contracts.

Karthik: You were saying something around how B2B businesses build quietly. And it's interesting because I think a lot of enterprises seek that stability. If I'm going to risk a lot of my business, whether it's productivity software or whether it's an input for my core ingredients, is that a long term sustainable business that I'm going and partnering with?

Karthik: So if you don't have 5-10 year visibility, why would I even bother? And which is why it's so difficult to break into enterprise, even in the stuff we fund, which is typically on the software side. But it's a lovely insight to pick up. So thank you for sharing that. As a corollary to that, I know you spoke about an aha moment where you've managed to finally break through to these enterprise customers.

Karthik: Today what percentage of your business is global exports, basically? 

Vinati: I would say at least 65%. Like ATBS, which is our largest product today, is 90-95% exports. IBB, which we were selling only in India today in India accounts for 35-40% of the sales, maybe less. 

Karthik: Understood. And there, I've always wondered in these commoditized businesses, which also is a challenge sometimes for... again, I'm trying to apply software, which we know well at Blume in commoditized businesses. How does.... how do you differentiate even within ... of course you're cheaper than let's say whatever the current source was. But it's not like India is not competitive. There are probably a few players in every one of the materials that you produce or manufacture, right? 

Vinati: It's been a unique process, like even the IBB technology was licensed from a foreign player. ATBS was a patented technology, it's been 20 years. So it was a different process. Then second... The way we have grown is integration, meaning synergies with our existing business. So what happened after ATBS, we backward integrated. We started making the raw material for ATBS and IBB, which had very small capacity in India.

Vinati: So we've not only used it for captive.. We are also selling it to other users who are importing and imports have stopped. Then from isobutylene, we started making other derivatives like the butyl phenols, which go into flavors and fragrances from those we've gone further ahead. And now we are making antioxidants that go into polymer additives in plastic.

Vinati: So it has been the entire value chain. 

Karthik: Move to adjacent strengths. 

Vinati: Exactly. Using the same process that we used to manufacture a particular product. What other products can we make with a similar chemistry. So adjacency, & synergies. This is what creates our moat and this is what makes you less commoditized.

Vinati: And not all products are commodities. For some of our products we are actually the only manufacturer in the world. It is like a cram's model. We're the only ones that make it. And for specific users for specific applications and that is where margins also may not be very commoditized 

Karthik: Understood and this is another interesting thing that we have seen more so in B2B businesses than in B2C businesses. Where it is important to leverage sort of the core product win to be able to start delivering more and more to the customers so that you build moats of that nature and you use your competencies to go wider and build a portfolio.

Karthik: Otherwise the market size might not look large and we'll come to that when we talk about the future of Vinati. I'm fascinated given where the journey has come so far. How big can this be in the future is what I would love to hear. And then you have two parts. Either you choose to get acquired because you don't have the competencies or capabilities or dreams to say, I'll do multi product & multi geography.. Which is what you're doing, right?

Even if it's with... people might consider ...boring specialty chemicals, but it's fascinating that you, and you have to do that to scale to 2, 000 crores, and we don't see enough founders having the ability to manoeuvre and they sell a product and eventually the product gets acquired. So B2B, in fact, in our business, by the way, so far about eight to 10 mid sized exits have happened and all of them are B2B software to global players because once they reach a certain scale, the question is, can you grow 20X from here?

Like how Vinati grew as a company and they're making the call saying, no, I think we're done. We're getting a nice price and we can get out and build something else. Of course, it's not easy to keep building new chemical plants. I know you can't do that. So I think maybe... a little bit now a shift... I know you touched upon the fact that you came in 06 and you started working alongside your dad. How has that apprenticeship been? Like, very common in tech to see intergenerational businesses. I think for the first time... of course, Ambanis announced it this week. So it's the flavor of the week. In Falguni's case, we've seen it too.. But it's very rare that you see this in technology businesses. Professionals run it. So you chose to come into the business. You love the subject. You came in & took over the reins. But how was that journey? Did you have to apprentice yourself through to becoming CEO? And can you give us a glimpse because not too many people are familiar with... that in the tech world, at least. What does that look like for 8 -10 years? 

Vinati: Most manufacturing businesses in India are multi generational. Especially if you look at chemicals. I'm just trying to think of chemical companies. Chemicals. Pharmaceuticals. our age... and the difference, I think, at least in my opinion, we view our businesses as a multi generational business. We don't view it as... If I get a good price or a good value, I'm going to sell it. And that, that's the inherent difference. I'm not saying what is right or wrong.

Vinati: Each person has their own view. And so the first few years, of course, I spent learning and anybody has to right? When you are 20,21,22, or 23... You are learning in every department, sales, purchase, factory, meeting customers, writing emails, checking accounts. And then over time you develop, right? You start understanding, you get the knack of business and you move... you realise that I can add more value in a more decision making role, rather than just executing all the time.

Vinati: And that is pretty much what happened in my case as well. I'll also address one more point. That chemicals is a non sexy industry and your daughter is in that. Recently, the last one year and that was totally the case when I joined, just to give you the market's perspective, nobody in the stock market was interested in chemical companies. Pharma was way more sexier, and we would get multiples of much- much lesser than a Pharma company simply because they were in Pharma, even if their product was more commoditized, even if you were a specialty, even if you were unique and you have margins.

Vinati: Things have changed now. The young generation, they are looking at chemicals... as like your daughter. In the last few months, so many people have asked me for an internship. They understand, realise chemicals are where the new innovation will be... Whether it is.. Green hydrogen, EVs, carbon footprinting and, environment friendly technologies.

Vinati: The heart of everything is chemistry. So suddenly more and more young generation people want to study chemistry and are not viewing this as very traditional. 

Karthik: No, that's a very interesting point. You talk about materials today.... and in fact.. The fact that environment has come back in such a strong way in the last three- four years. I think everyone was sleeping on it till the pandemic hit and it woke everyone up. And now it's like Prime-Time right? Do we have a shot at saving the planet from far more human catastrophes and right in the middle of that is chemistry more than even biology, right?

Karthik: Biology is post facto, chemistry is ahead of that. We have one, believe it or not, one star company in the space. So two IIT Kharagpur kids came straight out of college. I had a solvent that they tested in a lab and it was to more efficiently segregate COX and NOX from fuel gases. So it would be, it would attach itself.

I don't know if you have something like this, it would attach itself to the emissions from your manufacturing plants, separate out the two, and then essentially capture the carbon dioxide. The challenge is always what do you do with so much carbon dioxide? So back then in 2011, when no one honestly cared about saving the planet and they said.

"Yeah, we know the carbon tax is 30 dollar a ton, but this ... everything costs 60 a ton, so we're not really interested and so they got one or two customers in India, but they moved to the UK, got grants, went well ahead of the curve. And finally, now they're just getting raging demand. And it was sitting at, believe it or not, 20-30 million dollars of value.

Karthik: That too on paper, it's not like they have more than 7-8 million of revenue even today. And suddenly Chevron led like a 150 million dollar round into them...Like last year. And so that chemistry is being valued to your point. That's the only one we have in chemistry. We have a lot in manufacturing, but it's hard metal manufacturing and automation manufacturing.

So I think one curious thing we observed Is... coming to how you grew, actually, let me take a step back... how did Vinati plan as a company, its equity and debt layout? And what were your sources of capital as you grew? Cause it always stumps people that with such little baseline equity capital, very large companies can be built.

So that is not very well understood in the venture capital world. Whereas if you look at private equity or public markets, those are the companies that like to fund. Because a lot of the financial prudence is already built into the company. So little bit of that journey perhaps, how did you grow into an IPO and how did you or what sources of capital. Was it all bootstrapped before that?

Vinati: Yeah. So when my father started in 1990, before that he was a service guy. He was an employee. He needed, I believe, 20 crores to set up this factory to make IBB. So how did he go about raising money? He made a project report. That's how he got to know of this product because the state government was actually looking for a partner.

This product needed to be made in India because there was demand in India and it was being imported into the country. And he saw the price at which it was being imported. And ..

Karthik: this is the predecessor to PLIs. 

Vinati: Something like that. And he saw the price it could be made. He said, it's a good enough risk for me to leave my job and get into this.

Vinati: He got IFP, the French Institute, to be the licence provider. So he took a loan from ICICI. He IPO'd... back then that's how IPOs were done. They were done at the face value of the shares. 10 rupee share was IPO'd at 10 rupee share. 

Karthik: I tried to educate my kids on this. They don't.

Vinati: Because that is all he had.

Karthik: Oh, I wasn't aware of this. So you actually, it did IPO. 

Vinati: Yeah, so it's... we've been listed since the very beginning. Foundation of this company. Yeah. And that's how companies were started. Many companies. 

Karthik: In the 90s, what was your source of money? 

Vinati: What was your source of money? You had to go to the public and put out your arms. And then the state government had some stake and he had sweat equity. But with a buyback clause that over time he could buy back from the state government. Which he did, but also what he did, whatever dividends he would get, he kept buying more stake from the public markets.

Vinati: So he increased his stake over time from his sweat equity of whatever it was, 20% or maybe... I don't know. That doesn't matter... to it was 69 by the percent already by the time I joined, and today it's at 74, simply because SEBI doesn't allow us to go beyond 75 now. 

Karthik: Oh, fascinating. What a story. 

Vinati: It's so different from today's founders. 

Karthik: No, I was aware because I'm old enough to have seen the original IPOs. And the other day I was speaking to.... Havell’s bought one of our companies. So we were talking to the same generation, right? 70s in fact. So I was saying, when what era did you folks IPO, sir?

Karthik: And then he says 87 or something. And the market cap was like 20 crores or something like that, right? And something of that nature... 50 crores.. and today it is 35,000 crores right? So journeys were like that back then. An IPO meant that's the only source of risk capital. Yeah. Who else took risk capital? Unless you were born into a rich family.

Karthik: Or you had a community that could give you a family and friends round, you had to go and 20 crores is a lot of money 

Vinati: But to his credit.. To stick to that holding over time.. In the last 15 years, as the share price moved up, there's temptation to dilute some state to offloads, but he kept consolidating. That's the belief to have in your business and to also realise, which I keep saying, equity is actually the most expensive source of capital. People think that debt is more expensive, but your return on equity has to be higher. 

Karthik: So the business has been generating dividends from the get go, clearly.

And so it's never been a loss making enterprise. And when you come in, you're continuing to do these buybacks and you're growing. And so never had the need for an external capital post that I'm guessing. But since you brought up this debt issue, you've never had the need for debt. Is that internal?

Vinati: That's not true. Actually, we did have some debt on the books when I joined, I don't remember how much, and we are not opposed to debt. Like I said, I still think debt is cheaper than raising money through equity. We took debt from IFC in 2010, 11, which also I think was a very good move .It brought us in the spotlight having a company like IFC. And not going to a traditional bank because of their level of due diligence.. The reason they invested in our…

Karthik: Sometimes it's just self discipline…

Yeah, exactly. The governance and the…. it was actually FCC. It was convertible into equity, which they did. And that is because they believed in our process of clean and green chemistry. And so that gave us a lot of legit credibility in front of investors and then even customers 

Karthik: All of these are very value additive, right? You can get some Blume money, but that's not going to change things. But if you go public, or if you start getting DFI money or bank money, suddenly build a lot of credibility with all stakeholders.

Karthik: So at this point, the company is debt free. 

Vinati: It's been debt free for a long time now. 

Karthik: So fundamentally, this is a company that continues to grow methodically. gives dividends to all its shareholders and keeps growing at an incredible pace, as we can see. Maybe before I get to specifics of compounding and what lessons you have for entrepreneurs what about the future trajectory for Vinati?

So yes, you touched upon a lot of things around intergenerational, the fact that it has to be built long term. There's no intent to ever sell a business of this nature. Clearly not just specialty chemicals getting hot, but it is a very large global market. So is there in your vision that you've set out for the company, you're super young.

So I don't know how much longer you will be at the helm, 20 years, 30 years. How large do you think this gets? 

Vinati: All of us in our company and my father and I, we've had a very simple metric that we want to grow every year 15 to 20 percent. Now that's it. Now if you compound that over five years, maybe it doubles in four years, five years.

And growth is not linear. There will be years where you may grow 25, 30%, there will be flat years, there may be a negative, but you take it in your stride, accept it. And that's really the vision for the next 20 years. And then how do you get to that growth? I think you touched upon being limited.

And that's absolutely right. In a B2B business with specialty products, once you achieve 60% market share in a product, you can't grow beyond that. So you add other products, you diversify, we've also grown through adding capacity.. First adding capacities, becoming one of the top three in that particular product, and then diversify.

Karthik: Understood. And you've not gone the acquisitions path. 

Vinati: Not yet. So it's, so far it's been all organic growth. 

Karthik: Is that generally fear of the unknown or you're just happy with the growth that's up now? So don't need to really diversify that way. 

Vinati: No, it's really more about the acquisition that should make sense.

It should be a strategic acquisition where we can add value to the table. And it really has to fit in our portfolio of things. So far, I haven't come across such a product, such a company.

Karthik: If I may say so, like the journey seems almost picture perfect. Fairytale. In the sense that, ...and so now I want to hear the tough knocks, right?

It's been 17 years now. at the firm. What are the real tough moments? What were they? Why did they appear? What did they make you think about? Just curious, and what those could have been. Any one or two examples would be great. 

Vinati: No, so you know, you have to keep developing new products.

You work on a certain product. It takes 5 years to develop. You're working on the process. You're working on a unique process. In that sense, you can say it's a bit of R&D driven and there has been an instance where we've spent almost 10 years working on a product, which we thought would be our next step.

Vinati: And then finally, you realise that this is not giving me the results that I expected or my trials are unsuccessful and move on. COVID was a down year. This year, it's a down year for our industry as well as for our company, simply because the last two years was so good. 

Karthik: Yeah. So everyone's cut back on production.

Vinati: Yeah. But you have to look at it over five years or over 10 years. How have I grown over the last five years? And then. You make peace with it. 

Karthik: Understood. So you've always thought of, that approach also helps you to pace your growth and have enough cushion so that the setback of a year or two can't shake you up.

Can you grow consistently 15, 20%, right? Or 25%. And then lo and behold, suddenly in the fifth- sixth year, everything has doubled. And when... invariably that's the top line and then your bottom line is probably done even better if you put in the right ingredients for sustainable growth. So to us, we are trying to get enough of our tech ecosystem to think in that fashion and say, buddy, once you get to that point, it's far smoother to be able to grow because you're able to withstand shocks from, venture capital growth, venture capital dole outs, and the public markets will love you for it.

And we don't have enough tech, great tech companies in the public markets yet. We only have a handful. And if you can get that to be dozens and dozens, then we probably have the beginnings of something new, just as you, you're one of the great stories in specialty chemicals. We don't, I don't think we have enough in tech given where and how much we contribute as a tech ecosystem to the globe.

The U.S. is showing 30-40% dominance of tech stocks, and we just don't have that here. One, if you have a view, you can challenge me on that, but I would love to see more of a directional trend on that. Because tech scales on many levers much faster. When you look at a manufacturing business like yours, I know you've reconciled to the stable growth and not taking too many crazy risks.

Even that, when it comes to margins... let's talk about measures and margins, or stock prices, Not that relevant, perhaps... I don't think you think in that fashion. Employee turnover, stability you're building a long term business, but not everybody necessarily wants to be in a stable business, especially in a hot new economy like India.

And just culture. What do you think are the key ingredients to compounding, right? What has to be in place in a company for it to actually hit this steady state? 

Vinati: Few things. I think I've touched upon it briefly before. I think your product selection is key. I think what you call in your industry, the idea in our case is a product selection.

And what's the really unique proposition that you're adding? Second is your belief in your company. And that belief has to seep down to the very bottom. They have to believe in what you're making, why you're making, who you're supplying, why you have to serve. This is your customer. Another, you touched upon culture.

Vinati: We have actually very less turnover in our organisation. People who stick on, they really stick on with us and just give people a lot of accountability, responsibility, and ownership of what they do. Each person. Is an entrepreneur in his own regard. 

Karthik: That's fascinating. Yeah. Even for a company of this scale and.

Vinati: Given how our turnover has increased in volume, the number of employees' trend has not increased as much. This means you're taking on more risk, more ownership, and more responsibility per employee.

Karthik: Do you think that's the primary driver of what employees are looking for in the industry today? Is it far superior to any other experience in the industry? Is that why they're staying here, probably? And you find a steady base of... Given that it's a manufacturing sector, I don't see any challenges in the diversification of interests today. It has happened through our engineering careers, right? People, everyone wanted to go into computer science and not necessarily pursue... I know you mentioned there's a trend line shifting on that.

Vinati: But that's very recent. Very recent. Absolutely right. The most of the 15 years I've been, we've lost good talent to other engineering divisions and other, even the good chemical engineers will join IT companies.

Karthik: Does your father have a different view on some of these elements of culture and compounding, or was it his foundation that you built upon? And given that he's the chair now, how does that relationship work, to the extent that you can share it? I know it's a personal question.

Vinati: Absolutely. I think that at any point, when two people work together, we have agreed to disagree. Okay. It may not be public, but privately, we certainly do. And whoever presents a more persuasive, logical argument, in the end, we both give in and listen, hearing out the other person. So it's a very objective relationship in that regard. One key difference is that I still think he's more cost-sensitive and budget-sensitive.

And that's the culture he had to grow up with.

Karthik: He grew up with that. Understood. So in our case, what we've found is that manufacturing business models have been deemed relatively unattractive by VCs. This year, for the first time, you're seeing headlines.

And I'll tell you where they're coming from. They're coming from the fact that the world is branding India as the go-to strategy, while Vietnam is good, and the US will depend on Mexico, and there are other centers. The combination of the labor pool, the scale of the labor pool, the cost, and the need for a strategic alternative to China just makes it impossible to ignore.

If you look at someone like Taiwan and Foxconn being here, they have to consider it a political risk as well. So you're seeing Apple bursting at the seams. It's a phenomenal place, not just for chemicals, but for manufacturing as a whole. And while that is changing, I think the worries still exist. "Oh my gosh, it's a Capex business. Oh my God, it's like hardware or chemicals; margins are bound to be low."

These fears are there, again, it's a matter of perception, right? And for the first time, we're seeing an example. For one of our companies, for four years, nobody paid it any attention, and finally, boom, suddenly it's got 5 million, everything's in place.Customers are flying in from Israel and the U.S. to check it out. It's still a very small business. If you had told me two years ago, I would have said, "Oh my gosh, no one's looking at this. It might die a sorry death, right?" But the founder is resilient, he fought. And once it reached this point, it suddenly garnered a lot of attention.

Given your experiences in how markets, customers, or India have been perceived, do you have any tips you'd like to give to entrepreneurs today? And what do you think has changed in the last 15 to 20 years that you've witnessed in Indian manufacturing?

Vinati:  I think manufacturing in India makes a lot of sense. There is no doubt about the hype and the "China plus one" strategy. But we still have to realize that our manufacturing and CapEx are more cost-effective. When we set up a plant in India, the CapEx is much lower than for the same plant in Europe, the USA, or even China for that matter.

Then you come to Opex. Our Opex is also much lower. Our salary structures are lower even compared to China, and manufacturing seldom involves sustaining losses; most businesses become cash flow positive after the first two or three years. So, manufacturing in India makes sense.

Now, whether people are overvaluing this manual aspect, that's a different matter, but it is here to grow. The challenges certainly lie in our infrastructure. Issues like power availability, our general road infrastructure, and a lack of good ports, among others.

Karthik: Do you still think we're not up to the mark on that?

Vinati: Compared to China, we are still way behind.

Karthik: And how many manufacturing facilities do you have now?

Vinati: We have about three locations...

Karthik: Three sites...

Vinati: And we're building a fourth one.

Karthik: And all in proximity to Bombay?

Vinati: In Bombay, all in Maharashtra, near Bombay.

Karthik: Okay. What does equity value mean to a founder who has no intent to sell? It's very different when a young founder has not built a dividend path, as they seek validation of the journey. So, you have to sell some, and that's what's happening, actually. We're seeing ESOPs being sold.

We're also witnessing founder equity being sold, ensuring there is some cushion. Unlike your dad's journey before you came here, many of these people are in the minority today in terms of ownership. They don't necessarily control their fate as much as they might think. If push comes to shove, a founder can be asked to leave and replaced with an executive, and that's a board decision at this juncture.

So I know, I think it's important for them to understand how it feels when you're a majority owner and you don't need to validate it because you're profitable and you get enough dividends, so you don't have to touch your equity value. When the stock price is going up, say from 20,000 crores to the next step at 30,000, what does that mean for you?

Have you thought about what that wealth creation on paper means?

Vinati: Like you said, it's just validation. It's also a product of the liquidity in the market. In my journey, I've seen my company being given a multiple in the range from five times P to 70 times P, and the multiple can be anywhere.

Of course, there's a factor of growth and margins. But I think the bigger factors, at least in the public market, are external factors, like liquidity and the sector's flavor. It's cyclical; there will be very good times and not-so-good times. Personally, I would say if you're not interested in selling or raising money through equity, just take it with a pinch of salt. There's no need to pay too much attention to it. In your case, there's absolutely no need.

Karthik: Again, specifically, yes, I am touching upon a few gender-related issues.

One is that manufacturing has historically been very male-dominated, despite being intergenerational, as you mentioned. Of course, having your father's guidance definitely helps you navigate those challenges. But have you ever felt that from the customer industry?

Vinati: Actually, manufacturing is a leveller. In this business, it doesn't matter what your gender is or even your age; it's about your product, your price, your quality, and who's selling the product. So as a business, I think gender doesn't affect it. People's perceptions also change once they understand your expertise; these differences don't matter. However, historically there are fewer women in our industry. Women don't often choose traditional engineering fields like mechanical or chemical; they tend to opt for IT, where recruitment is easier.

Vinati: But our industry is changing. If you travel abroad, you'll find that most multinational chemical companies have more women, even in China. This trend is emerging here, especially in corporate roles like sales and purchase, where you'll see more women compared to the plant level.

Karthik: And do you have a community among yourselves as well? Is there a collective effort from women leaders to promote entrepreneurship within the community?

Vinati: I think I'm a part of about 10 different WhatsApp groups for women leaders because we want to connect, understand each other's challenges, and encourage each other.

Vinati: Absolutely. We want to support each other and share ideas.

Karthik: Absolutely. You're all supporting each other in that sense. I'm trying to see if I can borrow some good ideas.

Karthik: I spoke about this at the ET awards when they called me on stage and asked about the challenges in tech and the lack of women founders and success stories. The number of women in leadership roles is appallingly low, both in terms of employee base and leadership. I think it's improving due to the reasons you mentioned, with more women studying in tech. But at the leadership level, including our industry, we are guilty of being male-dominated. The first five partners in our company are all men.

Karthik: So we're working on grooming the next set and encouraging them to realise that it's their time to shine. I emphasised the importance of role models, and that's why I wanted someone like you on the podcast. I believe role models are essential.

Karthik: While you might have access at this point, there are hundreds of women who don't. When you discuss among yourselves, do you have ideas for young individuals, like a 23-year-old from an IIM or an IIT? I know you look around and see male dominance, but it's not as intimidating as it may seem. What are your ideas, and do you have any suggestions for us at Blume to make a difference?

Vinati: So I'll give you a specific example. For instance, I'm in YPO. They made me responsible for this South Asian region, how to recruit more women in YPO because women don't join. The reason is, even if they qualify, they have other family responsibilities to take care of, but they don't realize the network they're missing out on. So, encouraging them across the region.

Karthik: Thanks again, Vinati. This was fantastic. Before we wrap up, I'd love to take you through a few minutes of rapid-fire. This can be one word, one phrase, one sentence. I know we've been told that you love to exercise and keep fit. What is the exercise you dislike the most?

Vinati: I think that would be swimming. Just not my thing.

Karthik: In your journey, not just in your personal journey but what you've seen along with the leaders that you've built in the firm, what do you think is more important, talent or resilience?

Vinati: Absolutely, resilience. Talent without resilience is meaningless.

Karthik: And you think the best leaders that you've built and the best entrepreneurs have built up have that remarkable consistency. Yes. And fitness and health for you means what?

Vinati: I think it supersedes success. Success is meaningless without good health.

Karthik: Well said. It feels cliche, but as you keep growing older, I think founders ignore this. Who would you consider a role model other than, of course, your father, who started this?

Vinati: A woman founder who's from a similar industry, who I really admire is Kiran Majumdar Shah. She's built it on her own, and it's an industry I can somewhat relate to.

Karthik: And you've had a chance to meet her?

Vinati: Actually, never in person. I've never interacted with her in person. 

Karthik: She was one of our potential choices for this. So at some point, we should get you to meet her as well. I know you've obviously probably built enough talent diversity at the workplace, but one quality where women are inherently far better than us men.

Vinati: Again, this may sound cliche, but they have to be better at multitasking. It shouldn't be the case. These jobs need to be shared equally between men and women so that we don't have to be better at it.

Karthik: Thank you. Once again, it was a wonderful conversation despite the reservations. I think you're a shining example of what a woman leader can achieve today in India. We'd love for a lot of young women, aspirational leaders in tech to listen to these stories because I don't think entrepreneurial journeys are about one sector or the other. The challenges are about the same. As I mentioned, we do a community initiative called Lead Tribe, which was actually started by young women in the firm. It was an entrepreneurial initiative by them. They said we've talked about it, but again, no one moves. So the women said, can we take it upon ourselves and see whether they can get all we're asking of you is time. So I'm throwing an idea back at, maybe all the communities that you're a part of. So what we do is we put them through a vetting process, and we literally select 20-25 founders and do a little bit of a virtual now, hybrid, thanks to post-COVID. A hybrid boot camp where they can exchange stories, they can relate, empathise with each other, and also get everyone from Kunal Shah of CRED to me talking about fundraising and their journeys. These are all young women founders in tech, right? So it has to be relatable. At every strata, there are women leaders looking for a step up in mentorship. Hoping that Vinati Saraf becomes one of those.

Vinati: Karthik, incidentally, while not much involved in your VC tech world, my very first job, which was my very first internship, was with a tech VC firm called Insight Venture Partners. 

Karthik: So, you've seen our world a bit. 

Vinati: And back then, we were debating whether to invest in Facebook or not, back in 2004. They did not invest. 

Karthik: Fascinating. You've seen a glimpse of it. And I know you're an investor and you support some funds and you do some investing in tech. So thank you for all of that. We hope to see more of you in the tech world. Thank you once again.

Part of Blume Podcast

Welcome to The Blume Podcast, where we explore The Power of Compounding” through insightful conversations with industry leaders. In this season, we bring you four captivating episodes featuring Peyush Bansal, Raamdeo Agrawal, Nithin Kamath, and Dinesh Agarwal.

In the first episode, Peyush Bansal, founder and CEO of Lenskart, shares his journey of building a successful eyewear company and the importance of hiring the right people. Discover how his clarity of purpose and long-term thinking shaped Lenskart’s success.

Next, Raamdeo Agrawal, Chairman and Co-Founder of Motilal Oswal Financial Services, shares his investment philosophy and insights on India’s growth. Gain valuable advice on building a strong brand identity and the dangers of building a startup for the wrong reasons.

In the third episode, Nithin Kamath, founder and CEO of Zerodha, reveals the secrets behind building and scaling an online brokerage firm without external capital. Learn about the power of compounding and the importance of trust in the financial industry.

Lastly, Dinesh Agarwal takes us on a journey of starting a business in India during the internet boom. Discover his thoughts on business growth, profit margins, and the significance of small and medium-sized enterprises in creating employment.

Tune in to The Blume Podcast and unlock the power of compounding with these inspiring stories and valuable insights. Stay tuned for new episodes coming soon!