Jan 16, 2007

Sanjeev Bikhchandani on Naukri's IPO

I've interacted with Sanjeev Bikhchandani over e-mail and through this blog earlier, so it was quite a pleasure to finally meet him in person on Sunday. Sanjeev was on a business trip to Hyderabad and mailed to ask me if we could meet. I jumped at the chance. There are very few CEOs I've met, so I turned up at the Green Park hotel at Ameerpet on Sunday.

I found Sanjeev at his laptop struggling with a Reliance wireless connection to get onto the net. The hotel had no wi-fi (update: An anonymous commentor says that Green Park does have WiFi) that day. I think hotels should offer free wi-fi as they offer air conditioning or electricity. "Absolutely." Sanjeev says "They'll make up for that by higher occupancy levels"

So what brings him to Hyderabad ?

"Our our front line executives are having their first training session, and I try being there for all trainings picnics, gatherings, parties that our employees have across India. We are more than a 1000 employee strong and I like to meet as many people as I possibly can"

The beginning

Sanjeev said that when he began his career at an FMCG company in 1989, he noticed how all his colleagues crowded around the jobs listing section of the monthly business magazine those days. That was the insight that people are always interested in a job, whether actively or just for knowledge. The other fact that struck him was the calls from headhunters that his colleagues and he used to get. He realised then the jobs advertised were just the tip of the iceberg, and that the jobs market was a very fragmented one.

"It struck me that if someone could aggregate the data if would be a great business. But it was 1990 and the internet was not around".

Sanjeev thinks the factors that made Naukri.com a success was that it filled a real need and also the fact that it was the first jobsite in India to focus on Indian jobs for resident Indians. "We got a lot of press coverage and buzz because of that" he said "From the first two years the press clippings fill two big box files" he added smiling "We didn't have to hire a PR agency" However it was not all smooth sailing. "I worked as a contributing editor at the careers supplement of The Pioneer newspaper as well as did work with IMS, the MBA coaching institute to earn money to keep the home going."
A major fact he shares for his venture succeeding is "we didn't impose too much of change on our customers.

We went to HR people and Recruiters and said 'You already hire people through the newspapers, here, you can hire people through the internet too. Just fill up this form and fax it to us. We'll do the rest" Then he added, "We hired a lot of people later in corporate sales to get more and more jobs listed on the site, and therefore resulted in more and more job seekers also filling up their resumes on our site." It seemed like a virtuous cycle. Naukri seemed to be on a roll. Then they got the VC funding.

And then the great dotcom meltdown happened.

Sanjeev says "I guess we were the second last dotcom to get funding before the meltdown, before Makemytrip.com. In a way, because of the meltdown we kept the VC money in a fixed deposit, otherwise we might have spent it in an unwise manner. Then 9-11 happened and dotcoms were still struggling. At that time an IPO seemed like a distant dream."

I asked him if his VCs had ever asked him to sell out to recover the money.

"No" he says categorically "the ICICI fund was to close in 2009, so we never thought of selling out. We were lucky on that front too"

The way to the IPO

At that time the turnover of Naukri.com was around Rs 36 lakhs and then everything went into a free fall. "Then we broke even in 2002-03 with a turnover of Rs 9 crores and about 50-60 lakh profit. Things started to turn in 2004 when the Chinese jobsite 51job.com went for an IPO and soon I-Banks started calling us after we closed our 2004-05 financial year. At that point of time we had a turnover of 45 crores and about 500 employees. So we went to Hong Kong to meet some prospective I-Banks for the IPO."

BSE or Nasdaq? "Most of the experts told us we should try to get listed on Nasdaq to get a higher valuation. But we always wanted to list in India first since we see ourselves primarily as a Indian company servicing the Indian market. However the decision was taken out of our hands thanks to a Government of India rule that any firm had to first list in India before it lists anywhere else"

Choosing the Investment Banker. "When it comes to choosing an I Bank for the IPO, indeed, any kind of professional services the basis of choice is the comfort level we feel with the people who will work with us. That's because most of them are equally qualified at an institutional level. So finally we decided on ICICI Securities and Citibank".

The initial plan was to file for an listing in February 2006 and then go for the IPO in April '06. "But we understimated the preparation that would be required. In our case the preparation took 11-12 months."

So what was the biggest learning? "The biggest thing is to have a strong management team in place as effectively the CEO and CFO are out of the day to day operations for a long period of time. Thankfully we have Hitesh Oberoi our COO and a strong senior person to Ambarish, our CFO also assisting him on the IPO, so we could concentrate on the IPO with our full focus"

"We filed for end of May after our March audit, but the markets went choppy and we defered our plans so we ended up doing three audits before the IPO.while preparing for the IPO we were also simultaenously getting in Kleiner Perkins and Sherpalo Ventures - with whom we had signed a term sheet in Feb 2006. So we were preparing for the IPO, getting in two investors, navigating SEBI, BSE, NSE, doing pre-marketing meetings, getting our internal processes in order, doing three accounting audits in six months, dealing with three firms of lawyers and two investment baking firms all at the same time while Hitesh was de facto head of the company and was minding the shop. The 12 months before the IPO were exhausting and chaotic"

So what was the biggest learning for him personally?

"I learnt to sleep on flights" he smiles, "It was crazy, the roadshows, I mean. We started on 8h October. Our first stop was London with 36 hours, then to Boston for 24 hours, then New York for 40 hours again, then we moved to San Francisco for another 40 hours. Then we flew to Hong Kong for 12 hours, onto Singapore for 36 hours and finally reached Delhi for a days rest for Diwali. Then it was time to do the rounds of Indian road shows at Mumbai, Ahmedabad, Chennai and back to Delhi. Fortunately - we were joined by Hitesh for the Hong Kong, Singapore and India road shows - and that took some of the load off me since he was able to speak instead of me in many meetings."

And what exactly is a roadshow?

"Well it's a one hour meeting with a prospective investor whom the I Banks invite. It's one on one and they want to hear the CEO speak. They also quiz the CFO on the numbers later. It's a time for them to judge the management, as eventually they are putting their money on that basis. The bankers don't speak at all except for the introductions. If we are in a city for 1 day we have to do around 8-10 such meetings a day. It's physically and mentally tough. You have to give the same speil every time. You can't deviate from it at all. And for each meeting you have to convey your passion and enthusiasm for your business. Hong Kong was specially tough. We flew on a 14 hour flight, checked into a hotel for 45 minutes to iron our clothes, shaved and showered and then checked out to go to the roadshows"

The IPO itself. "It opened in the end of October, and we said that we'd be happy if it was oversubscribed 20 times" Sanjeev adds "then one the first day it was oversubscribed more than 3 times and our bankers were very happy, and they estimated that we'd be around 30 times oversubscribed"

Eventually the IPO was oversubscribed more than 54 times. How did they celebrate?

"We were too tired to celebrate, but I guess they did somethings in the office" he smiles."Everything however, was a pleasant surprise, the level of oversubscription, the price of the stock."

So post-IPO how is it?

"We have an immense sense of responsibility. With your own money you are merely answerable to yourself. When you take VC money, then your responsibility changes. Public money is a different kettle of fish altogether."

Does it bog you down?

"No. It gives us more confidence to handle the downturns of the market. Of course, the compliances need to be in place, and we have beefed up the management team to handle that."

What does the future hold? Apart from Naukri.com they've moved into real estate with 99acres.com and matrimonials with Jeevansathi.com. What next?
Product and tech innovation is the way forward.

"We are into the business of making online handshakes happen" he says clenching his hands together "After the initial introduction on our sites, the relationship moves offline. We'll stick to that. So we'll never have a travel site or a online shopping store or any thing that needs a supply chain to support such businesses."

He adds "Pricing strategy for India is critical to succeed"

Does the appearance of an Indian Craigslist scare him? Or an Indian Indeed or Simply Hired?

"How will they make money? Advertising will never be enough to sustain them?" On vertical search,"We give a job feed to Rediff, Yahoo, Bixee and Google Base - all of which are vertical search engines. In fact anyone can take a job feed from us via RSS. However our traffic analysis tells us that vertical search engines are yet to take off in India or for that matter anywhere in the world"

And what does he think of the Indian blogosphere?
I read lots of blogs. I search every day for Naukri on Google Blog Search.

" If a blog post warrants a clarification I do that. I think it's a great way to find out what people are saying about your product. I was unaware of blogs and bloggers, and it was the IIPM-Rashmi Bansal-Gaurav Sabnis saga that made me sit up and ask- what is this thing?"

Overall Sanjeev comes across as a passionate entrepreneur who has successfully scaled his organization.

It was a pleasure to meet and interact with him. Thanks Sanjeev !