In an exclusive interview with Pravin Prashant, Editor, Indian Chemical News, Arun Singhal, Founder & CEO, Source.One talks about revenue performance and forecast, network coverage, company's USP, technology differentiation, entering new territories, manpower addition, and international and domestic listing.
Source.One performance in FY 2022-23 and forecast for FY 2023-24?
Source.One started in 2018 and in less than five years, we are the single largest company in polyolefins. We are fast growing as far as engineering plastics and elastomers are concerned and we are well on our way to expand to other forms of chemicals, namely bulk chemicals. In 2023, we almost touched Rs. 2,000 crore of topline and we will continue to grow at 25-30% for the next 3-4 years.
How are you planning to achieve 25-30% growth?
First, the industry is pretty fast growing and we are catching up with the industry and are trying to keep ahead of the industry. Second, in the last few years there has been a lot of traction in plastics, polymers, and chemicals. India is a vast country and no matter what we do, there are always areas which have been left out or which have evolved from the last time we visited or the kind of work we do in those areas. We are the only pan-India player that has the largest network of imports in terms of both supplies and demands and still we have not covered 100% of the country.
What is your network coverage?
On the petrochemical side, we have largely explored a large majority of applications where petrochemicals are used and we have almost touched base a very high fraction of the processors that appear in the industry. In terms of geography, we have covered almost 96% of the pin codes. As and when the new processors came up in the industry we tried to cover them as fast as possible. Four years back, we were covering new processors within six months of their incorporation, two years back we were doing it within two months of their incorporation but the challenge is how do we incorporate the buyer on the day of their incorporation.
As far as applications are concerned, even plastics are witnessing new applications on a daily basis and we have put in place a mix of process and technology where we are able to explore these newer applications. We are probably one of the first people in the industry to reach them first and serve their raw material demand at a super-fast pace.
What's your USP and how do you plan to create differentiation vis a vis your competitors?
There are two USPs. First, is the network. Since day zero and even today, everybody in the company is involved in building networks whether it's a network of processors, stockists, transporters, and producers or different kinds of movement algorithms. Everybody is eventually involved in strengthening and building the network and it would be difficult for someone to replicate that network in the industry.
Second, the US $25 billion industry is undergoing disruption. We were lucky to be a part of this industry at a time when GST had started streamlining a lot of processes and a lot of trade in the industry. We were lucky to be in the industry before the pandemic struck and so we were born in the period between GST and the pandemic. We took our own free time of two years to build a base and since the pandemic, we have witnessed disruption from very close quarters. This experience teaches you a lot of stuff which is not taught in any schools or books. This kind of disruption holds you high for decades because you have seen companies changing behaviours, impossible things getting done, and thousands of people adopting something which they never thought of doing. So this whole experience will always stay with us and it will keep teaching us that everything is possible if your intent is right.
Is technology Source.One's key differentiator and how will this change in future?
We have a favourite line which we keep repeating within Source.One which is yesterday's technology is today's tradition and anybody working remotely with technology would relate to this because the whole technology itself undergoes disruption after every few years. In 2023, the concept of ChatGPT has caught up with everyone and everybody is coming up with their own version to solve their problem. People are building their products on the back of ChatGPT. This is just one example of how yesterday's technology can be today's tradition. The challenge for us remains the same and that’s how to keep innovating and how to keep coming up with new modes of technology which will help us catch up with the trade.
In 2018, we started with WhatsApp as a key partner in distribution and WhatsApp was a communications partner. In 2021, we started working on our own mobile app and in 2023, we have a good mass base having adopted mobile apps and it is India's only mobile app where one can do transactions of chemicals. This is not an app only for information or knowledge or only to put bids but it is a whole ecosystem where if you want to consume anything, whether you want information on the product or price or any analytics, this is the app for the whole industry. And that's something we've been building on for the last two years and in 2023 we are going to build further. Other features on this mobile app is to make it a complete ecosystem as well as use a lot of predictive analytics. On this mobile app today we are sitting on a heavy load of data and it is our responsibility to make good use of this data to service the trade in a manner which makes it better.
One can think of monetizing this data, one can think of increasing sales backed up by this data but our intent is to know how to use this data to serve the buyer better and that is a huge responsibility. It looks easier said than done and that cannot be done without technology.
From WhatsApp to mobile app to ChatGPT in due course of time. Is your team working on integrating ChatGPT also for financial transactions?
Yes, we have already integrated. We have already started solving a few problems based on ChatGPT. At the end of the day, ChatGPT is nothing but a large language model where we train the software to make decisions or to give answers based on the past. The kind of data we are sitting on has helped us give answers or solutions based on how it has happened in the past. ChatGPT is already a part of a lot of solutions to the problems that Source.One faces on a daily basis and we are going to make it bigger and better.
Source.One future rests on DE (Square) which is Delivery, Expansion, and Ecosystem. Can you explain this formula?
I will talk about the delivery, expansion, and ecosystem trio one by one and then establish a relationship between the three. On the delivery side, we will always focus on last mile deliveries. We feel that the single largest problem in the whole supply chain ecosystem is the last mile delivery because it is very micro spread across a country like India which does not have a pan-India smooth logistics system and you need to aggregate and correlate multiple stakeholders to make a smooth experience whether it is a shipping line or a container or even a last mile truck. All needs to be on time for the final processor to get the material on time. We're going to expand on this delivery Pan-India as we have already covered close to 73% of pin codes and we will continue to achieve 100% of pin codes.
On the expansion side, we started with polyolefins and over time, we expanded to engineering plastics and elastomers and this year we also expanded to bulk chemicals. The idea is to be all pervasive in the complete chemicals domain. We are going to enter agrichem and speciality chemicals as well.
On the ecosystem part, we do not want to get stuck to being a distribution company or a transaction company. We have already evolved ourselves to disseminate intelligence analytics based on data so that the whole trade can make better decisions rather than intuition based decisions. Within the ecosystem, we also started two years back when we started our packaging division. It is a line of business for us where we are going to aggregate the whole packaging supply chain into one single shop and provide a solution to the consumer of packaging and on the supply side use the ideal inventory or use the idle machinery to be engaged in providing that solution.
Source.One is looking to enter new territories such as bulk chemicals, specialty chemicals, and agrochemicals. How are you planning to move in these verticals?
I will take the last question first. The logistics framework policy that the government came out early this year has been a great boost but does it solve the whole problem? No, it has been a start and I am sure there will be more participation between the government of the day and private players to start solving many problems and because the problem we have at hand is huge and it cannot be just solved with one policy or one framework. It will be an ongoing dialogue between multiple stakeholders and we plan to participate a lot in that framework.
The second part, are we going to involve multiple partners? Yes, we do not plan to move mountains alone. We are already working with 13 different partners. Few of them work in core technology areas like AI, and a few of them are coming up with cutting edge technologies like ChatGPT. The face of Source.One might be a distribution company or a technology enabled distribution company but the backbone is these partners who have helped us solve some fundamental problems like creating a Pan-India logistics network, making sure that buyers are being replied irrespective of the time of the day; and most competitive stockists get business on a regular basis. These are the technology partners that have helped us achieve these mini goals.
What's your present manpower and how do you see it adding up in the next two years?
Today, we are about 150 people, divided between petrochemicals, bulk chemicals, and packaging business that we have with certain centralized teams like technology and logistics. We have done the bulk of the hiring in the last 12 months and almost hired almost 80 people in the last 12 months. So more than 50% of the company have less than one year in the company and that has been done with a very specific vision of what we want to achieve in the next 3-4 years. Our talent acquisition strategy or hiring strategies is largely from outside of the industry because we find it very difficult to make people unlearn and we find it very easy to make people learn. Coming to the next 2-3 years, there might be 20-30% growth in this whole talent pool every year. But largely, I think we have to build a very strong fundamental base of talent and from here it's only the top line that's going to grow.
Revenue and profit numbers by FY25? Are you looking at funds for future expansion?
We are going to continue growing at a 25-30% CAGR which makes it Rs. 3,000 crore by FY25. As far as funds infusion is concerned, fortunately we are in a business model where we are making reasonably good profits to sustain and fund our growth. We have partnerships with a lot of banks that have stood with us. We have been largely bootstrapped and will continue to remain bootstrapped for the period.
For fund infusion, we will look for strategic partners more than finance partners. Anybody who brings in knowledge of how chemicals are distributed, anybody who has stakes in the Indian chemical industry, and anybody who understands the pulse of Indian MSMEs are welcome. We are keen to join them but we are not looking for partners who only bring capital and do not bring intellect.
Three years down the line are you looking at international or domestic listings?
Value creation is more important for us than valuation. We are not in the game of valuation as we have seen how the valuation chasing sector has shaped up once a bad year comes in. Our trade is beautiful which keeps us humble and engaged in day-to-day activities so valuation, IPO, and any other forms of long term growth take a back seat. We have a very strong relationship with the debt partners and they continue to repose a lot of confidence in us and as long as that remains I don't think we could look at some mega event to justify what we are doing.