Riding on an e-ticket

Whom the gods favour, they meet out of turn. At Mumbai’s Siddhivinayak temple, that is facilitated by the Aashirwad pre-paid card. The refillable cash card helps devotees pay for a VIP darshan, make a donation or buy offerings for the lord. Not only is the card transferable, you can gift one too. Talk about counting one’s blessings twice over. Launched in September 2013, the card was the result of an epiphany experienced by Ashok Nadkarni, Siddhivinayak temple’s IT advisor, when he routinely boarded a BEST bus. 

The a-ha moment triggered by the use of smart cards by regular commuters has since then found its way to the Shirdi Saibaba temple; Kolhapur’s Mahalakshmi temple, too, may follow in its footsteps. More than divine intervention, it is this gradual word-of-mouth adoption that has powered the growth of Trimax IT Infrastructure & Services, the firm behind the smart card initiative. Trimax stands for ‘try maximum’ and founder Surya Prakash Madrecha, a science graduate, has been sticking to his philosophy since 1991, when he arrived from Udaipur to what was then called Bombay.

At 23, many people don’t know what to do with their lives but coming from a family that had a kirana store, money lending and wholesale sugar business, Madrecha and his four brothers always wanted to do their own thing. Even when he joined Sanghvi Electronics for his first job paying ₹800 a month, he told his boss, Suresh Sanghvi, “I want to start a business. I don’t know what business and at what level, but I am joining you to learn and start something on my own.” Sanghvi Electronics was into OEM manufacturing. In the early ’90s, almost all computer parts, be it a motherboard, RAM or hard disk, were imported from Taiwan and assembled here. 

After two years, the technical partner left the company (Sanghvi was the financial partner). An exodus resulted and most people who were electronic or computer science engineers left for bigger companies or started their own. Impressed with Madrecha’s grit and diligence, Sanghvi let him run the company. Madrecha used to be in office at 8.30 am and leave at midnight. Over the next two years, Madrecha ran the company single-handedly. He recalls, “Our customers, such as Onward, Nelito etc., were system integrators like we are today. They used to supply to banking and enterprise customers and make more money than us. The lesson learnt was: If you don’t own the customer, then the margin will always be wafer-thin.” 

With his accumulated savings of ₹50,000, Madrecha told Sanghvi that he wanted to start out on his own. “Sanghvi gave me his Lamington Road office on rent for a ₹50,000 deposit. He also gave me my first two customers, Dharamsi Morarji Chemical and Arthur Andersen, and that is how I started. Today, whatever I have become, I still feel that experience was very important,” reminiscences Madrecha, who now doubles up as chairman and managing director of a ₹1,000-crore company that he started from zilch 18 years ago. Trimax started off as an assembler, before gradually morphing into a systems integration company providing data centre services. In its earlier avatar, it also dabbled as a medical transcription company. 

One good turn…

At the Maharashtra State Road Transport Corporation (MSRTC), Madrecha’s existing relationship as a hardware vendor turned out to be the binding glue. Trimax had done a cumulative business of ₹20 lakh and when Omnitech InfoSolutions, the agency already appointed by the MSRTC for a piece-meal ticketing solution, failed to deliver, Trimax stepped in after winning an open tender in 2009. 

It sourced a handheld ticketing device and designed and developed the software to connect MSRTC’s depots and offices. For hinterland depots, the handheld has a USB port through which data is downloaded and fed into the system. 

Trimax not only put in place an electronic ticketing system for MSRTC, but also developed an online reservation system for it. Madrecha says when they developed the reservation system, their expectation was that it was going to be used mostly by Mumbai and Pune residents. Reality turned out otherwise, “80% of the bookings continue to originate from areas such as Kolhapur, Solapur and Aurangabad for travel to Mumbai.”

All lined up

Most major state transport companies are now using ETIMs supplied by Trimax

The successful implementation at MSRTC soon resulted in more electronic ticket issuing machine (ETIM) projects. Other state-run transport companies, realising the benefits of improved data and better fleet management, started piling in. After MSRTC, Trimax implemented the system for BEST, Rajasthan and UP State Road Transport Corporations and the Bangalore Municipal Transport Corporation (BMTC). For the BMTC implementation currently underway, along with electronic ticketing, Trimax is developing a passenger information system that will keep commuters updated on bus timings and frequency. 

For BEST, the company also launched a smart card. About 1.8 million smart cards carrying a one-month to three-month commuter pass have been sold so far. Madrecha can’t suppress a laugh when recalling the initial public reaction to the announcement of the BEST pre-paid cards. “Since the pre-paid smart card embedded a photo, people thought it could be used as an identity card. Therefore, when the card was launched, there was a kilometre-long queue at almost all points of sale.”

A little bit of history is relevant here as the Trimax initiative was the second attempt by BEST to launch smart cards. The first attempt was the Go Mumbai card, which had its share of shortcomings. Om Prakash Gupta, managing director, BEST, says, “The Go Mumbai card had no verification system and one was not sure whether the commuter was the actual buyer. As BEST was losing revenue, we decided to revamp the system. Now, revenue leakage via reuse of tickets or commuter passes has been stopped as the current tickets come with these details.”

What also helped at BEST was that Gupta was familiar with the execution skills of Trimax, having dealt with it in his earlier capacity as managing director at MSRTC. It was during Gupta’s tenure that MSRTC decided to upgrade its ticketing system. He recalls, “When I was managing director at MSRTC, whenever I asked for route or revenue-related information, not only did the data come in very late, its legitimacy was also suspect.” Madrecha points out the drastic reduction that resulted after the ETIM project was up and running. “Earlier, it used to take them six months to reconcile how much money is lying where. Now, they know each depot’s collection on a daily basis. They also get route-wise data in terms of how many passengers travelled and where, what is working and where they are losing money.”

At MSRTC, the whole system was designed from scratch, while for BEST, there was a ready template that needed to be customised to the city. Hence, the rollout was much faster. Says Gupta, “What took us around 30 months at MSRTC was done here in 10 months. Having implemented the same at MSRTC, we knew where the time delays were.”

One of the technical problems that conductors encountered in the earlier days was the frequent jamming of the thermal paper roll on which the ticket was issued, which brings to mind the sight of conductors frequently banging their handhelds. It was later discovered that as the roll size shrunk, it used to shift within its chamber. Since the alignment used to shift, the paper used to jam, so guidance rollers were provided on both sides to keep the roll in place all the time.

Madrecha recalls that at MSRTC, it took nine to 12 months just to train the conductors and get them comfortable with the system. There was a lot of resistance towards learning something new and there was fear about being replaced by a machine. “We decided to not start with the 55-year-olds but to focus on the 30-year-olds, who were relatively new in the system and who were more open to using it. We trained people between 25 and 30 years of age and they realised they were able to save a couple of hours from their after-trip paperwork. After they shared their experience with the elder conductors, there was a bigger buy-in.”  

Price for a prize

If it sounds like a picture perfect scenario, it isn’t. Most of the state transport bodies are loss making. Even Mumbai’s venerable BEST loses money on almost all its bus routes and has an accumulated loss of about ₹4,000 crore on the transportation side.

So, how does Trimax get these loss-making entities to fork out money for modernisation? It doesn’t. Instead, under a ‘pay per use’ model, it incurs all the expenditure and then recovers the costs on a per ticket basis (depending on the project, the cost varies from 10 paisa to 50 paisa a ticket). This it uses not only for its transport IT projects but for its system integration projects as well. Those who have availed of the scheme include BEST, Rajasthan State Road Transport Corporation and the Osmanabad District Central Co-operative Bank (ODCCB). 

Running ahead

Growth in receivables has been faster than that in the topline

In the case of ODCCB, Trimax’s order book is worth ₹32 crore and it expects to recover its investment over five years. Not having to incur initial capex may be prudent for the client, but does it not come at a cost for Trimax? Madrecha says co-operative banks will continue to be a focus area. “Core banking for the majors is done, but co-operative banks and rural regional banks still need upgradation. Going to Osmanabad or Jalna and computerising 30 branches may not be easy, but that is the market where we see growth. Over the past couple of years, through implementing piece-meal solutions, we have established a comfort level with these small banks.” 

While his intent of focusing on SMEs and co-operative banks may be noble, the systems integration business, due to its low entry barrier, is inherently competitive. Due to the lack of pricing power, the firm shifted from time and materials contracts to fixed price ones to win new business. This sheer commoditisation in its core business of computer hardware and networking forced Trimax to look out for an area where it could hold its own against competition. ITMS, or integrated transport management systems, has turned out to be one, so far. Under this, Trimax executes projects under the build-operate-transfer model and hands it over after the agreed period. 

Over the past five years, despite competition from UTI ITSL, DIMTS and TCS-owned CMC, Trimax has consciously focused on this segment. While topline growth is coming in systems integration and ITMS, it is at the cost of rising debt and piling receivables. While sourcing hardware and building data centres does cost money, there is also an additional investment that has to be made in developing the software, acquiring the GPS devices and handhelds as well as end-user training. 

This working capital requirement for system integration clients and upfront capex for BOT projects are the biggest drain on Trimax’s financials. Then, as most BOT projects are for the government, Trimax runs the risk of late payments. Receivables climbed from ₹301 crore in FY12 to ₹398 crore (of which about ₹75 crore is > six months) in FY13. To tide over its cash strained status, Trimax has kept adding debt. In FY13, total debt was ₹288 crore, compared with ₹230 crore in FY12. 

The drain notwithstanding, Madrecha says it is hard for competitors to replicate what Trimax does in ITMS because of its legacy advantage. “It is not just supplying of IT hardware, it is a five- to 10-year customer commitment. Competition is not much in this segment because more than IT capability, it is about operational capability,” he adds.

What the cards foretell

Madrecha believes that infrastructure initiatives under the JNNURM will open up enough opportunities for Trimax. He is particularly hopeful about BRT (Bus Rapid Transit) getting operational in many Indian cities. “Under JNNURM, about 20 cities were identified for BRT, but it is widely operational only in Ahmedabad. Pune, Nashik and Raipur are also potential BRT cities and each could be a ₹250-crore technology implementation market. If the operations get outsourced, that would amount to an additional ₹250 crore over a five-year period,” he says. Incidentally, Pune did have a BRT service, before it was shelved due to encroachment resulting from inadequate infrastructure. 

In order to capture such contracts, Trimax is deepening its expertise in automatic fare collection (AFC) as well as turnstile technology. Madrecha opines, “There are about five to 10 players in this market worldwide, spread across the UK, France, Japan and Korea. Our local operational experience could be a draw for those keen on entering India and we are open to having a collaborator for technology as well as equity.”

Even as it eyes potential BRT implementation, it continues to focus on its existing state road transport market. Here, after having offered the basic ETIM service, the attempt is to sell more solutions, such as fleet or fuel management. By availing of this, bus companies get precise data on fleet utilisation and can optimise their fuel spends.

Then, there is the common mobility card (CMC) market, which Madrecha is most excited about. A CMC can be used across transportation systems in a city. Common examples are Octopus in Hong Kong or Oyster in London. “Today, different reservation systems operate in islands. If someone wants to go from Bengaluru to Haridwar, then you have to take a flight or a train and then another bus or a private car. The entire booking should be seamless and our effort is to move in this direction.” 

True, Trimax has the required competency in terms of smart cards and card reading machines and also has an established user base of smart cards, which can later on double up as a CMC. However, the catch is that if open access is unavailable, then getting various different systems to handshake is difficult. Currently, the most seamless reservation systems globally are the ones used by airlines and Trimax has a tall task ahead even if it intends to integrate just the railway and bus systems in India. Having implemented many road state transport contracts, Madrecha’s company may have got attuned to some amount of bureaucratic red tape, but how Trimax will address the bureaucratic divide remains to be seen. 

Given its dependence on government projects, Trimax’s plan to aggressively scale up could hit a hurdle if it fails to navigate around government sloth and turf wars. The concept of a CMC has been bandied around for quite a while now but there is no city where it is used in its entirety. Delhi’s More cards are the most advanced and can be used on the metro rail network as well as metro rail connecting buses. Nevertheless, the promise of a CMC seems to have excited several private equity investors. While BanyanTree was the earliest investor to come in, it was followed by Zephyr Peacock and then by Aditya Birla PE. Though their acquisition cost varies, currently, they hold 9.06%, 9.62% and 9.5% in the company, respectively. 

Madrecha’s business journey has been one of continuous transformation and now he is banking on the ITMS segment to deliver the next chunk of growth. All through, like most prudent businessmen, he has banked on relationships to grow. He continues to stay in touch with his first and only boss through their regular walks around Mumbai’s Mahalakshmi race course. Therefore, when he says that his relationships are for keeps, it sounds anything but a canned line flowing from a glib operator’s mouth. As Trimax’s future is tied to government initiatives, pace could be an issue. Madrecha is aware of this reality and therefore remarks, “Coordinating with different agencies and constituents is a challenge. Doing that will be the next leg of our journey.”