Indian Hotels to debut own home delivery business under a new brand

This is an EXCLUSIVE story. Do not reproduce or use in any manner whatsoever without the writer's permission.

 

Tata Group's hospitality company will launch state-of-the-art mobile application in a week

 

An experiment, to deliver food from restaurants housed in some of its luxury properties in Mumbai, is set to go mainstream soon. Tata Group’s hospitality business, Indian Hotels Company Ltd (IHCL), will launch a mobile application next week that will allow customers to order home delivery of food akin to ordering from online food delivery aggregators like Zomato and Swiggy.

In an earnings call on Thursday evening, Puneet Chhatwal, managing director and chief executive officer, IHCL, said the move is part of the hotel company’s efforts to drive revenue growth. 

“Our RESET response to COVID-19 is based on revenue growth. We have lined up a number of key initiatives including new lines of revenue. In fact, within a week from now we will be launching our own home delivery business under a new brand through our own state-of-the-art (mobile) application. This was long desired in our business from the digital side,” said Chhatwal without sharing further details.

So far, IHCL has identified seven key initiatives to help drive revenues that will be unveiled gradually over the next four to six weeks (depending on the opening up of hospitality sector in India). Earlier this week, the hospitality chain launched the first initiative in Kerala, which is based on the concept of DriVacations i.e. holidaying at destinations and properties that are within three to five hour driving distance.

The new initiatives, Chhatwal said, are meant to compensate for the loss in revenue, or earnings before interest, taxes, depreciation and amortisation (ebitda) as well as profit after tax (PAT), which is the case for IHCL as well as the overall hospitality, travel and tourism industries across the globe in the first quarter of fiscal 2020-21.

“Additionally, we are coming up with strategies for new corporate, leisure, wedding and meetings, incentives, conventions and events (MICE) business across different space. “We will have new business based on the upcoming app involving gourmet shops in our hotels at key city locations,” he said.

In April, the hotel company had launched Hospitality@Home initiative involving three different varieties of hampers for people to pick up for personal consumption or gifting purposes. IHCL has also been driving The Chambers (its exclusive private club) membership for some time now.

The Chambers boasts of a completely new look, feel and design now and will be launched at Taj Mansingh in Delhi by September or October this year.

“It was delayed by three to four months for obvious reasons including air-pollution issues followed by COVID-19 pandemic as a result of which the hotel was shut. The Chambers will also debut in the London market giving the private club brand a great positioning. This will also be our competitive advantage going forward,” said Chhatwal.

As for the impact of COVID-19 pandemic on IHCL’s hotels, the company said in an investor presentation that approximately 50% of its properties across portfolio were closed or were acting as active quarantine centers as on May 31, 2020. The hotel company has put together a staggered opening plan post relaxation of the lockdown.

The management will also undertake effective asset management initiatives including monetisation of non-core assets, monetisation of hotel assets and minimisation of lease costs. 

For instance, in fiscal 2019-20, IHCL has raised a total of Rs 211 crore by selling land parcel in Pune (Rs 63 crore), 24 apartments (Rs 105 crore) and Taj Madras Flight Kitchen, Chennai (Rs 29.8 crore). The hotel company is also in talks to divest a few more assets in the current fiscal and lease it back or take it up on a management contract basis.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Liquidity issues add to worries of cement dealers in Tier I and II centres across 13 Indian states

Trade channels, accounting for approximately 60% of annual cement sales, stare at around 30% demand contraction

With April and May becoming a total wash out months due to the COVID-19 pandemic, cement dealers in the country are headed into a vicious cycle. Delay in new construction activities, gloomy business outlook, fear of income loss, labour shortage and uncertainty with respect to resumption of normalcy were among some of the reasons cited.

In fact, a significant decline in cement sales followed by prolonged credit period and higher working capital requirements have already made life difficult for the fraternity thus adding to their survival challenges. The trade channels account for approximately 60% of annual cement sales.

According to Rahul Prithiani, director, CRISIL Research, the cycle of recovery of retailer dues is expected to extend by four to six weeks over and above the usual four weeks. “This will potentially increase the working capital requirement of dealers by 12-17%, even as they reduce credit exposure, infuse capital and curb non-essential expenditure,” said Prithiani.

Courtesy: CRISIL Research

A recent CRISIL Research survey with over 100 dealers across Tier 1 and 2 centres in 13 states, indicated a significant decline in volumes and an extended lockdown can only worsen the overall situation. A whopping 93% of the respondents said they expect volumes to shrink 10-30% in fiscal 2021 in the base case scenario, i.e. the lockdown easing in May.

The survey pointed that over 60% of dealers are holding low inventories (two to four days), but spoilage concerns persist. Dealers are hopeful of liquidating inventory by offering discounts as soon as the lockdown eases, to contain spoilage and get volumes going.

Additionally, payment delays from retailers appear inevitable considering these players are small and fragmented, and most likely to delay payments amid liquidity crunch, gloomy demand outlook and cement spoilage concerns. That, in turn, would stretch the receivables cycle and negatively impact cash flows of the dealers, as much as 95% of whom offer credit, CRISIL said in the report.

The elongated working capital cycle could last at least a couple of quarters, and the risk of retailers defaulting on payment dues would aggravate the financial pain. However, the collateral-free MSME loans announced by the government on Wednesday will come as a big relief, since it will help cement dealers access working capital debt.

Over 90% of the dealers surveyed are hopeful of manufacturers’ support in terms of better margins/ incentives, or liquidity support to weather the hard times. But chances of a swift revival post ease in lockdown remain bleak, with 58% of the respondents believing it will take over three weeks for operations to normalise, said the CRISIL report.

Guranchal Singh, associate director, CRISIL Research, said, “An intermittent rise in daily wages, freight cost, and construction material prices will deter restart of construction activity. Return of labour, freight disruption and dwindling consumer confidence will weigh on resumption of normalcy in the near term.”

Improvement is envisaged in the second half as demand picks up and receivable days gradually decline. But even here, recovery in urban areas may take longer due to extended lockdown, slowdown in real estate construction and higher dependence on migrant workforce.

A few dealers, though, are optimistic that the labourers, who have not been able to earn wages for nearly two months, would return quickly post-kharif sowing to capitalise on pent-up demand and halted construction activity.

Courtesy: CRISIL Research

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Lemon Tree partners Al Waleed Real Estate for Dubai hotel foray

Lemon Tree Hotels, one of India's leading hospitality firm in the mid-priced hotel accommodation segment, in partnership with Dubai's Al Waleed Real Estate LLC has entered the Middle East hospitality market. Through its management subsidiary Carnation Hotels, the BSE-listed hospitality chain has debuted in the international market with the launch of its first Lemon Tree Hotel in the United Arab Emirates (UAE).

According to Rattan Keswani, deputy managing director – Lemon Tree Hotels and director – Carnation Hotels, said, the UAE market holds immense business potential for the hotel chain and their's is the first branded mid-scale hotel in the area. "We have a locational advantage, with the hotel strategically situated close to famous destinations like Burj Al Arab, Kite beach and the Mall of Emirates, and are equidistant from Business Bay and JLT, the two major business districts of Dubai. Such is our proximity to the Burj Al Arab, that our guests can enjoy unhindered views of the iconic building from the pool deck, and even some of the rooms," said Keswani adding that the hotel company is hoping to have many more hotels in the region in the future.

Owned by Al Waleed Real Estate LLC, the hotels is located on Al Wasl Road and is within a kilometre from Sheikh Zayed Road and Jumeirah Open Beach. Featuring 114 guest rooms, the property boasts of a multi-cuisine restaurant, Lemon Tree Café, with al fresco extension, a conference room, a swimming pool, a well-equipped fitness center among other facilities.

The addition of this hotel, Keswani said, opens a new location for the brand, thereby increasing its appeal to existing and potential customers. "We are confident that our partnership will enjoy mutually beneficial results within a reasonable stabilisation period after the launch. The UAE and Gulf Cooperation Council (GCC) is a resilient market in the long term and we could foresee the need for a recognised mid-market hotel in the branded space," he said.
 

Ideal for business and leisure travellers, the hotel is a short 20-minute drive from Dubai International Airport and close to Dubai Internet City, Dubai Media City, Barsha Heights, and Knowledge Park. It is also well connected by road and air to the other Emirates, including Abu Dhabi, Ajman, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Pan India RevPAR of premium hotels to remain stressed in fiscal 2020

The revenue per available room (RevPAR) outlook, for hotels across India in the premium category, will continue to remain stressed in fiscal 2020 (FY20). As per a senior ICRA Research executive, this is mainly owing to subdued demand environment in the country. While individual hotels have initiated price hikes, their ability to sell at higher rates will primarily depend on their capability to manage daily demand and occupancy.



Vinutaa Sriraman, assistant vice president - large corporate ratings, ICRA Ltd, said, “While demand has recovered marginally during October to November 2019 period, overall revenues for FY20 are likely to be flat at about 0% to 3%. The margin outlook for FY20 is also expected to be largely flat. ICRA also does not expect the larger hotel companies to embark on debt funded capital expenditure (capex) programme given the experience of the recent past.”

In terms of city wise performance, majority of the key markets witnessed a decline in RevPAR in the first half of FY20. In fact, Bengaluru was the only key market that witnessed improvement in RevPAR. With negligible premium category hotel room supply additions over the past several quarters, Mumbai has continued its position as a city with the highest occupancy of over 70%. However, the south Mumbai market has performed better compared to north Mumbai.

While the up-cycle would be delayed, Sriraman said, the healthy demand expected over the medium term is likely to facilitate improvement in average room rates (ARRs) and occupancy. “Among major markets, Mumbai continues to post high occupancies, as fresh hotel room additions have been slow over the last four years. Being a gateway city, Mumbai’s healthy demand prospects would drive RevPARs over the medium term,” she said during an analyst call.

In the National Capital Region (NCR), Delhi has about 63% of the NCR inventory while the remaining is spread across Noida, Gurugram and Faridabad. While Delhi can support higher ARRs, Gurugram, which has been struggling over the last few years owing to the Delhi International Airport Ltd (DIAL) Aero City supply, is showing signs of improvement. The micro market of Noida is likely to witness muted growth in occupancies and ARRs over the medium term due to anticipated increase in supply in FY21, FY23 and FY24.

“Monthly occupancies were growing for about 48 months on a year-on-year basis. However, occupancy in the first half of fiscal 2020 (H1 FY20) declined following the increase in airfare post the shutdown of Jet Airways. Adding to the woes were muted corporate performance, weak consumer sentiment and slowdown in foreign tourist arrivals (FTAs) and domestic travel due to extended election period in the first quarter of FY20.



Pan India average occupancy declined by 1% to approximately 63% in H1 of FY20 compared to 64% in the same period of fiscal 2019. Market wise, Mumbai, National Capital Region (NCR), Pune, Kolkata and Goa witnessed some moderation in occupancy in this period. ARRs, which largely remained flat for nearly three years up to the third quarter of fiscal 2016, started witnessing some traction beginning fourth quarter of FY16. The traction continued for the whole of FY17, FY18 and FY19.

“When demand slowdown impacted ARR in the first quarter of FY20, rates recovered marginally in the second quarter. As per ICRA estimates, ARR across India stood at Rs 5,400 for the first half of fiscal 2020 compared to Rs 5,500 in the same period last year. Current ARRs are lower by 30-35% from the peak levels witnessed in H1 of FY19. Corporate request for proposal (RFP) rates have been negotiated about 4% to 5% higher for the cycle starting January 2020. However, effective pass through of the same will depend on demand pick up,” said Sriraman.

The ARR movement is city specific. While most cities have witnessed a decline in ARR for H1FY20, cities like Mumbai and Bengaluru have reported growth. Impacted by lower occupancy and ARR, revenue per available room (RevPAR) declined by about 3% to 4% to close at about Rs 3,400 in the first half of the current fiscal. While the RevPAR was higher by Rs 500 than the all-time low of recorded in FY14 and FY15, it was still 30% lower than the peak in H1FY2009. Having said that, it was still equal to the peak RevPAR witnessed in FY11.

In NCR, there was a marked variation in performance across micro markets. With a large part of the business travel into Delhi being government related businesses, there was a decline in both ARR and occupancy in Delhi. On the other hand, Gurugram showed positive traction in both ARR and occupancy with inflow of corporate guests despite the auto sector slowdown. “The second quarter of fiscal 2020 will witness some pick up in government related travel in the Delhi region. Overall, pan India ARR and occupancy remained under pressure in H1 of FY20,” she said.

Demand drivers and their performance
Demand for the hospitality industry is multi-pronged and depends on foreign tourist arrivals, domestic leisure and business travel and MICE or meetings, incentives, conventions and exhibitions segment. Domestic guests account about 75% of the total demand while FTAs account for the balance. Business travellers account for about 60% to 65% of the demand, while leisure travellers account for the balance 35% to 40%. The ratio varies depending on the destination.

“The calendar year (CY) 2018 was a strong second year of international tourist arrival growth in continuation with a 7% growth witnessed in CY2017. This was higher than the 4% yearly average of CY2005 to 2016. For H1 CY19 the growth slowed to 4% due to economic headwinds and the already high base,” said Sriraman.

While Asia Pacific witnessed a 6% FTA growth during H1 of CY19, growth in arrivals into India stood at 3% and was lower than the Asia Pacific or global international tourist arrival (ITA) growth. Foreign tourist arrival, in year-to-date October CY2019 has been impacted by global trade wars and the economic slowdown.

The Pulwama attack in February 2019, the Indian general elections during April and May 2019, the second bout of Nipah virus in Kerala in June 2019, diversion of traffic to the Cricket World Cup in UK in May to July 2019, the Kashmir crisis and ensuing travel advisories in August 2019, Thomas Cook UK shut down in September 2019 and extended monsoon have further worsened the situation. In December 2019, USA and UK have issued reason travel advisory for women visiting India, which could further impact arrivals in the country. Bangladesh, USA and UK were the top three FTA source markets for India in October 2019.

The e-tourist visa (e-tv) scheme
Tourist arrivals, under the e-tv scheme, accounted for about 25.1% of the overall FTAs in India in year-to-date (YTD) October CY2019. The e-tv scheme, which started in November 2014, with about 43 countries has since been expanded to include over 165 countries. During YTD October CY19, travellers under the e-tv scheme grew at a healthy 20.9% on y-o-y basis, also lower than the 44.7% witnessed in YTD October CY2018. This is due to high base effect and slowing FTA growth.

Foreign exchange earnings (FEE)
FEE grew by about 2% in USD terms during YTD October CY2019 as against a 7.5% y-o-y growth, during YTD October CY2018. In Indian Rupee (INR) terms, the FEE growth was higher at about 6.1%. However, this was also lower than 11.3% for YTD October CY2018. Per traveller USD spend, witnessed a 1.2% decline, while in INR terms, it was higher by about 2.7% for YTD October CY2019.

Domestic passenger trafficIt grew by a modest 2.9% during YTD September CY2019 compared to a strong 21% y-o-y growth for the corresponding previous year. On year growth in domestic passenger traffic was in double digit every month since September 2014 until December 2018. April 2019, was the first month of decline since June 2013.

“Increase in airfares following the grounding of Jet Airways aircrafts in January 2019 and eventual shut down in April 2019, slowdown in domestic travel due to an extended election period of six to seven weeks, Nipah vitus alert for the second time and Kerala, muted corporate performance and consequent cut on discretionary travel spends, lower consumer confidence as indicated by the RBI current situation index, extended and excess rainfall in several cities like Mumbai and Goa, and water shortage in cities like Chennai have also impacted domestic travel,” she said.

Corporate performance
With second quarter FY2020, revenue growth entering a negative territory in almost four years, the uncertain business environment and cost-cutting initiative could have a bearing on travel related spends in the near term.

Supply dynamics
The supply growth pipeline in the Indian premium hotel segment is expected to be about 4.5% compounded annual growth rate (CAGR) during FY19 to FY24. With the pickup in supply announcements over the last few months, the incremental supply pipeline for FY20 to FY24 is now in line with the addition during FY14 to FY19. However, the growth rate is lower given the higher base.

According to ICRA research, total inventory to be commercialised over the next five years has increased from about 98,900 rooms in November 2018 to about 1,08,000 rooms in December 2019. This is an increase of about 9% in the last one year. Incremental supply is largely focused on Bengaluru, Mumbai and NCR, and is likely to be opened in FY23 and FY24.

“Part of the incremental supply is because of up-scaling and re-branding of midscale hotels into premium category rooms. Over the FY20 to FY24 period, about 3% to 4% of the incremental supply in the pipeline, is from brownfield expansion. A sizable part of the supply pipeline in FY20 and FY21, in the top eight cities tracked by ICRA are owned by real estate players. The supply pipeline in Goa and Kolkata are expected to come in FY20 and FY21 while incremental supply in Hyderabad, Mumbai and Bengaluru is spread over the years,” said Sriraman adding that large real estate developers like Prestige, Bhartiya City, Oberoi Realty and DB Group are aggressive on the hospitality sector.

Red flags
These have intensified currently. Demand weakness and supply uptake will continue to weigh-in, in the near-term performance and demand will be contingent on the overall economic revival.


(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Secure digital banking and payments system is a long road ahead

A recent video that went viral on WhatsApp about how a person was tricked into downloading a third-party mobile application and digitally robbed of every penny in her bank account was disturbing to say the least.

Earlier this week, the driver of an Ola cab I was travelling in, narrated an incident that happened with him over a week ago. A customer paid him the cab fare of Rs 1,500 using the Paytm mobile application. However, the money vanished from his bank account after the payment was being done!

"No one has a clue what and how did it happen," he told me followed by asking if I'm going to be paying with Ola Money, Paytm or cash. The cab driver has lodged a complaint and is now hoping the issue to get resolved soon. "They are saying, it will take 40 days to figure out where has my money gone," he told me seemingly worried about the possibilities of the money coming back into his bank account.

These are not one-off incidents wherein someone was robbed of her/his hard earned money. A Google search on digital payments frauds/ scams will throw up numerous results of instances wherein people have been deceived and have eventually lost money from their bank accounts in some manner or the other. Apparently, there are instances wherein users have also lost money while transacting with Google Pay or G Pay.

What's more surprising is the fact that such frauds/ scams are far from dying away. A recent report by the Reserve Bank of India (RBI) said that the country's banking system detected frauds worth Rs 71,500 crore in the financial year 2018-19. I am sure, the number will be significantly higher in 2019-20 when the Indian central bank comes up with its report next year.

New tricks are being used at frequent intervals and the common Indian citizen who is anyway struggling to make ends meet is faced with the challenge of keeping her/his money safe in a bank account, a digital wallet or mobile payment applications that keep harping about their safety features while playing ignorant to the vulnerabilities.

At the receiving end always is the user of such applications who places faith in the ability (or inability) of companies running the digital payment systems. The burden is always passed on to the user who has to be vigilant all the time.

While regulators and the administration have issued communications creating awareness about such frauds and scams across various digital modes of transaction, it's not enough to arrest the problem. Even the so-called intelligent minds in the information technology space working with banking and financial institutions and digital payments companies aren't able to find ways to address this issue.

I recollect a discussion, earlier this year, with a senior executive heading the start-ups initiative at one of the top global IT companies operating in India. Their portfolio of 'unicorns in the making' comprised ventures instituted by IITians as well as IT industry experts with extensive experience in the financial technology space.

However, none were really working on offering a solution to this pressing issue about payments frauds/ scams. And mind you, the problem is not something that's master-minded by a tech wizard. These are very common people sitting in some remote location of rural India, using basic ways and means for phishing and skimming while going untracked.

What's really holding back tech companies from using their prowess in finding an effective solution to this problem? Is it so difficult to design systems and processes that ensure safety and security of savings in bank accounts and modes of digital payments used by citizens?

People want to graduate towards a cashless society but with no respite from frauds and scams, they are finding solace in the convenience of cash for everyday transactions.

What seemed to be an opportunity, post demonetisation, to promote digital transactions and payments in the country is slowly losing its sheen. Adding to the challenge are vulnerabilities in the system that’s shattering the common Indian citizen’s confidence every passing day. This makes me wonder, does a secure digital banking and payments system really exist or it's just a myth.
(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Our focus will be to make people feel and experience 'The Mantis': Ranjita Ravi, Orxa Energies

The Mantis, India's first EV performance bike

A version of this interview first appeared in The Free Press Journal edition on Friday, December 06, 2019.

After operating in stealth mode since a couple of years now, Bengaluru-based start-up Orxa Energies has unveiled the first look of India’s first electric performance bike, ‘The Mantis’ that can do 200 kilometers in a single charge, can attain a top speed of 140 kilometers per hour (kmph) and boasts of a battery swapping feature. Ranjita Ravi, co-founder, Orxa Energies, in conversation with Ashish K Tiwari, speaks about the business of the company bootstrapped in 2015, experience at Airbus BizLab, electric vehicle (EV) segment, lithium ion battery technology and more. Edited excerpts...

The bike being unveiled is a finished product or you plan to refine it further for the commercial launch later next year?
This is a product unveil, something that’s very close to what’s it going to be in the final production version. There could be some refinements closer to the commercial launch. Small technical things like maybe increase the battery capacity a bit more. We’ll have to see how that happens.

Your company has been working on some developments for Airbus. What exactly are you doing for them?
We were a part of the Airbus BizLab, an accelerator programme by the European multinational aerospace corporation. They have four Airbus BizLab locations worldwide and Bengaluru is one of them. Essentially, what we wanted to work with them was in the battery space. So aspects like development, electronics and things like that around the whole battery technology. This was back in back in 2017-18. There are a few ongoing projects we are still working on for them but I’m not at liberty to discuss about these projects.

This idea about a performance bike in the electronic vehicle (EV) segment happened before the Airbus BizLab development or after?
Actually the company was started keeping the EV performance motorcycle in mind. I think there are quite a lot of synergies that our team has with aerospace majors like Airbus. That’s what led to us teaming up and firming this alignment. If you think of a performance motorcycle and aerospace application, their exigencies are very similar.
There is very less space available, it has to be of a very high performance and be very light-weight. So volume availability is less, there are strict weight restrictions and it has to deliver a great performance. That’s how we began working with Airbus BizLab.
We have other aerospace clients as well and are working with them on a very research and development (R&D) stage on a few pilots. Basically, our battery technology is very light despite being rugged and gives a very good performance. So there is a strong alignment between our product and the demand scenario in this segment.

Is the battery technology your primary business or EV performance bike?
The motorcycle is primary business. We started doing our own battery packs because there were no battery packs that could meet our requirements for the EV performance bike. In the initial stages, we thought off-the-shelf battery packs could be used to power our performance bikes but that was not the case. That’s when we started work on developing our own battery technology. The requirements for the two industries are similar and my co-founder and chief technology officer had extensive experience in this industry we saw the application immediately. That’s how developing the battery technology came into play for us. It’s already a separate business vertical for us.

The lithium battery space is getting very crowded with too many players homegrown and international joint ventures (JVs) claiming all sorts of things.
Competition is good and we think good technology will stay while bad technology will die a natural death. It’s also very important because the level of technology and R&D is newly developed. Right now, I think India has that once in a generation opportunity in this space. People keep talking about how we lost out on a whole lot of things in the past.
If you look at the entire EV ecosystem though, I think we have a great chance to the take lead. The EV space in India is not going to develop the way it did in Europe or for that matter any other nation where EV related developments have already progressed to a certain level. We need India-specific technology and there are a lot of people working on it at present and that’s very good. NITI Aayog estimates the battery pack industry to be about $9 billion by 2025 and that’s just for automobile category. So, the market potential is huge and a lot of people in India need to make a lot of noise about their achievements in the EV technology space.
People in India should be working on various EV technologies because it’s too early for standardisation. There should be different lithium ion and related chemistries, people working on various types of battery packs whether it is charging, swapping and so on. I think a lot of noise needs to be made until 2025 post which efforts will have to be made to figure out a business model around what works best for India. Thereafter it will be a completely new phase of growth for India in the EV technology space.

Do you have intellectual property (IP) rights on the battery technology?
We have multiple proprietary IPs in each of our battery packs. The battery management systems and controller systems are our own. The engineering and design for the battery pack is all in-house. The product is rugged, strong and does not require active cooling and still delivers in terms of performance. Some of the IPs have been filed already and others in the filing stage.

Tell us about the unique aspects about the bike and the battery pack.
Everything from the wheel to the handle bars for the bike has done by our team of engineers and designers. A lot of work has been done around its frame. Electric vehicles have to be lighter, faster and stronger. We are working on a frame architecture that’s very unique to us in such a way that it’s not only a design functional element but is also very different from what some of the other people are attempting to do in the market. The design helps in a big way to facilitate battery swapping while giving the bike attractive look and making it strong. Our battery pack has a capacity of nine kilowatt hours (kwh) and there are six modules giving the bike a 200 km range in a single charge.

A lot of engineering has gone into how the battery swap works and how we are going to fit a 9kwh battery in it. The very fact that we have such a large capacity battery pack gives us the advantage that these will last longer compared to the 3-4kwh options available in the market at present. The battery capacity not only gives a huge range per ride but the life cycle as well. We are still doing a lot of aggressive life-cycle testing in-house, a lot of R&D using multiple cells is on, extensive data collection and mining is underway.
All this exercise will be useful once we get into the commercial launch and offer customers products that are backed by qualitative and quantitative data points.
We started customer pilots of our battery packs mid-2018 and the response has been phenomenal. One customer put the battery pack in a plastic basket under his commercial vehicle and did a 50-60 km run without any issues. Another customer in north India used the battery pack in his passenger two-wheeler driving in 50 degree Celsius weather conditions.
Our battery packs are on passive cooling which is another unique feature in addition to the rugged ‘Made for India’ design. The customer pilots were done across two- and three-wheelers, commercial vehicles, aerospace systems. So 2018-19 has been a year of testing and pilots and 2020 is when EVs will actually pick up and run.

Have you also used aerospace materials for the structural design of the bike and the battery packs?
Yes, the entire chassis has been made using aerospace grade material. Some of the aerodynamics is also based on aerospace learnings that we got while at Airbus BizLab. Also, my CTO and co-founder, both have extensive simulation and R&D experience. So all of that have been put to good use in putting together the bike and the battery packs.

Could you share insights on the connectivity features in the bike?
The Mantis will have a coloured dashboard, a companion mobile application to see ride analytics and things like that. The app network will also be able to tell you about the battery swap station network that will come up eventually. In fact, just the battery pack will give the rider approximately 150 data points. So one can do a lot of data analytics, over the air updates and a host of other things. Having said that, we are against over the gadgetisation practice that’s happening in the market.
I think motorcycles should stay true to its spirit. Motorcycling is about the freedom and pleasure of riding, and the vehicle should not be restricting the rider from getting that performance on the road. If you are going to be distracted because your app is telling you one thing and the network is telling you something else, it will be very distracting for the rider. The bike will have all the essential features that’s just right for the motorcycle and the rider.
While we can do a whole lot of things and we will do it when the time is right but that’s not what The Mantis is primarily about. Anybody who is an amateur or a professional rider can just pick up The Mantis and drive. The Mantis has been designed by a team of bikers and it should be as natural for you to ride as any other motorcycle.

What’s your pricing strategy for The Mantis? And who are the target buyers?
The final price will be decided closer to the commercial launch. Some market studies have been done wherein 150 people rode The Mantis in mid-November. Prior to that, we’d done a ride with about 200 people. A lot of consumer studies have been done in between as well. These covered aspects like who will want to ride The Mantis, why would they ride it, how much would they be comfortable paying for it and things like that.
In this category, we are estimating the pricing to be anywhere between Rs 3 Lakh & Rs 4 lakh and we’d like to keep it within that range. The consumers will largely be those looking to own a performance bike. It’s not a mass market vehicle hence the positioning will be premium as well. We will largely use the online channel and other customer experience programmes reach the target audience. Digital is a very good tool for start-ups to scale up. Videos really work well for the automotive segment and help build a lot of excitement for various on the ground activities being planned. Over the next six months there will be a lot of customer engagement activities that will be done to get The Mantis into people’s hands and let them feel and experience the bike.

This pricing will require financing tie-ups as well. Have you already got vehicle financing companies on board?
Yes, we are working on the financing options. Getting the product in the customer’s hands is very important. As per our market study, riders in the performance bikes category are willing to pay between Rs 12 lakh and Rs 15 lakh for a motorcycle. And they spend over Rs 5 lakh more on accessorising the vehicle. For them having The Mantis as a city option is not very inconvenient.

How big is your team at Orxa Energies?
We are just a 15-member team and most of our engineers and designers are in the 23 to 30 year age bracket. Me and my co-founder are the oldest in the 30 plus age group. One of our designers builds custom motorcycles. We have a mechanical engineer who builds go karts. Our electronics engineer is a semi-professional biker and does robotics on the side. The team is our strongest asset and having such a lean team gives them the opportunity to do a lot of work. Our designers are thinking about engineering work and manufacturability of the design, something that’s quite unique in the value chain and it’s very hard to find designers who can actually do that. This is also the reason we able to do a lot of things in-house. The team also work s very closely with vendor partners to ensure the casting and related things are done to specifications and in the best manner possible.

Have you got any external funding for the bike and battery pack business?
We have raised money from an angel investor and an institutional investor in the last couple of years. We don’t make our investment numbers public as it tends to distract from the actual work that’s happening and the value the company is adding.

The commercial launch happens sometime in mid-2020. How are you going about producing the bikes?
We are already working with quite a few vendor partners for the components for the bike and the structure for the battery packs. However, the final assembly, quality check, etc. will be done by us. In fact, we are already doing the battery assembly in-house. We have a fair idea of the ecosystem, how and where will everything get manufactured as well as partners who will work with us in the process. Currently, we have a small assembly facility because we were only doing pilots however we will now set up a large one wherein the bikes as well as the battery packs can be assembled.

Will you have variants of the bike or will it be just different colour options?
We are still exploring that and will see how it pans out. The idea is to have a few variants of The Mantis post the commercial launch. What’s on display currently is one variant in different colours. But the idea is to have different variants eventually followed by other models from the Orxa stable. The new bike models will be more based on the performance and styling aspects.

Are you considering setting up own distribution and after-sales infrastructure?
Initially, we will pursue the online and below the line (BTL) approach. However, for our other products we may consider having a sales and distribution set up at a later stage. We are working on preventive maintenance and things like that. However, electric vehicles have very low maintenance as the belt and the wheels are the only moving parts. There is no engine, you don’t need coolant, oil, you’d probably need to get breaks and electronics checked once in a while. So we are working on an after-sales model. It’s in the works and details will be shared at the time of the commercial launch.

Could you also give us a sense of the market size for this product?
We are very ambitious and bullish about how the EV segment will operate overall. The category of performance motorcycles market in India that we are looking at, has been growing 30% year-on-year since the last four years. These comprise bikes with engine capacity of 200cc and above. It’s a very aspirational product and falls in the discretionary spending category. That’s also the reason there is very little impact of slowdown in this category.

Between the bike and battery packs, which one will be a larger business vertical for the company?
Both are equally important as one cannot exist without the other. In fact, if you consider any EV, batteries are 60% of the entire cost of the vehicle. So battery is very critical and more so for us to have it in-house. Generally speaking, battery packs is a problem that needs to be solved for a lot of people. Our battery packs are small, modular and can be swapped; it’s a solution that’s interesting for many people. Our battery pack can be charged at home in three-and-a-half hours and that gives the bike rider a 200 km range per ride. Also, the battery pack has huge capacity at 9kwh so it will not have to be charged very often and that’s a huge advantage.  We are collecting usage data from our customers and will be able to freeze on what sort of warranties can be offered. Generally, lithium ion batteries for automotive use can last for five to eight years, depending on the usage.

What are your plans on taking the performance bikes to international markets?
India is a very tough market to crack and companies like General Electric (GE) have said this multiple times. They had a baby warmer unit used in neonatal care. GE had to rebuild the unit in India at one-tenth of what it was priced globally. Like I said earlier for our battery packs, we couldn't just pick a battery pack off-the-shelf from any of the large global makers as well as those in India. It doesn't work that way. And that's why we had to design a battery pack that’ll run in 50 degree Celsius. Our aerospace battery packs have been tested at 65 degrees Celsius.
We do drop test for our battery packs in our office to see what study the impact after it falls from a one meter height. So there are many other things that we do to ensure the product quality and performance in extreme conditions. The product has been built to cater to the Indian conditions at a price point that suitable for the Indian market. Having achieved all this, I think we will be better equipped to take these products to a lot of international markets. We aren’t exporting the battery packs yet but that’s is part of the plan eventually.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Pro racers testing The Mantis on racing tracks in November 2019.