The 'lucky' businessman

Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
OM Associates CEO Ashok Khosla counts good fortune as a factor for his success in business, reports VICTOR KATHEYAS

'SUCCESS in business does not only depend on intelligence and ability,' said Ashok Khosla, CEO of OM Associates. 'Some people win, some people lose, often the crucial factor is luck.'

If that is so, it is clear that Mr Khosla is one lucky businessman. Last year alone, his achievements were recognised by three different awards: the Entrepreneur of the Year, Enterprise 50 and Singapore Indian Entrepreneur awards. In addition, the company's $274 million revenue for the financial year ending April 2010 represented a growth of 95 per cent on a year-on-year basis.

However, his decision to become an entrepreneur was made in less optimistic circumstances. Back in 2004, the American MNC at which he was working was in the midst of being sold. This resulted in many senior executives such as himself being made redundant. At that point, the road forked into two. He could either find another job or start his own company.

He chose the latter, in part because he had 'always wanted to do so since a young age'. Together with his business partner Harish Grover, who is based in the US, he set up OM Associates in 2004. Back then, the company's business entailed trading flash drives and dynamic random access memory (DRAM) chips. It would purchase these electronic items from the five or six major manufacturers in the market, and subsequently sell them for a relatively small margin.

Mr Khosla knew that this state of affairs was less than ideal. Prices of chips were 'very volatile' and changed about thrice a day. At each point, traders such as his company had to decide whether to buy chips and, if so, what volume they should buy. Such was the nature of the market that it was more than satisfactory to be 'right on 18 days in a month, but wrong on the other 12'.

The way forward for the company would be to find its own niche. To this end, he planned to acquire a factory in India to carry out the company's research and development (R&D) projects. This, however, required the company to raise funds.

Unfortunately, that was a tall order for the new company. 'If you go to a bank, they'll say bring your three-year balance sheet,' he said. 'But how are you going to do that if you're a start-up?'

Therefore, the company was forced to manage its finances conservatively in order to accumulate sufficient savings for the acquisition. Finally in 2007, the company opened its factory in Noida, India. This location was chosen because it was an 'export zone' with minimal bureaucratic red tape. As long as the value of imports did not exceed that of exports, the company's Indian branch had the option of either exporting everything it produced or selling everything within India.

The factory enabled the company to 'value-add', said Mr Khosla. He explained that DRAM chips were used in a wide variety of devices, ranging from computers to cameras and even industrial machines. Essentially, whenever a device needed to have some form of short-term memory, it was likely that DRAM chips were being used.

Most manufacturers preferred to use the top-of-the-line DRAM chips, especially if they were marketing themselves as premium brands. However, through his prior experience in the industry, he knew that even the rejected DRAM chips could be used in certain circumstances.

'Some of these chips were rejected because they had cosmetic defects. Others were rejected because they consumed too much current. However, while these chips wouldn't pass their manufacturers' quality control checks, other companies who had different requirements could nevertheless use them. After all, a consumer isn't going to care if the chip in his laptop has a cosmetic defect,' he said.

The factory in India helps the company make the most of this opportunity. It purchases DRAM chips rejected by manufacturers for various reasons, and subjects them to a battery of tests. Those chips which have been assessed to be usable are then either sold off to other companies who use them in their operations or sold under the company's own brand.


However, the company doesn't just deal with chips. In August 2009, executives from the Jaypee Group, one of the largest Indian conglomerates, asked Mr Khosla if the company would be interested in being a channel partner. This entailed marketing and selling properties that were developed by the Jaypee Group. Despite having no prior experience in that field, he decided to take up the challenge.

The rationale was simple. He reasoned, 'from a common sense point of view', that what all homebuyers really wanted was a realtor who was trustworthy and accommodating.

In retrospect, it appears to have been a wise decision. Within just one year, the company sold more than 3,000 property units, worth more than $250 million. Its property arm, which employs more than 100 workers in India, has since turned profitable and looks set to grow even bigger. Even still, he stresses that the foray into property was 'a fluke' - in other words, a result of luck. The next frontier for the company is renewable energy. It hopes to use its R&D capabilities in India to support these initiatives, which include setting up a five-megawatt solar plant in India, manufacturing windmills in Nepal and producing energy saving devices such as energy efficient water pumps.

Business philosophy

Mr Khosla believes that non-reliance on bank credit - which began because banks chose not to extend credit to the company in its early years - has helped the company stay afloat, even during the recession.

Back in 2008, he said, many companies were using bank loans to buy stock of DRAM chips and other electronic devices. However, when credit began to dry up, many of these companies found themselves squeezed by the banks - sometimes even to the point where they had to cease business. In other cases, these companies had to sell off their stock at an unfavourable price because they could not wait any longer to repay their banks, which were demanding repayment.

Mr Khosla also believes that the company has done well thus far because of staff empowerment. This means showing them respect, sending them for training courses and even having lunch with them on a regular basis.

'As a boss, you must be free the whole day. (This shows that) you have developed your staff well, and also that you trust them enough to allow them to make important decisions,' he said. This in turn would incentivise staff to do their best for the company. Mr Khosla hopes that the company will be worth 'US$1 billion within three years'. He also hopes to list the company, either in Singapore or in India, soon. With luck on his side, as evidenced by the company's successes thus far, these hopes look set to become reality.

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.

Forum Jump:

Users browsing this thread: 1 Guest(s)