27 OCT, 2011, 09.

40AM ST, LSON JOSEPH & SATSH JOHN,ET BUREAU

Spice Group chairman BK Modi back to running
business, pIans to raise a biIIion doIIars

MUMBA: Clad in an ash-coloured waist coat, blue jeans and a straw-coloured hat, Bhupendra Kumar
Modi, chairman of the Rs 9,800-crore Spice groupcould easily be mistaken for a Bollywood producer.
For sure, he has interests in the entertainment industry but it is the mobile handset industry that is
giving him the rush of adrenalin, these days.

Not since 1982, when he famously rode the Modi Xeroxjoint venture into ndia, has he been so
excited as he is now. n the early eighties, Modi was the single-point gateway for many foreign
multinational corporations keen on entering ndia. Then, about 25 MNCs tapped Modi to facilitate their
ndia foray.

Straight out of the strategy session with senior executives - at his new headquarters in a modern,
glass and steel building mysteriously named 'Boomerang' in Mumbai's Saki Naka - Modi shares with
ET his ambitious plans for the future.

At about the same time, his daughter Divya Modi was in Stockholm selling probably a very similar
story to European investors at a road show to raise funds for his mobility business.

"We are looking to raise about $100 million this year, and perhaps another billion dollars next year,"
Modi says casually. At the pace at which he has been acquiring companies across Southeast Asia,
and his still insatiate appetite for more, Modi would certainly need the money. He is currently
negotiating with three companies - Techno in South Africa, QMobile in Vietnam and Cherry Mobile in
Philippines.

His biggest purchase so far has been an ndonesian handset manufacturer Nexian, which he bought
in May for around $175 million according to business magazine Forbes. n 2009, flush with cash -
about Rs 2,700 crore - from the sale of his ndian telecom operations under the banner Spice
Communication to dea Cellular, Modi was looking for suitable assets in Southeast Asian economies.

However, he soon realised that the firms he wanted to buy preferred to work with an Asian company
and not necessarily an ndian company. So in 2009, Modi bought the Singapore-listed firm Mediaring
for S$60 million. He renamed it Si2i, where i2i stands for ndonesia to vory Coast, making it his
umbrella firm for Asian operations. Mediaring gave Modi access to subsidiaries in Tokyo, Kuala
Lampur, Shanghai and Beijing. Armed with Mediaring, Modi went shopping for handset makers
across neighbouring countries.

First to be folded into Modi's i2i was Malaysia's CL group, in which he picked up 65% for $25 million.
He followed up with NewTel of Thailand with a popular local brand called Blueberry. For the $22
million that Modi paid for NewTel he also got operational bases in Cambodia, Laos and Myanmar.
The acquisitions are aimed at helping Modi increase handsets sales from the current 1.5 million
pieces to 10 million a month over the next three years. "Don't judge us by what we sell now," says
Modi.

"Judge us by what we are going to sell." "Emerging markets are high growth markets. Sales are
higher than matured markets. This is an ideal strategy for mobile phone handset makers who are
looking for high growth," says Anshul Gupta of Gartner's principal research analyst. "We are in talks
with leading handset makers in the Philippines and Vietnam," Modi said. That is besides his planned
big buy in South Africa, where Modi is close to buying a local brand that claims sales of about 1.3
million handsets a month across the African continent.

Even as he is stitching together a pan-Asian story, investors are yet to give him the thumbs up. To be
fair, Modi has no qualms in admitting that his listed firm in Singapore is not doing well, at least when
looked at from the share price perspective. ntegration of all the companies he has been picking up in
the Asian markets may also be one reason why investors are wary, at least for now. "They are looking
to see our story," Modi said speculating on possible investor rationale for not rushing to his company's
shares.
n His Indian Competitors

With Modi talking mobile handsets and talking of millions of unit sales a month, it is only fair to
compare what he wants to do with famous ndian handset stories such as Micromax. Although
Micromax popularised it, Spice was the first to introduce dual-SM mobile phones in ndia. However,
Spice is generally perceived to have failed to capitalise on that first-mover advantage. "They
(Micromax) are very good at mobiles." But that's where the comparison ends according to Modi. "
don't know whether they will be able to make the transition to mobile internet. They do not have the
value added services. We have." Modi goes on to point out that Micromax does not own a handset
retail chain, which he does - about 800 stores.

The Story So Far

To back up a little and trace his footsteps, in 1982, Modi believed he had created its own identity for
his fledgling group. He started with two copy shops, one in Delhi and one in Mumbai with four demo
machines he got from Xerox free of cost. The demo machines were to be sent back to the firm in six
months, but Modi managed to get extensions without having to return it. Although he was a joint
venture partner, he wanted to run it his way but with the branding of the MNC and laws around foreign
ownership helped Modi. " was working with Xerox and not under them. That was the best decision
took in my life, when we created the company keeping in mind the culture of ndia, the customer
requirements," he remembers with nostalgia. There were huge learnings from that venture. Eventually
in early 90s, when ndian government opened up the gates and relaxed rules around foreign
ownership, Modi sold his share to Xerox for a handsome profit.

The Come Back

This is probably his third attempt to make it big in business. After the Modi Xerox exit and several
other joint ventures, he had dived into the then-nascent mobile telephony market in ndia, with
operations in Punjab and Karnataka which he later sold for a neat profit to dea Cellular. Modi had
raised quite a few eyebrows in 2003 when he took an early sabbatical at the age of 50. He renounced
his business interests in favour of his wife and son to practice vipaasana and became a Buddhist,
only to soon return to the rough and tumble of running a business house. t all started when Modi
once called his son Dilip from London. Dilip was visiting his grandfather's - Modi's father's - memorial
for inspiration. Modi's immediate reaction was, "Aren't you missing the link in between - me, your
father?" Slowly came the realisation that he is not anywhere close to what his father was in stature
and accomplishment.

1 Hat And CasuaI Attire

Modi may be a rarity, in that, he is one of the very few ndian business personalities to be seen
perpetually wearing a hat. When Modi decided to come out of the ashram, he sported an hirsute look.
Obviously, it did not go well with his taking over the reins of the company. For a company that caters
to the youth, the chairman should have a style that he could call his own. "When went to America
and Facebook's office, saw that everybody was wearing jeans," Modi said. "Look at the attire
of Steve Jobs, he had to relate to his customers, he has to connect with them." That's when he
decided on his trade mark attire of blue jeans, waist coat and hat, Modi says.

Father, Son And Daughter Team

With the riches from the Spice stake sale, Modi was grappling on how to deploy the money. " was
discussing with my son and daughter. We can either create a diversified group or we can create one
company," he reasons. So McKinsey, the management consulting firm asked the Modis, what do you
want? His ambition was to become a "top group". "f you want to make 10 billion into 20 billion and
you can make $20billion in one industry, the way forward is not to set up five industries, the
consultants reasoned "That's how it started,"he explains of his move to set up a beachhead in
Singapore.

The ther Modi

His nephew, Lalit of PL is the other Modi in the news. Quiz him about his nephew, with whom he
enjoys good rapport, Modi is philosophical. "You can't run a public company like it is a private
company. Somehow, he lost that. He tried to run BCCL as a private company. He was very
successful at that. follow the law of the land. t is foolish not to follow it," he says.