Paran Balakrishnan: India offers tasty morsels to brave entrepreneurs

What do John Lynch and Joe Sigelman have in common? Very little, apart from the fact that they both took a leap in the dark and set up shop in India - a country where few foreigners have dared to strike out on their own.

But the similarities probably end there. Sigelman was a young Goldman Sachs banker who spotted an opportunity long before others - business-process outsourcing. And not the downmarket call-centre stuff but the serious high-end work that can't be replicated easily.

His company, OfficeTiger, in Chennai, south India, now employs 4000 people and was recently sold to print giant R. R. Donnelly for US$250 million ($393 million). At 34, Sigelman insists he is not planning to quit. "We've put in so much hard work. Now is when it gets exciting."

Lynch was also a merchant banker (one other point of similarity) who came to India more than a decade ago, long before it became a fashionable destination for businessmen and ambitious bankers. After a few false starts, he's now making a huge success in an unlikely business: selling Australian cookies to the newly emerging Indian middle-classes who can now afford more than the crumbs.

Is there anything unusual about outsiders coming to do business in India? Yes. India is opening up, but it's still an insular country. And years of socialist-style government policies used to make it a nightmare to do business here. All that was enough to discourage even the bravest and most enterprising outsiders.

Today that's changing, but it's still a complex place to operate. "You shouldn't be here if you don't have the long-term view," says Lynch.

Sigelman's story is a modern corporate legend that could only have unfolded in the internet era. Back in the late 90s when he was a rookie merchant banker in New York, he was working late one night and found that his presentations for the next day had been messed up by the person putting it all together. He got on the phone to grumble to college pal Randolph Antschuler, who worked with Blackstone, the private equity firm in London.

The sum total of that evening was that Sigelman figured that the same work - and other equally complex stuff - could be done from a distant location. Amazingly, one of the first countries that came up on his radar was India, a country he had visited once at 12.

Together, he and Antschuler scouted potential locations (they dismissed Bangalore, saying it was too much like Silicon Valley) and finally settled on Chennai. They finally opened shop in Spencer's Plaza, a mall in the centre of the city, and Sigelman took up residence at the Connemara, a nearby five-star hotel, where he still stays. "I've never made my own bed and I don't want to start," he says cheerfully.

Now, six years down the road, Sigelman is a multi-millionaire who says that he's just a middle-class guy who doesn't really know what to do with really big bucks.

OfficeTiger's employees include about 750 chartered accountants, MBAs and lawyers. Its clients include the big four chartered accountancy firms and global law firms. Also, he's now looking after the 3000 people who work for R. R. Donnelly in Sri Lanka and India.

Sigelman's in a sunrise business that has grown explosively since the turn of the century. But Lynch has always turned his focus on more old-fashioned industries. He had his ups and downs from the time he came to India in the early 90s but hit the jackpot in recent years.

His Paracor Capital Advisers has partnered Foster's beer in India and also Cookieman, an Australian cookie retailing company. That's a pretty varied portfolio but, in addition, it has recently teamed up with American firm Archer Daniels Midland to start a commodities and derivatives brokerage here. It also owns a small travel agency. "There are so many opportunities here," Lynch says.

Paracor has a slightly unorthodox style of operations. It persuaded Foster's to try the Indian market and then took a stake in the venture and offered management advice. It pulled out of the venture last year and Foster's has recently sold its Indian operations to South African liquor giant SABMiller for US$120 million.

Lynch has also, in recent months, turned his attention to expanding the cookie business. Cookieman shops and counters are being set up in the new malls that are blossoming all over urban India. He's hoping to have 35 outlets in 10 cities by year end. The company also has the green light to offer the over-the-counter cookie experience at several airports.

What made Lynch and his team take a bite of the cookie business? Market surveys showed biscuits were a US$500 million business in India and that growth was more than 20 per cent a year. Plus they reckoned Indians would be now able to afford Cookieman's prices.

"There's a segment of society where the housewife doesn't mind paying more if it's value for money," says Lynch.

Lynch, who in an earlier incarnation worked with Ernst & Young, reckons that it's still tough to do business in India but it has become easier. "The environment is quite good. The policies have been really reformed and are easy to understand."

But he throws in a word of caution for potential investors from abroad. "Don't think the Indian consumer will buy you because you are foreign. It doesn't work like that," he says.

When Sigelman - who studied at Princeton and the Harvard Business School - first announced that he was going to do business in India, his mother was terribly alarmed that he would soon be jobless.

Instead, for Sigelman and Lynch, India has turned out to be the land of opportunity. And they've shown that it's possible to come up trumps if you play your cards right.