CASE 2 IT’S ALL ABOUT MONEY, HONEY

Nirmal Jain came from a family of commodity traders. Over the years, they had made
and lost large sums of money. After completing his post graduation from IIM
Ahmedabad, he decided to start his own venture rather than take up a job in the corporate
world. Starting Probity Research, an equity research firm, really paid off. The nineties
was the time the Indian masses had discovered the stock exchange as an investment
vehicle and they needed all the advice they could get to understand this uncertain
environment. By 1999, Probity Research had a turnover of almost one crore and things
were looking good. But Nirmal was not happy; he wanted to try for something much
bigger.

It was around that time that the Internet too was having an impact on business and
society in India. Anybody who knew a little about it was getting into some business based
on the Net in the fear of missing out on something big. Nirmal too was excited about this
new medium of communicating and doing business. He took a big risk and put all his
content online by launching ‘Indianinfoline.com.’ This put an end to the way he was
conducting his business and opened up entirely new possibilities. Not everyone was
convinced that he was on the right track. Many members of his top management at
Probity Research left him and his family was apprehensive that he had prematurely
ended a good business.

Initially things seem to have worked out for better. Even though he had not started
making profits,’ Indiainfoline ‘was making a name for itself and was able to gain very
high visibility in the rich circles. He was attracting interest from banks and venture
capitalist alike. Indiainfoline became the first company to offer e-broking in India and
Nirmal was even contemplating starting a TV channel.

With the dot-com bust, everything seemed to come apart. Good employees left the firm,
financer pulled out and revenues plummeted. The stock market plummeted and that
affected his basic business premise.

As a reaction to the macro-economic changes, he scaled down operations, got rid of all
frills and concentrated on e- broking and financial services. He persevered with his new
business model through some harrowing times and finally things started looking up in
2003. Currently, Indiainfoline has revenues of over Rs.300 Crores and annual profits of
over Rs.60 Crores. Nirmal Jain’s stake in Indiainfoline is likely to be worth over Rs.300
crores.
Questions for Discussions:
1. Do you think Nirmal Jain took a gamble by starting Indiainfoline? Explain.
2. What are the external factors at work which prompted Nirmal Jain to take the plunge?
 CASE 3. PATAGONIA
THE COOLEST COMPANY IN THE WORLD
Y von Chouinard, the 72-year-old founder of Patagonia, an outdoor clothing and
equipment company, calls his company an ‘experiment’. The free flowing work
environment in the office includes barefoot employees, Tibetian prayer flags, and pets
ranging from lizards to owls. He goes on to say, ‘I don’t think we are going to be here 100
years from now as a society, or may be even as a species’.
Yvon’s early years were spent very close to nature; he spent his youth surfing in the
pacific, climbing in Yosemite and trekking on the Rockies. He started making outdoor
equipment to support his freewheeling lifestyle. Along with his wife, Melinda, he
launched his company in 1972. This would be a business on their terms. Products would
be of highest quality and would be manufactured in the most responsible way. It was
Patagonia’s among the first companies in the world to provide onsite daycare, paternity
and maternity leave and flexi time. Long before recycling became a buzzword, Patagonia
was reusing material. In 1993 Patagonia introduced fleece jackets made from discarded
soda bottles. In 1996, it pioneered organic cotton and in the process helped establish the
organic cotton industry. When one of their Japanese suppliers came up with a process by
which used polyester can be endlessly recycled, Patagonia encouraged customers to send
back their worn-out underwear (Patagonia makes a line of polyester lined underwear).
But on the other hand, Patagonia is a profit making company with a turnover of over
$270 million. Even though it is small compared to other players in the industry. Patagonia
has been in the forefront of progressive policies and has earned the respect of much
bigger companies including Walmart.
Financial analysts are very critical of Patagonia’s performance. Revenue growth has been
at a modest 3 to 8 per cent per year in a industry where the leaders are growing much
faster. It had developed a very strong brand but does not have an aggressive marketing
plan to make use of its brand image. Y von and Melinda own 100 per cent of the equity
of the company. Many merchant bankers have made a strong case for growing the capital
base by inviting private equity, growing the company and taking it public. They contend
that in the end, Y von’s stake will be worth much more that it is now. Patagonia has been
called one of the most undervalued companies in the US. Y von is not interested. He feels
that this path will lead to the end of all he stands for.

Questions for Discussion:

1. Do you know of any other companies that have grown from the passion of the
founder? How are they different from other companies?
2. Do you think Y von is being fair to his employees, family, and other business
associates (suppliers and retailers) by refusing to allow his his company to achieve
its financial potential?