GREAT INDIAN - Sarath Babu

The inspiring rags-to-riches story of E Sarath Babu, the IIMA, BITS Pilanialumnus millionaire who at one point of time had to snatch rice grains from an ant because he was so poor and hungry!


Most parts of this answer have been taken from an interview given by E Sarath Babu to rediff.com (A crorepati who lives in a hut!) when he came into limelight for choosing entrepreneurship over safe, money milking jobs that he was offered at IIMA.

When 27-year old Sarathbabu graduated from the Indian Institute of Management, Ahmedabad, he created quite a stir by refusing a job that offered him a huge salary. He preferred to start his own enterprise -- Foodking Catering Service -- in Ahmedabad.
He was inspired by his mother who once sold idlis on the pavements of Chennai, to educate him and his siblings. It was a dream come true, when Infosys co-founder N R Narayana Murthy lit the traditional lamp and inaugurated Sarathbabu's enterprise.

This is how Sarathbabu describes his rise from a Chennai slum to his journey to the nation's premier management institute to becoming a successful entrepreneur. This is his story, in his own words.

Childhood in a slum


I was born and brought up in a slum in Madipakkam in Chennai. I have two elder sisters and two younger brothers and my mother was the sole breadwinner of the family. It was really tough for her to bring up five kids on her meagre salary.
As she had studied till the tenth standard, she got a job under the mid-day meal scheme of the Tamil Nadu government in a school at a salary of Rs 30 a month. She made just one rupee a day for six people.

So, she sold idlis in the mornings. She would then work for the mid-day meal at the school during daytime. In the evenings, she taught at the adult education programme of the Indian government.
She, thus, did three different jobs to bring us up and educate us. Although she didn't say explicitly that we should study well, we knew she was struggling hard to send us to school. I was determined that her hard work should not go in vain.
I was a topper throughout my school days. In the mornings, we went out to sell idlis because people in slums did not come out of their homes to buy idlis. For kids living in a slum, idlis for breakfast is something very special.

Admission to BITS, Pilani


My mother was not aware of institutions like the Birla Institute of Technology and Science, Pilani, or the Indian Institutes of Technology. She only wanted to educate us so that we got a good job. I didn't know what I wanted to do at that time because in my friend-circle, nobody talked about higher education or preparing for the IIT-JEE.
When you constantly worry about the next square meal, you do not dream of becoming a doctor or an engineer. The only thing that was on my mind was to get a good job because my mother was struggling a lot.
I got very good marks in the 10th standard exam. It was the most critical moment of my life. Till the 10th, there was no special fee but for the 11th and the 12th, the fees were Rs 2,000-3,000.
I did book-binding work during the summer vacation and accumulated money for my school fees. When I got plenty of work, I employed 20 other children and all of us did the work together. That was my first real job as an entrepreneur. Once I saw the opportunity, I continued with the work.



Life at BITS, Pilani



A classmate of mine told me about BITS, Pilani. He was confident that I would get admission, as I was the topper. He also told me that on completion (of studies at Pilani), I will definitely get a job.
When I got the admission, I had mixed feelings. On one hand I was excited that for the first time I was going out of Chennai, but there was also a sense of uncertainty.
The fees alone were around Rs 28,000, and I had to get around Rs 42,000. It was huge, huge money for us. And there was no one to help us. Just my mother and sisters. One of my sisters -- they were all married by then -- pawned her jewellery and that's how I paid for the first semester.
My mother then found out about an Indian government scholarship scheme. She sent me the application forms, I applied for the scholarship, and I was successful. So, after the first semester, it was the scholarship that helped me through.
It also helped me to pay my debt (to the sister who had pawned her jewellery). I then borrowed money from my other sister and repaid her when the next scholarship came.
The scholarship, however, covered only the tuition fees. What about the hostel fees and food? Even small things like a washing soap or a toothbrush or a tube of toothpaste was a burden. So, I borrowed more at high rates of interest. The debt grew to a substantial amount by the time I reached the fourth year.


First year at BITS, Pilani


To put it mildly, I was absolutely shocked. Till then, I had moved only with students from poor families. At Pilani, all the students were from the upper class or upper middle class families. Their lifestyle was totally different from mine. The topics they discussed were alien to me. They would talk about the good times they had in school.
On the other hand, my school years were a big struggle. There was this communication problem also as I was not conversant in English then.
I just kept quiet and observed them. I concentrated only on my studies because back home so many people had sacrificed for me. And, it took a really long time -- till the end of the first year -- to make friends.



The successive years

I became a little more confident and started opening up. I had worked really hard for the engineering exhibition during the first year. I did a lot of labour-intensive work like welding and cutting, though my subject was chemical engineering. My seniors appreciated me.
In my second year also, I worked really hard for the engineering exhibition. This time, my juniors appreciated me, and they became my close friends, so close that they would be at my beck and call.
In the third year, when there was an election for the post of the co-ordinator for the exhibition, my juniors wanted me to contest. Thanks to their efforts I was unanimously elected. That was my first experience of being in the limelight. It was also quite an experience to handle around 100 students.
Seeing my work, slowly my batch mates also came to the fold. All of them said I lead the team very well.

They also told me that I could be a good manager and asked me to do MBA. That was the first time I heard about something called MBA. I asked them about the best institution in India. They said, the Indian Institutes of Management. Then, I decided if I was going to study MBA, it should be at one of the IIMs, and nowhere else.


Inspiration to be an entrepreneur


It was while preparing for the Common Admission Test that I read in the papers that 30 per cent of India's population does not get two meals a day. I know how it feels to be hungry. What should be done to help them, I wondered.
I also read about Infosys and Narayana Murthy, Reliance and Ambani. Reliance employed 20,000-25,000 people at that time, and Infosys, around 15,000. When a single entrepreneur like Ambani employed 25,000 people, he was supporting the family, of four or five, of each employee. So he was taking care of 100,000 people indirectly. I felt I, too, should become an entrepreneur.

But, my mother was waiting for her engineer son to get a job, pay all the debts, build a pucca house and take care of her. And here I was dreaming about starting my own enterprise. I decided to go for a campus interview, and got a job with Polaris. I also sat for CAT but I failed to clear it in my first attempt.
I worked for 30 months at Polaris. By then, I could pay off all the debts but I hadn't built a proper house for my mother. But I decided to pursue my dream. When I took CAT for the third time, I cleared it and got calls from all the six IIMs. I got admission at IIM, Ahmedabad.


Life at IIM, Ahmedabad


My college helped me get a scholarship for the two years that I was at IIM. Unlike in BITS, I was more confident and life at IIM was fantastic. I took up a lot of responsibilities in the college. I was in the mess committee in the first year and in the second year; I was elected the mess secretary.


Becoming an entrepreneur


By the end of the second year, there were many lucrative job offers coming our way, but in my mind I was determined to start something on my own. But back home, I didn't have a house. It was a difficult decision to say 'no' to offers that gave you Rs 800,000 a year. But I was clear in my mind even while I knew the hard realities back home.



Yes, my mother had been an entrepreneur, and subconsciously, she must have inspired me. My inspirations were also (Dhirubhai) Ambani and Narayana Murthy. I knew I was not aiming at something unachievable. I got the courage from them to start my own enterprise.
Nobody at my institute discouraged me. In fact, at least 30-40 students at the IIM wanted to be entrepreneurs. And we used to discuss about ideas all the time. My last option was to take up a job.

My mother is my first inspiration to start a food business. Remember I started my life selling idlis in my slum. Then of course, my experience as the mess secretary at IIM-A was the second inspiration. I must have handled at least a thousand complaints and a thousand suggestions at that time. Every time I solved a problem, they thanked me.

 I also felt there is a good opportunity in the food business. If you notice, a lot of people who work in the food business come from the weaker sections of the society.
My friends helped me with registering the company with a capital of Rs 100,000. Because of the IIM brand and also because of the media attention, I could take a loan from the bank without any problem.
I set up an office and employed three persons. The first order was from a software company in Ahmedabad. They wanted us to supply tea, coffee and snacks. We transported the items in an auto.
When I got the order from IIM, Ahmedabad, I took a loan of Rs 11 lakhs (Rs 1.1 million) and started a kitchen. So, my initial capital was Rs 11.75 lakhs (Rs 1.17 million).
Three months had passed, and now we had forty employees and four clients -- IIM Ahmedabad, Darpana Academy, Gujarat Energy Research Management Institute and System Plus.
In the first month of our operation, we earned around Rs 35,000. Now, the turnover is around Rs 250,000. The Chennai operations would start in another three months' time.

The entrepreneurial struggle .
My first unit was at IIM, Ahmedabad. When we started our second unit in October 2006, I thought now I would start making money. But I made losses of around Rs 2000 a day. A first generation entrepreneur cannot afford such a loss. But I worked really hard, working till 3 a.m. in the morning. What reduced my losses were the birthday party offers.

 

I started the third unit again in Ahmedabad but it also made losses. All my units were cafeteria and I understood then that the small cafeterias do not work; I needed huge volumes to work. My friends who were extremely supportive in the first year when things were difficult for me. I had taken loans from my IIM-A friends. They were earning very well.
In December 2006, an IIM Ahmedabad alumni event took place in Mumbai and I decided to go there mainly to get a contract. I was hopeful of getting it. I also knew that if I got the huge contract, I would come out of all the losses I had been incurring.

I booked my train ticket from Ahmedabad to Mumbai for Rs 300 and I had Rs 200 in my hand. As the meet went on till late at night, I could reach the station only at midnight. I missed the train. I decided to sit on the platform till the morning and travel by the next train in the morning. I didn't have the money to check into a hotel. I didn't want to disturb any of my friends so late at night.

It was an unforgettable night as I was even shoved off by policemen from the platform. It was quite insulting and embarrassing. After two hours, people started moving in, I also went in.

A man who sat next to me on the platform gave me a newspaper so that I could sleep. I spread the newspaper and slept on the platform! I slept well. I got my ticket refund in the morning and went back to Ahmedabad. And, luck did not favour me, I didn't get the contract.

In March 2007, I got an offer to start a unit at BITS, Pilani (Sarathbabu was an alumnus of BITS, Pilani). That was the first medium break for me. For the first time, I started making profits there though the other units continued to make losses. The reason for our success at BITS, Pilani was the volume; there were more students and there was a need for a unit like ours while in Ahmedabad, they have at least a hundred options.
If I made Rs 5000 a day at Ahmedabad in two shifts, here I made Rs 15,000 a day. BITS, Pilani unit gave me the confidence to move on. Unless you make money, you can't be confident in business.

Decision to stay in the venture

When all my friends who worked for various MNCs made good money every month and I made losses with my venture. But I kept telling myself, I am moving in the right direction to reach my ambition and vision. My dream was to provide employment and I was doing just that. I continued to work till 3 a.m. but I never felt tired.
Through BITS, Pilani, I got the BITS, Goa contract and that was the biggest break for me. It was not a cafeteria like the earlier ones but the dining hall that we got. We had to feed 1300 students. We started our operations in July 2007. At Rs 50, for 1300 students, our sales was Rs 65,000 per day. We soon started making a profit of Rs 10 to 15,000 a day. Around 60 to 70 people work there. I gave the charge of the Ahmedabad operations to one of my managers and moved to Goa.

I was still in debt by Rs 15-20 lakhs but I knew BITS, Goa would keep my dream alive. Within six months of starting our operations in Goa, I repaid all my debt.
I was called to give a speech at the SRM Deemed University. After the speech, I asked the Chancellor, can you give me an opportunity to serve in your campus? He said, "If not you, to whom will I give such an opportunity?" It's a food court but a big one, similar to the one at BITS, Pilani. There were around 17,000 students there.
Now, I had the BITS, Hyderabad contract, ready to start in July 2008. Other than the six units, I have approached a few more universities and corporate houses too. In the first year, I had made a loss of Rs 25 lakh. Two years later, we have a turnover of Rs 32 lakh every month, which works out to 3.5 crore (Rs 35 million) a year.

I then hired about 200 people. Indirectly, we touched the lives of around 1000 people. By the year end, we had 500 people working for us. Only 10% of my workers were educated, the rest were uneducateed. I wanted to make a change in their lives. If they had any problem, I would take care of it. We supported the marriages and education of poor families. We are paying more to the employees as the company is doing well. Now that the foundation is strong, I plan to have ten units and a turnover of Rs 20 crore (Rs 200 million) turnover by next year.


The bamboo walls have been replaced with brick, and what was once a slum has improved over the years.

But Sarath Babu, 31, still lives with his mother in the hut she raised him in, in the Indian city of Chennai.

Despite his shiny shirt, Blackberry and beloved Chevrolet, he has few of the trappings of a graduate of one India's top management schools - despite the fact he now employs 250 people in his fast-growing catering empire.

He has set himself the target of providing for half a million people, by creating 100,000 (known as one lakh) jobs.

"I give a job, and that person takes care of four to five people - so I take care of five lakh people directly," he says.
He still regularly visits a slum similar to the one where he and his sister used to sell idlis - steamed rice cakes - made by his mother.

But although he has been offered salaries of up to $33,000 (£21,050) a year - highly paid in Indian terms - he says he never saw turning down employment and starting the business as a risk.

"What is risk? It's risk to lifestyle. Having come from the slum, with absolutely nothing… there is absolutely no risk for me."