A Vault of Resilience

By Pooja Kothari

Each time we hit a crisis, our desire to succeed becomes stronger and we come out stronger, ” says Rohit Kapoor (R) of the company he has built with Vikram Talwar (L)

Vikram Talwar walks in, dollar notes sticking out of his back pocket, into his office suite in one of the many office buildings that his firm, EXL Service, has in Noida—a commercial suburb of Delhi. Point that out to him and he shrugs it off, saying: “I usually have five or six currencies on me.”

A few details later, you realise why. He’s quite a globe-trotter—he spent just two months in Delhi last year, despite being based here. “I have spent most part of the year in hotel rooms. And I love it. It isn’t easy to do. But it helps the company become successful because I am in front of the clients more than my counterparts can be,” he adds, disarmingly.

It’s difficult not to be surprised by this joie de vivre from a man in his early sixties, and more importantly, in someone who has been working since 1970, and still loves coming to work every day—to feel “the thrill of a sale”. Talwar’s decision to walk the minefield called entrepreneurship at the age of 50 was as unusual as his desire to be in front of the customer even today.

“The day I get bored, I’ll walk out,” declares the executive chairman, flashing a bright smile. For now, Talwar isn’t budging from his corner suite, which he shares with his partner, Rohit Kapoor, chief executive officer and president of EXL, whenever the latter is in town from New York. “Both Rohit and I wanted to build something—a brand, a company; and we have achieved that. We are not in the market to sell this company. Having built it to the level it is, we have an emotional attachment,” adds Talwar.

That doesn’t sound very entrepreneurial, you think. Nine out of 10 entrepreneurs in their position would have sold off the company by now. The scene is a tad different here. The founders are still happy coming to work every day; Talwar to pitch their outsourcing services to clients; Kapoor to run the show globally. A deal closed still manages to flutter their hearts, much as start-ups feel in their initial years.

May be, it has something to do with their lives before EXL. They were both bankers; Talwar for 26 years with the Bank of America (BoA), which he joined straight out of IIM, Ahmedabad in 1970, and Kapoor for more than a decade. In fact, they met as bankers, when Talwar interviewed the young Kapoor for a position at BoA in India. But more on that later.

“Business as usual is not as exciting, or creative enough for most entrepreneurs. It becomes bureaucratic; but then, between Rohit and me, we have seen what it is to run a corporate entity,” laughs Talwar.

He has a supporter in Sanjeev Aggarwal, managing director, Helion Advisors, a private equity fund: “Founders who have been CEOs and company executives are better at navigating the scale-up phase than they are at the start-up phase, when everything is about boot-strapping. Having navigated the tougher part of the journey, what happens next is second nature to them.”

Aggarwal is also a veteran of the business process outsourcing industry in which EXL operates. In fact, Daksh, the company he founded and later sold to IBM, was built around the same time as EXL and Spectramind—another success story of that time which was sold to Wipro. Talwar and Kapoor, however, have chosen to stay on—a decade after they started out on their entrepreneurial journey.

And what a ride it has been!

Neither Talwar nor Kapoor had envisioned entrepreneurship in their matrix of career possibilities. Both belonged to middle-class families, where most members strived to achieve the security tagged to service. “When I told my father I wanted to do an MBA, he wanted to know what the hell that was,” recalls Talwar.

They weren’t friends either. Talwar, 15 years older than Kapoor, had at one point hired him. They weren’t even working together after some years, but joined forces to test the waters of entrepreneurship. They tried several things before EXL. When reforms rolled into India by the mid-nineties, opening up the banking sector, the first thing the duo did was to build a business plan to set up a non-banking financial company, along the lines of Kotak. The plan, however, failed to lure investors. Not ones to give up, they tried again a few years later; except this time they managed to hit the nail—raising US$10 million to establish a private bank. But, “the Asian crisis happened and our funding was withdrawn,” says Kapoor. By then, Talwar was done trying. He gave up his job with BoA and came back to India to “play golf” and look after his ageing parents. Kapoor, meanwhile, moved on to Deutsche Bank.

At 48, Talwar, however, was hardly ready to retire—or, at least his head-hunter wife thought so and found him a new assignment. He joined Ernst & Young in India to set up its technology consulting business, which was later sold to Cap Gemini. During the year and a half that Talwar built the business, he got an insider’s view of the emerging concept of outsourcing. E&Y finally didn’t get in to that space; Talwar did. “I decided to go out there and do it myself. It was a tricky decision. I was nearly 50 years old, hardly an age for taking chances,” says he. But it was also an opportunity to “prove to myself that I could build something of my own”.

The time was just right. India had till then only seen captive, or shared service centres, of global financial biggies, such as GE, Citi and American Express. There were no third-party outsourcing companies. Even the environment was different. The dotcom boom was at its peak and everyone was intent on founding a company out of some idea.

Talwar, along with Kapoor and another colleague from BoA, finally took the plunge, incorporating EXL in 1999. They had an idea that no one had ever tested before. But they believed that the model made sense. “The very large companies could set up their own shop, as GE did. But if you went below that level, or looked at companies that didn’t have an international footprint, it just made sense for them to take up our third-party services. The only hitch was the high cost of telecom,” adds Talwar.

Having decided to bet on all the copper that was being laid all over the world, their next problem was the capital intensive nature of the business. Even before they got a client, they had to have trained people on board, ready technology and a centre operational to deliver the services. Plan A had hinged on the thought that if they could secure “US$2 million”, things would be “in good shape”. Of course, by the time they set up their first centre in Noida, they knew they needed a Plan B. The US$3 million raised from Gary Wendt, the former chairman of GE Capital and a friend of Talwar’s, for which they almost sold the company, barely sustained them. By the time the centre became operational in October 2000, the EXL founders had done a lot more fund-raising in between.

Meanwhile, they also had to change their premise on the business model. They had begun offering email processing services to internet companies. “EXL processed email at a cost of a dollar, as against the cost of US$3. We even got two customers, 1800Flowers and Lifeperson,” recalls Kapoor. But, within a few months, the price of email support dropped down to 10 cents an email. That’s when they decided to experiment with the “non-commoditised end of outsourcing services” and began scouting for transaction-processing work.

Luckily, their association with Wendt, who had by then moved on to Conseco, an insurance company, also got them their first customer. EXL’s relationship with Conseco was such that in August 2001, the insurance company acquired the service provider. Talwar and Kapoor “sold the company for stock” and “felt good” watching the share price of Conseco climb from US$14 a share to US$20.

And then, abruptly, disaster struck. Conseco filed for bankruptcy—and share prices tanked to US$7 a piece. “We had signed an agreement saying we couldn’t sell for three years. Our sold price of US$50 million had suddenly evaporated completely,” recalls Kapoor, who had two young kids to support.

Towards the end of 2002, Talwar and Kapoor found new partners in Oak Hill Capital and FTV, and bought back EXL from Conseco. And that began a new chapter in the history of the company.

The nightmare didn’t end there, though. They had no clients—and 1,500 people on rolls. “Our burn rate was nearly half-a-million dollars a month,” recalls Kapoor. He knew that signing on a new client would take anywhere between “9-12 months”, given the nature of the industry. “We had a difficult decision to make. Do we let go of people we had trained in the hope that it will buy us more time to find a client? Or, do we think ahead and preserve the trained, tested and experienced workforce that was our real marketing edge?” Talwar lays out the dilemma. Ignoring conventional wisdom, they decided to keep the people. The senior management team even got the option of buying shares in the company with their money. Employees were paid to stay at home and the time was used to build training manuals, internal processes and build sales strategies. As Talwar put it, “it was pure risk-taking”.

And the gamble paid rich dividends. By February 2003, Aviva had signed up. The years that followed have been unanimously stamped as the “best times of our lives” by Talwar and Kapoor; and offered them numerous chances to prove themselves–again and again.

Says Helion’s Aggarwal: “I admire their resilience. These guys have been to the brink of a disaster several times, when big customers have left leave them, but they have navigated those challenges and reinvented themselves each time.”

Like, in 2005, when the duo sought exit from its “volatile” relationship with Dell Computers, which accounted for 20 per cent of the firm’s revenue. “It was not the right kind of business for us,” says Kapoor in hindsight. Another time, a build-operate-transfer contract resulted in the client walking away with the assets. “We learnt never to do a BOT deal again,” adds Talwar.

“Each time we hit a crisis, our desire to succeed becomes stronger and we come out stronger,” feels Kapoor.
EXL, which is listed on the Nasdaq, boasts of a global footprint spanning 14 centres across India, Philippines, Czech Republic and Romania. It is now dreaming bigger than ever. “We want to be a half-a-billion-dollar company by revenue,” spells out Kapoor.

In March this year, it announced plans to set up two new centres in India. Prior to this, in 2009, it acquired two companies: the global travel business of American Express, called the Global Travel Service Center; and Schneider Logistics’ back-office operations in the Czech Republic. EXL almost seems to be making up for lost time. Talwar acknowledges that “we could have grown a little faster inorganically and created a global footprint sooner. But Rohit and I have been quite conservative in our approach.”

The path ahead has many options. EXL could either widen the geographies it serves, or add more verticals. With its attention heavily focussed till now on the US and Europe, the Asia-Pacific region would certainly be an area of growth.

Similarly, while the focus on financial services has served them well till now, the future might need them to address more verticals such as telecom, technology, or retail. For either road to growth, the easiest is to grow inorganically through acquisitions, which the company has already started doing.

There’s one other option, though: getting acquired by a large European company that wants to set foot in India. But given Talwar’s love for multiple currencies and the duo’s global nomadic existence, the last is not likely to make it into the EXL matrix any time soon.

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