Growing Big Without Breaking

Second shift before second shed

The broker in Chakan, a cheerful man called Londhe who wore two mobile phones on his belt, had found me half an acre off the Talegaon road for ₹96 lakh. A builder I trusted had quoted ₹58 lakh more for a shed with a 9-metre roof. I had already spoken to the bank. In my head the new factory existed, down to the colour of the gate.

What I had not done was count the hours my existing machines stood still.

That night on the balcony I took a hotel notepad and wrote down the corrugator's day as it actually was. It started at 8 a.m. after warm-up, stopped for lunch, ran until about 7.30 p.m. and then did nothing for twelve and a half hours. Nine and a half hours of running in a twenty-four-hour day. I was about to borrow more than ₹1.5 crore to buy a second building because the first one was full. It was full of a machine that slept for half its life.

I came home and did the sum properly, with Sunita checking my figures because she did not trust holiday arithmetic.

	Second shed (Chakan)	Second shift (Bhosari)
Land and building	₹1.54 crore	Nil
New machines	₹38 lakh	Nil
Extra monthly cost	EMI about ₹2.9 lakh, plus staff and power	About ₹2.4 lakh: 9 people, power, one supervisor
Extra corrugator hours	Depends on orders	6.5 hours a day
Time to start	14 to 18 months	6 weeks

The extra six and a half hours were about 68 per cent more capacity on my bottleneck machine. That number was the whole argument. I knew that capacity was not the same as orders, and I said so to myself several times. But the two dispatch dates I was about to miss told me the orders were already there.

The rule I now give everyone is simple to say: run your existing machines sixteen hours a day before you spend money on land or walls. Sixteen, not twenty-four. You need the remaining hours for maintenance, cleaning and the changeover mistakes a tired night crew will make.

The second shift is harder than it looks, and I underestimated three things.

• Supervision. A night shift without someone who can decide is a day shift's scrap pile. Ganesh asked for the job. He had run dispatch for four years and knew every customer's grade card. I paid him ₹4,000 a month more and gave him the who-decides list with his name on more lines.
• Safety and transport. Workers finishing at 1 a.m. in Bhosari need a way home. I hired a tempo traveller at ₹19,000 a month. The insurance and the first-aid box had to be rechecked for night hours.
• Power. MSEDCL bills differ by time of day, and the night rate in 2012 actually helped me. Check your own tariff, because I do not know how the time-of-day structure will move in your state.

The first month's night scrap was 6.1 per cent against 2.9 in the day. It took until the third month to get under 4. The Morning Sheet grew a second column, one for each shift, and the Monday review started with whichever column looked worse.

I rang Londhe in July to say I was not buying. He told me the plot would be gone within a week. He rang again in December, and in 2014, to say it was still available.

Next door, not next town

Once the night shift settled, the question changed. The machines had hours to sell, so what else could they make?

My first answer was wrong, and it cost me about ₹7 lakh. In 2013 several box customers asked whether I could also supply BOPP tape and stretch film, since my tempo was coming to their gate anyway. It sounded sensible. Same buyers, same delivery, one more line on the invoice. But I made neither product. I bought them from a dealer in Bhiwandi, added 9 per cent, and gave the same sixty-day terms my boxes carried. Within eight months I had ₹7 lakh tied up in tape rolls and receivables for a product that earned me less per rupee than a single sheet of kraft. Sunita called it "the shop," and she did not mean it kindly. I closed it in 2014.

The test I use now has two parts, and a new product should pass at least one of them before I give it a second look:

• Same machine. It runs on equipment I already own, in hours that are currently idle.
• Same buyer. It goes to customers who already pay me on time, through a purchase officer who already knows my name.

When a product passes both, I move fast. In 2014 the Gokhale company asked about die-cut partitions to keep impellers apart inside the pump carton. The corrugator was already making the board. The offcuts we had been selling to the kabadiwala at ₹11 a kilo were the right size for small partitions. Partitions now bring in about 8 per cent of our sales, and part of that comes from what used to be scrap.

Meena found her own version within a month. Her mixing tank was idle every afternoon, and the nursing home taking her phenyl also bought toilet cleaner from someone in Malegaon. She added it in October without spending a rupee on equipment.

The loan and the ratio

Some growth really does need a machine. By 2016 both shifts were full and printed boxes were being sent out for flexo printing at ₹1.10 a box. A printer-slotter cost ₹42 lakh. This time I worked out the debt-service coverage ratio before I went to the bank. Bankers call it DSCR. It means the cash the business earns in a year, divided by the loan repayments due in that year.

	Expected year	Bad year
Net profit	₹14.0 lakh	₹7.0 lakh
Add depreciation	₹6.0 lakh	₹6.0 lakh
Add interest	₹4.2 lakh	₹4.2 lakh
Cash available	₹24.2 lakh	₹17.2 lakh
Principal (5 years) plus interest	₹12.6 lakh	₹12.6 lakh
DSCR	1.92	1.37

Most banks want at least 1.25 to 1.5. The officer at our branch, Mrs Rao, looked at the first column and nodded. I asked her to look at the second. That is where my own rule comes in: the bad year must stay above 1.25. I build the bad-year column from the worst thing that has actually happened to me. The kraft jump in 2021 took 11 per cent off my margin in six weeks, and I would not have survived that on a loan whose numbers only worked in a good year.

If your bad-year figure comes out under 1.25, keep running the second shift and wait another year.

The printer-slotter arrived in March 2017. It still prints the Gokhale logo in a blue that their quality engineer once rejected as "slightly hopeful."

Whose name goes on the box

I have never built a brand, and for a long time I was faintly embarrassed about it. Every carton that leaves Bhosari carries someone else's logo. Biscuits, pumps, poha, ceiling fans. Nobody in a kirana shop has heard of me, and nobody needs to.

A brand is worth paying for only when the person who chooses the product is not a purchase officer reading a specification. Meena's phenyl went to nursing homes and hotels for its first year. Their housekeeping heads bought on price and smell, and a printed name would not have changed a single order. Then Kishore's shops in Sinnar and Igatpuri began selling one-litre bottles to households. A woman picking between three bottles on a shelf does notice a name. Meena called it Aai, which means mother in Marathi. She spent ₹38,000 on a label design and a trademark filing, and nothing at all on advertising.

My rule is that a brand comes after repeat sales through shops, never before. If the shopkeeper is not reordering an unbranded product, a logo will not rescue it.

The first container

Most small units should not export directly. You need an Import Export Code, a freight forwarder, a buyer abroad who will pay against documents, and the patience to wait while a container sits at Nhava Sheva. A merchant exporter takes all of that off you. He buys from you in India, in rupees, and ships under his own name.

Harpreet did his first export this way in 2023. A Delhi merchant exporter supplying a hydraulics distributor in Sharjah wanted 6,000 pins to Harpreet's existing drawing. Harpreet invoiced at 0.1 per cent GST under the concessional rate for supplies to merchant exporters. The exporter then had ninety days to ship, or Harpreet would be liable for the full rate. Check the current notification before you rely on it, because I have seen these schemes change with very little warning. He accepted a price about 7 per cent below his domestic rate. I told him that was the cost of not learning letters of credit at twenty-nine, and I thought it was cheap.

Two things matter more than the price:

• Payment terms in writing. Harpreet asked for thirty days. The exporter wanted sixty. They settled on forty-five, with half paid on dispatch.
• Packing to the exporter's standard. The pins went in VCI bags, an anti-rust film, inside 7-ply cartons. I made the cartons.

Paid for turning up

In April 2022, with kraft still high, I asked every customer for a 6 per cent increase. Most agreed after some grumbling. The Gokhale company's purchase head, Mr Phadke, agreed within a day. Another box supplier on their list had asked for 4 per cent, and he got 2.

I asked Phadke why. He turned his monitor towards me and showed me the vendor rating screen. My on-time delivery over the previous twelve months was 98.4 per cent and my rejection rate was 0.3 per cent. The other supplier's on-time figure was 81.

"You are not the cheapest," he said. "You are the one I don't have to ring."

Since 2012 the Morning Sheet has carried a line I added after the Kerala trip: dispatches due yesterday, dispatches made yesterday. Most mornings the two numbers match. On the mornings they don't, the reason goes in the margin in Ganesh's handwriting, and that is usually where the Monday review starts. That line is how I came to be the supplier Phadke doesn't have to ring.

Phadke printed the screen for me. It is pinned beside the dispatch board, and it has begun to curl at the corners.

Worth something after you

The first factory I ever bought was worth exactly what its machines would fetch. Vilas sold me a slotter and a rotary cutter for ₹3.8 lakh, and that was the whole sale. His customers, his know-how and eleven years of work went for nothing, because none of it could be separated from him and none of it was written down.

I thought about him a great deal in 2022, when a friend I will call Deepak (not his real name) tried to sell his injection-moulding unit in Chakan. He had nine machines, thirty-one workers and a profit of about ₹40 lakh a year. A Gujarat packaging group sent a chartered accountant and an operations man to look it over. They stayed four days.

The accountant asked for three things on the first morning: audited accounts for three years, GST returns for the same period, and bank statements. Then he laid them side by side. Deepak had been taking part of his scrap sales and some small cash orders outside the books for years, as many owners do, and the GST turnover did not match the bank credits. The gap was about ₹18 lakh a year.

"Then your profit is what the papers say," the accountant said. "Not what you say."

The operations man spent his days on the floor. He asked the shift supervisor how a mould was changed on the 250-tonne machine. The supervisor said Deepak usually came down for that. He asked for the customer list. One appliance maker in Ranjangaon took 47 per cent of sales. He asked where the maintenance records were. They were in Deepak's head, which cannot be included in a sale.

The offer came in at a little under two and a half times the declared profit, plus the written-down value of the machines. Deepak had been expecting four. He did not sell. I do not know what the right multiple for a unit like his is, and I distrust anyone who tells you there is a standard one. But I know what pulled his number down, and none of it was the machines.

What a buyer pays for, as far as I can tell from Deepak and from two other sales I have watched closely, comes down to this:

• Books that agree with each other. Turnover in the accounts, the GST returns and the bank statements should match without anyone having to explain.
• No customer above 25 per cent. That rule from Chapter One protects your cash flow while you run the place. It also protects your price when you leave.
• Processes on paper. A buyer is not purchasing your skill. He needs to see that the skill already lives somewhere else.
• A floor that runs without the owner. The who-decides list, the maintenance cards and the Morning Sheet are more than habits. They are evidence.

After Deepak's four days I walked my own floor with a notebook and pretended to be the Gujarat operations man. Ganesh had written changeover instructions for the corrugator in 2014, in Marathi and in his own block capitals, and they were laminated and hanging on a hook by the control panel. The printer-slotter had nothing. The glue kitchen had nothing. The process for qualifying a new kraft mill existed only as a conversation between me and Sunita.

It took us until the following March to write the rest. Sunita keeps the folders in a steel almirah behind her desk, forty-three of them, each with a coloured spine. Last year my daughter took one down, the one marked Gokhale — specifications and complaints, 2009 onwards, and read it at Sunita's desk for most of an afternoon without saying a word to me.

Monday, 3 March 2025

The dispatch board hangs on the wall at the bottom of the stairs, so I pass it on the way to my office and again on the way down. It is a whiteboard, 1.2 metres by 2.4, bought in 2012 for ₹3,100 after the Kerala trip, with columns drawn in permanent marker: customer, carton code, quantity, vehicle, due time, done. Ganesh fills it in at 6.30 every morning before the day shift arrives. He uses a blue pen for the board and red for anything late.

That Monday it had fourteen lines and no red.

The Gokhale company was at the top, 2,400 pump cartons on a Tata 407 due at 11 a.m., which is the order this book has followed more than any other. Below it was the poha maker who nearly lost me in 2006, now taking his 31,000 cartons a month in four drops, this one 7,800. Rakesh's display boxes, 3,000. Two lines for customers I took on in 2023 and cannot yet promise you will last. Near the bottom, in Ganesh's capitals, was NASHIK — MEENA — 5L PHENYL CTN — 1,200. She had sent her own vehicle. She does not take credit from me and I do not give it to her, and we are both quite pleased about that.

My daughter came down at about 9.40 with two cups of tea and stood reading the board as if it were a newspaper. She had been home for a week. On the Saturday she had asked me why the Gokhale folder had three complaints in 2009 and none after 2011, and I had talked for an hour, which I am told is a habit of mine.

"Who decides the order of the trucks?" she said.

"Ganesh."

"Not you?"

"Not since 2012."

She nodded at that and drank her tea. I waited for the next question, the one about whether I wanted her to take this on, or whether she wanted it, and I had a sentence ready that I had been rehearsing since roughly Diwali. She did not ask it. She asked what VCI meant, because she had seen the word on Harpreet's packing note pinned beside the board, and I told her.

I do not know what she will choose. I have decided not to ask her before she asks me, which may be wisdom or may be cowardice; Sunita has opinions on which. If she says no, the folders are written, the books agree with each other, and nobody takes more than 22 per cent of what we make. The place will be worth something to someone. I would rather it were her.

At 10.52 the 407 for the Gokhale company backed up to the dock. Buddha was running on the far side of the floor, the slotter I bought from Vilas twenty-one years ago almost to the week, feeding sheets for an order that would go out on Thursday. It still knocks slightly on the return stroke. Ganesh says it always has.

At 11.04 he walked over to the board, uncapped the blue pen and put a tick in the last column. Then he looked at the clock, wrote 4 min in small letters beside it, and went back to the dock to count the next pallet.