Monish K Khosla, Promoter, CertifiedCNG is an MBA from Ashland University, Ohio, Khosla’s core forte lies in retail, logistics and telecom. He earlier spent seven years in Toronto working as a Product Manager for tablets in Rogers Communications, the largest consumer company in Canada. KNGC (CertifiedCNG) was founded by Khosla a young entrepreneur from Toronto, Canada, in 2012. Monish hails from a family that has been managing auto retail stores in Mumbai for the last 40 years. He realised the need to establish a professional retail channel that functions as per original equipment manufacture standards. His deep-seated desire to organise th- e CNG market in India has led to the birth of his venture CertifiedCNG.
CertifiedCNG's core business is alternative fuel equipment or CNG kits. It is one of the fastest growing retail chain for CNG conversions, owned by KNGC. The latter is founded by Monish K Khosla, a young entrepreneur from Canada. Its mission is to ignite the use of CNG in private cars and re-invent the CNG buying experience for Indian consumers. CertifiedCNG owns and operates its after-sales network for CNG conversions via its CertifiedCARCARE workshops. It is also spear heading the retro-fitment space with its socket-to-socket fittings and parallel wiring standards. CertifiedCNG offers options in CNG kits along with test drive cars for a hands-on experience. Currently, the company employs around 50 people and expects to ramp this up to 225. The company is looking to convert 16 lakh cars all over India to CNG in the next five years.
In an exclusive interview to IIFL’s Manu Kaushik, Khosla says, "I did my MBA in 2007 just when Barack Obama got elected as US President. The world economy went down the drain in 2008. I felt entrepreneurs were the answer as they truly can bring about a difference by creating businesses, structures, and models for future generations."
How did you decide to venture into this business?
My family has been in the auto retail business for the last 40 years. I did my MBA from the US and worked in Canada as a product manager for seven years in Rogers Communications, which is the largest consumer company in Canada. But I always wanted to come back and start my own venture.
When I came back to India in 2012, after being abroad for eight years, I saw a huge change. I noticed that air pollution has grown manifold. Everybody I spoke to complained about the rising cost of transportation and growing air pollution. My mind kept going back to the air quality we breathe in India and I felt the need to do something about the same. I realised that the only way to bring about a change was to promote cost-saving products and services that will have a direct impact on the environment.
At the same time, I was looking at ways to tap this high-growth potential market in India. I put together a small team in Canada and researched cleaner fuels for 6-8 months. We concluded that CNG was one of those products as it is cleaner, less polluting and cheaper as compared to petrol.
But the problem with CNG had more to do with people’s perception of it and the distribution model. Before we started operations, the only place to buy a CNG kit was from the local garage whose core business was not CNG. The consumer was also apprehensive about quality and reliability. Our local market research showed that people needed a brand they could trust as well as a strong after-sales network was wanting at that time. So, we built a brand that is obsessed with standardising the customer’s buying experience. We concentrated on re-inventing the way people buy CNG kits in India and supported that with our after-sales network.
In nutshell, there were three major factors that drove this decision. Firstly, I come from a business family where the entrepreneurial spirit runs high. Plus, I saw a lot of potential for this business in India. Secondly, pollution was a major concern to me along with the potential risks this kind of air-quality poses. This made me build an impact-based business instead of balance sheet-based business model to address the issue. Lastly, the size and potential for growth of this product is such that it only needs a distribution network and a brand to take-off. This is the whole essence of the business and this is what made me come back to India from Canada.
Some might feel the global recession might have played a part in your returning to India?
No, Canada was hardly touched by recession. I was working for one of the largest companies in Canada, which was cash rich. I came back solely because I believed in this business model and the Indian growth story. I did my MBA in 2007 just when Barack Obama got elected as US President. It was only later that the world economy went down the drain in 2008. During that time, I felt that entrepreneurs were the answer to the problem. They truly can bring about a difference by creating businesses, structures, and models for future generations that are sustainable for the overall society.
When was the company started and how has it done so far?
We began earnestly pursuing this business from July 23, 2012. Our pilot store came up in September. After that, we opened around 10 stores in Mumbai. We formally launched CNG certified brand on July 23.
What were the challenges that you faced initially in starting the venture?
My family has been in the automobile business for the last 40 years. They provided me with the initial contacts and a zero-rental office space for six months. The biggest challenge was to make people understand the operational model of CertifiedCNG.
It was difficult explaining and selling this model to partners. But after running a pilot project in a couple of stores, the model caught up quickly.
How did you overcome those challenges?
Initially, a customer would go to a garage or a retro-fitment center to buy a CNG kit. Our model does away with the garage and separates the booking and sales counter. Our detractors said the model won’t work as customers want to see the car being fitted in front of him. To overcome this, we introduced a service advice counter where a certified sales expert helps the customer pick the right kit for their car. The service advisor picks up the car from the customer's house and after the refitment at the workshop delivers the car back. He then explains to the customer what changes are made to the car. In case of any complaint, we try to fix the car at the customer's place. If the fault is major, we bring back the car to the garage, rectify the problem, and deliver it back at no extra cost.
What is your business model?
Our is primarily a franchise-based model but the mix going forward will be 50% franchise and 50% company operated. Our workshops, which is a separate vertical in the company, will also be franchise-based. Our cloud-based software allows all stores to be connected, so a customer can go to any store and get his complaint resolved. We spent close to a year just to build this model.
What are your plans to grow your business?
We are now looking to open 40 stores and 15 workshops in Mumbai in the next one-two months. Our franchisee partners have already signed up and these stores will come up along with dealerships at Maruti authorised service stations. This will enable us to emerge as the largest CNG fitting and after-sales network in Mumbai.
The goal at present is to perfect the model in Mumbai before rolling it out in different states and cities. We are looking at Delhi, Gujarat and Bangalore. To increase adoption, the presence of a gas station is necessary. There is a new pipeline that is going to connect another 120-140 cities. Once this pipeline is operational, we will be able to pick and choose where we want to go.
Are you in talks with investors given your plans to scale up?
The initial project was entirely funded by me. But given the capital-intensive nature of this business, we are currently scouting for investors.
Has business been affected owing to the downturn in passenger vehicles sales in the last 8 months?
Currently, India has close to 70mn automobiles. Even if we are able to tap 2% of this, it adds up to 14 lakh cars, which is a lot. A lot of OEMs are installing CNG in their line-ups which is changing the perception that CNG is unsafe. So, will this pose a risks to my business? No. At present, the total percentage of factory-fitted CNG vehicles is around 0.3%. This will not rise beyond 10%, even if factory-fitted CNG vehicles are pushed aggressively by OEMs. Hence, the market going forward will only expand for me.
The government has nearly doubled natural gas prices. Will this affect your business?
Petrol prices are also going up because an appreciating dollar affects both CNG and petrol equally. One can save as much as 80% in Mumbai by converting their car to CNG. People buy CNG to save costs, so I don’t think the move will have a material impact on our operations.
Some reports suggested that CNG sales in Gujarat went down by 80% owing to low differences in margins of 2-3% per unit between petrol and CNG. Can you comment on the same?
I was shocked to see gas prices shoot up in Gujarat. The Centre has a different gas policy for Gujarat. It doesn't allow the Gujarat state government to buy gas like other states. This is about to change, so prices will come down in that state. There is a high court order in Gujarat which aims to convert all passenger cars registered in Gujarat to CNG within a year for betterment of life in the state.
What should the government do to boost CNG usage?
India has a lot of untapped CNG reserves. There is huge pressure on the government to tap into it to secure the country’s energy needs and reduce the dependence on oil imports. In the US, the government in some states reimburses 50% of conversion costs in the form of tax credits. Similar such steps could be taken in India to promote CNG usage.
How do you evaluate the penetration of CNG pumps in India?
Mumbai currently has around 100 CNG pumps and Mahanagar Gas plans to add 100 more shortly. Of this, 30% will be installed this year. The company has the potential to expand its service to 20 cities.
How are your CNG kits priced?
We have kits ranging from Rs. 25,000-75,000.
What does a franchise cost?
It takes Rs. 20-35 lakh to set up a franchise.
Can you share some financial figures?
It's just been eight months since the company’s inception. The project is in its initial phase. We have done close to 500 conversions in the model running phase and are aiming to do 2,000 conversions going forward. We are also looking to set up 50 workshops.