Bankruptcy, experience, and wisdom: Hemant Jalan's Indigo Paints stint is not for the faint-hearted

We have come a long way. But we have a long way to go.” Hemant Jalan, chairman and managing director, Indigo Paints
Image: Varun Kulkarni for Forbes India

You want to start a venture. Right? And your heart says that you are not cut out for a job. Okay, so before you take the plunge, why don’t you ask a question and see if you are fit for entrepreneurship? “Step back for 5 minutes,” urges Hemant Jalan, 63, founder of Indigo Paints, to all aspirants whatever age they may be. “Now think, if this venture goes horribly wrong, how far does it set you back?” he asks. Remember, he stresses, the venture doesn’t only go wrong. “It goes horribly wrong.”
 
Back in 1985, a young Jalan—in his late 20s—didn’t ask this question. In fact, it never crossed his mind. “I had brash confidence, and had succeeded in everything till then,” he recalls. After completing his BTech in chemical engineering from IIT-Kanpur, Jalan went on finish his master’s from Stanford University and an MBA from Chicago Booth School of Business. Armed with degrees and knowledge, he set up a couple of small-and-medium-sized chemical manufacturing companies in Patna. Twenties, he reckons, is more likely an expected age to turn founder.

A decade later, in 1995, he encountered technical problems in his manufacturing equipment. “The largest unit that I had set up completely failed. It was a big fiasco,” he recounts. The setback was massive. Jalan was driven to the brink of bankruptcy, and was forced to sell all his assets, including his house and car. “I was left with nothing,” he rues, adding that the trauma was not over; he still owed a lot of money to banks.

With his entrepreneurial dream turning into a nightmare, the 38-year-old started hunting for a job. “To keep the family running, forgetting about entrepreneurship was the only sensible thing to do,” he says, justifying his move. In early 1996, he joined Sterlite Industries and headed their copper smelter division in Tuticorin, Tamil Nadu. He worked for three years. “It was an excellent experience. I learnt a lot,” he says, adding that professionally he was quite happy and satisfied.

The problem, though, was with his heart. It was panting for an independent journey. “It was not in my DNA to take instructions from someone,” he says, alluding to his stint as an employee which was coming after a decade of staying fiercely free as a master. At times, his job made him feel a bit stifled. In early 1999, he quit, and was staring at an uncertain future. What he only cared about was the voice from his heart which kept on reminding him that he is not cut out for a job.

Next, he shifted to Pune, Maharashtra, and worked as management consultant for a year. The short stint helped him gather his thoughts, discover that he still had a small chemical unit in some kind of working condition in Patna, and decide about his future. In 2000, he started Indigo Paints. “I had no clue where this journey would take me,” he confesses.

He stayed bold, and took the plunge. Jalan was 43, had two children—daughter was 17, and son 13—and didn’t have enough to invest in the venture. “I started with less than a lakh,” he says, adding that he knew that 43 was not the ideal age to restart. “Age mattered because of the previous failure. Starting again from scratch was a huge risk,” he recalls.
 
Fast forward to 2021. Jalan is 63 now; Indigo Paints is two-decades old; it got listed early this year and is now trading at around 50 percent more than the offer price; it is also the fifth largest decorative paints brand in India, and posted a revenue of ₹723.32 crore and an Ebitda of ₹122.52 crore for FY21. “I just followed my heart,” he says. If your heart, he underlines, says that you can do it, then you can.

During the early years, many a times, Jalan’s heart was in his mouth. The paint industry was dominated by the big boys—Asian Paints, Berger and Nerolac. Taking the biggies head-on would have been disastrous. Jalan made a clutch of smart moves. First, he stayed away from the cluttered top cities. Second, he found his niche in differentiated products. And lastly, he tapped into tier 3 and beyond markets. The reason was simple. Brand penetration is easier, and dealers have a greater ability to influence customer purchase decisions.


 

What also helped Jalan immensely was his experience during his Sterlite days. The biggest learning was to keep fixed costs down to an absolute minimum, and keep everything variable as much as possible. “When we started, we didn’t invest in land, building or anything,” he recalls. The gritty founder identified a closed industrial unit, just set up a skeletal plant and machinery at a low cost and started manufacturing. The idea was to test the waters, and take calculated steps and risks. “If things went wrong, we knew we could easily walk away without much damage,” he says, justifying his safe play.

The seasoned entrepreneur also decided to play by the book. “We ensured that we made tidy profits every month and never went into a loss,” he says. The move again made sense. Apart from instilling fiscal discipline, Jalan didn’t have the comfort of venture capital during the early days. At times, the monthly profit was as low as ₹2,000, but it hardly mattered. “We were not bleeding. That is what mattered the most,” he says, adding that while staying frugal might have pushed back Indigo Paints in terms of speed, it ensured that the foundations were rock solid. This also meant that Jalan didn’t have to think of fear of failure as he was continuously covering his ground.

After six years, for Jalan and Indigo Paints, it was not a question of survival. The point was to gather pace. “It took us 10 years before we could start paying salaries on time,” he says. The brash confidence of the 20s, he underlines, now got tempered with high doses of reality.

“I could not afford to make a mistake for the second time,” he says. He knew the cost of failure was incalculable at his age. The sedate pace of Indigo Paints was also due to another ground reality. Jalan explains. When you have children growing up, who are entering college, your perspective changes. “You can’t put their future at stake,” he says. The hope of a promising future kept him going.

In 2014, 14 years into his second innings, came the turning point. Sequoia Capital spotted the company and backed the founder. “It changed the game completely for us,” contends Jalan, who now had the money to advertise. The founder, though, didn’t paint the town red. The reason again emanated from his past. “Now we understood the value of money much more,” he says, explaining how he has been different from a rash of young entrepreneurs who have built their business around raising and burning money. “Most of the money invested by Sequoia is still lying untouched,” he claims. While to an outsider it might look foolish, to Jalan, it was prudent. The money, he explains, acted as a buffer and allowed him to take some bolder risks. “We had our back covered,” he smiles.

Cut to 2021. Jalan reckons that he has had a hard but satisfying journey. Ask him how he managed to put his disastrous past behind and muster courage to start again in his 40s, and pat comes a one-word reply: Future. “If you keep thinking and brooding about your failures, then you are dead,” he says. Starting late in life, he stresses, is not a problem. He dishes out an example of Falguni Nayar of Nykaa. Imagine how difficult it would have been for her to start as a founder as she didn’t even have an entrepreneurial background, he wonders. “In my case, I had been an entrepreneur for almost all my life, except for three years,” he says, adding that his failure has shaped his success.

A big failure, he reckons, is the greatest learning, and a huge blessing. When it happens, it feels like the end of the world. But later, when one introspects, one can see how hard lessons pave the way for future success. One might be justified in accusing circumstances, but the unkind blows are blessings in disguise. “It helped me make more right decisions than wrong ones at Indigo,” he says.

So what does it take to turn an entrepreneur? Jalan goes back to where he started, and replies to the question he posed to all aspirants: “What if things go horribly wrong?” If the setback, he stresses, is something that can be painfully endured and sets one back by a few years, then one must take the plunge. But if one is putting everything at stake and the gambit can raze one down to the ground, then it’s probably not a great idea, he says, sounding a word of caution.

“Evaluate the stakes involved, and if your heart still says you can do it, then go ahead and do it,” he says. “Nothing is more satisfying than being a successful entrepreneur,” reckons the seasoned founder who is still hungry to add more colours to his business.