Not very long ago in India, securing a telephone connection took a minimum of five years. A couple of decades later, we are running a digital marathon. There are numerous services that are being provided online through the internet, and the demand for online services is ever increasing. Too convenient, isn’t it? The transformation that’s materialising isn’t just remarkable, but highly commendable.
Human beings’ ease in accepting comfortable change is not a matter of dispute. We are so used the abundance of comforts of the new millennium. One of the examples is the communication sector… the ease at which we communicate today is mind blowing! Information and communication through sleek and savvy handheld devices are already widespread, and rapidly growing. What we don’t realise is the fact all of these components mentioned share one very integral thing in common — the Printed Circuit Boards (PCBs).
Saalfo Tech is a start-up which manufactures PCBs and is situated in Mysuru, Karnataka. It is indeed indisputable that this technology is core to our mobile phones. It is but common that many of us are just happy with the end product and seldom wonder about the real ‘work’ which operates the systems – the printed circuit board.
Profile of Saalfo Tech
Saalfo Tech is situated in Belagola Industrial Area, Mysuru. It is one of the top manufacturers and suppliers of PCB assembly units. Their chief customer base and prospects are world leading companies such as L&T, ABB, General Electric, Bosch etc. endorsing the quality process and products by Saalfo Tech. It has taken an investment of more than Rs 10 crore to set this up.
Mr. Ali Khan, one of the promoters of the business, is a rank holder in Masters in Marketing from the University of Mysore. He was placed straight out of the university in AT&S, which is a world renowned leader in high technology manufacturing. His leadership skills and versatility had comfortably asphalted his way to the leadership program in AT&S India /Austria where he worked with several departments. His professional growth knew no bounds when he moved to Rangsons Electronics in Mysore. The company was working on scaling up its production and increasing its turnover. Fortunately for Mr. Ali, he was a part of the turnaround team. The company was extremely successful in turning a Rs. 50 crore company into a Rs. 500 crore company in less than a decade’s time.
A decisive moment in Mr. Ali’s career was when he read a book named “The 4 Disciplines of Execution” by Sean Covey, Chris McChesney and Jim Huling. This led Mr. Ali on an introspection ride. Coupled with skills and experience, he finally created M/s. Saalfo. Mr. Ali’s core intention of creating and heading Saalfo was to provide quality components and to capitalise on the digitalisation revolution that is taking place throughout the country and the world.
Saalfo employs 60 multi-talented, sincere and competent individuals. To quote, Mr. Ali, “We don’t look at the academics, skill set or even experience at first. They’re all secondary to us. What we look for are individuals that have the right attitude coupled with integrity and honesty.” The vision of Saalfo is to transform itself into a one stop shop, which provides solutions to its customers and thus incorporating cross-selling at a B2B level, something that would be game changing for the industry. Saalfo has already achieved a tremendous growth of 233% since its inception a year and a half ago.
The profit percentage varies and depends on the product. Higher value added products command a higher price that results in higher profits and products that don’t cost much, bring up the sales volume of Saalfo. A balance between profit and sales is essential, conveys Mr. Ali Khan. There are two revenue streams for Saalfo, as shown in the table below:
|Basis||Consignment Model||HLA Model|
|Cost Incurred||60-65% of price||75-80% of price|
|Growth & Margins||Incremental growth, 35-40% margins||Substantial growth, 20-25% margins|
|Percentage of Orders||20-25%||75-80%|
|Raw Material||Provided by the customer||Procured by manufacturer.|
The Road ahead
However lucrative a business is and whatever profits it rakes in, there are hiccups. Some fact-finding allowed us to narrow down on a few companies that share the same business line as Saalfo. The competition isn’t just restricted to the domestic borders in today’s modern business era, this means that Indian PCB assembly manufacturers also need to lookout for manufacturers in other countries. For instance, companies located in Shenzen, China, produce 1/3rd of the world’s PCB Assemblies.
Stabilisation is another challenge that Saalfo is currently striving to address. Stabilisation would mean greater efficiency, profits and scaling up production. This would require funds, which has constantly been a problem for many of the small enterprises.
And to complicate matters, the recent goods and services tax has been a bitter pill for Saalfo. While the process to pay tax and get a refund of the input credit has been streamlined, the tax refunds are yet to be streamlined. The average material acquisition cost has gone up to 18%-22% from 12% earlier which means Saalfo needs extra cash flow which is not budgeted; however this cost can be recovered by way of input credit. The labour contractors who provide the daily wage workers that are hired on a contractual basis haven’t registered under GST and rather feel it is an outflow of their hard-earned income.
The interaction with Mr. Ali Khan, which ran up to an hour and a half was quite engrossing and has very rewarding.