MeritTrac is one of India’s most prominent skills assessment company. Till date, they have assessed over 10 million candidates for over 350 clients across several sectors including the IT/BPO sector, banking and financial services, public sector, retail, healthcare and manufacturing. In this article, we take our readers through the MeritTrac story through the eyes of its chief-executive officer, Madan Padaki.
STORY STAGE 1:
Identifying the niche: In early 2000, I was a sales guy selling software in Japan. Murlidhar (S. Murlidhar) worked for 3M India selling floor solutions and Mohan (Mohan Kannegal) worked for Citicorp overseas in a project management role. That is when a friend, who ran a boutique information technology (IT) consulting company, was telling me about an interesting project. He had to build a question bank management software to help Indian IT companies manage written interview tests that they organised at various colleges as part of their hiring process. This triggered my interest, as it was something very niche and I felt there was an opportunity there.
- Sensed an opportunity in early 2000
- Nasscom-Mckinsey report about the addition of a million jobs in the IT services industry
- This meant at least 8 to 9 million people would have to be tested to fill up these positions.
- This is when I knew I had my big business idea.
- I wanted to build a ‘talent assessment’ company that would manage the complete testing process for client companies.
- Managing the testing process wasn’t the core any IT company, and they would be happy to outsource it.
Mohan, my classmate at SP Jain, was excited about the idea. And I knew Murlidhar was looking at starting up a business as well. The three of us worked together in this venture. As the first step, we discussed the idea with Pratik Kumar (who was then General Manager at Wipro, he is now on the board of Wipro) to identify if there was any other company like ours. He highlighted the importance of assessment for companies and why credibility was critical. Typically, companies outsourced recruiting, payroll and the likes, but, selection of candidates was always owned by the company. With our business idea, we were taking away part of that right. We decided to organise written tests and select candidates who cleared the first round, and then send them for the interview. Pratik liked the concept and confirmed that there was nobody else who had approached Wirpo.
MeritTrac was born as an independent talent assessment company for the IT/BPO industry in August 2000.
STORY STAGE 2:
Year One: Our goal for year one was clear: raise our first round of funding and get our first few customers. We made our first pitch to Wipro. At that time, Wipro was hiring a sizable number of science graduates for the first time into their IT division. We did not have our tests and processes setup when we approached Wipro, but, their HR managers understood our vision and gave us the opportunity.
Project number one and then on
- It involved testing over 2000 candidates in Chennai, Pune and Bangalore.
- We managed the complete process – we put together the test with the help of subject matter experts, identified and booked venues for conducting these tests, sent invite letters and hall tickets.
- By mid-2001, we had four customers, one of which was IBM.
- Marquee clients like IBM and Wipro played a key role in getting further projects and setting up our process.
However, our funding search was going nowhere.
STORY STAGE 3:
Raising money for the first time: Our first investor was an agriculturalist, Ranganath, from Shimoga, a small town near Bengaluru. His business was agriculture, and he really did not understand our business. But, he believed we had the passion and trusted us. What I fondly recall from our meeting with Ranganath was once he decided to fund our venture, he invited all the founders to his home in Shimoga. We met his family over a weekend, and before we headed back to Bengaluru, he told us, “I trust you guys, if for any reason you break that trust, I would be utterly disappointed.” At that point, we realised trust played a critical role in a businessman’s life.
We raised Rs 1 crore for 27 per cent in the company from Mr. Ranganath.
STORY STAGE 4:
The 9/11 factor: Then, 9/11 happened. The whole IT industry froze hiring. We were a single-trick-pony, and the recession hurt us. Also, due to this, Ranganath had also lost a lot of money both in his business and in the stock market. The final investment was only Rs. 35 lakh at the same valuation. In December 2001, we had around Rs. 3 lakh in the bank and we could not afford to pay our 15 employees for more than a month.
Our only viable option to stay afloat was to wait for the economy to turn around. We were convinced our business model worked. We had paying customers and big ones at that. We decided not to diversify into training or placement. If we had to build a large ‘skills assessment’ company, we had to remain independent without conflicting interests.
Surprisingly, all of our employees decided to stay with us and beat the slump together! Almost everyone was trying to bring in sales the next few months. We opened up our books of accounts to all our employees and share any profits equally among all team members.
STORY STAGE 5:
Enter Ashish Gupta: By mid-2002, India’s IT industry started picking up. 2003 onwards, the IT/BPO industry was India’s flagship industry. People were at the heart of this business, and MeritTrac’s services became extremely important. By mid-2005, we were doing very well. Our annual revenues touched Rs 8 crore, with huge profit margins.
An important learning
- But, we had turned complacent.
- I ran into Ashish Gupta of Helion Venture Partners. I knew Ashish to be a remark able mentor for startups and several companies he invested in did extremely well.
- He liked our business model but he thought we didn’t think big.
- He invested in his personal capacity and joined our board and this changed our thinking.
- We started thinking big, diversification plans to serve other sectors started, and we were a transformed company.
STORY STAGE 6:
Merging with Manipal: By end of 2005, we were ready to raise our first big round of funding. We hired Bengaluru-based Avendus as our investment bankers. We had six term sheets and 11 out of the 13 investors we pitched to were interested in us. We took up the offer from HSBC Private Equity. In this round, Ranganath exited with a 10x return.
In 2007, I met Anand Sudarshan, chief-executive officer, Manipal Group (Manipal). We realised that Manipal was fairly big in educational assessments and we had the same vision for skills assessments. HSBC Private Equity exited the investment within 18 months, and MeritTrac became part of the Manipal Group. The promoters also exited a portion of their stakes in this round. We decided to remain an independent company, run by the same management.
STORY STAGE 7:
The team: The team at MeriTrac is extremely diverse, from data entry personnel to doctorates. We have conducted tests in 350 different areas from communication skills assessments to aerospace engineering. While on one side we assess a prospective candidate in the IT industry, on the other hand we assess skills of prospective constables for the Indian Police force. Now, we cater to several different domains and industry sectors.
In addition to our full-time staff, we employ a large number of freelance MeritTrac certified test administrators to monitor at testing centers. The process we have setup is critical to our seamless operations.
STORY STAGE 8:
Innovations at MeritTrac: While we were stuck during the dotcom recession, we knew we had to sort out our recession strategy before the next slump. One part of the strategy was to serve several sectors. We have also setup a structured program called Innovation at MeritTrac to expand in related areas. We developed a ‘standard operating procedure’ document and follow it like a bible. The innovations team has, till date, launched two products: an automated spoken English evaluation device and a biometric device to take attendance at testing centers. Six other such innovations are in the development stage.
STORY STAGE 9:
Expansion: We are looking at three broad areas within skills assessments: international markets, K-12 segment and we continue to looks at expanding our client base in the Indian market. The partnership with Manipal also gives us the ability to look at assessments for educational institutions abroad and probably, some areas where we can minimise costs for them.
So far, all of us have thoroughly enjoyed the MeritTrac journey and we are excited about implementing our plans going forward.