Zetwerk rides China+1 wave, eyes 80% revenue from global companies

Startup plans IPO in 12-18 months as global order book swells

The ₹14,000 crore business-to-business custom manufacturing startup Zetwerk has successfully leveraged the China+1 opportunity — with as much as 60 per cent of its revenues coming from global multinational corporations (MNCs) that have shifted part of their China capacity to India. They expect that share to go up to 80 per cent in the next three years.

 

The Bengaluru-based company estimates that around 5 per cent of the global capacity from China has shifted to India in the last three years.

 

Speaking to Business Standard, Amit Acharya, co-founder and chief executive officer, says: “When we started out six years ago, we never planned for it. But the China+1 move is very strong. Our orders from Global 500 companies are over 10x the size of that of Indian companies — so their spends are higher. Currently, 60 per cent of our revenue comes from these Global 500 companies that have shifted some capacity — in areas like machines, electronics, and renewable energy, where we operate. We expect this number to go up to 80 per cent in three years.” 

 

Acharya says their estimate is that these companies have shifted, on average, 5 per cent of their global capacity. “We expect this to double easily if the US imposes tariffs that are more favourable to India than China,” he argues.

 

The company, which has already raised over $700 million, is already earnings before interest, tax, depreciation and amortisation-positive and hopes to make net profits by 2025–26. It is planning to go public in 12–18 months.

 

Acharya points out that currently a majority of the MNCs are coming to India to address the domestic market, which earlier was served through direct imports from China — like laptops, for instance. They are not yet doing large-scale exports from the country.

 

On global competitiveness, Acharya says that in metals (machines), India is cheaper than China by 5–10 per cent in cost because the country already has vertically integrated supply chains, apart from availability of key metals within the country.

 

But in electronics, India is not on a par with China. However, the government subsidy through the production-linked incentive (PLI) scheme and lower import of components have helped them remain competitive. That is why the company has eschewed getting into mobile manufacturing — as it was not in the picture when PLIs were being given for smartphones. 

 

Zetwerk has used a dual model for manufacturing — it outsources the manufacturing order in areas where excess capacity is available in the country, as it has done in renewables, where 80–85 per cent of the orders are outsourced. “In many ways we are like Amazon — we are a marketplace for manufacturing,” says Acharya. The company concentrates on project management, ensuring that the products are of requisite quality and delivered on time. But in electronics, it has gone ahead and created its own manufacturing capacity, as excess capacity is not available.

 

Acharya also points out that the tariff war between the US and China has spooked many MNCs. “Many global MNCs have been spooked due to the  high tariffs imposed by China and the US. So they are proactively shifting products to India, even if it is slightly costlier — with the hope that with scale, costs will go down. They are hedging.” Zetwerk is also preparing for a new world where governments like in the US want manufacturing to be done within the country. 

 

The company has already taken steps — setting up factories on both the West and East Coasts of the US and in Mexico for solar products — and hopes to replicate the same for electronics when required.

 

Says Acharya: “Our goal is to offer a menu to our global customers — we are there in India if they want to assemble here, or in the US or Latin America. We are also looking at Europe.” The US already accounts for 20–25 per cent of its revenues, but it now aims to get 2–3 per cent of its revenues from Europe, especially in areas like renewables.

 

Growth layout 

• Zetwerk hopes to go for IPO in 12–18 months
• Setting up manufacturing capacities in the US, Mexico; eyeing Europe
• Share of electronics in revenue likely to double to 30% in 3 years