Dhama Innovations 'warms up' to lifestyle and health care products

The Hyderabad-based start-up looks to cash in on its climate-control technology in functional apparel, accessories

Sohini DasVinay Umarji
When Kranthi Vistakula was a student of the Massachusetts Institute of Technology (MIT), he used to dress in layers of clothing to protect himself from the minus 15 degree in Boston. Worse, he had to the extra layers the moment he entered the classroom, which had centralised heating. He wondered why no jacket was available for cold and hot environs.

Thus, Vistakula developed ClimaCon, a patented technology that can reduce or add heat, to provide thermal comfort to the body.

"I developed a prototype at the tooling laboratories at MIT; it was a fun project. I also got one person on board whom I would pay from my pocket. That's when I won some competitions for my technology, and the idea of developing the project into a business venture first came to my mind," he says.

He returned to India in 2007. With $7,000-8,000 (Rs 3.8-4.2 lakh) of prize money won at competitions. With this and a Rs 12-lakh grant from the Technopreneur Promotion Programme (TePP), he started Dhama Innovations. He was offered incubation at two places, National Institute of Design (NID), Ahmedabad, and Indian Institute of Technology, Delhi. He chose the former.

Dhama Innovations started as a three-member team. It is now 30-people strong and has moved to its own innovation centre in Hyderabad.

Initial years
"When we came to NID, we did not have a product ready, only the technology," says Vistakula, founder and chief executive officer of Dhama. His first product was a heavy jacket weighing seven kg, which included motorised fans, heating pipes and electric wiring. After a lot of trial and error, he turned to Peltier thermo-element, a device that uses the Peltier Effect. Peltier thermo-element is made of semi-conductive material and consists of a junction between two metals. If an electric current is passed across the junction, it makes the metal on one side heat up and the other, to cool down.

Vistakula used multiple Peltier plates. Depending on the direction of current flow, the jacket can either pump heat from the interior to the exterior (giving a cooling effect in hot weather) or pump heat from the exterior to the interior (giving a warming effect in cold weather).

The finished jacket now weighs around 700 g and can maintain internal temperatures between 20 and 40 degree Celsius. It can operate in ambient temperatures between -50 to 50 degree Celsius. The product has also been tested by the Indian Army in the Siachen glacier and Rajasthan, two places with extreme climate conditions.

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On coming back to India, Vistakula applied for funds from the government's TePP . "We got an approval in a week's time," he says. In two phases, his company was granted Rs 60 lakh. The firm also raised Rs 90 lakh from Reliance Venture Asset Management (RVAM), an arm of the Anil Ambani-led Reliance Group, and from Mumbai Angels, an angel investment network, in 2009. "Together, they picked up around 19 per cent stake in the company," says Vistakula.

"Our initial concern was the long timelines to have a finished product in place before going to market. We mitigated that by working on the scaled-down version of the product and used that for the initial beta of the product, while continuing to innovate on the product," says Sasha Mirchandani, founder and managing director, Kae Capital, one of the Mumbai Angels investors.

However, both investors decided to exit within two years. "RVAM had decided to exit early-stage companies and exited from four-five companies at that time. We were very small in their portfolio," says Vistakula. He is quick to add that the investors got 100 per cent return on their equity.

"A group of three to four people, high net worth individuals (HNIs), picked up RVAM and Mumbai Angels' stake," he says.

These investors will have a two-three year gestation period, he says, after which they will exit.

Will they be able to get enough returns? Vistakula is confident. When RVAM invested in March 2009, Dhama was valued at Rs 7-8 crore. By the time it exited in February 2011, the company's value had grown to Rs 17-18 crore, claims Vistakula.

Product line-up
Starting with its first product, the jacket, Dhama gradually moved to developing therapeutic products (pain relief systems), lifestyle products (cooling and heating neck scarves, beverage coasters), defence and industrial products, and consumer goods packaging solutions.

The firm's therapeutic segment accounts for $12,000-15,000 sales a month. Dhama's focus market is the US. That's the right strategy, according to experts. "If he wants a utility-based consumption for such products, he should look overseas, where climates are at extremes. Also, the high pricing will find takers only in overseas markets, as people in India wouldn't be ready to pay $500-600 for a functional jacket," says Prashant Agarwal, joint managing director of apparel consulting firm Wazir Advisors.

While ClimaWare products are available online, only 10 per cent of total sales come from online retail. The company follows a distributor-based model for both domestic and foreign sales. "These are mainly small entrepreneurs who buy from us and sell in their respective markets. The products are sold under the ClimaWare brand or the distributor can also mention that it is marketed by them in the packaging," explains Vistakula.

Dhama also plans to tap the medical insurance segment in the US. "Under the workers' compensation scheme, employees who get injured during work are taken care by their employers and the insurance companies reimburse a certain category of products. With minor tweaking, our products can fit into this segment. The estimated market size for just cooling products is around $1 billion in the US, while the entire market size is $6-7 billion per annum," he explains.

To tap a market as big as that, the start-up firm is planning to have a larger investor on board this time. "We are looking at raising $10-12 million (roughly Rs 55-65 crore) this time. And, as our major market is the US, we are also looking at an international investor," says Vistakula. He expects the firm's turnover of Rs 50 lakh (2011-12) to grow to Rs 80 lakh to Rs 1 crore in 2012-13.

The firm plans to tie up with about 10 distributors over the next three months. Dhama has also started working with multinational corporations (MNCs) to co-develop products. "We have been working with a foreign MNC operating in India for the past year to jointly develop a product. We will own the intellectual property, and would opt for a revenue sharing model," says Vistakula. He doesn't want to identify the MNC, citing a confidentiality agreement.

Dhama has also developed some interesting products such as a ClimaWare coaster, which lets you keep your coffee hot as well as your cold drink cold. These serve as corporate gifts and the firm has sold around 25,000 units of these coasters (priced around Rs 800) in the last one-and-a-half years.

The company tasted initial success by getting its ClimaWare jacket tested by the Indian Army. However, the process of getting final approval seems long drawn. "The testing got over around four months ago and they have recommended the project for induction, which would take around another one-and-a-half years. We are not sure whether we want to pursue it or not; it is a time-consuming bureaucratic process. Plus, this would also mean focus on one product only. At present, we want to diversify our focus," says Vistakula. Currently, Dhama sells just one or two jackets (priced around $650 a piece) a month.

Another challenge is to retain investors, for whom the "longer than expected sales cycle" for the product is a concern. This means Vistakula will have to explore as many options as possible to enhance the product's scalability. And, while the sales cycle could be long, Dhama should find a stronger footing and not rush into small revenue generation streams, say experts. "This can be done by deciding on two-three major avenues for using this technology and building a stronger value chain around it," adds Agarwal.

Expert take: Mani Iyer

It is an interesting and cost- effective technology and initiative, and will find phenomenal usage in the days ahead.

However, Vistakula will have to protect and create value over the intellectual property rights (IPR) and design of the technology that he has come up with for Dhama Innovations. He will have to be specific and position the product strategically. He will have to strategise in such a way that these products keep evolving even with the same technology. Further, India is under pressure to work indigenously on defence products, thanks to the recent scams that have surfaced. So, there is scope for him in the defence sector. I am just worried that if he unnecessarily delays on building upon the IPR, somebody might just walk-in and replicate everything.

The scalability of the business looks promising. But he should not be under pressure of revenue generation and run behind small revenue generation streams. Instead, he should look for some more capital and invest it into the product and strengthen it. He will have to first fine-tune the technology and then work on products around it which will have a plethora of applications. More, he will also have to work on exclusivity for the product.

The author is founder and mentor at Incube Ventures Pvt Ltd, and former executive director at Intas Biopharmaceuticals

First Published: Mar 11 2013 | 12:28 AM IST

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