How a tech unicorn founded by ex-ITC execs boosted growth via brick-and-mortar biz

It is not every day that you stumble on a tech startup making its presence felt bang in the middle of old economy businesses covering manufacturing and infrastructure, among others.

Indeed, Zetwerk Manufacturing Businesses Pvt Ltd is an outlier in the world of tech ventures that are largely anchored on the internet as a playing field.

The startup was founded by former ITC executives Amrit Acharya and Srinath Ramakrushnan, along with Vishal Chaudhary and Rahul Sharma. Last week, the firm elevated Ankit Fatehpuria as its fifth co-founder.

Zetwerk runs a managed marketplace for contract manufacturing. It entered the unicorn club of startups last August when it raised a Series E cheque of $150 million at $1.35 billion valuation. Soon after, it raised additional funding at twice the value.

And it had investors eating out of its hands for the right reasons as it accelerated its growth last financial year.

Zetwerk is backed by marqee venture capital investors such as Sequoia Capital, Lightspeed Venture Partners and Accel. Its other investors are D1 Capital, ICONIQ, Steadview, Avenir, IIFL, Greenoaks Capital, Kae Capital and several high-net-worth individuals. Overall, it has raised over Rs 4,000 crore across seven funding rounds.

On the flip side, Zetwerk had also been in the news like any other legacy businesses with income tax raids earlier this year. But that’s a one-off side note. The real picture lies in how the four-year-old venture is growing at a breakneck speed and is poised to be among the more profit-spewing new-generation companies among its peers.

How Zetwerk started and spread its wings

Bengaluru-based Zetwerk operates a technology-enabled, asset-light managed contract manufacturing platform, where it ties up with small manufacturers.

Essentially, the startup’s custom manufacturing platform helps customers convert their digital designs into physical products. It offers customers across sectors such as energy, infrastructure, aerospace and apparel access to fabrication, Computer Numerical Control (CNC) machining, plastic injection moulding, 3D printing, and aluminium die castings.

Zetwerk started its operations four years ago with general fabrication. Since then, it has evolved its capabilities by diversifying into industrial manufacturing for the infrastructure sector as well as for consumer businesses.

The company has rapidly expanded its supplier network and ramped up exports over the last three years. Lately, it has spent money to acquire manufacturing facilities to have greater control over project execution.

Zetwek has grown its supplier base to over 3,000 as of March 31, 2022 by providing scalability and reducing the risks related to supplier concentration. This has helped the company to gain clients such as Tata Projects and Aditya Birla Fashion and Retail.

The company’s key business proposition is to consolidate the capacities and place orders with its suppliers through its managed platform. In addition, it also caters to the key requirement of SMEs where they lack access to credit at competition rates for their working capital needs via supplier advance or vendor financing.

On the fast track

The startup has been on a breakneck growth path. If the financials of last year are anything to go by, the diversification has not just derisked its revenue profile but also helped it attain operational breakeven since July 2021. This makes it a rare startup to have turned a corner.

The company’s revenue jumped six-fold to almost Rs 5,000 crore for the year ended March 31, 2022. This even beat its own projections as the firm had said last August it was looking to grow its revenue four-fold in 2021-22.

If early indications are anything to go by, it may triple its revenue to almost Rs 16,000 crore in the current fiscal year. In May 2022, it had income that translated into an annualised revenue of over Rs 11,000 crore.

Besides, the company recorded EBITDA of Rs 60 crore for 2021-22. Its EBITDA margin has grown to 2%. If it manages to maintain this margin through the year, it could boost its annual operating profit to over Rs 300 crore in the current financial year. This could improve further as the infrastructure order book has much higher margins.

The company also managed to bring down the customer concentration significantly. The revenue contribution from its top 10 clients declined to just about a quarter of the total compared with half in 2020-21 and nearly 90% in the year ended March 31, 2020.

In April, Zetwerk received a Letter of Intent for an order worth Rs 126.55 crore by Larsen & Toubro for the Mumbai-Ahmedabad Bullet Train project. Zetwerk will supply 10,000 metric tonnes of fabricated girders. This will support the load-bearing capacity of the steel bridges that L&T is fabricating for laying the bullet train corridor.

The company had an outstanding order book of around Rs 8,800 crore as of May 30, 2022 with the infrastructure sector comprising close to two-thirds of the total.

One of the segments where the company is likely to push its weight is exports. Revenue from outside India accounted for around a tenth of its turnover last year but its contribution could double over the next few years.