'Startups need 5-8 yrs to be profitable'

'Startups need 5-8 yrs to be profitable'

'Startups need 5-8 yrs to be profitable'

Chartered Accountant turned business woman, Nidhi Agarwal is the founder and CEO of Delhi-based women’s apparel brand Kaaryah. Agarwal launched Kaaryah in September 2013. A two-year old startup, it now serves as many as 3,500 orders monthly. As a part of the startup movement herself, Agarwal shared her insights with Mamta Bharadwaj of Deccan Herald. Excerpts:         

What is your take on Action Plan for ‘Startup India Stand Up India’?

The policy that has been announced is extremely well rounded, whether you look at it from an investment point of view, financial implementation point of view or even a knowledge protection point of view. As a startup founder myself, I am very curious to see how it is operationalised.

Among all the announcements made, which do you think is integral and will be most effective in boosting the startup ecosystem in India?

The two announcements that I think may add to operational efficiency almost immediately are: a) Self Certification and Registration: Incorporation and compliance becomes easier to manage; b) No inspection for three years: Entrepreneurs like us are under the purview of The Factories Act etc. Compliance validation and related certification is a nightmare in the current environment. Removing this obstruction to operations will go a long way for us.

What is your take on the three-year tax exemption for a startup, especially considering it takes much longer for a startup to become profitable?

Most startups require a period of five to eight years to be able to start thinking of earnings before tax. In many cases like eCommerce, this period is even longer. Even Myntra, Jabong etc, these guys are all talking about unit economics positive, they are not even talking about profits, and they are so much older.

In any case, a startup, initially, is expected to function under Minimum Alternate Tax Act and Section 79 of the Income Tax Act, where they will carry forward the losses. I am sure the policy considers the impact of the above, and the fine print will articulate how this additional rebate is expected to make a difference. Also, indirect taxes are almost five per cent of my cash flows.

How can it be ensured that the initiative does not falter? Can the government monitor without intrusion?

To sustain this, it is important that the government articulates the policy quickly so that there is clarity about its nuances. Secondly, the government needs to ensure that both at the state and central levels the policy operationalises very quickly. It is also important that all government officials who will be a part of implementing the new policy are educated about the policy to ensure flawless implementation.