Chhattisgarh caught in a vortex of overtrading

Raipur-based channel partners predict that an overtrading-induced jolt is
likely to throw the state market out of gear sometime soon. Chhattisgarh is
caught in a vortex of overtrading. It is likely that a number of partners may
declare themselves bankrupt. According to market sources, such is the severity
of business-in-rotation that quite a number of partners are over reaching their
capacities. In about 1,800 PC-a-month market at least 2,700 PCs can be found
dumped at any given point.

According to market estimates, from a barely Rs 1 crore-a-month the market
turnover in Chhattisgarh grew to a Rs 3 crore-a-month in three years. However,
this year alone it has grown to become a Rs 8 crore-a-month market. "This
is a serious anomaly as it does not tally with expansion of customer base,"
pointed out Chetan Vithalani of Raipur-based Merlin Multitech.

Vithalani entered the market in 2001 with his company Merlin Multitech and
has recently expanded in retail. Given the overtrading scenario he is employing
a cautious approach in his distribution business. Vithalani has also effected a
change in the distribution:retail ratio in his business bringing it to 80:20.
"The target is to take it to 60:40," he said elaborating on how
opening a city office six months back has done wonders for his retail business.

Ditto is the case with Sunil Aggarwal of Raipur-based Hi-Tech Solutions. He
has a network of 125 dealers across state and focuses more on dealers outside
Raipur, primarily those who are in retail. He forecasts a 100 percent growth for
his company, this year taking, the turnover to Rs 5 crore. Aggrawal claimed that
his outstanding amount is quite in control. He elaborated that
"overtrading" is an occupational hazard in the IT channel business.
"In fact, overtrading plays a critical role in bringing market maturity.
Earlier this year, one partner in Raipur had gone bust and some more will go the
same way until the market learns and grows," he said. The number of channel
partners has increased sharply in this year. "However, most of them have no
money muscle and are operating on business-on-rotation so, if they are not able
to manage their finances, survival would be very difficult for them,"
cautioned Aggarwal.

Keeping the outstanding in control is what the channel in Raipur is aiming
at. However, not many are lucky enough to recover their money. According to
Vithalani, who has safeguarded himself and has limited his losses, there are
many who are sleepless - just on the verge of rotation-breakdown.

The breakdown though difficult to predict as to "when exactly" is
not far as the price points and consequent profitability has suffered greatly in
the last year, particularly in the last six months.

The blame rests with over ambitious vendors, distributors and channel
partners. One disturbing trend Vithalani points out is that the distributors are
billing goods left, right and centre without looking at the balance sheet or the
bank statement of the channel partner.

"But that is nothing to worry," stated Aggarwal as most of the
players in the business are well aware of the risks involved. Only the
blissfully unaware will suffer and those like Raipur Computer Services who are
majorly into retail are hardly at risk to even bother about the situation.

Nandita Singh

New Delhi