17 Apr 2017 16:37 IST

This bear is a phoenix

Having steadied the ship, the founders of Karadi Tales have now taken on fresh challenges

CP Viswanath has been an entrepreneur for 20 years. But when he reels off plans to double the turnover of his company Karadi Path in a year’s time, and passionately talks about the country’s education industry, the 55-year-old comes across as an energetic, newbie entrepreneur excited about the future.

It is not surprising. For a good part of the last two decades, Viswanath has been fire-fighting to keep afloat Karadi Tales (now a unit of Karadi Path), the company he and his wife Shobha founded in 1996. A distribution agreement with Times Music had landed them in court. And the merger with ACK Media (publishers of Amar Chitra Katha) and subsequent acquisition by Kishore Biyani’s Future Ventures didn’t pan out as expected. But in late 2015, the couple managed to get back the reins of Karadi Path after diluting their shareholding. They have since been trying to make up for the lost years.

 

We have released 12 titles this year,” says Shobha, publishing director, Karadi Tales. The company had revolutionised the children’s entertainment genre with their audiobooks that had as its protagonist the friendly bear Karadi, which spoke in the voice of veteran Bollywood actor Naseeruddin Shah.

Karadi Tales now works on picture books too. “We have gone international — Karadi Tales sells in 15 countries. Recently, the New York Public Library included Blue Jackal (one of the most popular Karadi Tales titles) in its list of best books for kids in 2016,” adds Shobha.

She sits in the residential neighbourhood of Adyar in south Chennai, two blocks away from Viswanath’s office. While Shobha oversees the creative development at Karadi Tales, her spouse is busy scaling up Karadi Path. The company helps customers, mostly school students, learn language in an “organic” way.

“We are present in 1,800 schools across 10 States in India, reaching nearly four lakh students. We want to double our reach within a year,” says Viswanath. That will help accelerate the company’s revenue, which stood at ₹10 crore last year. “We also expect to double the revenue this year,” he adds.

While Karadi Path was until now a B2B (business-to-business) company, it is now working on a B2C (business-to-consumer) offering that will leverage on the mobile connectivity in the country.

Assisting the Karadi Path director in this high-growth strategy are two investors who came on board in late 2015 — Pearson Affordable Learning Fund (part of the British publishing major Pearson) and Aavishkaar India Company Fund.

“Though investment has dried up in the education sector, we have bucked the trend. And fortunately, our investors are not looking for immediate exit, but for growth,” says Viswanath.

That was a relief for someone whose first two attempts at forging business relationships didn’t bear much fruit. It is a lesson that the entrepreneur now readily shares with his peers. “Don’t go for outsized partnerships,” he says. He adds, “You have to survive the dark days. Not many entrepreneurs recognise that times will change and one has to weather that period.”

The missing link?

At first glance, the partnership with Times Music appeared an ideal one. The Times Group, which publishes The Times of India daily, had a wide distribution network through its music retail company Planet M (it was later sold to Videocon group). That network was the missing piece in Karadi Tales’s business model.

When the agreement was eventually signed with Times Music at the turn of the century, Karadi Tales was just four years old and its audiobooks had made a mark among children. Viswanath and his wife started Karadi Tales (initially Sky Music Private Limited) after failing to find audiobooks with Indian content; their son loved to listen to audiobooks when the family was in the US.

Sensing an opportunity, Shobha wrote the script and Viswanath’s brother Narayan Parasuram, a well-known music director, created the score for the audiobook. Karadi Tales was born once Shah agreed to be the voice of the friendly bear.

Though the distributors were happy to sell Karadi Tales, their ambition didn’t match that of the founders. While distributors considered selling 3,000 copies a year good enough, Viswanath had already produced 12,000 copies. He desperately needed a larger distribution channel, which led him to Times Music. A deal was soon signed and Karadi Tales found a place in the shelves of Planet M. Apart from distribution, Times Music also managed Karadi Tales’s public relations.

 

The partnership turned sour when there was a change in leadership at Times Music. “There is a problem in the Indian corporate structure. There is no continuity,” says Parasuram. A change in management effected a change in priorities. Karadi Tales was no longer a top priority as children’s entertainment was a niche market.

When Viswanath cited the exit clause and asked for the agreement to be nullified, his partner refused to oblige and instead took him to court, which issued a stay order. Viswanath and his team, despite founding Karadi Tales, could no longer use the brand. “It took us two years to get out of the case,” says Viswanath, who also had to face an arrest warrant. Meanwhile, the company bled and went into debt. It was indeed a relief for Viswanath when he eventually won the case and regained the rights to the Karadi Tales titles. But the joy was short-lived as he needed money to move his ship.

Life’s mission

Enter Samir Patil, a McKinsey partner who had returned to India in 2007 to launch a media group focused on children. He bought Amar Chitra Katha — the iconic comic series launched by Anant Pai in 1967 — and set up ACK Media. His next stop was Karadi Tales.

“I was inspired by Viswanath and Shobha. Karadi Tales was not a business but life’s mission for them. That is the fundamental reason for its longevity ,” says Patil.

While the investment brought in the much-needed money, Viswanath was also hoping to tap into ACK’s reach to scale operations, including distribution. That distribution reach came from India Book House (IBH), which used to bring out ACK. In 2010, Patil bought IBH, making it the distribution arm of ACK Media, including for products from Karadi Tales.

It appeared to Viswanath that the last piece of the puzzle was finally in place: Until the industry turned on him. With the e-commerce boom led by the likes of Flipkart, readers were increasingly buying books online. By 2014, book retailers such as Odyssey, Landmark and others had drastically curtailed operations, or in some cases, shut down. IBH suffered, and struggled to meet payment obligations. This further stunted Karadi Tales’s plans.

With ACK Media struggling, entrepreneur Kishore Biyani’s Future Ventures took over the reins in 2011. A year later, Patil exited the company he had founded. For Viswanath, the new development brought hope. Biyani’s Big Bazaar — the supermarket chain — was present across India and appeared an ideal vehicle to sell Karadi Tales audiobooks. It was heartening that Biyani had a vision for products such as Amar Chitra Katha and Karadi Tales. In an interview to a business daily, he had talked about using stories woven around mythology and culture to impart values to the young.

But did the promoter’s vision trickle down to store managers and sales executives? “For those obsessed with turnover per square feet, Karadi Tales might not be priority when there are other faster-moving and higher-valued products on the shelf,” says Parasuram. “The vision of the top guy didn’t trickle down,” he adds. Says another executive at Karadi Tales: “Biyani probably didn’t realise that he couldn’t choose a small business and get the big business to support it.” It didn’t help that the sales team was mostly based out of Mumbai, which made coordination and communication with the Chennai office of Karadi Tales a not-so-smooth affair.

Apart from persistent distribution woes, differences cropped up around scaling up operations as well. While the Karadi team wanted to increase the print run, those at ACK Media thought otherwise. In less than two years, reports suggested that Biyani was looking to dilute his holding in ACK Media.

Turning point

In the midst of these challenges, Viswanath had founded Karadi Path in 2011 after he watched children in a school in Mumbai’s Dharavi slums trying to learn English using Karadi Tales audiobooks. It occurred to him that it was possible to teach language using music and dance.

Within a year, the entrepreneur raised ₹8 crore from Aavishkaar Fund.

The money helped him scale up Karadi Path’s business, spreading it across several States and nearly 2,000 schools. Vindication came from the Series-A round of funding in 2015, with Pearson coming in as the second investor. “Entertainment still remains a small space, compared to education. And in Karadi Path, Viswanath had a conceptual breakthrough,” says Patil.

The shareholding rejig in 2015 has now helped the couple refocus their energies — while Shobha has scaled up the creative production at Karadi Tales, Viswanath wants to expand the boundaries of the education business. Karadi Tales now has its own sales team that has created a network of 200 stores across the country. Its international presence has also grown and an agent represents it at book fairs and festivals.

It is not as if all the challenges have been overcome. The education industry is not in the pink of health and many such as Educomp are still struggling to find the perfect business model. Few schools have the budget to afford a Karadi Path product, which is not in the curriculum. Plus, teachers have to be first trained — often a time- and money-consuming affair.

But with control of the business back in their hands, it will be easier for Viswanath and Shobha to steer the company.

“The Board is supportive,” says Viswanath. While he declined to give details, Karadi Path now has the two founders, ACK Media, Aavishkaar and Pearson as its shareholders.

“Hopefully, we have risen from the ashes,” says Shobha.