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The unbranded assembled PC market in India is already in its death throes, with prices of branded desktops going southward now for a long time. The final nail in the coffin of the once thriving grey market now looks set to be driven in by a little known Kolkata-based company, Xenitis Infotech, which breached the Lakshman Rekha with its hitherto unimaginable Rs 10,000 PC. Not only is Xenitis, with its host of local brands like Aamar PC, Aamchi PC and Apna PC, threatening the existence of the local assemblers, it is set to give a run for the money to even established brands like HCL, HP and Zenith-none of whom have been able to breach the 10K barrier.

Flooring competition
A quick comparison with some of the branded competitors brings out the magnitude of Xenitis' achievement. For an under 10K price tag, Xenitis provides a PC fuelled by a Cyrix 1 GHz chip, with 128 MB RAM; a 30 GB hard disk drive; a 52x CD drive, a floppy drive and a 15 inch color monitor. The software is Red Hat's Enterprise 3 professional version of Linux, which comes on 9 CDs that include the Open Office suite, database, e-mail tools and a browser. It is a reasonable configuration for any one who wants an affordable entry into the PC world - the only rider is that you would also need a modem card that would cost another couple of hundred rupees, only. Users would need to install this before they can exploit the browser and e-mail tools.

The better known Indian PC brands -HCL, Zenith and Wipro-have tried but could not come up with what they thought was a sensible configuration for less than Rs 10,000. Even market leader HP has still not trodden the sub 10k path. HCL recently announced a Rs12,990 EzeeBee Pride Internet-ready PC with a 30GB hard-disk, 128 MB RAM, 15 inch color monitor, and a CD ROM Drive. On the other hand, Zenith's Celeron 2.4 GHz based PC with 128 MB RAM, 40 GB hard disk, Ethernet connection and 15 inch monitor, is around Rs 14,000. Even on the laptop front, Xenitis has considerably reduced the price barrier. The entry-level laptop with a Celeron 1.5GHz (mobile) processor, 256MB RAM, 14.1 inch TFT monitor and CD/DVD-R+W combo comes at less than Rs 30,000 while a wi-fi counterpart with a Centrino 1.6GHz (mobile) processor comes for Rs 45,000. 

No wonder, with such competitive pricing, Xenitis enjoyed a stupendous 2004-05 closing at Rs 178 crore, emerging straight away as a serious competition to the HPs and HCLs of the world. The crux of the matter is that at under 10k, Xenitis is not just cutting into its competitor's share, it is also expanding the size of the market itself, thereby playing its role in bridging the digital divide. Today, the position of Xenitis in the desktop/laptop market is similar to that of Reliance, which took the mobile market by storm with its CDMA services. 

However, whether it would achieve the same success as Reliance in increasing the market penetration is a question only time can answer. The initial signals are promising. A significant turnover of Rs 178 crore has been achieved only via sales in the east and a three-month stint in the west. Not just content with the success of Aamar PC, the company has aggressively gone national with cleverly renamed brands: Apna PC in the North, and Amchi PC in Maharashtra. Initial sales in all these regions have been encouraging-in fact in Maharashtra demand far outstripped supply and even led to some cancellations. No wonder Santanu Ghosh, chairman, Xenitis Infotech is upbeat about the future: "From Rs 178 crore now, we hope to reach a target of Rs 500 crore in 2005-06; further grow to Rs 700 crore the next year and then go for a public issue in 2007-08." To achieve these ambitious numbers, the company is also looking beyond Indian shores. Last month, it launched Aamar PC in Bangladesh; this month it is launching in Dubai and would enter the Russian market by September.

Fact File Manpower Expected to touch nearly 2500 by this year-end-about 400 people in the first PC plant, 1500 in the Unitek plant and another 500 in the third monitor plant. Plus, a host of senior executives have recently joined-including the new CEO David Nair and other business heads across different regions. Investment Close to Rs 400 crore in its various manufacturing plants in West Bengal. Turnover A significant turnover of Rs 178 crore has been achieved only via sales in the east and a three-month stint in the west. Target Expected to touch Rs 500 crore in 2005-06, and grow to Rs 700 crore the next year. Xenitis plans to go for a public issue in 2007-08. Deals & Alliances West is witnessing tremendous promise-thanks to some smart alliances with distributors like Creative, and SIs like Allied Digital. The company is manufacturing PCs for Bangalore-based Sogo Computers. Some of the initial contracts signed for bulk supply have been significant. In recent months, one of the most lucrative deals it bagged was the Rs 40 crore contract with the Kalinga Institute of Industrial Technology in Bhubaneshwar-Deemed University. As part of the deal, Xenitis will establish a Center of Excellence at the University Campus in Bhubaneshwar that shall provide an opportunity to over 100 students every year to receive hands-on practical training on manufacturing, maintenance and testing of both desktops and laptops. The Center will be spread across a sprawling area of over 4000 sq ft where the University will provide all facilities. Xenitis will supply the University 7000 laptops amounting to Rs 40 crore, in three phases. Xenitis will also be in complete charge of the annual maintenance for each of these laptops. The Xenitis premises at Chinsurah, near Kolkata

Countering allegations
Like any successful Indian venture, Xenitis too has attracted its own share of aspersions and mistrusts from the market. Particularly doing the rounds is one story that Xenitis might go the way of some other IT outfits from the East-especially Caltiger or Globsyn. Some are even thinking of Super Computers, the ill-timed venture of former Karnataka CM Bangarappa. The Caltiger story has eerie similarities: both, ie Xenitis and Caltiger, zoomed into the market with amazing levels of competitive pricing and showed high initial revenues. However, for Caltiger, once the initial euphoria died down, it was realized that this model is not sustainable, and it gradually died a natural death. Many of the dealers in Ganesh Avenue, Kolkata's counterpart to Nehru Place and Lamington Road, predict a similar future for Xenitis. While none can be absolutely certain, there are at least two strong reasons why Xenitis is unlikely to go the same way of dissipation like Caltiger. 

One, Xenitis is not just a service-oriented business like Caltiger; not only is it a mere PC distributor-it has already invested close to Rs 400 crore in its various manufacturing plants in West Bengal. Such an investment of huge capital at least ensures that this cannot be a fly-by-night operation. Initially, the company invested over Rs 250 crore to set up a manufacturing facility in Chinsurah in the Hooghly district, to manufacture its myriad brand of Aamar/Aamchi/Aapna PCs. This initial factory currently handles a monthly production capacity of 15,000 and with buoying sales Ghosh admits it is difficult to add capacity here. A visit through this facility shows the scale of production achieved today and the paucity of space thereby. More impressively, another Rs 125 crore has been pumped into a second manufacturing plant in Chinsurah, only that is supposed to go into production end of June. 

This 20,000 square meter plant set up jointly with Unitek Computers of China, is slated to manufacture PC casings, and peripherals like mouse, keyboard, CD and DVD drives. Though Ghosh could not reveal names, he informed that he has signed OEM deals for these peripherals with most PC vendors in the country, who are in effect Xenitis competitors. From day one, this plant is expected to see a production of 1,25,000 per month-a capacity the company plans to double in one year.

A third plant is coming in the vicinity by September, that is expected to produce about 65,000-70,000 monitors per month in addition to its own PCs. Ghosh also plans to set up a second PC manufacturing line in Silvassa and is looking at Noida and Pondicherry as options for plants to address the northern and southern markets. By this year-end, the company also plans to bring out entry level RISC based workstations and servers for 50-60K range.

While all these manufacturing initiatives are strong evidences against Xenitis going the Caltiger way, the other positives are the consortium of PSU banks that have provided loans to the company. Next is the allegation of political patronage that Xenitis enjoys in West Bengal. However, for a home-grown venture to take on MNCs and other established brands head on, some political connections are indeed necessary and albeit useful-more so if the manufacturing happens in West Bengal, a state known for militant trade unionism. It seems that the emergence of Xenitis is changing the rules of the game and is gradually wiping out many of the small time dealers in Ganesh Avenue who are subsequently crying foul. This explains why serious players like VK Bhandari of Supertron Electronics, probably Xenitis' biggest competitor in the home turf with its Vintron PCs, refuses to call it a fluke. He even admits that since so much investment has being made, there must be a sound strategy. 

Ghosh says till now he has not made a single sale to the West Bengal government. With the government increasing its spending on IT, the future looks rosy for Xenitis. 

Rajneesh De

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