Stanza Living: Learnings From Hyper-Scaling A Phygital Business

In today’s episode we have Anindya Datta and Sandeep Dalmia the co-founders of Stanza Living. In conversation with Tarun Davda, Managing Director at Matrix Partners India. In this episode we cover what it takes to hyperscale a phygital business amongst pandemic and biggest learnings that have emerged from this experience

Salonie: Hi and welcome to Matrix Moments, this is Salonie and on todays episode we have Anindya Datta and Sandeep Dalmia the co-founders of Stanza Living. In conversation with Tarun Davda, Managing Director at Matrix Partners India.

Stanza Living is India’s leading co-living start up that provides manages accommodations targeted at student, employees or anybody who moves to a new city. Both founders were also recently featured on Fortune India 40 under 40 list, that recognizes India’s young and brightest entrepreneurs.

In this episode we cover what it takes to hyperscale a phygital business amongst pandemic and biggest learnings that have emerged from this experience. Tune – in to know more.

Tarun:

Welcome everyone to Matrix Moments. I have two very special guests and founders that personally very, very fond of and I really enjoyed the journey with them since the time we invested. Anindya and Sandeep from Stanza. Thank you, guys, thank you for taking out the time, really appreciate your doing this.

Anindya:

Thank you, Tarun, the pleasure is all ours.

Sandeep:

Thank you, Tarun.

Tarun:

Great, guys. So I’m going to kick off with a question and like I was mentioning earlier the thought of doing this actually got triggered when Anindya and I were talking I think a couple of weeks ago and obviously we’re recording this when hopefully the worst of Covid is behind us. Wave 2 was brutal for a lot of us personally as well as, you know, for our companies. It looks like things are stable now but there is always this lingering fear of a now the third wave. And I was asking Anindya saying how do you guy’s plan. You guys are in what people call a phygital business which is significant on the ground operations but being disrupted using a sort of digital layer.

And especially in your case given a lot of what you are doing there is an external sort of dependency on when states and colleges sort of announce reopening. I was just asking him, saying hey, how do you guys even like plan like every day, every week when you guys wake up do you decide to double down. Do you say, hey, let me wait and watch, do you, b, take a more conservative stand and say we’re not going to do anything until this thing is behind us. So I think first question and that was the context of doing this because I thought a lot of the things that Anindya was mentioning and I’m sure there are lot of learnings beyond which we’ve discussed.

So lot of changes since I guess early 2020 when we last did this together. Walk us through a little bit about highlights of the last 18 months specifically and maybe with a focus on how do you adapt the business to a off now, on now, again off now nature of what has happened in the last 12 months given the lockdowns and what have been your biggest learnings and stuff that hopefully will be benefitting other founders that are running similar businesses.

Anindya:

Cool. I’ll take the first one first as to what have been our learnings over the last kind of 18 odd months of kind of dealing with the post Covid or like through Covid world. And I think Sandeep can add some points around the pieces around how we’ve kind of worked this out from a digital lens. I think one of the big challenges for us in April of last year was to I think acknowledge and embrace the ambiguity which we were in and then I think one of the key important points at which Sandeep and I said that this is how we’ll approach things was when we said that look, this is not a one size fits all answer.

So, you know, what works for some other business will not work for us and so even though we’re hearing a lot of things around us let’s figure out what’s right for us in our first principal spaces. And so a lot of companies for example through that period and you would have seen them were -- there was a lot of talk around pivots and about how do you pivot from something to another or do something else differently. We took a contrarian approach to that, we said focus on your core.

You know, what you do well just focus on building that out even better. Maybe there’s pause but let’s focus on what is really good, what we’re really good at. And I think there are four things which we always say that we’re reasonably good at as a company. We think we do things at a sensibly aggressive pace in the sense that we’re not mindless with our expansion. So we want to be sensible with our aggressive pace of growth, one. Two, we said is that quality of people who are running different parts of the engine focus on that and strength of the quality of people is important for us and we’ve always said this internally that we’re not a ecosystem of stars but we want to be like the New Zealand of the startup ecosystem where there’s no one single star but then everyone as a collective punches above their weight.

The third thing for us was playbooks and focusing on kind of creating as scalable an ecosystem as possible and said that let’s go back to all our processes, systems and ask ourselves this question. And fourth was around tech and product and saying that can we double down on our tech ecosystem now. So of these four things I would say scaling up at that time was out of the question, right, and we said scaling up at this point of time doesn’t make sense. So let’s forget that kind of sensible aggression is not doing anything at this point to begin with. But the other three which was like focusing on building the playbook, focusing on tech and focusing on people.

Something which we doubled down really, really hard on over the last 18 months and we said this I what is going to strengthen our core and what we’ve built out. So every single process at Stanza was minutely kind of revisited and then luckily for us we had this period from December to March where we could stress test it as kind of business was starting to come back. And then again we’ve gone back to the kind of engine room and said that okay, let’s look at what we’ve learnt from these 3-4 months and again revisit that.

So lot of focus in strengthening playbooks. We built an entire F&B tech product literally within one month. And it’s a kind of product which companies will build by themselves completely, right, from menu management to customer choice selection to creating virtual storefronts, all of that on the F&B side we built it literary within a month and since that we’ve been kind of improving and fine tuning that.

So building on product was very, very important, our entire consumer interface. We said what have we learnt over the last 18 months where things went wrong in terms of consumer experience was bad or we missold or we undersold or we oversold or did something wrong and correct and plug those gaps now in terms of what the consumer his journey through the technology product has been.

And then third was like quality of people, like we said keep our flock together, keep our teams engaged, everyone needs to kind of feel that they’re building something big here and we’re pausing here but we’re not stopping. So one of the things we did was for example we didn’t cut salaries we deferred comp. We said comp is there, it’s your comp, we’re not taking it away from you we’ll defer it till a kind of bright Sunday comes back. And more importantly we doubled down on equity allocation. Every single leader whatever stock they had we bumped it up by whatever more, we said you should be more of one of the business.

We opened up equity ownership plans for everybody in the company and so that you can become an owner of this business and you can participate in its growth story in the coming future. And a lot of people asked, we said this is great, bottom of the cycle, let’s buy into this company at this point of time and a lot of people in the company actually doubled down on their equity allocation. So I would say those are the three kind of pieces of the puzzle which we spent a lot of time.

We said strengthen your core and for us our core was people, product, playbook. And we said go back to that and double down on that. And I think that’s what we did over the last 18 months. We didn’t spend as much time on thinking about alternative uses of our properties for example or short term revenue generation. No, those are obviously options on the table but we just felt that -- it’s not that we didn’t do all of that but we just felt that that was more of a distraction than a long term project for us and we’re going to build moats in the long term and this is how you need to focus on.

Covid is here, it’s going to be gone at some point of time, what will stay with you after that will not be short term. Yeah, it will not be the short-term revenues but will be with you the long-term kind of capability building which we’ve put in place. And so, we actually didn’t go down the route of thinking about pivots or alternative uses, we said let’s focus on what you know you do well and do that best.

I will let Sandeep pick up the point on optionality in building but I think that’s one of the things which is important for anyone in the phygital world is that are you structuring all your relationships with all your partners whether they’re landlords in our case or whether they’re vendors or whether they’re warehouses or if they’re -- you know, whoever you’re working with who are in the ecosystem helping you piece your story together with sufficient amount of optionality on day one. And pay for that optionality on day one because you will need that optionality and you’ll exercise that option at some point of time. And I think we did that through the last 18 months the relationships which we’ve built with a lot of our partners had a lot of optionality’s built in through our contracts.

You know, unlike a lot of young startups we were one of the very few companies where all of our contracts had force majeure clauses in place. And we invoked them as and when appropriate but it’s not like we then said this is the FM clause, go to hell Mr. landlord. We sat down with the landlord and we were saying to him why we’re doing this. So I think that across the board and even on vendors and, Sandeep, you can elaborate on that, we’ve done a lot of this optionality building.

Tarun:

Sandeep, just before you -- this is really good, Anindya, thank you. I think along with I guess the stuff that Anindya asked you to comment on, Sandeep, one thing that would be helpful I guess is when I’ve been talking to founders the constant dilemma is there is a short-term sort of supply side attractiveness because we’re beaten down today, I know I can get better deals, I can lock in them much, much for longer periods of time at terms which are much more favorable to me.

But then there is also this constant fear about, hey, what if there is a third wave, what if there is a fourth wave, am I biting more than I can chew. How do you balance this sort of long term versus short term? Maybe if you can give a live example of one or two actual tough tradeoff decisions that you had to make and how did you think through those and how did you all figure out in each scenario what decision to take?

Sandeep:

On the supply side, Anindya, maybe you can add but at least on all our partner ecosystems, Tarun, so I’ll go back to when Covid started, right, and this was a new thing for everyone so all our partners were equally confused about their businesses as everyone was in terms of how Covid would impact and how things should be. So one of the things for us was very clear and transparent communication with our partners on day one for example, if we needed certain amount of discounts even above and beyond what the contract had said we were pretty open towards discussing that this is what we need and why don’t we talk it out and figure it out what you need to do to give us this discount.

For example one of our larger fixed cost in the business can be internet cost and we got upwards of 60-70 percent discount month on month from our internet partners on an ongoing basis and they were very strategic partner to it and it was a very frank discussion and he said that go live of any new property will probably be deferred by 30 days if I have to give you this discount because I will do certain things at my backend to do it. And therefore, we figured out that, okay, our business timelines will change and we’ll plan for it because we also don’t know when we want to go live and we’ll plan around that. But we got 60-70 percent discount without like getting a hit to our partners. We’ve continuing to get that discount with them on most of our assets as we do.

And the second thing as you -- and this example I particularly chose because as you were saying we can get opportunistic rates right now for a lot of things in the market but for us there were few strategic partners we would like to stick with because this is like probably, they’re building a business for many decades to come and not just for next 2-3 years. And if we keep on losing these strategic partners during these opportunistic times probably, we won’t find many of the strategic partners.

So we haven’t lost any strategic partner and we continue to work with them. We haven’t even gone fishing out many things. What we’re continuously doing is figuring out with them if they’re getting any strategic benefits during these times and should we get part of that benefit passed on to us. And in fact we’re working harder to build more and more optionality in our clauses for going forward because Covid was one type of situation that came into the business and maybe what will come in future we don’t know.

So our learning from this has been more bite sized commitments and how can we have -- so for example in the past we used to have a six month commitment to certain volume, we’ve moved on to LOIs rather than POs but we now do bite sized POs so that vendor doesn’t get their capital stuck. So most important thing for anyone in this business not just us is cashflows. So even for partners and vendors it is the cashflow, so the more you over commit the harder it gets for the vendors and partners because their cashflow gets equally stuck. And so that was I think the most important thing for us was working hand in glove with the partners for understanding their constraints and working around that in most cases and solving for cashflow issues for them and us.

Right, while we were getting discounts we were also planning cashflow payments and things around that, we were always good with the bank balance but at least we wanted to manage that and work with them with our partners closely. The second thing in my head and Anindya and I discussed this many, many times was between -- there was a very strong tradeoff and I’m sure your other portfolio companies and founders faced this was cost cutting and strategic cost. I mean there’s a very fine line, there’s very high pressure to reduce costs and everyone wants to reduce cost when revenue is getting massively impacted due to Covid.

So we very carefully chose certain costs were strategic. Now you may call them cost or you just may call them strategic investments and certain costs are pure cost. So we were ruthless on pure cost, we reduced every possible pure cost that existed but we were also pretty I would say we were hellbent on not cutting down any strategic investment and we kept on double downing. Like for example you said there was opportunistic way to get cost reduction, there was opportunistic time to get great talent in the industry. So at middle and senior level we actually kept on hiring throughout Covid because we wanted to bring strategic people who we were not able to bring onboard during pre Covid times and it is again started getting harder given all the fundraise that has been happening around the world.

But end of last year, beginning of Q1 of this year we were able to get some very, very critical people to our leadership team. And we were also very, like we still feel very proud of the fact that we did not lose anyone in our leadership during 18 months when it was very deeply impacting our industry. So I think for us these two things were very, very critical working hand in glove with partners and looking at strategic investments carefully.

And last and this happened more on supply and operations side and sales side. We decentralized more and more decision making because our business is more regionally spread and Covid rules were also then very state-run rules. So centralized decision making across the board was not possible so launching a property, not launching a property etcetra was all decentralized to most extent and that allowed us to have that agility in our business. So we’re functionally rented as a company so regional functionalities would be able to decide and come back on what we do.

And I think we started this exercise at the beginning of Covid and more and more now I think it’s almost decentralized to some extent; we’re not involved in most decision making which is completely actually dependent on Covid because we’re not aware of actually what happens on different states as much as our regional leadership does.

Tarun:

So I want to touch up on one point you guys mentioned about sort of doing right by your partners, right, through this tough phase. A lot of people, a lot of companies, like I said it’s easy to slip into this hey, you know what, the power equation is in my favor, let me squeeze these guys to the extent possible. And I’m sure that temptation may have been an option for you as well to exploit. How have different stakeholders in your business responded, what are you all seeing in terms of overall market structure. I guess how did you decide and what allowed you to take a step back and say hey, we’re going to take a long term view to this, we’re not going to take a short term, hey, let me try and squeeze everybody that I can.

Anindya:

That’s an interesting one. I think one of the things which surprised me a lot was how a lot of people got the what I thought at least was basics wrong. And the basics on this was pick up the phone and talk to the person and explain to him what’s happening in your business. And hear what’s happening in his business or his side of the story and then triage this and say, okay, these are ex kind of partners, you know, landlords, vendors, who probably have the ability to bear this out strategic maybe we’ll kind of push hard on some of these guys.

Some of these guys they’re very specific asks and very specific commitments can we meet that for them and hence build on that relationship. And there are some where if you look this is no way on earth I can kind of -- the balance of power is not with me at all in this conversation so let’s be a little more giving on that. So not trying to paint everything with one brush was very, very important. For example, a lot of our landlords -- I was very clear in some properties that look I want this property come what may. The landlord today may not want me as much as I want this property. So you know what, pay up, and keep this property in your ecosystem.

There are some properties where I know there’s no one coming to this landlord tomorrow but me because I’m kind of very well entrenched in the system, you know, it’s a large property, I will probably not have too many or too much competition here and maybe on this one I’d spend a little bit more time negotiating, talking to the guy, trying to kind of get a little bit more if I can but again not in terms of bullying the guy into submission. But more in terms of like conversational approach before we sign.

And there were some cases where the landlord’s simple ask was look, I understand your position, I have an EMI, can you cover my EMI costs or not. And that’s a clear ask from the guy and you do that, right. The other thing is can you find softer ways of working with your partners in helping them. I remember and Sandeep will know this better than I do, there was one of our vendor partners who was in the middle of a fundraise at that point of time. And for him having collections of some sort was important. We said, you know what, we will support you, so we’ll get you whatever money you need now but can you give me a long-term rebate in return.

There was one partner of ours, one landlord of ours who in the second wave of Covid went through an absolute tormentous time with his family and lot of people being in the ICU we went and helped to get him and his family ICU beds, oxygen --

Tarun:

These are outside, these aren’t employees, these are just like supply partners.

Anindya:

No, these are our supply partners, so landlords, vendors, etcetra, etcetra.

Tarun:

Wow.

Anindya:

So there were a lot of softer things which I think strengthen the relationship with a lot of landlords. Having said that, Tarun, is it that all of our relationships have been smooth sailing, no. Right, I mean give or take 2-3 percent of the portfolio does enter into a like slightly more combative argument and both sides are posturing. But I would say by and large 97-98 percent of our supply side and vendor side portfolio has been very well managed by the team in terms of figuring out what is the -- you know, there were lot of times and last I remember Sandeep used to create P&Ls for our partners so that we know where his cash situation is and how it will evolve in the next 3-4 months so that we are not kind of shortchanging people at that point of time.

I think all that work was very, very important for us when we kind of sat down with these guys and negotiated that. What surprised me was how quickly a lot of the other players across sectors just stopped communicating and I think that’s where relationships went for a toss, that’s where things turned sour. And I think that’s what we luckily didn’t do as a mistake.

Tarun:

You communicated your stand. I think that’s a great point. I really liked the doing the softer things as well because I think during these times that’s really something that people don’t forget very easily. The other question I did want to cover is -- so you’ll announced, well, I don’t know if you’ll announced but your 100 million dollar plus fundraise earlier in the year and I think that caught a lot of people by surprise partly because of the timing of it but also partly because generally there’s been sort of mixed views on hey, what does the pandemic mean for co living as an industry.

I would love to get your view on how do you see the pandemic altering the dynamics of the overall co living space and if there were -- I don’t know if there are, but if there are maybe one or two big changes in your view of what Stanza will look like in five years as a result of having been through this experience would love to maybe spend a few minutes on that and understand that.

Anindya:

Sandeep, do you want to take that.

Sandeep:

So, Tarun, obviously having the money in the bank is useful, gives a lot of confidence in terms of continuing to double down on growth as we all are talking about and doing that with money in the bank is easier than otherwise. From pure the Covid experience plus where we are as a company and five years from now how we think about it what we haven’t spoken about and we’ve kept a little quiet on is we’ve done a lot of multiple pilots in these 18 months on different aspects of the business to see how -- we’ve always spoken about how we have a very, very exciting consumer set with us and we can get a lot of consumer services that we can layer on on our base product.

And we’ve got these 18 months in on and off periods to try out in different spurts of the country, like so to see what would work in a Karnataka versus what would work in a AP Telengana and so on. And we’ve been able to now see there are many consumer services which are very, very attractive for our consumers which wherein all the extra services that we’ve always spoken about is becoming familiar in our mind. So I can see that Stanza will no longer be a student housing or a working professional operating or a co living company.

The way we talk about ourselves now is a real estate operating platform for long term accommodation. And this time has given us confidence to actually you bring on any set of consumer base which needs long term accommodation we’re up and ready to deliver it. We were able to launch our B2B business in 15 days of our first agreement signed and we were able -- we were live up and running operations for 1000 consumers in a remote part of Karnataka in 15 days and we got very good feedback from our client partners. And that gives us confidence that the business model or the tech platform and the physical platform that we’ve built allows us to serve each and every consumer base.

So I think our vision has expanded beyond student, right, why can’t it tomorrow be a different other consumer sets without naming and committing any of those I feel there are many other consumer audiences that can be very, very relevant for us. And secondly for each of those audiences there are a lot of daily services that they consume whether it is bite size e-commerce that they consume or last mile mobility that they consume Stanza can play a very, very strong role in each of those services whether we do it directly, whether we partner with companies, there is massive opportunity on those which we’ve seen in the mini pilots that we did.

So I think the entire and more than Anindya and me I think the entire leadership at Stanza believes that this is no longer just a student and a co living play, right, it is much wider. And that is more important to us than us believing because in the end they’re the ones who are going out there and getting things done. Andy, you want to add anything, please do.

Anindya:

I think, Tarun, the big kind of -- were we a pandemic proof business, no, we were not. I mean it was very clear when the pandemic hit that this is definitely going to hurt us in the short term. But I think a few kind of clear consumer trends have emerged out of this which are very, very important and has changed I think the positioning vis a vis us and our competition significantly. And I think that’s why I think we managed to raise capital as well.

I think we’re seeing for the first time that the Indian managed living consumer is prioritizing health, sanitation, trust, brand, all softer aspects of living in a place over and above simply price. Which means that our competition which everywhere has been the largely unorganized market operator who doesn’t have to think about compliance costs, or any other kind of overheads and hence is able to potentially price at a 500 rupees discount to a Stanza Living facility.

And then you have to work really hard to kind of keep the consumer with you that certain balance of power has changed where suddenly consumers are saying, no, forget 500 rupees, I’m willing to pay a little bit more if I were to get some place which I can trust in terms of where I want to live in and what does it mean in terms of hygiene, sanitation, safety. So for example in JFM of this year when we went back live and all the students started coming back to live in our facilities we were selling product at 5-10 percent premium to what we thought would work for us in terms of our operating margins and that directly hits your bottomline.

So all of that was significant margin expansion which we saw in the short term. I don’t think all of it will remain, at some point of time the price consciousness of the Indian consumer will come back but I think some of it will remain at this point of time because there is going to be this new focus on health, sanitation, hygiene etcetra.

Tarun:

So you’re saying there is just a more I guess a broader change in consumer preference towards more organized states versus like --

Anindya:

So one is from a demand side lens which is exactly what we’re seeing, the other thing is we’ve seen significant supply side obliteration which has happened in the last kind of 18 months which means there are less options on the table as well for consumers. So, you know, now you have to really kind of be differentiated as an operator.

So just a case in point, Bangalore today has 45,000 -- at the beginning of the pandemic Bangalore had 45,000 registered paying guest/hostel ecosystems in place which were registered. You know, you can imagine equally 100 percent which are not registered. Of those 45,000 registered paying guest accommodations roughly 20,000 of them submitted their licenses, they kind of gave the licenses back to the association saying that we cannot operate. So, you know, shut down, here’s your license, I don’t want to pay any kind of license costs anymore.

That was the first wave, in the second wave another 8000 have returned their licenses. So you’re seeing that that 45,000 has now become 17-18,000 just over the last 18 months. So what that means is that one, obviously there’s significant supply side obliteration which has happened. Two, the demand side is shifting more towards organized as well and three, I think suddenly from a enterprise, university, college, you know, slightly more kind of institutionalized operator lens the focus on employee wellness, the focus on student wellness has changed completely.

You would never have a bluechip tech company CEO or CHRO sitting across a table with me and discussing how they can kind of bring 1500 to 1000 employees back to work in Bangalore or in Pune and have a conversation around, oh, can you provide them enterprise internet in their room so that if two days they’re working out of office and three days they’re working out of home it’s seamless.

And all of this was never happening before because earlier it was like people who come to live work with us and we’ll solve for their needs in the corporate but what they do outside is no more our concern. Same with universities and colleges, there is dedensification which is happening, increasingly parents are asking about how are your hostels managed, how many people in a room. What are your kind of SOPs in place and suddenly for us the B2B segment which Sandeep was referring to earlier we had never thought that we will be in the B2B business for at least another 24 months out.

And here we are, we’ve got a few deals closed, we’ve got a lot more in the pipeline. Suddenly we’re seeing inbound interest from universities and colleges. And to your point earlier, Tarun, about why this about the fundraise and how that kind of played itself out it’s a lot of these factors which are kind of secular tailwinds which are not going to be visible in the immediate short term but which are medium term and long term impact in terms of how this business gets built out. Obviously we were able to kind of make the point around that and the investors saw what was getting built out around that was very, very important in terms of how I think the post Covid world is going to look for a Stanza.

Tarun:

No, I remember I think one of you had used this when we were chatting, this was probably 7-8 months ago where you said now that the dust has settled and this was I think pre wave 2 and somewhere after wave 1 where you said there are at least tailwinds which are going to sort of help improve our business but there’s one head wind which is just uncertainty of when the colleges reopen.

Anindya:

The way I think about this, this is what I like about what we’re building at this point of time is the head wind is an artificial constraint, it’s not a natural constraint where consumer preferences change.

Tarun:

This is a short term, yeah.

Anindya:

This is a university or college or workplace being shut down for now. Fundamentally what we’re building or what we’re solving for is creating a technology enable ecosystem for a very, very non-discretionary spend which is a place for someone to live in. Which means actually this is very counter cyclical, it may not be under the proof in the context of what we’ve seen. But otherwise, economic cycles we’re very confident this business actually sees itself through it in that context.

Sandeep:

In fact this month itself, Tarun, there are at least three or four states where colleges have opened up for examinations and we’ve seen almost 80-90 percent people coming back for a 15 day period to cover for their exams. And that shows that even for such a small thing consumers are ready to move in and do this and all of them have had -- we’ve seen our surveys. 90-95 percent people have had first dose of vaccination and they’re very confident after first dose, I mean, in few months’ things should become better and better only. I mean even if third wave comes in our minds it is again maybe a delay of two three further months, it is not something which fundamentally changes as Andy was talking.

Tarun:

Yeah. On that note different cities and different states have seen a differing impact of Covid, right, obviously lockdown in some of the larger cities have been far more strictly implemented, maybe in some of the smaller cities less so. Any change in how you are thinking about geographic expansion, any change in your sort of long-term strategy in terms of where you will focus and if you can maybe share a little bit about how you are thinking about that.

Anindya:

Yeah, so I don’t think there is a fundamental change in terms of how we’re thinking about geographies. One of the things which you mentioned is absolutely right which is for example for us Pune and Delhi were two markets which actually didn’t open up at all in even the first and second wave And Pune obviously because of Maharashtra was obviously one of the first kind of to go back into lockdown and Delhi also we saw the kind of enormity of impact which all of this had.

Honestly this question would have been a little bit more relevant, Tarun, at the end of the first wave where I think a lot of conversation was still happening around how this is a very urban metro phenomena. I think that has fundamentally changed post the second wave.

Tarun:

Changed, yeah, absolutely.

Anindya:

Because a lot of tier 2 towns and cities have been ravaged badly through the second wave which means that some of this entire conversation around whether people will come back to the economic centers of activity or not I think has changed fundamentally and you’re seeing that. A week back Wipro announced that in September they’re going back to work in all their offices. We’re now hearing that Infosys is going to announce the same thing and some of the other tech giants will follow. Which means increasingly now I don’t think that the conversation around how you build your business from a geographic location changes.

So for us the plan was always that a working professional business is going to be very urban, you know, metro large economic center focused and our student business is going to be in all the knowledge hubs which may or may not be in a large town or city, for example one of the large markets we’re opening up this year is Vijayawada which is never going to be a huge economic center from a working professional migration perspective but attracts students from all over the country in terms of student hubs and people who go to study there.

So from a student business perspective we will continue to be spreading ourselves across the length and breadth of the country. Our working professional business will continue to focus on the five largest cities at this point of time and that’s what we’re focusing on.

Tarun:

You touched upon this a little bit, maybe if you can go one or two levels deeper on the student business as well as on the young professionals business. Other than hygiene, sanitization requirements are you seeing any other sort of changes in consumer preference like are people -- is how you’re thinking about designing the next set of Stanza properties different in any way as a result?

Anindya:

Very good question. We’ve had this -- this has been a lot of debate internally at Stanza. I think the one thing which has not changed and Sandeep you will know this more than I do. The one thing which has not changed is occupancy preferences which means consumers still will not pay 2x to get a single occupancy room as opposed to a double occupancy room. So I don’t think that has changed fundamentally, I think there was lot of question whether people would now prefer private rooms over shared rooms or not. That we’ve not seen change at all.

However what has changed is a lot of questions are being asked of us around what happens if there’s a lockdown again. You know, will there be continuity of service delivery. Are you well equipped to kind of provide food to me four times a day even if there is a lockdown.

Tarun:

In extended lockdown, yeah.

Anindya:

Do you have backup internet connection in your properties or not and what happens if your internet connection fails. If I don’t want to work in the same room as my roommate because he’s on a Zoom call is there a quiet place in your property where I can go to and sit down and work or not. So those are the kind of questions which we’re seeing, so lot of common area design changes are happening as a result. I would say the room fundamentally has not changed despite what I think a lot of people initially thought would happen which is a lot of requirement for private rooms, we’ve not seen that happen.

Tarun:

And are sort of your college, university partners any big requirements coming from their side in terms of mass testing, quarantine facilities, you know, some more I guess security procedures, stuff like that. Anything you’re seeing and how are you responding to that.

Anindya:

Yeah. So I think a lot of questions around what happens if a student or a working professional in your facility contracts Covid. What are the kind of processes you have in place. So we have obviously put for example lot of processes in place. So every demand center and micro market of ours has a building always on standby to be used for only quarantining people.

Tarun:

Oh, wow.

Anindya:

So if tomorrow someone is sick he doesn’t stay in his room, he moves out into a separate facility completely. And that facility then has kind of fully kind of WHO protocols in place irrespective. All our facilities anyways will have Covid protocols in place but I think the big question which people ask is that are we running the risk of mass Covid contraction just because one person picks up Covid and hence passes it on to everyone else. I think we have responded to that and I think people -- till now at least what we’re hearing is people are satisfied with what we’re saying. Sandeep, you were saying --

Sandeep:

No, I think this is what mostly it is, right, and requirement for RTPCR vaccinations etcetra is there which anyways every organization is taking deep care of. I think, Tarun, what has helped us fundamentally in this is being more and more full stack than a lot of other. So it has allowed us to continue our services because the decision making is more and more in your hands versus not. So food being inhouse has allowed us to ensure that even during the heaviest of lockdowns in last year we were always able to ensure all four meals are delivered across all our buildings.

And that was something which can otherwise be very, very difficult and hard. And second was I think our approach has always been deep in clusters and therefore we don’t ever have a one isolated building in any part of the city. And that allows us to ensure that the micro scale is always useful for us to deliver these last-minute services that are just any Covid norms that need to be followed. And on the other part around the design of the buildings which Andy was saying he’s absolutely right in terms of room design hasn’t changed a lot.

The only thing that we’ve started working on and few buildings we’ve designed around that is a lot of thought is being given on in and out working and living environment so a lot of people might continue to spend the day at hostel and work from home or work from hostel environment so having dining areas or café areas which can be doubled up as working zones is something which has become an integral part of our design. We’re trying to get more and more study tables for our consumers so that they can take individual Zoom calls or they can study from room one day a week sort of an environment.

So I think the sharing is still as it was in the past and any economic impact cannot happen to the consumer. So we have to be real that it’s not that people have started earning more because of Covid, right, so how will they start spending more. If anything they’ve actually got impacted is their incomes, so we have to be extremely competitive on every economic lens and we’re trying to create a value for money brand and value for money offering for our consumers. And in that spirit we’re trying to make it more and more convenient rather than adding any extra cost to the consumer in every part of our design. So our aspiration is to continuously reduce our design cost so that we can pass on the benefit to our consumers.

Tarun:

You guys alluded to B2B business and how you sort of quickly were able to respond to that. Is that another big macro shift that you foresee happening where earlier colleges, corporates almost didn’t care where their employees or their students are. And like you said they were only worried about what’s happening within the campus and then once the employee or the student leaves campus it was up to them. Are you all seeing much more openness as well as much more involvement from these in terms of working with companies such as yours?

Anindya:

Yeah, absolutely. And I think that’s probably one of the most fundamental changes we’re seeing in the market today which is a lot of demand which we are seeing today is actually not from the individual but it’s forward looking from our corporates saying that look, this is the service which I want for x people who’re going to live in your facility. A lot of people are asking us to make the facility exclusive to their company if possible and are willing to pay to kind of make it exclusive if possible. And they’re very clear on what they want, what service set they need, and there’s no ambiguity at all.

I think the one big concern which I always have with kind of the B2B and the corporate business is working capital management because obviously that becomes a problem but in a lot of cases the corporates are saying you charge this to the end consumer, this is the price I’m going to lock in and you charge that and we’re going to kind of make it very clear --

Tarun:

So they’re basically partnering with you on the spec and the pricing but they’re basically leaving the end consumer to -- so it doesn’t change that.

Anindya:

No, they’re asking end consumer to either pay directly and then get reimbursed from the corporate or pay it directly. But they’re willing to take on the inventory risk and that’s the most important learning which we’re having.

Sandeep:

And this is across the chain, it’s not just for I would say senior managerial. We’ve seen that happening at managerial level, we’ve seen that happening at I would say very lowest levels of organizations also. So with every employee they’re equally I would say sensitive about this and this is the first time mass migration has happened and mass migration reverse migration happened to their own towns now there needs to be some clear incentive and timing so that they can bring back all the people so that the office environments and culture is also setup.

Tarun:

Yeah. I think final question and this is a little bit more forward looking, as you look at -- I mean if I just state the overall and again I’ll start with student and then we’ll talk about young professionals and other segments that you’re looking to go after. It almost seems like you’ve just scratched the surface of what this market could turn out to be. And I won’t share any numbers because I know you will kill me after the call so I’ll keep the numbers outside of this. But you guys are aggressively expanding, you’re adding inventory and supply very rapidly. We all hope that there is no more major disruptions in the demand side.

But two things, one is what’s your point of view on the market opportunity and take a five to ten year lens on that. Within that how do you look at international, are you guys considering it. I know it was probably again very tempting to look at international markets especially over the last 6-8 months saying hey, we have the capital, we have the knowhow, why don’t we look at another market which is probably less affected by Covid than India is. So how did you all think about that but even long term like how do you look at international. Where will Stanza be 5-7 years from today?

Anindya:

I think the first thing is to think about how the business model will evolve, right, and then where does it take us geographically. One of the things and there’s a lot of talk in the offices today these days about Stanza 2.0 and we’re asking ourselves what does Stanza 2.0 look like. And one of the things which we’ve been saying is that let’s make this analogy to a personal computer where we say that the real estate is like the hardware of a personal computer.

And every service which a consumer needs today is like a software which sits on that personal computer. But that software cannot talk to the hardware or that service cannot talk to the real estate without an operating system. And what does Stanza want to be, and Stanza wants to be this kind of technology backed operating ecosystem which wraps itself around any real estate and suddenly makes it convenient for a consumer to access not just the space but also space which kind of then makes it easy for them to kind of move in and start living.

And when you make that the problem statement suddenly the problem doesn’t become limited to students, or young working professionals. There are multiple people who need access to a range and bouquet of services and they want to do it in a well subscriptioned manner which could be like bite sized, you know, full 12 months whatever we could kind of figure that out. So lot of questions which we’re asking ourselves is that if this were to be a pure player technology platform forget everything else, what do we need to do to kind of build that out, whether irrespective of whether we do it with students, working professionals, married couples tomorrow, senior living day after.

So there are multiple consumer sets which we could go after, right. So really we’re saying that the core which we’ve built out, can we now expand lifetime value of this consumer so that he walks in at the age of 17 into a Stanza facility and hopefully stays with you for life because over time we’re kind of expanded into different stages which correspond to different stages of his life and he moves to be a part of the Stanza ecosystem whether it’s a Stanza managed hostel or whether it’s tomorrow a Stanza managed apartment or whether it’s a Stanza managed senior living facility and so on and so forth.

The other piece is today we’re this all services included one single price which someone kind of signs up for and he gets everything in that. But there are multiple other things the consumer kind of spends on, you know, whether it’s discretionary or non-discretionary different kinds. Can we become that conduit through which a lot of other brands, other services talk to the consumer and can we then kind of do some of the top of the fund skimming on some of that to kind of give me more larger share upon it than --

So it’s both in terms of expanding the number of months, the number of years a consumer spends with you and what does he spend per month with you to kind of end up getting a larger piece of the pie from this consumer. And I think that’s going to be very, very heavily technology led as opposed to inventory led in the coming future. So I think we are increasingly preparing ourselves for a product led non inventory led growth in the coming kind of 12-18 months. And I think we’ll be live with some of this in the next 6-12 months for sure.

And I think that’s where this suddenly takes a life of its own, right, then suddenly you can look at any residential building and say, okay, is this Stanza plugged in or not and hence is the Stanza operating system on it or not. I think that’s the way we would think about this. And suddenly to the point Sandeep was making earlier, fixed cost management. Suddenly you’re doing so many buildings in one area, your fixed cost management gets better, it becomes more value for money, it’s kind of virtuous loop which you get into.

And I think once that gets built out that’s very unique in the global context and then that suddenly is very, very exportable as a business model. And so for us the way at least Sandeep and I have discussed this that probably international expansion unless it happens opportunistically now will be 18-24 months out from where we are. Obviously if opportunity knocks on our door and something sudden comes by and gives a chance to go international we might do it today but I think the plan is very clear that build out this Stanza 2.0 ecosystem and then suddenly this becomes a definitely you can take it to the rest of the world. And that’s when this kind of acquires a life of its own completely.

Tarun:

Sandeep, you want to add on what’s your -- I mean we would love to hear some collect from you as well.

Sandeep:

I think Andy has covered everything. For us, Tarun, it’s always been about ensuring that our core is intact, and the core is expanding itself. All these ancillary services that we’re talking is becoming part of the core and international expansion then becomes ancillary to that though we will want to be very, very robust in what we do in terms of all the top of the funnel services that where some of them don’t exist in the market so we might have to build some of those. And some of them may exist --

Tarun:

Like you guys did with food and so many other things. Yeah.

Sandeep:

Like we did with food and so many others that are consumer pain points which don’t exist. They help us build a very strong moat around our business and it becomes such a strong moat that we don’t want to look behind our back as we’re expanding constantly. And therefore, I think we’ll rather solidify our business here, the TAM is extremely large, B2B space is extremely large so one of the reasons while we’ve always wanted to expand internationally was TAM.

You know, it is so large here that why don’t we capture significant part of that here before we look into international expansion. And so 18-24 months is absolutely right, now I never say never B2B was again 18-24 months away in our mind, it happened faster than we planned so if something exciting comes up then we never say no to any exciting opportunities.

Tarun:

Awesome. Thank you, guys. I really, really enjoyed and learnt a lot through this conversation. Appreciate you guys candidly sharing your insights. Very excited about what I guess the next few years of Stanza are going to be. I know you guys are just getting started. It seems like a little bit like we spent a lot of the last 12 months where I’m sure there’ve been some frustrating moments, there’ve been some impatient moments. But I know what you guys have done under the hood in terms of really strengthening the core. So very, very excited about seeing how this all sort of unfolds once market opens up a little bit more and allows us to do sort of experience everything you guys have done. So very excited about the future and thank you again for doing this.

Anindya:

Thank you, Tarun.

Sandeep:

Thank you, Tarun.

Sandeep:

Thank you, Tarun.