The market churner

If Ringing Bells manages to deliver what it has promised, it will revolutionise the country’s telecom sector. But the odds are heavily against it

vivek

Vivek Avasthi | March 4, 2016


#Freedom 251   #Telecom sector  
Ringing Bells president Ashok Chaddha (left) and managing director Mohit Goel launching Freedom 251 in New Delhi

 Don’t hang us before a proper trial and give us an opportunity to be heard,” says Ashok Chaddha, president of Ringing Bells Private Limited, the company which is offering a smartphone for just Rs 251. Ringing Bells indeed created a huge flutter in the world of smartphones with these dirt cheap rates. For days together, the firm is in the eye of storm and its offer has been termed as ‘too good to be true’.


The company is being closely followed and monitored by several government agencies now, which include several ministries, the income tax department, Noida police, and Noida authority to name a few. “Why are we being hounded, what wrong have we done,” asks Chaddha. The 65-year-old IIT alumni with astrophysics background claims to have worked with chemical and pharmaceutical industry before shifting to financial consultancy. 

Chaddha further says that the bookings received by his company are in safe hands – the money has gone to payment gateways and from there to the nodal banker. “This money would come to the company only once the delivery receipt from the customer is submitted to the nodal bank,” he adds.

According to the records of the ministry of corporate affairs, Ringing Bells Private Limited was set up in September 2015 and has been registered at Delhi’s registrar of companies office. The paid-up capital of the company is said to be Rs 60 lakh while its authorised capital is Rs 1 crore. 
 
The fear of scam

The company, which was unknown till a few days back, is in the midst of a deep controversy with BJP member of parliament, Kirit Sommaiya terming this as a ponzi scheme. He has already knocked the doors of the ministry of communications of IT, telecom regulator, consumer affairs ministry, SEBI, corporate affairs ministry, finance ministry, RBI and the Uttar Pradesh government alerting them of a possible scam and requesting them to verify the business model of the company, which has managed to convince 7.35 crore people to book a smartphone through its website.

The apex body of mobile industry, Indian Cellular Association (ICA) has also written to communication’s minister Ravi Shankar Prasad, asking him to look into this matter. The ICA has also expressed its concern over the intent of the company as it feels there is no way any company can sell such a handset below Rs 2,700, even after considering all the discounts that the promoters have been presenting as a back of the envelope calculation to justify their business model.

According to ICA, considering that this handset features a 4-inch display, Qualcomm 1.3-GHz quad-core processor and 1 GB RAM, the individual cost of each of the components itself would be far more than Rs 251. Moreover, without any aid or grant from the government quarters, which the company owners have declined so far, a smartphone for Rs 251 seems to be a far-fetched dream.

Sources in the department of electronics and information technology (DeitY) inform that the department had sought clarity on the matter and had summoned the promoters of Ringing Bells to Electronik Niketan for the same, where they were informed that the company has placed an initial order of one crore handsets with a production unit in Taiwan. “They told that one smartphone would cost them about Rs 1,100 and that they are in talks with some various companies to partner and subsidise the product,” the DeitY official says.

When asked about their business plan, the company representatives told them that they were about to seal their business deals with partners that will enable them to book a profit of Rs 31 per handset despite selling the product at Rs 251 a piece. The company has also informed the government officials that they would be putting pre-installed apps and sign up with e-commerce companies. They added that they would have plenty of big companies to partner with, taking into consideration their customer base of 7.35 crore people. 

Sources in the DietY also informed that the company was asked about the certification from bureau of Indian standards (BIS) and the promoters of the firm said that though they had not applied for BIS certification, they would start this process immediately. The company representatives told the officials that in the first phase they would be importing smartphones. But the second phase would be made in India as they are acquiring land for their own production facility in the country, which would be set up in the next six to eight months. The company has teamed up with two lesser known technology companies of the NCR for assembling these smartphones.
 
The freedom that could be

Talking about the idea behind launching out such a cheap smartphone, Chaddha says that this is a step towards Digital India where his company would have great earnings in terms of turnover clubbed with the more than large figure of customer base with them. And who in e-commerce or in the world of apps would not like to partner them, he adds.

Talking to this reporter Chaddha further explains, “It is not only pre-installed apps that would work towards economising this smartphone. With such a huge consumer base, we have plans to launch an online e-selling platform – www.freedom251.com – that would help us generate more business to subsidise the product. We are also looking at reduction of costs due to tax rebates, online marketing and sales and no further advertisements to achieve lower costs. Besides, the sheer volume will help us procure components at a very low price.”

On being asked why the prototypes handed over to journalists were from a different company and did not work properly, the company says that they gave these phones just to show what type of a model they were intending to launch and also specified there and then, that their own product would be a little different from the one shown, with a button here or there.

According to Kiran S, senior superintendent of police, Noida, where the company has its office, the local police are keeping a close watch on the company. He says that they had called the promoters of the company who told them that the manufacturing of major components of the smartphone would be done in a facility in Taiwan. Kiran further informed that they are in the process of checking the antecedents of the directors of the company.

However, there are still many unanswered questions that the company has failed to respond. It does not have the backing of a corporate giant or a multinational firm, which could book initial losses and kill competition, only to capture the entire mobile segment in the months or years to come. Also, with no government partnership, aid or grant, it is a big question how does Ringing Bells intend to enter the market.

Chaddha admits that they are not a cash rich firm but with the volume of trade in hand he would for sure raise debt from the industry rather than diluting his equity. He says that the company is taking the marketing route and exploring multiple partnership routes that will be the cornerstone of its innovative business model and strategy that can completely change the rules of the retail market game. “The 7.35 crore registration is a indicative of the customer confidence and the sheer volume is lucrative enough for companies to tie up with us,” he says with a glint in his eyes.

This could be termed as a new model of business in the country which talks of economy of scale, piggy backing of various products on one platform, lowering cost of sales and marketing through online selling, etc. Experts say that if this experiment is successful, it could well be a magical business proposition which nobody had thought off till date. But it if boomerangs, it could take few decades for any entrepreneur to try and take this route to success. 
 
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