Purchased by SIMSR from IIM A not to be used by others

GOOD KNIGHT
IN 1973, when Mohan boarded a second class compartment of the
Jayanti Janata Express to Mumbai (Bombay) from Thrissur in Kerala in
South India in search of a job, little did he realize that he would be
known as ‘Good Knight Mohan in a few years’ time. Jobs came easy to
this young new Electrical Engineer, but he was not satisfied. After
switching jobs twice, Mohan started a trading firm to deal in ceramic
insulators. While this paid for his livelihood, he experimented with the
design and production of indigenous diapers from his flat in Kalina.
Sales were limited and market never picked up for want of perfection.
Also many people did not know then what a diaper was all about. In
1981-82, when electrical equipment industry went through a bad patch
Mohan had to sell his insulator business.

It was at that time that he was looking for a safe anti-mosquito repeller
to protect his little daughter from mosquito bites and sleepless nights.
He finally located an effective repeller in the form of a paper mat under
the brand name Vape in one of the shops in Mumbai. Although the
shop-keeper did not show much interest in selling it apparently to
avoid any risk of non-performance of an unknown product, Mohan
bought it as he wanted to try it out. The next day itself Mohan felt that
it would be a high successful product if it were marketed well and he
soon took over the distributorship of the little known Vape. Although
Mohan was convinced about the future prospects of Vape, the
managing director of the company did not give him any support in
terms of advertisement and reliable distribution. It was when Vape
started fading away that he decided to explore possibilities of starting
a firm of his own to manufacture mosquito mats in collaboration with
Sumitomo of Japan.

Technology and financing

His attempts to collaborate with the Sumitomo group of Japan which

had a monopoly of the technical materials, was faced with obstacles.
He met their liaison officers in Mumbai several time. They were polite
but asked him to wait for some more time before they could make up
their mind. After several futile attempts Mohan felt it was becoming an
unending waiting. There was still no firm response from Japan although
he knew that they were keen on an Indian collaboration. Finally he flew
down to Osaka in 1983 on a courtesy ticket obtained through his wife
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who was working for the Air India then. He phoned up the corporate
office of Sumitomo from his hotel room and sought an appointment.
The very next day he met senior officials of Sumitomo who, to much a
surprise, had preserved all the correspondence he had made for the
purpose of collaboration. Soon Mohan returned to Mumbai with an
agreement for the supply of the technical ingredient called allerthin for
the manufacturer of mosquito repeller mats, and the single equipment
for dipping allethrin. They did not give him any credit. Further,
Sumitomo was free to supply the material to anyone else in India.

Another, major hurdle was yet to be crossed. It was finance, and he did
not have any money with him. His friends and family members who
had supported him in experimental diaper business could not help him.
His banker with whom he had long years of association dilly-dallied for
eight months with his loan application before finally rejecting it. In the
mean time the Sumitomo machine had arrived in Mumbai airport and
was lying idle there. His loan application was rejected by almost 30
banks and financial institution on grounds of non viability.

Finally, in 1984 one private financier offered to lend Rs.0.20 million @

5 % interest PM, taking Mohan’s flat as collateral. Since he had no
other option open he took it and got the machinery released from the
airport. The financier’s son offered funds for purchase of raw material
on a condition that he be given sole Distributorship of Good knight. In
mid 85 the father-son franchisers came with a proposal of 50% stake in
the company, lest they would pull out immediately from the business,
and Mohan have to settle their accounts forthwith. Though he was
pushed to the wall, he did not give up. Finally, on hearing his story a
loan officer of the Bank of India who had provided him with a credit
facility of Rs 0.5 million earlier agreed to bail him out.

The total liability that Mohan had with the bank of India came to Rs.
2.10 million after settling his dues with the private financiers. HE had
promise to repay the bank by November 1985. It was mid 85 and a
personally known advertising agency made a television advertisement
for Rs.0 .50 million and on 45 days credit. The first television
commercial of Good Knight came on 31st July 1985; only large reputed
company advertised these days.

Product

To drive mosquito away people had been using an organic coil which
emitted smoke on lighting. Yet another method followed was use of
skin ointments. Transelektra Domestic Products introduced Good
Knight as a substitute to all such mosquito repellers. Operationally it
was simple. A rectangular light blue colored paper mat of 3.5 cm x 2
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cm is electrically heated at 106 degree C temperature using a heating

element to inactivate mosquito. A mat is effective for eight hours when
heated this way. In order to maintain temperature at the specified
level, they used Electronic Mosquito Destroyer (EMD) which worked on
imported thermistors.

An EMD consisted of a plate to seat the mat, a thermistors to heat the

mat, a plastic cover and an entire wire. Transelektra got EMDs
assembled through sub-contractors using imported thermistors from
Sumitomo from Japan. They have had three sub contractors since
beginning. These were started and owned by people known to Mohan.
In, 1992, they were paid fifty paise per piece in terms of labour
charges as it involved only manual assembling . Later in 1992, they
started manufacturing 70,000 thermistors a year in Bangalore using
indigenous raw materials. The rest of their requirements were met
through import from Japan, and later from Italy too.

Harpanhali who was Mohan’s colleague in his earlier job made a

research break through for them by developing the raw material used
in the manufacture of thermistors, otherwise called tablet. He had
settled down in Bangalore, and after this development his laboratory
was converted into a factory to produce light weight and compact
thermistors. He joined the company as the factory manager there.
Lakshmanan, a supervisor in the Mumbai factory who started his
career as a typing assistant to Mohan, mentioned that Transelektra
was the only firm which made thermisters in India. Indigenization of
thernistors brought their cost down by a third to Rs.12. besides,
several problems of import such as restrictions on foreign exchange
release by the Reserve Bank of India, and carrying of about five
months’ inventory could be avoided. Most competitors used cheaply
available ordinary heating elements. Mohan mentioned that a few
cheap imitators of Good Knight EMDs without thermistors were
available in the market and they often had to get police help to stop
them. In any case, the effect of initiation was not substantial.

The production process was simple. It started with cutting an easily

available special type paper into the size of a mat and impregnating it
with the brand name ' GOOD NIGHT'. This job was sub-contracted and
Tran Elektra received impregnated mats. The next stage involved
adding specified drops of a mixture of chemicals which include
allethrin, evaporator, fragrant etc. to the mats with the help of a small
machine. Mats were manually placed on a slowly moving conveyer belt
above which a burette carrying the chemical mixture was placed. It
was adjusted in such a way that only a drop of the chemical mix would
fall on each mat. It took ten hours for the blue colored chemical spread
uniformly on the mat. Mats were than individually packed into strips of
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ten using thin transparent plastic sheets. Samples of mats were

weighed before and after the addition of chemicals, and samples of
finished mats were tested for quality in a mosquito chamber in their
laboratory located in the head office. “MOHAN never compromised on
quality”; said LAKSHMANAN. In 1992, they had introduced EMD’S in
blue and red colours. They had also reduced the size of packing. The
factory consisted of a three storied block with a total area of 6,500 sq
ft. The ground floor housed the store, and the other two floors
production. They had four dipping machines- two, six- track and two,
three-track, three of which were locally fabricated using the design of
the imported machine.

Each of the two six –track machines could produce 6 000 boxes of 30
mats each and the three-track machines 3 000 boxes each per shift.
They used to operate three shifts a day but switched over to single
shift in 1991. The installed capacity was 10 000 boxes per day in 1985.
Wastage in terms of defect etc. constituted about ten percent which
anyway was not a source of concern to them, said Lakshmanan .
Finished mat remained in stock for a day.

They opened a new factory in Chennai (Madras) in 1991, where the

factory space was expanded from 5,000 to 8,000 sq.ft with in a year.
50 out of 100 employees were contract workers. Production capacity of
Chennai Units was 70,000 boxes of mats per day

Raw material supply become easy by 1991 .In October that year they
started importing allethrin from France.
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Market

Their first ever TV advertisement was telecast in the evening on 31 July

1985 in Mumbai. The theme was, “no smoke, no cream, no ash, sweet
dreams, Good Knight”. Mohan positively responded to the large
number of enquires for distributorship and dealership that followed. By
1992, the company had 2, 50,000 retail outlets spread all over the
country, created to by 18 branch depots and 500 distributors. There
were 156 field sales staff and area managers employed by the
company. Each state had an Area Manager who fixed sales targets for
distributors. His sales representatives produced orders from retailers.
In reality, about 60 percent orders were produced by them, the
remaining by stockists themselves. Customers often had to wait for the
product to arrive in those days. When the company was started, sales
were limited to the western and northern parts of the country. In 1988,
coverage was spread to the southern and eastern regions also. “We
want to reach the nooks and corners of the country. Good Knight
should be easily available everywhere”, said Mohan.

Operating from a small sized factory in Vasi on the outskirts of

Mumbai, his turnover of Good Knight brand mosquito repeller mats and
EMDs grew from Rs.9.00 million in 1985-86 to Rs. 110 Millon in 1988-
89 and further to Rs 468 million in 1992-93. Sales in quantities rose
over the years as given
EMD Mat Boxes (30 each)
(Fig in millions)
1985-86 --- ---
1986-87 --- ---
1987-88 0.32 1.50
1988-89 0.87 3.33
1989-90 0.95 6.69
1990-91 0.89 9.29
1991-92 1.00 12.70
Initially, they targeted Good night to upper income group. It was based
on Gut feeling that they fixed a price of rupee one per mat. Later they
provide that the market was open for middle income segment too.
EMD which was initially priced at Rs. 25 was raised to Rs. 100/- after a
couple of years.

Mahendran, Executive Director insisted on the Area Managers sending

collections to the head office on a fortnightly basis. Area Managers in
turn used to pull up distributors, often indiscriminately and would even
appoint new distributors for meeting cash dispatch deadlines. They
often found scagoats in head office appointed distributors. Since 1991
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Area Managers had to obtain head office permission to change/

appoint distributors

The top management allocated targets almost evenly (ranging

between 23-28 percent) among the four region. Targets and
performance were reviewed in the monthly of the regional managers
held at the head office. Production and distribution plans were finalized
and divided between their production units in Mumbai and Chennai
.they had about 40-50 distributors/Stockists in each state who
received goods once or twice a month and paid in advance.
Distributors, however, gave 30 days credit to retailers. Mohan felt that
over the year some of their Area Mangers had become arrogant to
both distributors as well as retailers.”I have to correct it” he said.

In 1991-92, nearly Rs 20 million was spent on good knight

advertisement. The national telecasting Agency Doordarshan’s charges
had gone up from Rs 0.10 million for 30 seconds in 1985-86 to Rs 0.40
million in 1991-92. As percentage of turnover, advertisement expenses
declined from about 26 Percent of turnover in 1985-86 to 29 in 1987,
17 in 1988, 11in 1989, 9 in 1991 and to 6 in 1992

Most of the other competitors did not stick to quality norms fixed by
Sumitomo, said Mahendran .Besides, Good Knight emitted a pleasant
odour. He added that they had rejected ideas for making Good Knight
in different fragrance.

In 1991, they sponsored an all India Good Knight Cup football

tournament in Cuddalore 200 kms., away from Chennai. It was
inaugurated with a lot of publicity and fanfare.

Competition

Since entering into the market in 1985 Good knight remained the all
India market leader, and in 1992 they had 60% market share. Jet and
Banish brands of mats and EMDs with 15% market share each and
Odomos with 8% were closest rivals. There were another brands such
as Casper, Sumari , Odomos, Six to Six ARS and Knight Queen sharing
rest of the market. Casper had come out of fragrance mats and roll in
cord EMD. Over the years the expanding market attracted not only
small and large firms, but multinationals too and 1992 Bayer and
Reckitt & Coleman had also joined the fray. According to Mahendran,
they competed neck to neck with Jet in Madhya Pradesh and Banish in
a 60:40 ratio in Tamil Naidu. Their market share in Mumbai was 60
percent, Calcutta 80 and Delhi 70 percent.
 Purchased by SIMSR from IIM A not to be used by others

The Economic Times reported on 17th Feb. 1993 the good knight
continued to be the all India, market leader in Madhya Pradesh,
Rajasthan, Andhra Pradesh and Orissa. Their sales had risen from
Rs.1.1 million in 1987 to Rs.140 million in 1992.This report also
mentioned that the household insecticide segment was a Rs. 2000
million market growing at 25 % per annum. It consisted of Mat, (45 %)
coils (25%), non aerosol liquid (21%), aerosol liquid (4%) and creams
(5%). Mats segment grew at more than (25 %) per annum. Mahendran
also felt the market growth rate was about (25%) per annum but was
likely to stagnate by mid 90s. When Odomos was launched by the
Balsara Group in the Mumbai market, Good knight hit back head on
effectively by dumping their product all over the city two days before
the Odomos launch. This was an approach they adopted with other
competitor too.

Jet was always priced marginally lower then Good Knight. In 1991 Jet
introduced mats which emitted fragrance throughout the day, besides
introducing Jet Plus, an EMD with two heating plates, one each for
mosquito and fragrance mats. Its price remained the same at Rs.90. Jet
also came out with Jet Gypsy, a plug in model. 1992 saw Jet Fighter
(Price Rs.245) which used allethrin in liquid form to work with a
thermowick. This eliminated the need to replace mats everyday.
Transelektra did not pick up fight with the Jet Fighter. Anyway it faded
out of the market soon.

In the mats segment, Good knight’s retail price was Rs.37/- per box of
30. The others were priced at 35/- or lower. For sometime in 1991,
Good Knight offered 5 mats free with every box of 30.

HIT

Transelektra expanded their product range to cover aerosol liquids and

introduced Hit for flying insects in December 1991. The introduction of
HIT for crawling insects was immediately followed by the entry of
Bayer India with their Baygon Power cans. Both of them had a major ad
campaign to corner market share .Transelektra spent Rs 10 million on
advertisement for the launch of both the products, and annually since
then. Their “cockroach” ad on buses etc. created much adverse
reaction from public. Their slogan “Cockroach Cockroach , Hit
Cockroach, No cockroach” with pictures of cockroach all over the
buses created much repulsion in the minds of public. For this
campaign, they used the bodies of Mumbai city buses. Since Mumbai
office goers have to take buses at fixed timings to avoid missing
connecting trains, they had little choice but to tolerate it. The
newspaper reports on it provided extra publicity to Mohan .Although
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Bayer initially introduced a single product to counter the two different

Hits, later they also switched over to follow the Hit strategy.

Snuggy

Mohan’s diapers project got a facelift in the light of Good Knight’s

success, and a new company called Diapers India Ltd was started with
technical assistance from a US firm. Snuggy brand of diapers was
launched in 1989. Use of diapers for babies was still a new idea in
India, and the market was limited to a few urban centers. Buyers
belonged to upper middle class and upper class.

There were two other small manufactures, one in Delhi and the other
in Hyderabad, both small firms. They had also appeared in the market
about the same time, and all the three were finding it difficult to sell
diapers. Transelektra spent Rs. 5.0 million each in 1989 and 1980 for
advertisement but discontinued all advertisement in 1991. By 1991
end the other two companies had almost stopped operations, leaving
Snuggy to be the sole survivor. 1993 saw revival of Rompies from
Delhi. Mahendran claimed that Snuggy had a market share of over 75
percent. Snuggy international , an improved and higher priced product
was in introduced in mid 1993 .The price of Snuggy was raised from
Rs. 9 per diaper to Rs. 11 in early 1993. Mahendran said that margins
were about 10 percent of sales before taxes in diapers at the price of
Rs. 9 per piece. It was rumoured in market circles that both Procter &
Gamble and Johnson & Johnson were contemplating entry into diapers
market.

They had started a Snuggy Club in Mumbai for young mothers were
mothers could meet and discuss problems of bringing of babies. It
provided occasions for social and learning interactions to the mother.
One can become a member for a maximum of three years. Cochin and
Bangalore had similar clubs with a total membership of 1,200 young
mothers.

They had introduced Snuggy books containing children’s stories in

1992. It was expected to push the sale of Snuggy. There was no
second printing of these books. Their monthly publication for mothers
called Young Mother sold over 20000 copies, and was a competitor to
other popular journals.

Mohan had been passionate with cinemas, and got into film making in
1990. The first film, which was made in his mother tongue, Malayalam,
was a run-away success and had several scenes with Good knight, Hit
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and Snuggy advertisements in the background. It was the first time

anyone had used full-length feature film as advertising.

In 1993 he produced his first film in Hindi called “Gardish. A week

before the release of the film there was rumour in Mumbai that the
hero of the film and some others related with it were arrested by the
police in connection with a serious of bomb blasts that had rocked
Mumbai. In fact, a fortnight before that a popular Hindi film star was
arrested with charges of involvement in the bomb blasts conspiracy.
The rumour originated from a newspaper distributed in the evening in
the over-crowded sub-urban trains in Mumbai. Lead newspapers
reported in the next couple of days that the rumour was a joke, and it
was only an advertisement notice for Gardish. The case writer saw the
notice in Mohan’s office the subsequent week and noticed the close
resemblance this Good Day had with the popular newspaper Mid Day.

Personnel

In 1986 when Mohan had just started operations, he was assisted by

cousin, one sales representative, one steno typist and 20 workers. He
used to get professional advice from Mahendran, a charted accountant
who later joined him as Executive director in Feb 1987. Mohan looked
after marketing himself, but delegated other functions such as
production, finance, and personnel to Mahendran. He, however, had
the final say in everything especially in the early days. As business
grew and activities expanded he delegated further and got involved in
operational details only in times of crisis. Mohan and his wife together
owned the entire equity of the company. About team building, Mohan
told a group of students “I recruit quality people who are capable of
delivering the goods. I can train and groom them to be organization
men. Values can be inculcated in them”.

They recruited a purchase manager in mid 1947 and a marketing

manager by end 1987. They added professionally qualified people in
1989 for various departments. However, Mahendran said that they
found it very difficult to recruit highly qualified people for various
functions. In 1992, they employed 30 field sales staff and 200 workers.

In one of the meetings with the case writer, Mohan shared his dreams
of making Transelektra a big firm manufacturing and selling several
innovative products. In the greeting cards area which was started after
indentifying creative talents in one of his officers; insult card was one
thing. They contemplated a public issue for financing growth. They had
plans for expanding production of thermistors and the special quality
paper used for the manufacture of mats in large scale, even to the
extent of meeting at least part of the requirements of their
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competitors. They wanted to expand production of Hit also for Indian

and overseas markets. They needed nearly Rs. 250 million for these
projects, but were not sure whether they would be able to generate
enough funds for the share issue for all these without hurting growth of
other products. They were also concerned that they did not had
enough funds to cover the 25% promoter’s contribution stipulated by
the securities and exchange board of India.

Transelektra Changing Hands

The process of economic liberation unleashed since 1991 led to series

of corporate restructuring in India. Several overseas companies tried to
acquisition of existing medium sized companies to quickly establish in
India. Some of large Indian companies also started restructuring their
portfolios.

Mid 1992 saw Mohan intensely negotiating with a large US based

healthcare company for selling more than half of the equity he was
holding. To a question whether he was not feeling sentimental about
selling his own “babies” he replied I have bought these products as
children. Now that they are growth up, let someone else with more
muscles power run them. I will move on to other new and interesting
things. I believe that such strength will be required to be successful in
this area in the Transelektra Domestic products was finally sold to
Godrej, one of the largest consumer products manufacturers in India
for a net price of one billion rupees in 1994. Godrej obtained the brand
good Knight for the western region whose major market was Mumbai.
In 1995, Godrej Hi Care Ltd., as the company is named with Mahendran
as the Managing Director, acquired their two major competitors Banish
and Jet registered a turnover of Rs 842 million in 1994-1995, Rs 1247
million in 1995-1996 and Rs 2017 million in 1996-1997. Net profit after
taxes for the same period was Rs 83, 182 and 294 million respectively.
In 1997, Godrej offloaded majority of their stake in the company to US
based Sara Lee Corporation for Rs 155 billion. While Sara Lee held 51
percent, Godrej had 44 percent and Mahendran the remaining 5
percent of the shares.

In 1998, Mohan was already managing a company called Shogun

manufacturing different varieties of paper. Shogun was probably the
first company in India to produce a high quality facial tissue paper. He
was also deeply involved in aero sole bottling and real estate. He
collaborated with an Israeli firm to introduce an innovative computer
based education programme for the first time in India. Mohan
continued to finance films and produced his own films with young and
highly creative directors
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