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'Listen to your heart and never fear failure'

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July 28, 2008

He's a maverick entrepreneur.


Patu Keswani, the owner of five Lemon Tree Hotels with revenues worth Rs 100 crore and a valuation worth Rs 1,000 crore in 2006, has his dog Sparky as a part of his company's management team. Sparky owns one share in the company. Taking this forward he has appointed one dog for each of his hotels who represents the values that his hotel chain stands for.

Most of his top-level employees sport a ponytail -- because of which a banker once rejected his loan for Rs 4 crore -- like him and he encourages his employees to dress more informally than he does.

"I've asked all my employees not to dress formally though unfortunately many are more formally dressed than me," says this owner of a hotel chain that was valued by the famous private equity company Warburg Pincus at Rs 1,000 crore in 2006.

As for his academic credentials, he first did a BTech in computer science from one of India's prestigious institutes of learning: IIT Delhi [Images]. Not satisfied and afraid that an engineer with his qualifications may not land a good job he enrolled for an MBA at IIM Calcutta.

After 15 years with one of India's best hotel company and two years at top-notch consulting firm A T Kearney Patu decided to hang up his suit and tie to start his own hotel company. This unnerved his parents -- both from the services sector -- no end.

Patu, however, had the courage and passion to realise his dreams. A failed attempt to secure a loan from a public sector bank -- the bank manager was aghast to see an entrepreneur sporting a punk-like ponytail -- only steeled Patu's resolve.

Today, he owns five Lemon Tree Hotels -- yes, that's the name of his hotel chain. He has also recently started another chain named Red Fox Hotels.  He has an ambitious target of building another 20 Lemon Tree hotels by 2011 and five for Red Fox.

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In an interview with Prasanna D Zore Patu Keswani discusses his success mantra, his life as an entrepreneur and the fun and adventure he had in starting his own hotel chain.

From engineering to management. Was it a good move?

I think in those days an MBA improved your career options and it's no different today.

The advantage in India is we can do an MBA immediately after graduation unlike in the US where you need some work experience before you could actually enroll yourself for a management course.

You began with the Tata Administrative Services?

Once you join TAS you are sent on deputation to different companies within the Tata Group.

When I joined TAS I was sent to Tata Steel [Get Quote] and I had the opportunity to work with Russi Mody. Then I thought that the hospitality business was more service-oriented and more interesting so I joined Indian Hotels Company [Get Quote] that runs the Taj  properties. I was a part of it for 15 years.

I was quite intrigued and excited about the business of running hotels. In 1991 good career options were very limited with only three or four good companies like Hindustan Lever [Get Quote], Nestle [Get Quote], Citibank, Grindlays Bank etc.

The decision to join the hotel industry was not properly thought through. I found the sector very interesting so I joined it. Many of the things I have done in life have not been thought through. And perhaps it has given me very good results.

Your family's reaction when you planned to start your own hotel?

I left Indian Hotels in 2000 and joined one of the top four Indian consultancy firm A T Kearney. From every perspective it was a good move for me and I worked with them for about two years. Though I left the Taj as senior vice president it was not intellectually stimulating enough for me.

When I joined A T Kearney my folks were not too bothered as it was a very well-paid job. But when I left A T Kearney my parents were very disturbed -- my father's a retired government employee and my mother was a doctor in the Indian Army [Images]. Though they never showed it to me they talked about it with my sister and my wife.

Was it difficult then to venture out on your own?

It was a breeze actually. One of the major reasons why people don't become entrepreneurs because in India six years back a small private entrepreneurship was not considered a good career option, especially if you came from a services background like my family did. The second is there is more risk when you start your business and thinking too much about it paralyses your decision making.

You will never become an entrepreneur if you think what society is thinking about you. Fortunately in my case I was clear about what I wanted in life. I was not thinking too much about money and success. I just wanted to have a good time and fun. When I look back I am amazed that I made that decision in just three days.

About Lemon Tree Hotels...

We don't manage hotels. We only own them. We are an integrated play. We buy land, design and build hotels on it, finance it ourselves, manage it and brand it ourselves. I just wanted to build only one hotel and experience the fun in doing it.

The first hotel was built in Gurgaon and it did very well. Then we bought more land, got Warburg Pincus to invest and after that it were sort of a dream run. Right now we own five Lemon Tree Hotels in India. By 2011 we plan to build 20 Lemon Tree Hotels all over India.

Today, we also have a separate company called Red Fox Hotels. By 2011 we will have five Red Fox Hotels as well and a little over 3,000 rooms. This year we will have revenues of about Rs 100 crore.

How is Lemon Tree and Red Fox different from other hotels?

I guess Lemon Tree has actually no competitive hotels in it's category at present in India but it certainly is refreshingly different from the other existing hotels in India -- much funkier and brighter, not stuffy, fun, extremely professional (the last is today offered only by five star deluxe hotels).

Red Fox will also have no competition in its category -- it's positioned as an efficient, safe and clean, limited service hotel in the economy ie budget segment.

How did you convince Warburg Pincus to come on board?

By 2005 with our internal accruals, the money that I put from my own pocket and by raising through private sources we had bought about six plots and private equity investment never occurred to me.

I was not really looking for funds then as it could have led to equity dilution. When Warburg Pincus approached me in 2005 we got talking only casually and nothing happened beyond that.

Eight months later Warburg Pincus' managing director called me from outside a Lemon Tree Hotel in Pune and asked if I remembered out talks earlier. "Are you looking out for funds?" he asked.

I asked him to come over to our office and in the next days they gave me a valuation beyond my expectation. They valued Lemon Tree at that point for over Rs 1,000 crore. Today they own 26 per cent in my chain.

About your ponytail, casual attitude at work and dog on your company's board...

Let me tell you one thing. I had been an executive for more than 15 years. I had a clear idea of what employees like about their workplace and what they don't. I believe that we don't live to work; work is just a small part of our lives though we spend a lot of time at our workplaces.

So what I promised myself was whoever joins Lemon Tree should have fun and no stress while at work. I believed my employees should look forward to come to work everyday in a happy frame of mind. Sometimes even I used to wake in the morning and say to myself: "Shit! I have to go to work now!"  

I'd a pony tail when I was studying at IIT Delhi. Those were perhaps the best days of my life as I had no responsibility, no accountability. At some level I was trying to return to that point. When I started Lemon Tree along with five to six of my colleagues they said they want to grow a ponytail. So it just evolved from there.

Then my dog 'Sparky' joined me from the day I formed this company. It was just crazy as it struck me one day why not put her up as an employee. So we started paying her five biscuits a day as her salary. Then we made her the part of our management team -- Sparky owns one share in Lemon Tree Hotels -- and now of course we have dogs in each of our hotels.

Your loan application was once rejected by a banker...

I had decided that once I start on my own I'd not wear any formal clothes. May be I was sick of suits and ties. I've also asked all my employees not to dress formally though many of are more formally dressed than me unfortunately.

I'd already made arrangement for Rs 5 crore and needed a loan of another Rs 4 crore to start my company. When I sat face-to-face with this bank manager at a public sector bank he agreed to give me that loan at a very, very high cost (16.5 per cent in 2003). However, while leaving he saw my ponytail. When I looked back at him he was actually staring at my ponytail with utter disbelief. That was it. My loan didn't come through.

Your advice to young entrepreneurs...

Listen to your heart and never fear failure.

If you want to do anything just go for it. Especially, if one is a young entrepreneur, s/he has nothing to lose. Failure is just a step that you put to achieve success.

Your inspiration...

I don't have a role model or inspiration in business. On a personal note I admire Mahatma Gandhi [Images] and Martin Luther King for the value they stood for and fought all their lives.

What's your success mantra?

Actually, I don't have one. If you enjoy what you are doing and are passionate about something success is all yours. I have a passion for designing and building hotels and interacting with people that helps in my business.

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