Constelli Signals confident of break even in FY22

Constelli Signals, a Hyderabad-based startup focusing on core defence technology, is perhaps among few organizations to take up hiring in turbulent times of Covid-19. After overcoming teething problems and the impact of Covid pandemic, the technology startup is set to break even in 2021-22 financial year i.e. in the fourth year of operations. "We want to become a global defence organization by exporting our products and technology solutions," says Chenreddy Avinash Reddy, founder and CTO, Constelli Signals, in an interview with Bizz Buzz

How's the journey so far in the last 3 years?

We started our journey in November 2017. Within the first six months of operations, we raised Rs1.2cr. Thereafter, though we had opportunities, we didn't avail of any funding support. First 18 months, we faced issues pertaining to cash flows, operational issues. Initially, we had some problems. Of course, it was a learning experience as well. We faced many issues such as funding, but never compromised on choosing projects as we remained focused on our domain i.e. defence technology. We couldn't pay salaries for six months, but our staff supported us in the initial phase.

For team building on niche technology, we need the right talent. Finding the right people is very difficult. We're facing this challenge. We focus on work culture. We interviewed 60 people to hire 3-4 candidates. We have good support from THub, which invited us to propose some ideas offered office space also.

Have you faced any funding obstacles for the startup?

Of course, we had funding problems, but got help from a seed investor. We need investors generally for startups. For apps and general services, investors can easily understand the business model and come forward to fund them. But for the defence sector, investors need to have domain knowledge. On the other hand, billing takes upto two years. So, attracting investment is a bit difficult exercise for startups with a focus on the defence sector. We faced a setback as one investor opted out of the project after initial work was done. We worked from home for a couple of months. Later we got another investor. We have to run the show for 18 months until we get revenues for the delivered projects.

What products do you make?

Our startup is focusing on niche signal processing technology including satellite communication, WiFi, mobile communications, etc. Our product range includes radio links from radars, detect objects, etc. The product line is spanning to three domains-- radars and EW (electronic warfare), telemetry used in getting information remotely.

For providing telemetry solutions, we partnered with DRDO. We have a lab in Odisha also. We developed indigenous product digital telemetry receiver, which is an import substitute. We have orders for seven products. Currently, we're catering mostly to Indian defence sector.

Any plan to export your products and solutions?

Yes, we want to export our products and technology as we do a lot of system integration. We want to build a brain for core signal processing. We have an export order from Turkey for a radar test simulator. We are participating in multiple tenders abroad and in discussions with EU companies to partner on technology sharing. We may enter into an MoU with an overseas company very soon. Our objective is to become a global defence organization.

How do you see demand and competition for defence products?

There's completion always, but not much in India. However, we face stringent competition in global markets. We are just a three-year-old startup, but facing competition from global majors with over 30 years of experience. We participated in first level tender in Australia and are selected for technical qualification for the bid. We see many opportunities despite Covid and funding issues. Business dynamics keep changing. We have opportunities in India also. We have good opportunities globally in radar and EW segments.

Any boost from Atmanirbhar Bharat initiative?

Right now, there're MSME loans available, but we didn't avail of it. Some key decisions under Atmanirbhar Bharat on EMD for tender, priority to startups, innovation for defence sector, grants for startups on defence are good. The Centre offers Rs1.5-crore grant in contests for startups on defence space.

What needs to be done for a successful Atmanirbhar Bharat?

Core thing apart from system strengthening is that the Centre should encourage technology development in India. Generally, we develop products based on foreign technology. Hence, we need to focus on core technology to be developed in India. For example, though we make cell phones, we import all the raw materials to assemble them. This shouldn't be there. We should be self-reliant in manufacturing, startups, etc.

What is the impact of Covid-19 on the company?

One negative effect is that we worked remotely, unable to hire more people. Delay in payments. However, it didn't impact defence startups much. We managed to work from home.

What measures that company has taken to mitigate the impact of Covid-19?

We had already established contacts during the first two years of operations. We're not impacted much by the pandemic. In fact, during the times of Covid, we're hiring now.

How do you see the future in post-Covid?

Now, we're almost self-sufficient, feeding ourselves sustaining ourselves. We had a turnover of Rs2.9 crore in the last two years. We expect to touch Rs7cr of billing and orders worth Rs12 crore this year including Rs3.5 cr from abroad. For FY-22, we forecast a revenue of Rs18cr including 30 per cent income from exports. We want to scale up fast. One export project is already in progress.

How do you see the ecosystem for startups in Telangana?

Ecosystem in Hyderabad is very good. We chose T-Hub as our mentor. T-Works is supporting the hardware segment and it's also doing well and already set up a few labs for startups. We see continuous growth of startups in Telangana as the state government is giving grants. Hyderabad is becoming a good hub for defence companies after Bengaluru. Major companies are setting up their units in Hyderabad as it offers a good ecosystem for startups. We're growing organically and our growth is satisfactory. For three years, we got I-T benefits as we're recognized as a startup by DIPP. We won in a competition organized by the Union Defence Ministry.

What's the next target?

We're on the way to become a self-reliant startup and confident of achieving break-even point in 2021-22 financial year. Touching break-even level within four years for a startup like ours is reasonably good. Today, if we want to scale up the operations to the size of our startup, it needs more funding and time. We're cautious on spending.

We face stringent competition in global markets. We are just a three-year-old startup but facing competition from global majors with over 30 years of experience. We participated in first level tender in Australia and are selected for technical qualification for the bid

Ecosystem in Hyderabad is very good. We chose T-Hub as our mentor. T-Works is supporting the hardware segment and it's also doing well and already set up a few labs for startups. We see continuous growth of startups in Telangana as the state government is giving grants