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March 27, 2006

Will Nimbus buckle under its ambitious cricketing bid?

Business Today is skeptical whether Nimbus Communications, which raised $45 million from UK-based PE firm 3i last year, can manage to make money on its $612.18 million bid for the global television rights to Indian cricket (2006-10).
The general consensus is that it's going to be a tough ride for Nimbus. According to Modi's calculations, "Nimbus will have to generate around $700 million (Rs 3,150 crore) to break even"; that's because logistics and other expenses will add about $90 million (Rs 405 crore) to his costs. To earn a 20 per cent profit, he will have to generate another $140 million (Rs 630 crore). "On the face of it, the target does look daunting," says ICC's Stewart. "But Thawani might have something big up his sleeve," he adds.
Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

"The Pre-IPO Pricing Party"

Business Today has an article on how companies on the IPO path strike deals with financial investors - like PE firms, hedge funds or FIIs - to "discover" their IPO pricing a few months before the actual issue.
Like many of its predecessors, (M&M Financial) the tractor maker's NBFC too had placed a chunk of its shares with a private equity player at the pre-IPO stage. One-and-a-half-month before the bidding for sale of shares actually started, Copa Cabana, a Mauritius-based wholly owned investment arm of Chrysalis Capital, made an entry into the Rs 400 crore M&M subsidiary by buying out 4 per cent equity at a price of Rs 190 per share. When the issue did finally hit the market, guess what was the price band 'discovered' by lead managers Kotak Mahindra Capital Co. and ABN Amro Securities (India), via the much-touted book-building process? Rs 170-200 it was, making the ChyrsCap subsidiary's entry price the beacon for pricing of M&M Financial's IPO. Welcome to the primary market's best kept secret pertaining to IPO pricing: Price discovery actually takes place a couple of months before the book-building process.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

Is Novatium yet another Net PC/TV Co.?


Business Today has a profile of Chennai-based Novatium - co-founded by Indiaworld fame Rajesh Jain and IIT-Madras' Prof.Ashok Jhunjhunwala - which is creating sub-Rs.5,000 network-computing devices.

The big challenge before Novatium is to sell its concept to telecom companies and multi-service operators. But, company officials don't consider this a very daunting task. Says Alok Singh, CEO of Novatium Solutions: "Media centre PCs"-these enable seamless downloading of content from a TV to a computer-are coming into vogue. And telecom operators are looking for ways to provide video on demand through their existing networks." But media centre pcs cost at least Rs 35,000. There are also additional charges for this 'premium' service; and maintenance becomes a big issue. "The Nova Net pc and Nova Net TV offer all the features of a media centre pc but at far lower price points and, thus, guarantee service providers their revenues."

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

IT Outsourcing: Big rewards from the big renewals?

Business Today has a cover story focusing on the $100 billion worth of IT outsourcing contracts that are coming up for renewal in the next two years. The article examines the chances for Indian firms to "break the stranglehold of the IBMs
and the Accentures, and grab a piece of this (action)".
WHY INDIAN VENDORS COULD REAP A WINDFALL
» Customers are increasingly breaking up contracts, looking for multiple vendors and specialist, best-of-breed vendors around the world

» Indian IT services firms are considered the best in the application maintenance and development space

» The value proposition of Indian vendors-the global delivery model-has matured today, and there is enough confidence on the client side in Indian vendors, as well as on the vendor side on the implementation front

» With Indian companies integrating into the consulting space, they are able to provide a total solution-for instance package implementation, infrastructure hosting, applications development all together-to clients

» The capability to offer an integrated solution is also resulting in Indian companies aiming for larger-value deals, in the $500 million-$1 billion (Rs 2,250-4,500 crore) vicinity

» In many large, single-vendor outsourcing deals, customer expectations from outsourcing haven't been met, which is reflected in the termination of a few contracts


Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

What makes Suzlon's Tanti tick?

Several Indian entrepreneurs have tried and failed to make money from the winds. Not so Tulsi Tanti, Founder & CMD of Pune-based wind energy turbine maker Suzlon Energy. Tanti (Age 47) is now #8 on the Forbes list of richest Indias with a personal net worth of $3.7 billion. His net worth is clearly a reflection of the phenomenally successful IPO of Suzlon in 2005 (which was preceeded by two rounds of private equity funding in 2004).




Says Forbes:
Faced with escalating power costs, this former textile producer moved into wind energy a decade ago, eventually building Asia's largest wind farm. In October listed his Suzlon Energy, in which he and 3 siblings own 70%. Expanding into the U.S., China and Australia.

Businessworld and Economic Times have published detailed profiles of Tanti and Suzlon's recent breathtaking $565 million acqusition of Belgian wind turbine gearbox manufacturer Hansen Transmissions.

Says Businessworld:
This deal — the second largest ever by an Indian company — is Tanti’s biggest breakthrough ever. In the early 1990s, he was a passable entrepreneur with a Rs 40-crore textile business. But the textile mills’ power consumption was greater than the profits that they generated. So Tanti decided to set up windmills to cut power bills and discovered the wind power business. But he had no access to the technology needed to manufacture wind turbines.

In 1994, Tanti acquired Sudwind, a bankrupt wind turbine company. That provided the technology base. Then, in 2000, he purchased part of the assets and technology of Airpack, a bankrupt company that made turbine rotor blades. The technology and demand for wind turbines in India (thanks to the tax incentives) helped him build a company. He ploughed on even as others like TTG Industries and NEPC fell by the wayside. In a few years, he became the market leader in India. Says CVC’s India head Ajay Relan: “Tanti is one of the best entrepreneurs we have worked with.”



Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

March 25, 2006

"VCs seek dot-com success stories in India"

United Press International has an article on the return of interest in Internet-based services companies - aka "dotcoms" - in India.

"India is particularly appealing for a number of reasons, such as being forecasted to be the world's largest economy by mid-century, GDP growth of 8 percent, world-class companies and talent in offshore technology services," Arora (Manik Arora of Battery Ventures) says. "The Internet/enabled consumer services opportunity in India is particularly promising given the emergence of a middle-class with purchasing power and increased Internet connectivity," he added.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

March 20, 2006

Why Paramount Airways is targeting business travelers

Businessworld has an interview with M. Thiagarajan, the 29-year-old Managing Director of Coimbatore-based Paramount Airways, which caters to business travelers between the major metros and smaller cities.


Our target is corporate India. We are offering a powerful proposition to those who fly frequently and who need a far more comfortable flying environment as they fly almost once or twice a week.

Many companies in India have restrictions for business class travel for their employees. So, we have a value proposition for them. You fly business class and pay lower than economy prices. That’s what we are all about. Also, don’t forget, we don’t have as many seats to fill. So, if we are able to attract even a percentage of the traffic, our aircraft can be filled. And our market size is corporate India.
We have been flying for a few months, we are a zero debt airline and we are already cash positive. What more does one want?

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

ChrysCapital bulks up for a bear market

Businessworld has a cover story on ChrysCapital.

In his interview to the magazine, ChrysCapital Co-Founder and Senior Managing Director Ashish Dhawan, explains why his firm decided to raise a $550 million fund fourth fund so close on the heels of its $258 million third fund.
After we launched Fund III in early 2004, we realised that a lot more capital would come into India by the end of 2005. By late 2005, the fund-raising environment had turned euphoric and we decided to go out and raise Fund IV. The investment climate is not going to be as good going forward, and we want to have a strong balance sheet before we go into a bear market.


Each time ChrysCapital has raised a fund, it has doubled its corpus — $64 million, $127 million, $258 million and $556 million. Two of these funds — Fund II and Fund III — were raised at a time when the fund-raising scenario was extremely hostile. In fact, apart from ICICI Venture and WestBridge Capital Partners, no other Indian fund has been able to raise fresh capital till date.



Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

Life after FoodWorld for RPG Retail

Businessworld has an article on the RPG Group's plans for retail parting with its FoodWorld joint venture.
Right now, the plans to move on seem to be in top gear at the Rs 450-crore RPG Retail as it tries to make up for lost time and opportunity. From about 0.6 million sq. ft currently, Goenka plans to take his retail footprint to over 3.5 million sq. ft by March 2008, which should include over 50 hypermarkets from the current four. All this does not include MusicWorld, RPG Retail’s national chain of music stores. Goenka says an initial public offering is also in the offing in the next 12 months.


...Its retail strategy for Spencer’s encompasses four formats. The first is ‘Hyper’ — a hypermarket that covers close to 50,000 sq. ft. Then, the 15,000-sq. ft ‘Super’, a supermarket or convenience store, two of which have come up in Hyderabad and Faridabad; ‘Daily’, a food store selling staples, processed foods, FMCGs, and chilled and frozen items covering about 4,000 sq. ft; and the 2,000-sq. ft ‘Fresh’, a round-the-corner store that sells only fruits and vegetables.

Spencer’s Fresh will dot neighbourhoods, closely followed by Daily. The Super will be placed at strategic locations — property for one has already been firmed up at a Delhi Metro station. The number of Hypers will depend on the city. Says Sumantra Banerjee, president and CEO, RPG Retail: “Along with competitive pricing, quality will also be a key ingredient in our offerings.” Banerjee took over last year from Raghu Pillai who had been closely involved with the group’s retail experiments since 1996.




Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

"We are excited about consumer market plays"

ContentSutra has an interview with Sandeep Singhal, Managing Director of WestBridge Capital, on the firm's recent investments in Internet and mobile services companies like Shaadi.com, Mauj, Nazara, etc.

Internet cannot be ignored with more than 20 million users online.
Another opportunity that has come up in India is mobile. In India, there are close to 100 million mobile users. This is the time companies have to be built in the value added space. There are several companies in China that have made it big in mobile and internet. So naturally the companies who have survived the crash stand in good stead to cash in on this opportunity. Some of them have built a brandname, a market, the proof of concept, revenues, and a good management team. We have looked at all companies that have been formed (in the last five or six years) before finally we made the investment.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

March 12, 2006

"VC investing by majority vote is a bad idea"

Paul Kedrosky argues that the common practice at VC firms - of requiring unanimity (or at least, majority) among the partners for making investment decisions - is a "dangerous" one.
Consensus in pretty much anything leads to mediocrity, and venture investing is no different. If everyone agrees, and assuming all the partners weren't grown in the same gene pool, then you're probably either doing something staid, or the market is past its peak. After all, you need some risk in venture investing, and when everyone "gets" the deal then too much of the risk is gone.

That's why I'm fond of partner models where unanimity is not only not required, but majorities against you can even be overturned. For example, a couple of flag-waving wild-eyed supporters of a deal might be able to overturn a majority of weak "No"s. When most funds look at their history they often find that those unanimity deals are the ones that return 3x cash, or get bridged into infinity, while the ones where a noisy minority gets its way more often turns into either a flop or a ten-bagger.
Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

Media & Entertainment industry to grow at 19%

A study by FICCI-PricewaterhouseCoopers has predicted that the Indian Media & Entertainment industry will grow at 19% to touch Rs. 83,740 crore by 2010 from its current size of Rs.35,300 crore, reports news agency PTI.
With an estimated 28 million Indians already hooked on to the internet, internet advertising in India is presently worth Rs 100 crore. With the broadband slowly becoming popular, the segment would show a compound annual growth rate (CAGR) of 50 per cent.

...In terms of value though, television would dominate the industry with the size growing three times from Rs 14,800 crore to a whopping Rs 42,700 crore by 2010 with the CAGR at 24 per cent. Subscription revenues which will be the key drivers for the growth, would increase from the number of pay TV homes and increased subscription rates. New distribution platforms like DTH and IPTV will only increase the subscriber base and push up the subscription revenues.


Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

"4.6 million Indians bank online"

A Business Standard report quoting a December 2005 study by the Internet & Mobile Association of India (IAMAI) and Cross Tab Marketing Services, says that an estimated 4.6 million Indian Internet users currently bank online and that the number is expected to cross 16 million (inclusive of Internet and mobile banking) by 2007-08.

Online banking user traits

* 60% had relationships with 2-3 banks while 59% have 2-3 bank accounts

* 25% users were in the age group of 18-25, 43% in the group of 26-35, 19% (36-45 years), 10% (46-60 years) and 2% (61+)

* 83% are males; 17% are females

* 41% access their online banking account from home

* 51% cited convenience as the most important factor to bank online

* 38% said that they liked the facility of checking bank balances and statements online

* 45% operated their online banking accounts on weekdays and weekends; 17% use online banking between 6-9 pm and 15% between 9-12 pm

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

Corporate, bank restructuring providing new opportunities

Economic Times (in its Corporate Dossier supplement) has an article on the rising number of distressed asset funds in the Indian market.
Call them distress or stress asset funds. Restructuring funds or turnaround funds. Their target is to rescue sick or potentially sick companies, and turn around their fortunes. Over the last few months, India has seen a host of such funds, attempting to turn around sick companies in sectors ranging from infrastructure to manufacturing, leading them out out long debt traps. The distress funds are not targeting totally defunct enterprises, but those having good market potential and a strong management in place.

GE Capital, Asia Debt Management, Clearwater Capital, Citigroup, DSP Merrill Lynch and JP Morgan are some of the leading names that have floated such funds. Many of them have struck some unique deals — involving equity, debt or a mix of these and preference shares. Some others are now actively pursuing non-performing or under-performing assets for such deals.

Business Today has a report on how banks are purchasing non-performing assets (NPAs) - a euphemism for bad loans - from other players in the industry.
A new breed of investors, mainly foreign ones, is willing to pay cash upfront to acquire them. Since October 2005, this space has witnessed nearly Rs 2,000 crore of cash transactions. The trigger: Reserve Bank of India's announcement in July last year of norms for inter-bank transfers of these assets. The players: ICICI Bank, HSBC, State Bank of India and Punjab National Bank as sellers and Standard Chartered Bank, JP Morgan, Deutsche Bank and Kotak Mahindra Bank as buyers. The total NPAs in the Indian banking system: Rs 1,11,000 crore.

...For buyers, the low acquisition price makes these assets attractive as they can scavenge for significant returns. Market sources say ICICI Bank received about 15 per cent of the book value for Rs 1,300 crore of dicey assets it sold Stanchart recently.


Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

March 08, 2006

"I can’t think of any place I’d rather be a developer today than India"

Dale Anne Reiss, Global Director of Ernst & Young’s Real Estate, Hospitality and Construction sector, visited India recently to explore the new landscape for the industry. Her reading of the market, in the form of an interview, is available on the E&Y web site as a video or as a transcript.
I expect numbers and significant transaction between foreign investors and Indian developers, primarily in the development and hospitality sectors. I think we can look to see the formation of many more venture funds to hold real estate, similar to the recently announced Tishman Speyer/ICICI venture. And I also think in the future the government will allow REIT-style vehicles, I-REITs or Indian REITs, to open the door to more foreign investment on a long-term basis.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

March 06, 2006

Online stock trading takes off

The number of investors signing up for online stock trading accounts has tripled over the last two years to tocuh 1.3 million, reports Business Line. Online trades now account for about 12 per cent of the daily turnover on the National Stock Exchange. ICICI Bank's ICICIdirect Service is considered the market leader.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

Forbes cover story on buyout funds

Forbes magazine has published a cover story - with a negative slant - on buyout funds. Some extracts:
Investors poured $106 billion into leveraged buyout funds last year, double the total of 2004, says Private Equity Analyst. Weary of the wobbly stock market and alarmed by the real estate run-up, they were lured by eye-popping returns of 50% a year (or better) at a few elite funds. Globally, 2,700 funds are raising half a trillion dollars in cash to invest; this will bankroll them for $2.5 trillion in deals, given their penchant for putting $4 (or more) of debt leverage atop every dollar they put up.

Just half a dozen giant firms control half of all private-equity assets. Three titans--Blackstone, Carlyle Group and Texas Pacific Group--lord over companies with 700,000 employees and $122 billion in sales. Buyout shops own such iconic brands as Hertz, Burger King, Metro-Goldwyn-Mayer, amc Entertainment, Linens ’N Things and more.

... More companies are going private, frustrated by the antifraud Sarbanes-Oxley Act. Thomson Financial counts 32 firms with a combined market value of $54 billion that went private in 2005, up tenfold in three years. Banks, meanwhile, have loosened up lending to extend five times as much senior debt as the equity put up by buyout funds.

Thus buoyed, buyout titans have done well grabbing underpriced, down-but-not-out businesses and whipping them into shape: Texas Pacific with memc Electronic Materials; Silver Lake Partners with Seagate Technology; Blackstone with trw Automotive. Their success has stoked ever more investor demand--never mind that buyout-fund returns go down as money inflows go up

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.