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December 31, 2007

Rejuvenating hydel power

Businessworld has an article on the challenges facing hydelpower projects in India.
While India is reeling under a huge power shortage, hydro accounts for just a fourth of the total installed capacity of around 100,000 mega watts (MW). India’s progress on the hydro front has, after the initial spurt, been tepid. Till now, only 21 per cent of the potential hydro capacity is developed.

...three-fourths of the projects still remain in the public sector, with central PSUs such as National Hydroelectricity Power Corporation (NHPC) and North Eastern Electric Power Corporation accounting for the bulk. Only 4 per cent of the installed hydropower capacity has been commissioned by the private sector till September, according to the CEA.

...Manoj Gaur, chairman of Delhi-based infrastructure group Jaiprakash Industries, says that land acquisition and government clearances pose the biggest hurdles. Jaiprakash has the largest share (58 per cent) in private hydropower in India. Uncertainty in the time-line for clearances is one of the main reasons why the private sector is staying away, he complains.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

December 27, 2007

Deal Alert: IDG Ventures India invests $3-M in Perfint

From the press release:

IDG Ventures India, a $150 Million early-stage technology venture capital fund has announced an investment of $3 million in Perfint, a healthcare devices start-up.

Perfint is headquartered in Chennai with its product development labs in Mysore. It has been co-founded by Mr. S Nandakumar, Mr. B D Vijaya and a team of healthcare device professionals that were closely associated with building GE Healthcare's Design, Manufacturing and Sourcing hub in India.

Perfint will focus on developing Niche Healthcare Products and Solutions, that address Clinical Productivity needs globally with a special focus on Emerging Markets like India, China , amongst others and subsequently developed markets like USA, Europe etc. Their first product called PIGA, is a Tool Positioner for Image Guided Minimally Invasive (IG-MI) procedures. Some of the clinical applications that PIGA supports would be, Fine needle aspiration (FN A), Biopsy and RF Ablation (RFA) of small tumors in the lung and the abdomen. PIGA, to be launched in India in early '08, would be amongst the earliest positioning devices available globally, for such soft tissue procedures. PIGA is under clinical evaluation at this moment.

"IDG Ventures is very happy to be associated with the ex GE team led by Mr. Nandakumar and Mr. B D Vijaya, more so since I have known them from my Wipro days. Given the expertise of the team and the disruptive nature of the products, Perfint is well placed to be a leader in this domain. This is the first of our many Life Sciences Engineering investments in India" said Mr. Sudhir Sethi, Chairman & Managing Director, IDG Ventures India.

Image guided interventions can be broadly categorized as IG (Image Guided) diagnosis (like biopsy), IG therapy (like radiation) and IG Surgery. The global market for minimally invasive image-guided interventions is currently over $3 billion, though, for example, currently only less than 15% of all surgeries are performed using IG-MI approach.

"With increasing healthcare awareness and ever improving hospital infrastructure across the world, guided procedures for early stage cancer diagnosis, drug delivery etc, are estimated to grow from under 10-15% of total procedures done today to about 50-60% by 2010. That presents a huge opportunity for devices such as PIGA" added Mr. Sudhir Sethi.

"Perfint works closely with healthcare professionals to co-create niche devices that are Intelligent, Connected and Affordable while meeting global standards in safety and reliability. Our product development professionals are passionate about creating world-class products. We will deploy the funds raised from IDG to accelerate our New Product programs .We will start with emerging markets and look at entering the US markets in 2009. Our investors' global network will be of great help as we build world-class clinical and technology advisory panels" said Mr. S. Nandakumar, co-founder and CEO of Perfint.

Mr. Sudhir Sethi and Mr. Ranjith Menon of IDG Ventures India will join the Board of Directors at Perfint.

December 24, 2007

Interview with Kreeda Games' Quentin Staes-Polet

Kamla Bhatt has a two part audio interview with Quentin Staes-Polet, the Belgian CEO of Kreeda Games, the Bombay-based online multiplayer gaming start-up funded by IDG Ventures India and SoftBank.

Quentin has some interesting points on why the firm chose not to disclose the amount of funding it raised, interplay between social networking and gaming, experience of an "foreigner" starting a business in India, etc.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

Lassi Making Machines

Businessworld has a profile of a Delhi-based company that makes Lassi making machines.
...an enterprising young man called Sultan did the next best thing. He perfected a lassi-churning device. He sold his first machines to the numerous lassi shops and restaurants in the crowded lanes around Delhi’s Jama Masjid area. The devices ran on electricity, worked for hours on end, needed little maintenance and almost never broke down. That was the 1950s.

Fifteen years after starting out, Sultan passed away. His son Mohammed Usman, barely 20 then, took over. Usman decided to name the devices ‘Sultan’ in memory of his father. He moved the workshop to Daryaganj in 1992 and also set up a factory in Wazirabad, which employs 25 workers and engineers, to meet the growing demand for his father’s machines. He called the business Raja & Co. — a nickname given to him by friends and loyal customers.

Usman’s sons have helped add a modern touch to the 50-year-old family business. Orders from outside Delhi frequently come in via e-mail. This has taken Sultan machines to lassi shops in faraway cities such as Meerut, Ranchi, Patna and Lucknow. “The final machine depends entirely on what the customer wants,” says Arish. He pulls out brochures and photographs and begins to explain all the options.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

December 21, 2007

Deal Alert: IDFC PE invests $63-M in Goodearth Maritime

Edited extracts from the press release:

IDFC Private Equity (IDFC PE) has invested Rs.260 crores in Goodearth Maritime Limited (GML), a leading Chennai-based dry bulk shipping company. o3 Capital was the sole advisor to GML for this transaction.

The company intends to use these funds to fund its growth plans for the green-field ship building yard in Tamil Nadu, as well as for its foray into the on-shore and off-shore oil drilling sector. The shipyard is expected to require a total investment of around $500 million in the first phase, with a capacity to build about 25 to 30 ships a year, including VLCCs.

Mr. P.B. Anandam, Chairman, GML, speaking on the occasion, said “We are in the process of making Goodearth Maritime a global shipping company, with a strong shipbuilding base in India. The potential of Indian shipbuilding economics will fully unfold in our yard near Cuddalore with third generation international standards of ship construction. It would give our ship owning a competitive edge in terms of size, quality and our commitment to Indian resources, both human and material.”

Luis Miranda, President and CEO, IDFC PE, said “We have a large portfolio in the transport sector covering ports, airports, roads and logistics, and GML fills the gap in terms of the shipping and ship building sector. This is our largest investment to date.”

About Goodearth Maritime Limited

Goodearth Maritime Limited (GML) is the flagship company of the Archean Group. Archean Group is a large conglomerate of businesses spanning various interests such as Ores and Minerals, Coal, Common Salt, Industrial Chemicals, Shipping and Ship Building and Renewable Energy Resources.

GML owns and operates a fleet of six ships, and has a pipeline of nine ships which are to be delivered over the next three years. It is professionally managed with Mr. S. Madhan as the Managing Director, and is supported by well-trained and skilled staff. GML is also the first Indian company to boast of an in-house design team which caters to the requirements of the company and also for external consulting.

For more information, please visit www.archeangroup.com

About IDFC Private Equity

IDFC Private Equity (IDFC PE) is the largest infrastructure focused private equity investor in India. It manages funds of INR 28,500 Million (USD $630 Million). Some investments of IDFC PE include GMR Infrastructure (Exited), Gujarat State Petronet, Chalet Hotels, Delhi International Airport, L&T Infrastructure developers, Gujarat Pipavav Port, Manipal Education, Manipal Healthcare, Delhi Assam Roadways, SICAL Logistics and Moser Baer Photo Voltaics.

December 18, 2007

Deal Alert: IDG invests in IISc incubated co.

Extracts from IDG Ventures' press release:

IDG Ventures India, a $150 Million early-stage technology venture capital fund, has announced its investment in 3D Solid Compression (3DSoC), a startup incubated by Stanford University and Indian Institute of Science (IISc).

3D Solid compression has been co-founded by Prof. Fritz Prinz (Stanford) Prof. B. Gurumoorthy (IISC), Dr. Krishnan Ramaswami and Mr. K K Venkatraman around the vision of ‘3D for All’. 3DSoC is positioned to be a key player in the 3D content creation and visualization space with VIS (Virtual Interactive Solid), its novel 3D representation format. The ability to interact with the concise representation enables 3DSoC to straddle markets as diverse as 3D Publishing and Visualization and Rich Internet Applications. Today, 3DSoC’s customers in India include major players in the Automotive and Engineering verticals who see significant benefits in leveraging 3D product data in both marketing and the MRO side of the business, due to the highly compressed nature of the files. VIS is a multimedia representation where, in addition to 3D shape information, animation, textures, audio and text may be integrated.

“It is our belief that 3D technology adoption forms the next wave of innovation in digital distribution of content. Whether it be 3D GUI’s, Rich Internet applications, a Second Life like platform or global engineering digital supply chains, our investment in 3D Solid compression is well positioned to ride this wave.” said Mr. Sudhir Sethi, Chairman & Managing Director, IDG Ventures India. "After ConnectM, a spinout from Sasken, this is our second spin out, this time from two leading academic institutions."

“Our vision is to enable 3D Animated Content creation and experience by ALL from large enterprises to the common man with the freedom to deliver the content on any platform – from desktop to handheld. 3DSoC’s value proposition lies in its ability to compress models significantly and allow for interaction at the same time. You can potentially distribute heavy 3D models over the internet or even mobile networks. We are seeing good traction with the enterprise sector for our present product offerings and will be using the funding to achieve the same on the mass consumer side. Our immediate priority is to hire top talent for accelerating product development and building out the global sales infrastructure. We hope to benefit from the rich experience of the investor nominees on the board, the strong presence of IDG globally and their long standing connections with the publication vertical.” said Mr. K. K. Venkatraman, co-founder and CEO of 3DSoC.

“Even though the VIS models are very concise, they are lossless. Thus it is possible to create precise and complex 3D models that are smaller than the static image files. A static 3D model can be compressed by up to 100 times even with animation embedded in it. Our goal is to create a platform that enables easy creation of animated 3D models by a novice user. One of our customer’s experiences has been that models that took a few months to create with existing tools took only a few days to create with our product. We believe that 3D content will be the next wave of user generated content that will be disseminated on the web.” said Mr. Krishnan Ramaswami, co-founder and CTO of 3DSoC.

December 17, 2007

VC Market

The following companies are seeking capital for starting-up / expanding their operations:

07-11-28-2: Yanam, AP based developer seeks around $5 M for acquiring land for the development of Industrial Estates, SEZs and tourism-related projects.

07-11-28-3: Hyderabad based ERP focused IT Services firm seeks above $5 M – ideally from an investor with strong network in Europe - for funding acquisitions.

07-11-28-4: Bangalore based group seeks <$1 M for setting up restaurants business.

07-11-28-5: Nagpur based Project Engineering company engaged in HVAC Projects, Marine AC & R Projects, Industrial Chilling Systems etc. seeks <$1 Million for expansion of operations.

07-12-12-1: Delhi based woman entrepreneur seeks $1-5 M for launching day care services for working women

07-12-12-2: Ranchi based award-winning anti-hacking services organization seeks <$100 K for expansion

For more information about any of these companies, investors - who are subscribers to the Venture Intelligence service - can email the company code to vcmarket@ventureintelligence.in. To learn about our subscription services for investors, please visit our web site.

Are you an entrepreneur seeking capital? List your company in the Venture Intelligence VC Market using the form here

December 12, 2007

Interview with Symphony Cap's Sunil Chandiramani

The Mint has an interview with Sunil Chandiramani, Partner at Symphony Capital. The team behind Symphony, which was earlier investing as Schroders Capital Asia, is one of the most experienced "India hands" with successful investments in companies like Apollo Hospitals, Blue Dart and Orchid Pharma. In the interview, Sunil talks about the firms pan-Asia focus, why it decided to raise money from the public capital markets (instead of the LP route) and, of course, valuation concerns.
One of the things we constantly face with entrepreneurs is that they don’t want to sell their businesses but an IPO (initial public offering) can cause them to be locked in longer than they may want. So now we can give a third option for exits. We can give them stock in our diversified investment company. As long as we are comfortable that there is a succession plan in place, we can swap stock in his company for stock in our company.

...Our 1994-1995 vintage fund saw rough times with the Asian crisis and when the fund life came to an end, our investors wanted to sell. But we were just beginning to see the turn up that we had seen in other Asian markets, and knew it would take 18 to 24 months to see higher valuations. Yet, investors were concerned about another crisis. So even though we didn’t really want to sell, we were required to sell, because the fund’s life came to an end. To an investor this may not be a big deal, but this was a $220 million fund and had we waited another 12 to 15 months, we would have made another $150 million – with 20% of carry that’s $30 million. That is a lot of money to leave on the table.

...At that time, during 1994 -1995, valuations in most of Southeast Asia in were very high. India was comparatively attractive. Many of our investments were made in the low single digit price earnings ratios or low teen. So we made a spate of investments in India between 1995 and 1998. Apollo Hospitals to Blue Dart. And a couple of pharmaceutical businesses: Orchid and Strides. We have directly invested in India and also through portfolio companies. For example, Singapore’s Parkway Holdings has investment in India and so does Aman Resorts, which was our portfolio company until we sold our stake to DLF in the last few weeks.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

December 11, 2007

The Restaurateur from Chennai

While I was reading a profile of M. Mahadevan of Oriental Cuisines in The Hindu, I realized that he seemed to own almost every restaurant that I'd enjoyed eating at in Chennai. (And, I had always associated his name mainly with "Hot Breads" - which I don't frequent at all!)

The gentleman indeed seems to be a very fascinating entrepreneur - one that is sure to be besieged by offers from Private Equity firms.

Along the way, Mahadevan, the restless man that he is, launched a whole slew of fast food and restaurant brands for every segment of consumers – Benjarong, the Thai restaurant, Wang’s Kitchen and Noodle House for Chinese, Don Pepe for Mexican, Zara, the Spanish Tavern and the byword in food courts – PlanetYumm.

Not being content with India operations, Mahadevan ventured into foreign shores – he took Hot Breads to France and Italy, tied up with Saravana Bhavan to take the brand to US and opened a string of bakeries in the Gulf region. “But India is still my exploring territory and Chennai especially is my favourite city. I have been toying around with a chocolate idea for sometime now. And, I wanted to take the bread experience a step further,” says Mahadevan. So, out came The French Loaf and Maple Leaf.

...With 11 brands in his Indian operations and 4 in the International markets, Mahadevan manages a large work force – almost 1400 people in India and about 1000 in the International markets where he is present. Mahadevan is presently on an expansion spree with plans to open outlets in Bombay and Delhi. “Benjarong and Zara are the two brands I am taking to these cities. Thai food and Spanish Tapas will quite be the rage when the outlets open,” says Mahadevan. The art of retailing food is what he has mastered over the years, catering to the constantly changing food habits of new generation and old in different market situations. Mahadevan sure has a finger in every pie as much as he has a finger on the pulse of the food market.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

December 10, 2007

McHospitals

Business Today has an interesting article on how healthcare firms are responding to newer consumer needs with innovative formats.
The Cradle is a high-end model where people come and pay for the experience. Just like Gayathri, 28, who recently delivered her child at The Cradle in Bangalore. She and her husband, R. Venkateshan, an engineer with Accenture, chose The Cradle because, as he says: “We opted for this place mainly to undergo the experience. It’s very homely here and of international standards.” His corporate insurance took care of the bills.

Typically, a Cesarean section delivery costs about Rs 80,000 at The Cradle. That’s not too much if you consider the facilities. The place hardly looks like a hospital with its bright colours, no visiting hours, a cake shop, private birthing suites, and all-in-one labour, delivery and recovery room equipped with imported Hill-Rom beds that cost around Rs 10 lakh and can perform many tasks—for instance, it has drawers fitted with infant monitors. In the nine months of its existence, the hospital has handled 382 deliveries and most mothers have returned home with their babies within 48 hours. "We do not see the need for a longer stay, unless there is some complication. Ours is a western way of recovery. We have 70-80 per cent occupancy and we get all kinds of people ranging from housewives to wives of bureaucrats and politicians and MNC professionals," says Dr R. Kishore Kumar, The Cradle MD, and a neonatologist.

...As a recent Technopak study (healthcare outlook) points out: "While hospitals will continue to be the mainstay of treatment for episodic acute care, we see a fundamental shift in the nature, mode and means of delivery." And its study of the trends abroad suggests that the way forward would only be in formats that range from retail healthcare, day-care centres, assisted living formats, rehabilitation centres to even medical malls!

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Deal Alert: IDG Ventures invests $2.5 million in security product co. iViZ,

Edited extracts from IDG Ventures's press release:

IDG Ventures India, a $150 Million early-stage technology venture capital fund, has announced its investment of $2.5 million in iViZ, a network security startup in the Security and Vulnerability Management market. Kolkata-based iViZ has come up with the world’s first "Automated and On Demand Penetration Testing product".

"It is our privilege to support iViZ founded by Mr. Bikash Barai and Mr. Nilanjan De. This investment is based on our thrust of investing in disruptive software product firms out of India with a potential to scale globally,” said Mr. Sudhir Sethi, Chairman and Managing Director, IDG Ventures India.

iViZ plans to utilize the investment to build its sales team in North America, Europe, Middle East/APAC and India and to significantly enhance its product development initiatives.

“Our vision is to be a global leader in the Security and Vulnerability Management market with Automated Penetration Testing and Security Risk Management as our first offering. We partnered IDG Ventures for the global IDG Platform and the strategic help that iViZ will derive in realizing its vision from the presence of investor nominees Mr. Sudhir Sethi and Mr. Hemir Doshi on the Board” said Mr. Bikash Barai, co-founder and CEO of iViZ.

“We have used Artificial Intelligence techniques and simulation of next generation hacking techniques to build the product” said Mr. Nilanjan De, the co-founder and CTO of iViZ, “Unlike current Penetration Testing process which is manual and non comprehensive our product can detect vulnerabilities and also its corresponding remedies in a completely automated way”.

Metamorphosis at Manipal

Business Today has an article of the changing face of the education- and healthcare- focused Manipal Group.
Gradually, he has ceded close control of his businesses to professional managers. “We want each business unit to be run individually and we will take a minimal supervisory role,” says Ramdas Pai. On the education front, Sudarshan has been given a broad mandate to not only expand its global footprint (with institutes in Antigua in the Caribbean and possibly in Curacao, a Dutch principality off the coast of Miami), but also look to inorganically grow the company’s businesses.

“We want to model ourselves on Tata Sons, especially when it comes to nurturing new companies and providing seed funding,” says Ranjan Pai. Manipal Cure and Care, in fact, was begun with Rs 5 crore in seed funding from MEMG. It then leant on MEMG’s chain of doctors and other medical staff to get people for these centres. Now, it wants to replicate the model for Stemputics, its stem cell research initiative. “They must conceive business ideas and we can provide financial and operational support to them. But, they must eventually be able to fund these initiatives in the long-term," says Ramdas Pai.

Backed by this funding, Manipal Cure and Care now plans to launch at least seven or eight more stores up to March. "Our focus will be on getting prime real estate to set up these stores. We want to target people who donft want to enter a hospital-like atmosphere for mainly cosmetic treatment," says Somnath Das, COO of Manipal Cure and Care. This chain will stock medicines and beauty products. Das sums up the gameplan when he says: "We want to be part of the Rs. 1,000 that a customer would spend on movie and dinner and not on the money used in medical emergencies. We want to be a planned retail expense for them."

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Profile of Godrej Properties

Business Today has an article on the Godrej Group's property business, which is to launch an IPO shortly.
As of September, GPL had projects—in progress and signed—on close to 200 acres of land. Some of them are joint developments, involving other developers, whilst a few are wholly-owned by GPL. Going by the property prices prevailing in the various locations where these projects are being executed—in areas in Mumbai, Pune, Bangalore, Kolkata and Hyderabad—Godrej’s share is estimated to be worth a little under Rs 4,000 crore.

...It’s the sheer scale of the potential that’s locked within the group that has investors licking their chops in anticipation of GPL’s public offering (which is slated for March 2008; GPL is expected to raise a little under Rs 1,000 crore by issuing 10 per cent of fresh equity). Analysts currently value the company at 3,500-4,000 crore, based on current operations. But that is the proverbial tip of the iceberg that is GPL. As Korde points out: “Today, we don’t have access to the land available with the group (in Vikhroli). However, as when the group plans to develop that land, that land will come under GPL.” Company officials point out that the land in Vikhroli is equally owned by Adi Godrej and cousin Jamshyd.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Rupee Rise Begins to Hit Manufacturing

Business Today has an article on how millions of jobs in the manufacturing industry "could vanish" due to the rupee's seemingly inexorable rise.
The weakening dollar has now started taking its toll on manufacturing in India. The worst hit are export-intensive sectors like textiles, leather, handicrafts and engineering. Faced with contracting margins, companies in these industries are now resorting to drastic measures, like retrenchment drives, to stay competitive. And the estimated job losses run into several millions. According to the Federation of Indian Export Organisations (FIEO), the apex export body, almost 8 million jobs are likely to be lost this financial year. And it reckons that the problem will get worse if the rupee continues to appreciate rapidly.

...Exporters, then, are struggling to cope with the onslaught of the rising rupee. If the rupee continues to appreciate, then it could force many small exporters to fold up operations or slash production, resulting in more job losses. Economists point out that at the root of the problem is not the appreciating rupee alone but the pace at which the currency has gained against the dollar. Says Subir Gokarn, Chief Economist, Standard & Poor’s, Asia Pacific: “If you see between 2002 to 2007, the rupee gained about 10 per cent. An average of 2 per cent a year was manageable for exporters, who offset the losses through improved productivity and export growth remained buoyant. But this time, the sharp spike in the rupee value has really hurt exporters.”

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

December 04, 2007

DFJ's Sateesh Andra on mGinger investment

ContentSutra has an interview with DFJ's Sateesh Andra on the firm's investment in mobile advertising services firm mGinger.
How much have you invested in mGinger?
We’ve invested $1.5 million, while NEA-IndoUS has invested $500,000.

Why mGinger, what was the company’s valuation, and how did you value the company?
There are three things - first is a good marketing opportunity. Mobile is a great medium, as is opt-in permission based advertising in that segment. The second factor is that the mGinger team is a great team. The third factor is the traction - there are close to 1 million subscribers. Also, the change in market dynamics: when I turn on a spam filter, I don’t receive advertsing. That’s what the Do Not Call registry is doing. As a marketer, I can sign up with a network like mGinger, and I get advertisements that interest me. mGinger is building a directory of consumers. I can’t comment on the valuation.

There other advertising models like 160by2 for free messaging and even (Rajesh Jain’s) MyToday that is a publishing based model...Why the push advertising model like mGinger’s?
All of these things can be done. mGinger is not a one product company. When advertisers look for a platform, they consider: (a) Content Compositition, (b) Cost of Campaign and (c) Measurability. We think mGinger provides this value, and importantly, it has traction.

...Which other sectors interest you?
We’re interested in essentially consumer services - nano technology, clean tech, IT enabled retail entertainment. Reva, Komli, MChek (mobile payments) and Live Media are among our investments. Also SeventyMM, which a combination of NetFlix and FedEx. The entry of Reliance in the online home video segment validates the opportunity.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Co. that makes "water out of thin air"

The Mint has a profile of Chennai-based economist-turned-entrepreneur S.S.Sivakumar whose Akash Ganga International is seeking to help solve the city's chronic water problems through its unique device.
The scientific basis behind Sivakumar’s air-to-water conversion is the heat exchange process: In this case, it involves sucking in air from the atmosphere and blowing it over cold gas resulting in the creation of water (in much the same way, condensate, or water, forms on the outside of the windows of a heated room in winter or an air-conditioned room in summer).

...By mid-2004, Sivakumar and his team worked out how to make water from air. AGL invested in a modest 3,000 sq. ft manufacturing facility and started rolling out its products. Priced between Rs9,200 (for an 8-litre version) to Rs42,500 (for a 120-litre one), the machines were powered by electricity, and sold through stores that sold consumer durables such as television sets, washing machines and refrigerators. The Akash Ganga machines produced a litre of water at an average cost of Rs0.80 a litre, but, surprisingly, found little success. The company was unable to sell the product as it lacked the resources to market the product on a larger scale.

...Since the process of converting air to water results in a drop in temperature (one reason why some air conditioners leak water), AGI has pitched its products as a three-in-one as the company terms it: an airconditioner, water creator, and air cleanser.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

December 01, 2007

GPS based navigation services

Businessworld has an article on the market for GPS-enabled navigation services.
Until last year, Hyderabad-based SatNav Technologies was the only vendor of GPS devices. Since then, other companies have also entered the market with their own products. These include GPS-enabled mobile phones, personal digital assistants (PDAs) with built-in GPS receivers and other PNDs.

...MapmyIndia’s online maps are now used by several organisations such as Yahoo! India, Yatra.com and even India’s Election Commission. This September, the company introduced a PND for about Rs 22,000. It also launched several new navigation products. These include new PNDs, free-to-download navigation software and maps for mobile phones and PDAs, and a Web-based SMS service for directions.

...One company that promises to revolutionise the industry is Nokia. Two of its phones, the N95 and the E90, have built-in GPS capabilities . A third device is in the offing. “Navigation has the potential to surpass any other service, based on consumer need alone,” says Devinder Kishore, Nokia’s marketing director in India. Nokia’s recent moves show just that. According to media reports, the company will spend as much as $8 billion (Rs 32,000 crore) to buy NavTeq, the world’s largest digital mapping company. “If Nokia has its way, it will have GPS in most of its devices in two years,” says Canalys’s Jones.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Taking banking to migrant laborers

Businessworld has an article on an interesting experiment by Axis Bank along with an NGO.
Anwar is one of the nearly 1,500 urban labourers who have joined a technology-assisted financial inclusion programme started by Basix, which describes itself as a livelihood promotion institution. The project, in collaboration with Axis Bank, provides basic, no-frills banking services to poor migrant workers. Basix and Axis Bank have also started a pilot remittance project to help migrant labourers in East Delhi transfer money quickly to dependents in Muzaffarpur in Bihar.

...Basix and Axis Bank are conducting their experiment in financial inclusion in the eastern part of Delhi, home to the capital’s largest slum. The area is populated largely with immigrant workers from remote hamlets in Bihar and Uttar Pradesh. “Most of the people who have enrolled for the pilot project are those who make a living as rag pickers, rickshaw pullers, house maids and auto rickshaw drivers,” says Preeti Sahai, who spearheads Basix’s programmes in Delhi. “These people earn very little and, until now, did not have a way to save.”

...Basix field staff physically verify addresses and job details of prospective customers. The staff then fill out the account opening forms for the bank. Basix agents keep making rounds of their respective localities so that customers can meet them to transact business. There is also a local branch office. The field agents carry three devices — a mobile phone and a mini receipt printer. These devices have smart-card sensors and a smart-card scanner with a biometric fingerprint reader to authenticate the ownership of a card as the person who wishes to make the transaction.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

November 28, 2007

Countering hedge fund invasion

In an article appearing in AltAssets, James Kelly of US-based law firm Nixon Peabody LLP, talks about the increasing "hybrid" strategies adopted by hedge funds and how PE firms need to counter this. While the article is written based on the US context, parts of it are relevant for other rapidly maturing markets like India - where hedge funds like Galleon, DE Shaw, Passport, Quantum, etc. are becoming increasingly active in traditional PE turf - as well.
In our view, hybrid funds will likely begin to play a bigger role in the middle market. As money continues to pour into private equity funds and hedge funds alike, these funds find themselves in bidding wars as competition for deals rapidly increases. Further, as the markets have become more efficient and the role of transactional intermediaries has increased, proprietary deals are becoming rarer and auctions commonplace. Aside from the obvious intangible currencies of operating focus and expertise, timing, and track record, the hybrid flexibility of a particular firm may add additional currency to the mix, allowing bidders to get creative to win bids, since valuation is not the only driver.


As we have seen, large hedge funds are already using side pockets to engage in middle-market buy-out activity. These hedge funds (as hybrid funds in this capacity) are attractive to targets as they provide financing without usually demanding control of the target, in contrast to venture capitalists and private equity firms, which more often require significant minority holder protections or complete control. A hybrid fund can justify lower returns in an investment it views as conservative to diversify its main return-generating activities such as traditional hedge fund investments in public securities. This may make hybrid funds more competitive in auctions where they are bidding against traditional mid-market private equity firms that typically seek higher returns.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Will Dubai avoid the "skyscraper curse"?

Bloomberg columnist William Pesek has an interesting theory on the correlation between tallest-building projects and financial crises.
It happened in Kuala Lumpur in 1997, Chicago in 1974, New York in 1930 and in biblical times with the Tower of Babel. A bizarre coincidence perhaps, yet humankind's propensity for architectural overreach has been a reliable omen of meltdowns. Taiwan, which in 2004 became home to the tallest building, was arguably affected. Its economy didn't implode, so much as it's disappearing....

...The thing about record-breaking skyscrapers is that they can say as much about hubris as wealth, ambition and technology. Is Dubai a development miracle? Or is it the center of an Arabian asset bubble tied to surging oil prices?

At least for the moment, it would appear to be the former.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

November 27, 2007

VC Market

The following companies are seeking capital for starting-up / expanding their operations:

07-11-21-1: Hyderabad based company seeks <$1 M in angel investment for their upcoming real estate portal.

07-11-21-2: Kolkata based Enterprise software company seeks <$1 M for marketing and promotion of ERP product targeted at Manufacturers, Exporters and Retailers.

07-11-21-3: Panchkula, HR based company providing agricultural financing and support services in the areas of land cultivation, marketing, IT applications, decision support systems, outsourcing services, capacity building etc. to farmers and lending institutions seeks <$5 M for expansion.

07-11-21-4: Bangalore based battery maker, with over 25 years of experience in the industry, seeks about $5 M to set up manufacturing of Lithium ion batteries used in electric vehicles scooters and cars.

07-11-21-5: Niligiris, TN-based floriculture and horticulture firm seeks $2.25 M for expansion and diversification.


For more information about any of these companies, investors - who are subscribers to the Venture Intelligence service - can email the company code to vcmarket@ventureintelligence.in. To learn about our subscription services for investors, please visit our web site.

Are you an entrepreneur seeking capital? List your company in the Venture Intelligence VC Market using the form here

November 25, 2007

Why Ramzan is crucial for Carrom Board exports

Business Today has an off-beat article on the business of exporting carrom boards.
This unmatched frenzy at Meerut, a sports goods manufacturing hub of India, is triggered by the preparations for the Holy month of Ramzan in the Gulf countries. Sales of carrom boards in countries such as Saudi Arabia, UAE, Kuwait, and Bahrain increase by almost 50 per cent in the month of Ramzan, the fasting period that culminates in Id-Ul-Fitr, the biggest festival for Muslims. “During this period, the timing of the offices changes in the Gulf countries. People work from 9 in the evening till 4:30 in the morning and keep their shops closed during the daytime. Since playing cards is considered haram (profane), people prefer to play carrom that is considered a great leisure activity for the entire family,” says Anil Mahajan, Director, Himco International, an export unit based in Meerut.

Anil Mahajan is one of the 300-odd manufacturers of carrom boards, bulk of whose business happens two months preceding Ramzan. For the minuscule Rs 30-crore industry, three-fourths of the business is generated by the Gulf countries. “While carrom boards are exported all through the year, the order books swell in the month preceding Ramzan when bulk orders from the Gulf countries start coming. All the orders are dispatched 15 days prior to Ramzan,” he adds.

Traditionally as well, Arab countries account for a large chunk of the total carrom board exports from India. Says Kuldip Mahajan, Proprietor, Hind Sports, a manufacturer with more than five decades of experience in carrom board making: “This is both because of the huge numbers of expatriates from South Asia diaspora such as India, Pakistan, Bangladesh, Nepal and Sri Lanka there, and also because of the increasing local market for the product.” Mahajan exported over 6,000 units of carrom boards before Ramzan this year as against an average of 4,000 units in the rest of the months.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Business Today's Cool Companies listing

Business Today has published its latest annual listing of "hip and happening" companies. This year's list includes a VC firm - APIDC-Ventureast. Other cool companies include two Canaan Partners back companies Cellcast (Mobile VAS) and TechTribe (online business networking).
For a fund that goes by the name of Apidc Venture Capital, its seven partners are anything but old fashioned. One is a blues guitarist who’s done gigs at blues bars in Chicago; another is an amateur bartender who can knock up deadly margaritas and mojitos; the third has an abiding passion for interior decoration, the fourth is a meditation expert, the fifth is a long-distance runner, the sixth has co-founded an art gallery, and the seventh founded a ‘Heart of a Child Foundation’ with Sylvester Stallone as one of its patrons.

But guess what? That’s not the reason why APIDCVC—managed by Sarath Naru, Chandra Shekhar Reddy Kundur, Aditya Kapil, Ramesh Alur, Raghuveer Mendu, Venkatadri Bobba and Siddhartha Das—is on our Cool list this year. Rather, the Hyderabad-based firm is on the list because, despite being a public-private partnership (until last year, the Andhra government owned 49 per cent of the firm, but its stake is down to a token 1 per cent; the rest is owned by Ventureast promoted by the management team), it thinks very differently as a VC. “Our model,” explains Naru, “is very much based on the businesses and technologies that are relevant to India and on having multiple funds with a pioneering focus in each.”

As a result, APIDCVC, which will soon call itself Ventureast, has been the first to launch an incubation fund, the first biotech fund, and the first micro-equity fund. With funds of Rs 1,200 crore ($300 million) under management, APIDCVC may not be the biggest VC firm around. But with investments in small and relatively unknown organisations such as Naturol Bioenergy, Ocean Sparkle, Cecelia Healthcare and Sapala Organics, it bravely goes where most other VCs fear to tread.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Hollywood's growing fondness for Indian films

Business Today has an article on how Hollywood studios are now aggressively tapping into the regional language market in India.
Thus far, Hollywood studios have had only a peripheral presence in India, sticking to the traditional business of distributing their own—and sometimes, independently made films— in the country. Result: Hollywood’s share of the Indian film entertainment pie is a minuscule 3-4 per cent. But the big money lies in producing and distributing local films, and that is the path that some of the big boys of Hollywood are now taking.

...Hollywood first began testing the waters in the regional language market with dubbed versions of its English hits. The trend started with Jurassic Park in 1994. This was followed by Titanic in 1998. The success of these two films—the dubbed versions contributed as much as 25 to 40 per cent of their gross collections in India—highlighted the potential of the market. These were followed by Spiderman and Spiderman 2, Godzilla and Casino Royale, all of which reported multimillion dollar collections, thanks mainly to their dubbed versions. According to SPRI figures, 50 per cent to 60 per cent of its revenues in India come from dubbed versions of Hollywood movies. From there to local film production is, thus, a natural progression.

The obvious attraction is the size of the Indian market. The revenues of the Indian film industry, which were at Rs 5,990 crore in 2004, are expected to touch Rs 9,680 crore this year and grow further to Rs 17,500 crore by 2011, according to a projection by Pricewaterhouse-Coopers. Throw in television, home video rentals and film-related merchandising, and the pie is clearly too large for any serious player to ignore. Result: Sony, Viacom-Paramount, Time-Warner, Walt Disney, and Fox are sitting up and taking notice. Only Universal Studios has not yet announced any India plans.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

"Indian ports require a sea change"

Businessworld has an article on private participation in Indian port development.
Ever since India struck its first privatisation deal in 1996 when Nhava Sheva International Container Terminal was awarded to global port operator P&O (since bought by Dubai Ports), Indian ports have attracted Rs 7,585 crore in private investment: an average of Rs 700-plus crore a year. That’s still a trickle compared to the Rs 7,000 crore per year required in the next five years, but it has helped. The average turnaround time for Indian ports has improved from 5.23 days in 1998-99 to 3.5 days now.

Then, efficiency has taken a hit, even in Jawaharlal Nehru Port Trust (JNPT), which handles more than half the containers being shipped to India, despite two of its terminals being privatised.

Ramnath Iyer, director at Delhi-based Crisil Risk and Infrastructure Solutions, says the average time a ship has to wait before docking on to a berth at JNPT, the most efficient port, is 10 hours. In Singapore, the waiting period is zero; in Colombo, it is just two hours. The time taken for a ship to unload and leave the berth — the turnaround time — in JNPT is 1.98 days, in Singapore just 12 hours, and in Colombo, 15 hours.



Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Online bill payment firms make a comeback

With Clearstone Ventures and SIDBI Ventures investing into BillDesk and the Battery Ventures and Greylock combine backing TechProcess (the new avatar of ICICI Venture backed BillJunction), online bill aggregation companies have made a comeback on VC radar screens. Businessworld has an article on the trends in this space and business models of these firms.
“There are only two aggregators in India, and their business models are very different,” says Shalini Mehta, executive vice-president for retail liabilities and branch banking at Kotak Mahindra Bank. “The business for aggregators has grown only over the past two years. Last year, it was estimated that only 300,000 online payments were made. But this year, the number could go to 1.8 million.”

Mumbai’s BillDesk and Tech Process Solutions (TPS) are the two aggregators ploughing this lonely, potentially fertile furrow. Ever since broadband took off in India two years ago, both the companies are waiting for billers, such as utilities and mobile service providers, to get more people to pay online.

...In a study conducted by the IAMAI, 51 per cent of the 3,000 people interviewed were comfortable paying in cash, and 37 per cent preferred to pay by cheque. However, Srinivasu believes although individuals could be shying away from using the internet to pay bills, the number of companies paying bills online is on the rise.



Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Inputs to farmers via SMS

Businessworld has an article on a SMS-based service for farmers.
UK-based financial information and news provider Reuters Plc and Mumbai-based Multi Commodities Exchange of India (MCX), who are already empowering farmers by providing real-time agri-related information, believe food production could be revolutionised by integrating rather than sidelining middlemen. “The middleman is a key player and need not be wiped out,” says Anjani Sinha, director of MCX, which is setting up electronic mandis (wholesale markets) across the country to help farmers garner information. “He could help the farmer get produce to mandis that offer better prices.” For now, Reuters is helping farmers in Maharashtra do that through its SMS-based service, Reuters Market Light, which provides information on cropping patterns, mandi prices, weather updates and other agri-related information. In the process, it is indirectly helping sustain the middleman by ensuring that farmers go to those offering the most competitive prices.

Why SMS? “Mobile subscriptions are growing in rural regions,” says Amit Mehra, managing director of Reuters Market Light. “We can use this as an opportunity to provide information to farmers.” The service already has 4,500 subscribers in Maharashtra, with farmers receiving data in Hindi, Marathi or English. Mehra says farmers are keen as they can leverage the service to bargain with middlemen. Reuters has information coming in from 25 mandis across Maharashtra (the state has 293 in all), secured from the Maharashtra State Agricultural Marketing Board.

In 2006, an Indian Market Research Bureau study of 1,500 Maharashtra farmers who were given timely market information found that price realisation increased by 30 per cent when compared with farming without such information. Not surprisingly, the study also found that farmers were willing to pay for information. Subscribers to Reuters Market Light, for instance, pay Rs 60 per month per crop for text messages to be sent to them every day on weather and crop prices.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Apparel shopping as family entertainment

McKinsey Quarterly has an article comparing shopping for apparel across India, China and Brazil.
Indians devote roughly the same share of their income to apparel as do Chinese and Brazilians. But the country’s lower per capita income levels mean overall spending on apparel is significantly lower, and the habits of Indian shoppers present intriguing challenges for multinationals eyeing the market.1 For starters, nearly 40 percent of the mass-market Indian shoppers2 we surveyed said that their most important shopping occasions revolved around special events, such as weddings and annual religious festivals—a figure dramatically higher than the one for shoppers in the other emerging markets we studied. Furthermore, to a greater extent than elsewhere, shopping is a family activity in India: nearly 70 percent of its shoppers always go to stores with family, and 74 percent—more than twice the average of Brazil, China, and Russia—view shopping as the best way to spend time with family. The preference for family-oriented shopping is consistent across age groups, income segments, regions, and city sizes.

As in many markets, in India women are the primary decision makers in apparel purchases for the entire family. But India’s men also have an important role: indeed, half of our survey respondents said that their husbands had a major influence on which stores they frequented—a proportion far higher than the one for Brazil (3 percent), China (8 percent), and Russia (18 percent). What’s more, India is unusual in that the market for men’s apparel is larger than the women’s market, where traditional Indian apparel still dominates. Mass-market apparel retailers must therefore find formats and merchandising approaches that will attract shoppers seeking apparel not only for special occasions but also appealing to the entire family.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

November 20, 2007

VC Market

The following companies are seeking capital for starting-up / expanding their operations:

07-11-07-1: Mumbai based online service for MBA aspirants and students seeks <$100,000 for expansion.

07-11-07-02: Hyderabad based HR Services firm specializing in offering recruiting, payroll and time & billing solutions seeks <$1 M for expansion across India and Middle East

07-11-07-3: Vijayawada based bio-fertilizer manufacturing company seeks <$5 M for adding new products and marketing.

07-11-07-4: Bangalore based Hotel and Resort chain, focusing on the mid market segment, seeks <$5 Million to ease leverage and acquire real estate for future expansion.

07-10-03-1: Mumbai based logistics services company seeks <$100,000 for expansion.

07-10-03-2: Kakinada based real estate developer seeks <$1 M for investment into real estate projects.

07-10-03-3: Mumbai based entrepreneur seeks <$100,000 to develop an interactive matrimonial website.

07-10-03-4: Ludhiana based auto components company specializing in fine blanked components and other big precision automotive assemblies seeks <$5 M for expansion.

07-10-03-5: Mumbai based, 18-year-old manufacturer and exporter of Home Care Products seeks <$100,000 for expansion and marketing.

07-10-10-3: Bangalore based maker of condition specific nutrition products seeks <$1 M for investing into filing international patents, production facilities and marketing in the US.

07-10-10-4: Bhopal headquartered operator of city specific portals seeks <$5 M for expansion.

07-10-10-5: Bhubaneshwar based entrepreneur developing a unique retailing system seeks <$5 M for development.

07-10-17-1: Mangalore based firm that designs and manufactures robots for agricultural and industrial applications seeks <$1 million for augmenting manufacturing facilities and setting up R&D facilities. The company is also open to a Joint Venture.

07-10-24-2: Pune based entrepreneur seeks <$1 million for setting up plant to manufacture alloy wheels for passenger cars catering to both OEM and after market requirements.

07-10-24-3: Dubai based software products company specializing in retail and hospitality solutions seeks JV/M&A opportunities to expand to the Indian market.

For more information about any of these companies, investors - who are subscribers to the Venture Intelligence service - can email the company code to vcmarket@ventureintelligence.in. To learn about our subscription services for investors, please visit our web site.

Are you an entrepreneur seeking capital? List your company in the Venture Intelligence VC Market using the form here

November 18, 2007

Why Battery is keen on media deals

Battery Ventures' Ramneek Gupta and Mark Sherman have published an article on the Indian media landscape and themes their firm would be keen to invest in.

TV and Print are the two largest sectors in Indian Media with $4.25B and $3B in revenues respectively. Additionally, TV is expected to grow at a CAGR of 26% over the next 5 years.TV accounted for ~43% of the total media market in 2005, a share that is expected to grow to 55% by 2010.

We will be looking to leverage this mindshare with opportunities along the following key themes in India:

1. Local Advertising and infrastructure – There are very few mass media avenues available for local advertisers in India today with the exception of Print. We believe there will be tremendous equity value creation in this space in the near-term.

2. Audience measurement systems – Infrastructure and Data services companies focused on audience measurement that allow the advertisers to measure the efficacy of their advertising campaigns is another huge area of opportunity in India. Systems that can enable audience measurement across mediums (from TV to Print to Radio) will be key to the growth of advertising revenues in India.

3. Niche content / channels – With the growth and maturing of the audience in India, niche content channels focused on Education, Real Estate, Financial Services, Women, Wellness, etc. will be another key area of opportunity in India.

4. Intersection with Mobile / Internet – Convergence between new media (mobile and Internet) and old media (TV, Print and Radio) will give rise to new business models for customer acquisition, retention and monetization.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

November 08, 2007

Multiplexes: The New Game in Tinsel Town

Businessworld article on the business of Bollywood points out how multiplexes, while accounting for just 4% of the 13,000 screens in India, generate 30% of the box office collections.
It is the exhibition end that is emerging as Bollywood’s most modern arena. Multiplexes, expectedly, have led the charge. Over the last 5-6 years, aided by waivers offered on entertainment tax by various state governments, multiplexes have grown as part of the new mall culture. Today, multiplexes offer 450 screens at 130 locations with 140,000 seats per show. Of the 13,000 screens in the country, the multiplexes’ share is only 4 per cent. Yet, they have transformed film entertainment by generating nearly 25-30 per cent of the Rs 3,000 crore annual box office revenue. Furthermore, by offering a high quality viewing experience with comfortable seating, and a package of food, beverages and gaming, multiplexes are a whole new show in filmed entertainment.

The multiplex business is dominated by six corporate groups — Adlabs, PVR Cinemas, INOX Leisure, Shringar Cinemas, Cinemax and Fun Republic, most of which are listed entities that follow fairly transparent accounting practices. “With an occupancy of 35-40 per cent, we were able to go into the black with a Rs 9.8 crore profit for FY2007, from an earlier loss of Rs 4.9 crore,” said Shravan Shroff, ED of Shringar Cinemas.

This transformation in film exhibition is also driven by aggressive adoption of digitalisation by companies such as Pyramid Samira who are putting up a chain of digital theatres in south India. Simultaneously, Apollo Group subsidiary UFO Moviez is retrofitting theatres in small towns and rural centres to allow for satellite delivery of movies. “The industry has been losing huge revenue as new launches reach smaller towns often a month later. Besides a loss of box office revenue, this encourages piracy,” says Sanjay Gaikwad, UFO’s CEO. So far, 900 screens have been digitalised at a cost of Rs 110 crore. Increasingly, filmmakers are turning to a combination of print and satellite digital releases. For instance, Heyy Babyy was released on 364 UFO digital screens and 325 traditional print screens, says Gaikwad.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Ajay Shah on Private Equity

Extract from economist Ajay Shah's column in the Business Standard argues for removing the tax and regulatory irritants for PE investments in India:

The investments in place today might generate 1,000 exits over the next four years. On average, the PE industry will produce one company per weekday! Some of these exits would be through an IPO; the others would involve sale to an existing listed company. In either event, this would give growth of the overall market capitalisation of India and grow the modern sector of the economy.

A key feature of PE funds is that they have a substantial shareholding in the investee company — sometimes even a majority stake. This is a sea change in the governance environment when compared with the usual Indian family run company, where the CEO has job security owing to owning over 50 per cent of the shares. PE funds, in contrast, exert substantial control, and sometimes even sack the CEO. This pressure helps to improve the performance of the company. Once the Indian listed space has hundreds of companies which have experienced a few years of PE investment, this would lead to an improvement in the corporate governance climate in the country.

Indian capital controls matter greatly. The bulk of the money coming into this field is from foreign investors, particularly after the mistakes of Budget 2007, which restricted tax passthrough for PE funds for domestic investors. Investee companies are now often planned out as a global business doing outbound FDI very early in the game. Sometimes, investee companies are being structured as offshore firms so as to avoid Indian capital controls. Global PE funds are setting up operations in India, and their ability to do so critically depends on an environment which is supportive to global firms operating branches here and moving money across the boundary. A strong effort is required, on solving mistakes of tax policy and capital controls, so as to enable private equity to impact on India’s growth.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

November 01, 2007

Deal Alert: IDFC PE invests Rs. 35 crores in water management co. Doshion



Edited extracts from the press release:

Water management company Doshion Limited has raised Rs. 350 million from IDFC Private Equity (via its IDFC PE Fund II). Doshion has a pan-India presence and has executed projects - in sectors like water purification, waste water and effluent treatment - in over forty countries across the world. The company was founded by its Chairman Dhirajlal Doshi in 1978 and is managed by his sons, headed by Ashit Doshi (Managing Director) and backed by a team of professionals.

The money raised from IDFC Private Equity will be used to fuel further growth, including acquiring niche companies in the areas of design and fabrication of water treatment plants and for bidding for upcoming BOT and BOOT projects in the water segment.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

October 30, 2007

GMR gears up for global growth

Business Today has an article on the management recast at the infrastructure focused GMR Group.
The company is looking at other segments to expand its global reach; it is eyeing coal mines in both South East Asia and South Africa to integrate its power business backwards and it is also eyeing other airport projects in West Asia and other fast growing economies. "The competition is much tougher on the global stage. There, we are up against large global infrastructure players and, possibly, some of our partners," says Rao. GMR has already experienced both of these when a consortium it was part of beat half-a-dozen others (including Frapport, its partner for the under-construction Hyderabad International Airport) to win the contract to upgrade the Sabiha Gocken Airport in Istanbul, Turkey. "We have demonstrated our capabilities in delivering projects on time in India across our businesses. Now, we want to take the next step," says G.B.S. Raju, Chairman, Corporate and Internal Services, GMR, who also oversees the company's overseas forays.

Before it can make a global splash, Rao has taken steps to put sufficient management and operational bandwidth in place. Over the last six months, the group has worked with consulting firm McKinsey & Co. to recast its top management and sharpen its focus in each of the segments it is present in. Following this, in early September, Rao took on a less hands-on approach to the company, by becoming GMR's Group Chairman and appointed four business chairmen to drive the company's growth. He has also started the process of appointing CEOs for each of its units, who will be responsible for running the day-to-day affairs of the individual businesses. "The business chairmen will have a strategic role and I will only intervene in exceptional circumstances," says Rao, "but, this is not my first step into retirement; there is a long way to go for us." While professionalism may be GMR's new mantra, the company is not going to lose its family moorings so quickly (See "We want to be a global company").

Rao, who started three decades ago as a jute yarn manufacturer in Rajam, Andhra Pradesh, has transformed the company into one of the best known names in Indian infrastructure. It now boasts a top line of Rs 1,700 crore, but Rao's ambitions are much larger. He is targeting operational assets worth $10.5 billion (Rs 42,000 crore) in four years, compared to Rs 14,000 crore now. Already, the Hyderabad and Delhi airports, managed by GMR, handle a third of the country's air traffic; its power stations generate around 4,000 mw of power and it has built and operates 450-500 km of roads across the country.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Searching for the true Indian VCs – A LP’s Perspective

The following article, by Anand Sunderji, originally appeared in the latest quarterly India VC Report.

Recently, a well known venture fund announced their India plans. However, further information revealed that while the fund plans to be loyal to its venture capital strategy offshore, in India they would largely concentrate on growth capital. Needless to say, something about India makes traditional venture capital funds veer off their beaten path.

Several funds that look exclusively at venture capital deals outside India, have changed track when operating in India and have been dabbling in what would be called growth capital deals or even larger ticket transactions. “Venture” firms are now entering sectors as varied as manufacturing, hospitality and auto components. This was, however, not always the case.

The late 1990s witnessed a surge in venture capital activity in India. Venture capitalists largely looked to replicate the Silicon valley success stories on the Indian subcontinent. Start-ups that looked to bring U.S. success stories to India found favor with the venture funds. Several bad investments and a technology bust later, the U.S. model for Indian market was no longer an accepted path. The 1999-2000 debacle led the venture capital movement to take a beating and the survivors to severely realign their strategies and portfolios away from high risk early stage investing. Today, as the Indian private equity is seeing a veritable boom, the venture capital segment in India still remains underserved.

But the burst of the technology bubble is not the only reason for the dwindled venture capital industry. While the private equity is the current media darling, the Indian entrepreneur’s familiarity with the concept still remains rather basic. Also, Indian firms apply for their initial round of financing at a much advanced stage of development. Hence, as the entrepreneur looks for capital for his/her fledgling enterprise, venture capital does not feature among the available options.

This makes one wonder that if the venture firms are doing the growth deals, who is taking care of the venture capital requirements in the country? The venture space in India, as it exists today, consists mainly of local teams, usually with successful entrepreneurial track records. These venture capitalists are mainly looking to fund business plans that cater to unmet local demands and are tuned to the domestic business environment, quite unlike the preferred models of the 1990s. Typical investments include the travel services company Flightraja/Via with its wide network of local travel agents and the multimedia and animation company DQ, both of which exploit niche demand and talent available locally.

Also bridging the gap to an extent have been angel investors. Groups such as the Indian Angels and Mumbai-based Mumbai Angels have to their credit investors who helped create landmark brands such as Indiabulls. These groups largely consist of successful entrepreneurs that have the experience and expertise, in addition to the capital, to help budding entrepreneurs set up their businesses.

The last few years have seen an increase in reported deals, diversified across sectors (beyond technology) as well region (beyond Bangalore). The investor’s work, however, remains cut out for him. With the traditional venture players doing big ticket deals, we need to dig deeper to find the true venture capitalist with the deal pipeline and the talent to find the next big story.

Anand Sunderji, Director and Head of Asset Management at Thomas Weisel International in Mumbai (which manages a Private Equity Fund-of-Funds for India with an active interest in the Venture Capital segment), provides an overview of the VC landscape from a Limited Partner’s perspective. He can be reached at asunderji (at) TWeisel.com

The opportunity and economics of intergrated townships

Business Today has an article on the business and economics of integrated townships.
At present, there is no one format that is being adopted by developers, although the key drivers seem to be common: It is either mass housing requirements or demand for commercial space. Therefore, the townships promise to come in all shapes and sizes. The 390-acre Kolkata West International City in West Howrah primarily offers plotted development, while the Mahindra World City in Chennai offers both commercial and residential space (although dwelling units are yet to come up). In fact, Infosys Technologies, which has built a sprawling campus in the Mahindra special economic zone (SEZ), hopes to employ 35,000 people when the facility is fully occupied. Magarpatta City in Pune is built on 400 acres of agricultural land and offers the walk-to-work concept to its residents, and the Dankuni Township near Kolkata is expected to have one of the largest planned developments involving public-private partnership and also cater to the needs of the industrial sector.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Are spin-outs the way to go?

The following article, by N. Sriram, originally appeared in the latest quarterly India VC Report

On May 4, 2006, when all commercial activity in Bangalore came to a standstill thanks to a general strike (“bandh”), Rajiv Mody, Chairman and CEO of Sasken Communication, and Sudhir Sethi, Managing Partner of IDG Ventures India, met to discuss an innovative idea: is it possible to spot product areas where Sasken was not adequately realizing the potential and spin them out into a separate corporate entity?

Over the next six months, after considerable research and several meetings later, five areas were identified as worthy of spinning off from the Bangalore-based provider of embedded communications technology solutions. After some more filtering, machine-to-machine (M2M) communication emerged as the top contender segment that Sasken should spin out. Between November 2006 and April 2007, the business plan was firmed up, potential customers and markets were identified. The next step was to pick advisors, employees and, of course, the CEO.

In June 2007, Sasken and IDG announced that they were together investing $6 million in the new entity christened ConnectM Technology Solutions. Kumar Prabhas, a senior executive at Sasken, was named ConnectM’s CEO.

In a sense, ConnectM has been given everything it needs to succeed on a platter. Even a potential exit strategy for the VC - since Sasken has reserved the right to fold ConnectM into itself.

Spin-outs like this indeed seem to be a convenient solution for a key problem facing VCs in India: how to put larger sums of money to work in a situation where the average start-up requires far less than the $5 million or more that their fund sizes dictate they deploy per deal.

There however seems to be one key problem: in a spin-out situation, who exactly is the entrepreneur - with “fire-in-the-belly” and all that – who is supposed to be the heart of any successful startup?

Sudhir Sethi of IDG counters this, saying that a senior executive, when made a CEO, realizes the opportunity to create a large company and works as aggressively as an entrepreneur. In ConnectM’s case, Prabhas was picked as the CEO after short-listing candidates from outside Sasken as well.

Sethi also suggests that the issue be looked at from a different angle: how should a medium size company grow? And points out that the spin-out route provides an alternative, without the company losing market leadership. "Also, the time taken to complete the quality cycle will be reduced", he says pointing out that ConnectM, within three months of inception, has completed the execution of a project precisely because it hit the ground running.

Explains Prabhas, ConnectM’s CEO, "The rationale was to explore verticals outside of telecom, while still leveraging the communication expertise, global reach and mature policy and processes of Sasken. All ConnectM offerings are new, as they address vertical markets that Sasken never addressed."

ConnectM’s progress will indeed be interesting to watch.

What do you think about the opportunity to do spin-outs in India? Do send us your views at feedback@ventureintelligence.in

Update on the Indiabulls phenomenon

Business Today has a cover story on the 8-year-old company, which enjoys a market cap of over Rs.29,000 crores, is rapidly expanding into territories beyond its original domain of online broking.
"The consumer finance business is 10 times the size of broking. If corporate growth is expected at 15 per cent, financial services will grow at 30 per cent. And in the next 10 years we will grow 10 times in the consumer finance business from $3 billion to $30 billion (in market cap)," says Gehlaut, who after working with petroleum and energy giant Halliburton in the us came to India to start a mining and earth moving business. In October 1999, along with Rattan and Mittal, Gehlaut started Indiabulls after acquiring a Delhi brokerage.

...The real estate push also gives Indiabulls an opportunity to diversify into another sunrise sector, that of organised retailing. Here, the promoters are exploring formats like hypermarkets and multiplex-cum-mall, and are busy acquiring properties for this purpose. Gehlaut has earmarked Rs 1,500 crore for this project, and has been busy acquiring land via auctions in cities like Madurai, Jodhpur, Hyderabad, Agra and Kanpur. "Financial services, real estate and retail are the key sectors for growth that will deliver double-digit growth over the next 20 years. Retail is a missing piece in our pie and we are seeing it as a definite business option as the sector coincides with the real estate story," says Rattan, the 35-year-old CFO of the group, who worked as an operations manager for Schlumberger before co-founding Indiabulls.

The article also touches upon an hitherto unknown (to me) facet of Indiabulls: one of its promoters actually is closely associated with the US-based hedge fund Farallon Capital which has been pouring significant dollops of money into the company. (Farallon also, to my knowledge, has no other India investments outside of Indiabulls.)
Saurabh Mittal, the promoter based in the US, is a partner and portfolio manager at Noonday Asset Management in the US. Before that, Mittal had joined Farallon in 2001 (after co-founding Indiabulls), the same hedge fund that today has an exposure of Rs 365 crore in the group. Mittal may no longer be with Farallon, but Noonday manages its money. Dalal Street veterans question the ethics of a promoter also being a manager of the funds that find their way into the same company.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

October 26, 2007

Deal Alert: 3i invests $80 M in steel pipe co. Welspun Gujarat

Edited extracts from the 3i press release:

UK-headquartered 3i has invested US$80 million for a 6.6% stake in Welspun Gujarat Stahl Rohren Ltd (“Welspun”) through a purchase of secondary shares in the company. Welspun Gujarat is the flagship company of the Welspun Group, led by Mr. B.K. Goenka, and is listed on the Indian and Luxembourg Stock Exchanges.

The company is one of the world’s largest manufacturers of line pipes used by the oil & gas sector and is in the midst of executing an ambitious expansion plan including adding new capacity, backward integration into manufacture of plates and coils and establishing an overseas presence with a facility in the US. The company counts the world’s largest oil & gas companies, including Exxon Mobil, Chevron and Saudi Aramco, as its customers. Post completion of the Company’s expansion plans, it will have a total capacity of 1.75 million tonnes per annum, up from 1 million tonnes per annum currently.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Deal Alert: Havells to raise $110 M from Warburg Pincus

Edited extracts from the Warburg Pincus press release:

Electrical and power distribution equipment company Havells India has announced that Warburg Pincus is investing $110 million in the company. Havells will issue fresh shares and warrants to Warburg Pincus, representing approximately 11.2% of the fully diluted share capital of the company.

Earlier this year, Havells acquired Dutch-based SLI Sylvania's lighting business to enhance their global presence. Warburg Pincus’ investment will be utilised to partly retire the debt raised during the Sylvania acquisition, and in strengthening the company’s manufacturing capacity and distribution network to address the Indian market.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

October 21, 2007

Deal Alert: Tejas raises $24 M from Goldman Sachs

Bangalore-based Tejas Networks, a provider of optical technology based telecom equipment, had announced that it has attracted $24 million in new equity financing from Goldman Sachs. The company will use proceeds of the financing to significantly grow its business and invest aggressively in R&D for developing new products.

The Fabindia story

Business Today has an profile of Fabindia, a retailer of ethnic ware, which recently raised a round of Private Equity funding.
Fabindia is recasting its supply chain, setting up dozens of "supply-region companies" that will gradually take over its entire supply chain in a particular region; these companies will also offer shareholding to Fabindia's suppliers in line with the vision plan articulated by Managing Director William Bissell (40), who sees himself as a champion of free market in the NGO- and government-dominated handicrafts sector.

For a company that owns India's most successful and chic brand of handloom garments and handicrafts, that's only one of many exciting developments taking place-Fabindia has opened 37 stores in the last 18 months; sales have been growing at a CAGR of 40-50 per cent over the last three years; and margins are so attractive that investors are queuing up with their cheque books.

Bissell, who is married to an Indian, says Fabindia's emphasis on utility and contemporariness, rather than beauty and quaintness, have created "sustainable demand". Result: customers buy a product because they need it, not because they think it's beautiful. "Fabindia's regular customers tend to be Indians who are not insecure about their identity; who appreciate the fact that they have an extraordinary culture and that a handmade product has an intrinsic value, not an externally imposed price of a big brand, inflated manifold by advertising and packaging," says Bissell. Then, given that its "basic" line of garments starts at a price point of Rs 150, Fabindia has become synonymous with "affordable chic".

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Are REITs the right way?

A Businessworld article discusses how real estate companies like DLF and Unitech are raising money via REIT listings overseas and raises questions on whether such issues are fair to their domestic shareholders.

For instance, the promoters of DLF, India’s largest private land bank owner, have filed a prospectus for floating a REIT in Singapore. DLF Asset (DAL), their offshore entity, has already acquired assets of 5.3 million sq. ft of commercial office space from DLF, the publicly-listed Indian firm. An additional 6 million sq. ft will be sold to DAL at regular intervals over the next couple of years. It is 1.8 per cent of DLF’s total land bank of roughly 615 million sq. ft. “Singapore’s investors have a great penchant for REITs,” says Saurabh Chawla, vice-president of finance and investor relations at DLF. “In addition, Singapore is a great place for pan-Asia property deals.”

...Once its REIT gets listed on the Singapore exchange, there will be a public valuation of the 5.3 million sq. ft of commercial office space sold by DLF to DAL. Only then will investors be able to determine whether DLF’s asset sale to its promoter-owned entity was at the right price, or it went cheap.

Indian shareholders invested in DLF or Unitech’s listed entities in India will not benefit directly from REITs. In the case of DLF, it is the promoter and private equity owners of DAL who will profit the most. Similarly, Unitech Corporate Park is owned by shareholders in the AIM market.





Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

October 19, 2007

Crush on Cross-Border Continues

Here is the full text of my article for the Economic Times-Corporate Dossier (issued dated October 19, 2007)

Despite the liquidity crunch in the US and Europe, Indian companies are stepping on the accelerator when it comes to acquiring overseas companies. Indian companies have closed over 60 outbound acquisitions worth over $4 billion during the latest quarter – i.e., amidst the “sub-prime crisis”. These included 15 deals that cost over $50 million and six that with tags of over $200 million!

Click Here for a table on top outbound acquisitions during the latest quarter.

So, why the hurry? One answer is the opportunity presented by the near absence of competition from LBO (Leveraged Buyout) firms. With lenders turning off the taps for cheap debt, LBO firms are no longer able to outbid strategic buyers with ease. This could be prompting the strategy and M&A heads at Indian companies to think what’s a few basis points here and there when the lack of alternative buyers can shave off a few millions on the target’s price? Plus, an ever rising rupee is only making overseas assets that much cheaper to acquire. We are hoping to get more insights on what makes cross-border acquisitions tick from a host of experts – including from companies like Suzlon Energy, Spentex Industries, Geometric Software, Take Solutions, UTI Ventures and others - at the Venture Intelligence M&A Summit in Mumbai on October 25.

New Sources of Liquidity
Private Equity firms exited their investments in 34 companies during the first six months of 2007 via M&A deals compared to just 26 such exits during the entire of 2006. The rising number of M&A exits is driven by two trends. The first - and slightly older trend – is that of MNCs acquiring companies in India to “hit the ground running” in terms of market access and capabilities. While this has been driving acquisitions the IT & ITES industry (think IBM-Daksh, EDS-Mphasis, etc.), what’s new this year is the acquisition by MNCs in consumer targeting businesses – good examples being Hershey’s acquisition of Godrej Foods and Norway-based Orkla Foods’ acquisition of MTR Foods.

The other – newer – trend is the rising acquisitions of PE-backed companies by other PE firms. The number of such deals, known in PE industry parlance as “secondary sales”, is growing thanks to the ever increasing number of new PE firms entering the market. And it is giving existing funds a nice source of liquidity for their investments. Last year, we had witnessed several such deals in IT & ITES companies including SAIF’s buyout of Baring India from CSS Group and Carlyle providing liquidity to Euronet Ventures from Allsec Technologies. This year the trend has again moved beyond IT exemplified by the acquisition of APIDC VC’s stake in Hyderabad-based port management firm Ocean Sparkle by India Equity Partners.

It is not just strategic acquirers and new PE entrants that are providing liquidity to existing PE & VC firms. A new category of investors - Special Purpose Acquisition Corporations or SPACs – are promising to open up another avenue on the exits front. (SPACs, also called “blank check” companies - are newly-formed companies without assets, whose sole purpose is to acquire an unidentified company in a targeted industry.)

Several India-focused SPACs have raised (or filed to raise) capital via IPOs on the US and European exchanges and are scouring the country for acquisition opportunities. They include the Phoenix India Acquisition Corp., Global Services Partners Acquisition Corp. and TransTech Partners (all of which are IT focused); Trans-India Acquisition Corp. (which is focused on Life Sciences) and Millennium India Acquisition Company (which has a broader focus including financial services, healthcare, infrastructure, retail and hospitality).

Malaysia-based PE firm Navis Capital, which had developed a strong taste for Indian food and restaurant businesses, has found an exit route for its investments in three such companies – Mars Restaurant, SkyGourmet Catering and Nirula’s – via a sale to India Hospitality Corp, a SPAC listed on the London AIM exchange.

Tail piece
Build to flip or build to last? Using an interesting analogy, K. Ganesh, Founder & CEO of TutorVista and a serial entrepreneur who has successfully exited three ventures, provided an answer to this eternal start-up question while speaking at a recent Venture Intelligence conference. Ganesh compared building a company to that of building a house.

Depending on whether you plan to sell the house or rent it out or live in it, you would build and furnish the property differently. Similarly, depending on their vision for their businesses, the approach of entrepreneurs who planned to exit the business after building value over a few years would vary from that of others who intend to pass it on to their children. However – whether a company is built to last or flip - in order to create a significantly valuable business, it is critical for an entrepreneur to be passionate about the core idea and willing to “bet his or her life on it”.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.