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October 31, 2008

Ashamed of being a Wall Streeter?

From the "Dear Lucy" career advise column in Financial Times.
At a dinner party last Saturday I was asked by a fellow guest what I did and I said I was an investment banker. I might as well have said I was a paedophile. Suddenly the whole table – all friends of my wife from the art world – turned on me with such venom I was really taken aback. I tried to defend myself by saying that I had nothing to be ashamed of in the work that I do in M&A, but the more I argued the more hostile the other guests became. Next time this happens – and I fear there will be a next time – should I accept guilt for what isn’t my fault, or should I lie and say I’m a librarian?

There is absolutely no point in trying to convince arty people that you are anything other than the devil; any attempt will make things worse. The complaint against investment bankers is that you have dragged the world into recession through your greed, stupidity and arrogance, and any attempt to say otherwise will enrage them still more.

To avoid further ugly scenes, next time say you work for the government. Which, depending on your bank, may be partly true. If there is a follow-up question (although there probably won’t be) say you work on the financial side. That will shut them up.

...The bigger question is, who is right: you or the outraged artists? The answer is neither. You weren’t personally responsible for what has happened, yet neither are you in a good position to claim the high moral ground. M&A is not the most honourable of callings: mostly it just added to leverage and job losses, so to show a bit of humility might have been seemly.

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. Email the author at arun@ventureintelligence.in

October 30, 2008

Policy Confusion in the Air

In an article for The Economic Times, Suhel Seth, an advisor to British Airways, points out the problem facing Indian airlines has more to do inaction on "vital but unpopular steps" on the policy front, including "day-light robbery" by PSU oil firms on the ATF pricing front.
States in India are levying a state sales tax of 25% to 32% on ATF (aviation turbine fuel). But the catch is not just the obscenely high tax. The base rate of the ATF that is being offered by the oil companies is double the international price of fuel at current rates. So while Murli Deora has every right to berate the airlines for not paying the oil companies on time, the truth of the matter is, they are not selling ATF. They are instead indulging in day-light robbery and operating as a cartel , not the airlines.

The Airports Authority of India charges the highest for any aircraft related activity. For instance, the landing charges in India are the highest in the world; add to that the infrastructure limitations in terms of runways and you have yet another dangerous situation. Every minute you spend hovering in the air costs a fortune at current ATF rates, but yet again, this is not being factored in.

You then have an alarming situation of political interference in retrenchment issues. Naresh Goyal was silly to take back all those people and I have the fullest sympathy for those who did lose their jobs. They had no business to be axed in the manner they were but that is no excuse for the manner in which they were welcomed back. Everyone knows that the political class leaned on Naresh Goyal and he wilted. In the process, you have created a new spectre of demonic activity qua employees and the political class.

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. Email the author at arun@ventureintelligence.in

"M&A landscape to alter significantly"

Moneycontrol.com has a video interview with Ashok Wadhwa, MD of Ambit and Sumanth Sinha, COO, Suzlon Energy, on the drying up of deal activity. Both panelists agreed that more transactions that are still on the table are likely to get renegotiated on account of falling valuations and the derailing of the financing plans for the deals.
Wadhwa: Pure-cash buyout transactions will not happen for a period of time (in significant numbers or value) because the cash for making these transactions happen is just not available. But I do see this as an opportunity for people to consolidate.

...Those who have money will be able to get bargain deals without question and therefore our advice to all our clients at this point of time is: keep your cash tight for a three-six month period. You will really get outstanding value, probably even better than what you have today in but even in the interim, there will be consolidation through stock swaps.

I do see that people have gone and incurred significant amount of costs and one-way to rationalise cost is to actually consolidate your businesses. I do see strategic alliances. I do see stocks swaps. I do see a significant amount of consolidation, which will give rise to a new generation of transactions that won’t be built on the basis of long-term strategic need but which will be built on the basis of short-term need to be able to cut costs, consolidate and bring larger revenue on to the table. There will be transactions that will happen for sure. Also remember that when markets fall the way they do, valuations are getting far more real.

...Sinha: The kind of transaction that we are likely to see in the marketplace is going to be of a distressed nature where a lot of corporates have to sell assets or have to sell parts of their businesses. So, one might find some bottom fishing going on and those sorts of things. I think one will see some private equity transactions taking place. Just before this collapse happened a lot of the private equity funds raised money and therefore are sitting on a tonne of cash. Of course, that cash has to be called and so we have to see what happens when these private equity firms took call that cash. We could see those sorts of transactions. I am not so sure about stock swaps, to be honest, because ultimately a lot of Indian companies are promoter-run and for promoter-run companies, a dilution is always an issue. That is always going to be a concern

Click Here for the transcript of the program.

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. Email the author at arun@ventureintelligence.in

October 29, 2008

Correction in Valuations a Positive for PE: Adveq CEO

AltAssets reports on the Swiss-headquartered PE fund-of-funds manager's annual press conference in Frankfurt.
The current global financial crisis will impact private equity in three waves: firstly, through a correction of EBITDA multiples in the short term; secondly, through a contraction in corporate earnings caused by a reduction in GDP growth rates; and thirdly, through some companies' need to seek refinancing in a more challenging credit environment, Adveq said at its annual press conference in Frankfurt. The Swiss-headquartered private equity fund of funds manager spoke in detail about its current market assessment and outlook for the private equity industry.

...Bruno Raschle, CEO of Adveq, said, "The world is currently experiencing financial markets turbulence that is unprecedented, at least for the past several decades, and this has a number of implications for the private equity market, both for existing and new commitments to the asset class. However, while it is clear that there will be a reduction in the return expectations for past vintage years in certain segments, we believe sharp reduction in valuations will in fact create attractive opportunities for both current and future private equity fund commitments in most private equity segments."

"In particular, we believe that these trends will, once again, increase the attractiveness of "traditional" private equity segments, namely small and mid-sized buy-outs and venture capital, while special situations funds will also benefit in the current climate," he added.

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.

"Freeing Up Education Key to Avoiding Demographic Disaster"

In an article for The Economic Times, Janmejaya Sinha, MD at The Boston Consulting Group India, makes a passionate and stats-filled case for an urgent freeing up of the Education sector in order to prevent India's "demographic dividend" from turning into a curse.
India's workforce today has 484 million people. Of these 273 million are working in rural areas primarily in agriculture (many of them clearly underemployed), there are another 61 million working in manufacturing and about 150 million in services. Shockingly, 40% of the current workforce is illiterate and another 40% is below 12 class pass. That means 200 million of our workers cannot even sign their name! Given that 60% of our workforce is in rural areas, which provides only about 18% of our GDP and the growth engine for our economy is the services sector, these simple statistics condemn our rural workforce to penury and destitution.

What is worse, given their skill levels it is very difficult for them to escape their fate by migrating to the services sector. It is true that much of our services sector is correctly characterised by the woman carrying bricks on a construction site or the family run neighbourhood kirana store - both services reasonably tolerant of illiteracy. However the openings arising in modern India, even in modern retail and more mechanised construction, will seek a basic education. It is hard to use uneducated people in the productive parts of our economy. At the higher end in IT, financial services and healthcare the problem is different - we need high quality graduates. In fact, we will not be able to accelerate our GDP growth rate to over 10% or have any meaningful impact on inequality in incomes unless we can address this.

Let me ply you with some unfortunate statistics. Currently about 23 million children are eligible for entry into the school system yet only six million finish the 12 standard and only about 2.3 million graduate. Thus 17 million do not even finish school. It gets worse than that - the quality of education on offer is abysmal. On any day 25% of the teachers are absent and 50% of children in class V cannot read a story and 21% of them cannot recognise numbers. Little wonder that parents dependent on government schools do not see the relevance of sending their children to school.

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.

Why aren't there more Shankar Sharmas?

On the "Samvat 2065" show on CNBC-TV18, Samir Arora of Helios Capital Management pointed out something I've been thinking of frequently in recent months: why are there so few market experts (at least on TV) whose opinions are as bold and more importantly, as reasonably accurate, as that of First Global's Shankar Sharma.
Arora: We cannot talk about Shankar because he has been right most of this year and I totally appreciate that. But look at other people who come on your channel and look at what they have been saying about oil, (they said) oil was in shortage and it was going out of supply that there was one last Saudi Arabian field [remaining] in the world. With great conviction, everybody would come in and say the same things. Three months later, they come now and say [prices of] commodities are going down.

In fact, barring a few other exceptions, most "experts" I see on TV over the past several monthly have been saying that "there is likely to be a maximum of 10% downside from here" all the way from 21,000. And now (at Sensex=8,500), they don't want to "hazard predicting a bottom for this market". Capitulation of the "experts" anyone?

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.

Rakesh Jhunjhunwala vs. Shankar Sharma

Normally, Samir Arora of Helios Capital Management makes for good TV. Not on the "Samvat 2065" program on CNBC-TV18 though. The often volatile sparring between his co-panelists - well known stock market investor Rakesh Jhunjhunwala and Shankar Sharma of First Global Services - on Diwali day, made the normally outspoken Arora seem quite staid.

Some of the issues the two disagreed strongly on included the rising US dollar (SS believes it will continue to appreciate; RJ the opposite), sectoral trends (SS insists the winners in the bull run will suffer the most since that's where investors can still "recover" some profits; RJ disagrees) and India's correlation with global market (SS feels India will continue to be highly correlated; RJ insists actual earnings matter more).

Samplings from the colorful debate:

SS: The reason why emerging markets did well was because the weak US dollar drove up commodity prices. That drove earnings in emerging markets in general, made a flight away from US dollars into non-US dollar assets. That tide has changed. The US dollar is back to being the safe haven, the reserve currency. That change is not going to reverse anytime soon. So one will see the euro weaken against the dollar. All emerging market currencies are very weak against the dollar. That’s the central problem. It’s not just about India or the BRIC countries. The larger problem for emerging markets is the strength of the US dollar.

RJ: America also requires 6-7% current deficiency. Who is going to finance it and for what reason? How long will my driver say: put that money in a bank and the Indian government will invest in the US treasury for that person in America. So the dollar has to reverse, it is only a matter of time. As far as Indian fundamentals are concerned, I don’t know how worse or better they can get but to my judgment, we are best suited to face whatever problems arise, amongst the countries in the world.

...RJ: One cannot look at the S&P and Sensex in isolation. That from 2002, even in the base estimate that you gave me, the Sensex earnings are up 3.35 times. I don’t think the S&P earnings are up 3.25 from 2002. They won’t even have doubled. So one cannot compare the S&P to the Sensex. You are comparing apple with peaches. Here the earnings have gone up 3.25 times, there the earnings have doubled.

SS: That is completely incorrect. It is the same global bull market pond that every market drinks from. Nobody stands out. The only way you can say it is an Indian bull market is when every market is down and India goes up 50%. Then I will agree with you. Otherwise it is a big global macro move....During the last 10 years, I don’t know of any six-month period in which India performed very differently from how the world was performing. That’s the reality, we have to admit 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.

October 23, 2008

"The scope for PE is much larger"

In a column for The Mint, Govind Sankaranarayanan, CFO of Tata Capital, says the current tough environment for capital raising is likely to spur Private Equity investments in India.

Somewhat disappointingly, although there have been some high visibility transactions in 2007, many prospective companies remain untapped. As one who has been on the buy side of a few private transactions, I can attest that owners, temperamentally imbued with an unrealistic perception of the value of their company, perhaps reinforced by the exuberance of 2007, turned off a large number of funds. In most cases, unless owners were confident that they had fully ripped off the investor of any remnant of value, no transaction seemed to get done. Funds did not do themselves any favours either, by queuing up for almost any investment idea.

Moreover, even after transactions did take place, there has sometimes been resistance to even the most well-intentioned management interventions. A consequence of this is that, though media attention has focused on the deals that did happen, in a far larger number of potential transactions through which the economy could have benefited, governance and expertise were turned away by the well-established players. Hopefully, the frozen market for capital will induce more Indian SMEs to open their doors enthusiastically to PE, which can in turn play their role towards efficient capital allocation and improved governance.

...Finally and most critically, this focus on governance combined with the distilled experience of external investors can significantly facilitate further capital raising including listing, most of which value will accrue to the entrepreneur. Consequently, if the present crisis in liquidity can accelerate the depth of the private market, one can look forward, over the next few years, to a new wave of Indian companies, heirs to icons such as Fedex, Apple and Oracle, which were founded on private funds. These investments will soon come to the top table of the Indian corporate world, thanks to a sharper focus on disciplined management. Were that to happen, the dark night of the capital markets may yet have a silver lining.

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.

Why the Oracle of Omaha is buying now

From Warren Buffet's NY Times article.

I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

...You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy. Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”


Petty common sense stuff, when you come to think of it. But, as they say, common sense is one commodity that’s rare in both good and bad times.

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 22, 2008

"Calling all PMI experts"

TheDeal.com has a couple of posts highlighting the huge demand thrown up by the various gun shot weddings in the US financial sector.
The expanding financial crisis is not only completely remapping the world of finance, it's also forcing a rewrite of the traditional rules of integration. Most strategic consultants agree that post-merger integration issues covering IT systems, personnel, training, real estate, branding and others should be discussed and budgeted for long before a deal is signed. Now there are plenty of instances when this is simply not possible. But the speed with which deals are coming together in the financial services industry is unprecedented.

As strategic consultancies line up to help financial giants merge complex systems and businesses and thousands of employees, they may encounter challenges on a scale unlike any they've faced before. The volume of work alone may have even serial acquirers like Bank of America Corp. relying more heavily on outside consultants for strategic advice. And with most Americans invested in the outcome, the stakes of getting these integrations right couldn't be higher.

Is this likely to be a silver lining for Indian IT Services firms?

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.

"Shrinking of Wall St. Isn't a Bad Thing"

Fareed Zakaria has a thoughtful article in Newsweek on the silver linings in the dark cloud that hangs over the USA.

Two decades of easy money and innovative financial products meant that virtually anyone could borrow any amount of money for any purpose. If we wanted a bigger house, a better TV or a faster car, and we didn't actually have the money to pay for it, no problem. We put it on a credit card, took out a massive mortgage and financed our fantasies. As the fantasies grew, so did household debt, from $680 billion in 1974 to $14 trillion today. The total has doubled in just the past seven years. The average household owns 13 credit cards, and 40 percent of them carry a balance, up from 6 percent in 1970.

...Wall Street will also need to change. Paul Volcker has long argued that the recent spate of financial innovation was nothing of the kind: it simply shuffled around existing resources while contributing few real benefits to the economy. Such activity will now be reduced significantly. Boykin Curry, managing director of Eagle Capital, says, "For 20 years, the DNA of nearly every financial institution had morphed dangerously. Each time someone at the table pressed for more leverage and more risk, the next few years proved them 'right.' These people were emboldened, they were promoted and they gained control of ever more capital. Meanwhile, anyone in power who hesitated, who argued for caution, was proved 'wrong.' The cautious types were increasingly intimidated, passed over for promotion. They lost their hold on capital. This happened every day in almost every financial institution over and over, until we ended up with a very specific kind of person running things. This year, the capital that remains is finally being reallocated to more careful, thoughtful executives and investors—the Warren Buffetts … of the world."

...The financial industry itself is likely to shrink, and that's not a bad thing, either. It has ballooned dramatically in size. Curry points out that "30 percent of S&P 500 profits last year were earned by financial firms, and U.S. consumers were spending $800 billion more than they earned every year. As a result, most of our top math Ph.D.s were being pulled into nonproductive financial engineering instead of biotech research and fuel technology. Capital expenditures went into retail construction instead of critical infrastructure." The crisis will stop the misallocation of human and financial resources and redirect them in more-productive ways. If some of the smart people now on Wall Street end up building better models of energy usage and efficiency, that would be a net gain for the economy.

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 20, 2008

Making a success of Contract Farming

Businessworld profiles a few companies that have made a success of contract farming.
Most retail firms — from Reliance Retail through More (the Birlas’ chain) to Food Bazaar — have not been very successful in either building the infrastructure or integrating the supply chains. But a clutch of other firms that has focused on one end — contract farming as a method of sourcing produce — has found ways around the problem of supply-chain management, and let others handle the front end of the retail business. Some export, others sell to established retail chains, while others sell to captive buyers, and a few reach out to the McDonald’s and Subways of the world.

...KS Oils, an edible oils manufacturer in Morena in Madhya Pradesh, sources, processes and sells its own brand of mustard oil in the Indian market. Working with over 2,000 farmers, the group has consolidated 5,000 acres of farm land in the Chambal area of Madhya Pradesh. “This initiative of working with farmers is very recent,” says Sanjay Agarwal, managing director of KS Oils. “We give the seeds to them as an input for free, and buy back the produce.”

...While some have managed to address supply- chain issues, a few have attempted and, perhaps, succeeded in creating access. Trikaya Agriculture built its own cold store and processing units, and managed its own farms in Induri, Maharashtra. Samar Gupta, 45, managing director of Trikaya, says his clients include the McDonald’s and Subway chains in India; he also supplies exotics such as gherkins and iceberg lettuce to other retailers. “I work with 70 different exotics, and this is the future,” he says.

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, 2008

The I-Banker's dilemma: Get a "real job" or join Uncle Sam

Harvard Business School Professor Kenneth Rogoff has an interesting take on the US bailout package in a column appearing in Businessworld.
After years of attracting many of the world’s best and brightest into ultra-high paying jobs, these collapsing banks are now throwing them out left and right. One such victim, a former student, called me the other day and asked, “What am I supposed to do now, get a real job?”

This brings us back to the US Treasury’s plan to unclog the subprime mortgage market. The idea is that the US government would serve as buyer of last resort for the junk debt that the private sector has not been able to price. Who, exactly, would the Treasury employ to figure all this out? Why, unemployed investment bankers, of course. Let us ponder this. Investment bankers have been losing their cushy jobs because they could not figure out any convincing way to price distressed mortgage debt. Otherwise, their firms would have been able to tap the trillions of dollars now sitting on the sidelines, held by sovereign wealth funds, private equity groups, hedge funds and others. Now, working for the taxpayer, these same bankers will suddenly come up with the magic pricing formula that has eluded them until now.

Efficient financial systems are supposed to promote growth in the real economy, not impose a huge tax burden. And the US financial sector, in greasing the wheels of the real economy, has been soaking up 30 per cent of corporate profits and 10 per cent of wages. Thus, unlike in the 1930s, the US faces a hypertrophied financial system. Isn’t it possible, then, that rather than causing a Great Depression, significant shrinkage of the financial sector, particularly if facilitated by an improved regulation, might actually enhance efficiency and 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.

"Distant financial thunder"

In an article for the Economic Times, Samir Kumar Barua, Director of IIM Ahmedabad, has an interesting analysis on the impact of the unfolding global financial crisis on India.

Ashani Sanket, a novel by Bibhutibhushan Banerjee, was the basis of a film by Satyajit Ray. The English version of the film is titled Distant Thunder. The story deals with the famine that caused death of millions in undivided Bengal in the early nineteen forties. The simple villagers are unable to fathom as to why despite plentiful rains and a good harvest, rice becomes scarce and its price rises rapidly to make it unaffordable. The Second World War being fought in the distant land has disrupted their cloistered life without their being able to fight back.

What is happening to the financial world today in the emerging economies such as India is similar to the plot of the novel. The world of finance in the west has been hit by a tsunami, and the waves generated are not only drowning the financial sector but even the real economy of the emerging nations. What has taken most by surprise is the ferocity and swiftness of the impact.

...There is, therefore, still a chance that we may escape with much lighter punishment from here on. If the economy continues to chug along even at a reduced 6% growth rate over the next one year, we may yet see the markets recover by the third quarter of the 2009. That appears to be the best case scenario. The role of the Reserve Bank will be crucial in the recovery process.

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 13, 2008

The DreamWorks-Reliance romance

Dealmaker has an interesting piece comparing the coming together of DreamWorks and Reliance Big Entertainment to a Bollywood movie.
Forbidden Fruit
In a society known for arranging marriages, it's not surprising that one of the most common threads in Bollywood films involves a woman who feels trapped and yearns for romance. Fitting, then, that DreamWorks, thrust into a loveless marriage with Viacom's Paramount two years ago, would begin to pine for something more satisfying than the creative vision of Sumner Redstone.

Heartbreak
Indian movies are famously melodramatic. Interestingly, the wheels of this deal began to turn after DreamWorks execs were the subject of scornful comments by Viacom CEO Philippe Dauman, who last year told investors that any DreamWorks defection would be "completely immaterial" to Viacom. (Cut to David Geffen, tears welling in his eyes.)

Kabhi Khushi Kabhie Gham
The title of one of Bollywood's most famous films translates as Sometimes Happiness, Sometimes Sadness -- an apt description of DreamWorks and its recent run. Sure, the latest Indiana Jones movie minted money this summer, as did Transformers in 2007. But big-budget flops, including Sinbad: Legend of the Seven Seas and The Island, nearly bankrupted the studio. Should Ambani succeed in righting DreamWorks, "Hooray for Bollywood" might well become Spielberg's new theme song.

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 12, 2008

Interview with NEA-IndoUS' Vani Kola

NEA-IndoUS Ventures has had a busy 2008 announcing investments in eight companies across sectors such as publishing outsourcing (PreMedia Global and Pressmart Media), software for educational institutions (Idenizen), online services (Seventymm), Communications Tech (Connectiva Systems and Bay Talkitec), Financial Services outsourcing (Basiz Fund Services) and waste recycling (Attero). Venture Intelligence’s N. Sriram spoke recently to NEA Indo-US Ventures Managing Director Vani Kola to learn more about the firm’s latest investments. The full version of this interview is to appear in the next issue of the India Venture Capital Report.

Venture Intelligence: Tell us more about Attero Recycling. Has this kind of business been VC-funded elsewhere?

Vani Kola: It’s the first of its kind in India for sure. This business is pretty much in existence in many countries in Europe but I cannot confirm whether they have been PE or VC funded. We are excited about this investment as India doesn’t have a proper solution for e-waste management. Nor do we have a proper recycling system for the e-goods that we use.

VI: You seem excited about outsourcing opportunities in the publishing industry. What is driving your interest in this sector?

VK: There are certain industries where the cost models are going through radical changes just like it happened with the IT industry. Publishing is one such space. Even with the advent of online news and online consumption of information, publishing still has a strong role to play. The cost models have changed fundamentally that India, as an enabler in the publishing industry, will continue to grow as a destination, much the same way as IT did. We are glad that we are early in that trend.

VI: Isn't selling to Indian educational institutions a tough business? What excites you about Idenizen?

VK: I agree that selling to educational institutions in India is difficult just in terms of how they adopt these kinds of solutions but we also understand that there is a need for different kinds of solutions in these institutions. What excited us about Idenizen was that they pioneered a very interesting business model. It is such that there is no cost to the educational institution at all and the benefit accrues to students if they pro-actively adopt next generation technology and solutions. The offer that Idenizen makes is that “we will bear the investment cost of setting up the solution for you as a college and if your students derive value from it, they will subscribe to it”.

VI: How does your investment in Basiz Fund Services correlate with the current environment for hedge funds in the US? Is this a play on their being forced to outsource more, given the tougher investing and fund-raising environment?

VK: It is similar to what we were discussing about publishing. Fund management companies in the US are facing cost & skills crunch. Cost cutting is where the arbitrage with India can be very effective. There are many companies in India rendering general purpose financial accounting services for companies in the US but Basiz is providing specialized accounting services to fund management companies.

VI: Given the turbulence in the airlines sector, how you do view your investment in Via?
VK: Via’s market-share in the overall pie is small and it has got ample scope to grow. Even though there is a slowdown in this aviation sector, there are people to be served who are always on the look out for cheaper airfares.

VI: Given Vinod Dham's background, we expected NEA-IUV to make some semiconductor-related investments. Can we expect any investments in this sector in the near future from your firm?

VK: It’s a sector that interests us, but we have not yet found any interesting opportunities. If we find interesting investment opportunities, we have no problem in considering it.

October 07, 2008

Symbiosis business plan competition

Symbiosis Institute of Business Management is running a business plan competition for working professionals and startups.

This event seeks to provide an opportunity for working professionals/start ups to pitch to venture capiltalists for seed funding. Participants are given an opportunity to present their B-Plans to an eminent panel of venture capitalists for a period of 8 minutes.

The winning teams would get :
- Funding of Rs. 5 crores
- 30 minutes to present before the core team of Seedfund in Mumbai.

Participating Venture Capitalists :

Seedfund | NEA-IndoUS Ventures | IndiaCo Ventures Ltd
Indian Angel Networks | Canaan Partners

For more information Click Here

October 06, 2008

What went wrong? Just rewind a 100 years.

Ruchir Sharma, head of emerging markets at Morgan Stanley Investment Management, has come with an interesting article in the Economic Times on how the current US financial crisis is more like the one 100 years ago rather than the Great Depression. And, in the process, gives hope for a roaring 2009!
The US does not currently suffer from widespread excesses in the real economy that typically mark a deflationary spiral. Capital spending is broadly in check and inventories levels are low. What’s forgotten is that the capex bubble was pricked in the 2001 recession following the tech boom-bust cycle and there has been little new investment outside the real estate sector since. Corporate balance sheets are in very good health with high cash flows.

The 1907 recession too did not arise out of an over-production problem that has otherwise marked deflationary busts from the Great Depression to the Asian meltdown in 1997-98. The panic of 1907 is the most relevant template for the current crisis as it was largely the result of a credit bubble burst in the financial sector.

...If the 1907 analogy holds, then the US is likely to experience a recession of 3-4 quarters, beginning with the third quarter of 2008. The global nature of the credit crisis implies the entire world economy will remain in recession territory till the second half of next year. But as the 1907 experience shows, once some confidence is restored in the financial system - and the odds are that the might of the global policymakers will eventually prevail - stock markets can start to recover well before the world economy turns around. After all, 1908 was one the best years in history for the US stock 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 05, 2008

New Wave of Software Product Cos.

Unlike even three years ago, VCs now have a clear preference for product companies. Business Today, in association with NASSCOM, has come out with a list of promising product companies.


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.