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November 30, 2008

Why India too got sucked into the liquidity crisis

Business Today has used a recent research paper titled "The current liquidity crunch in India: Diagnosis and policy response" by Jahangir Aziz, Ila Patnaik and Ajay Shah, to review why India got sucked into the global liquidity crisis.
Their hypothesis in brief: in trying to manage the exchange rate, growth and inflation, the central bank had kept the system chronically tight on liquidity. Several Indian companies that had been using the London money market fell short of dollar liquidity in mid-September. So they borrowed on the money market and took US dollars out. At the same time, corporations were liquidating their holdings in mutual funds. Mutual funds, too, then started making claims on the money market, leading to a colossal shortage of liquidity. This was accentuated by factors such as advance tax payments and sale of dollars by RBI to prop up the rupee.

Plausible? Perhaps, but that may not be the only explanation for the domestic turmoil, say finance heads of companies. “Yes, we did sell over Rs 200 crore of our holdings in mutual funds; yet, that was to meet our domestic requirements. The redemptions would not have happened if the consumer market was growing,” says the Chief Financial Officer of a consumer durables company. The rupee’s fall also hastened the outflow.

...Is there a way to manage this extraordinary crisis? In their paper cited above, the three economists point to a four-pronged strategy—increase rupee liquidity, increase dollar liquidity, refrain from artificial exchange rate stability, and remove currency mismatches. Author Ajay Shah believes the RBI has moved quite a bit on providing rupee liquidity but the weakest links in the coming days will be dollar liquidity and currency mismatches.



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

November 26, 2008

Growing with each blast

For an overseas investor researching "hot sectors" in India remotely, it looks like the easiest thing to do would be to list services that the government is expected to deliver and, then, invest in private Indian companies which are filling the yawning gaps. Physical Infrastructure, Healthcare and Education come to mind. And given that the government is finding it "challenging" to deliver on its fundamental job of providing Law & Order, it's not surprising to see Businessworld come out with a cover story on the booming market for private security services.
Much of the demand for private security has been precipitated by the series of bomb blasts that have rocked India over the past decade. India is now one of the world’s most terror-prone countries, with a death toll second only to Iraq, says a report from the National Counterterrorism Center in Washington. India’s crime rates, already some of the highest in the world, are also rising, as is the incidence of corporate espionage, though there are no official figures for this. But with a police force of just about 1.6 million, India has just 1.45 cops for every 1,000 citizens, much lower that the global average of 3 per 1,000, as per a UN report. Little wonder, then, that the country is home to the largest private force in the world, with 5.5 million guards across the country, according to CAPSI. In fact, the private security industry, which is employing an additional one million new people every year, is already India’s second-largest employer and could soon overtake the largest, manufacturing, which employs 5.6 million people.

The organised private security business — industry estimates put its worth at Rs 5,000 crore — is growing at 35 per cent. (The total size of the sector including smaller firms that do not file IT returns is pegged at Rs 10,000-15,000 crore.) This year alone 200 new security companies were established, including one promoted by DLF, signalling the entry of mega corporates into the business.

Besides, this year, Mumbai-based TOPSGRUP also acquired a majority stake in Shield Guarding of the UK for Rs 125 crore in an all-cash deal. “This is the first-ever acquisition of an overseas security company by an Indian firm,” says Rahul Nanda, the company’s chairman and managing director. Companies such as G4S, which saw a 30 per cent revenue growth last year — gross profit margins are around 20 per cent for companies in the sector — are working to become more professional, offering sophisticated security solutions and hiring managers from across industries.
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

November 25, 2008

World's Most Pirate-Infested Waters

CNBC has a slideshow on the resurgent business of maritime piracy. India (with 10 hijackings this year) also features as part of the dubious list of "8 worst pirate-infested places on earth" headed by the Gulf of Aden (which separates Somalia from Arabia).

Piracy remains a serious threat to life and commerce, with 199 attacks tracked by the International Maritime Bureau's Piracy Reporting Centre through the first three quarters of this year. Many more attacks, most of which take place near shore, go unreported.

...Nigeria – 24 Attacks
As the Danish container vessel Claes Maersk (pictured) sat docked on April 17, it was boarded by 10 pirates who came alongside in speed boats. The crew fled to the ship's accommodations and locked themselves inside. Two shore watchmen hired for security remained absent from the scene until the pirates had left, according to IMB, and Nigerian authorities took no action after the crew reported the attack.

Indonesia – 23 Attacks

Twelve pirates in a speedboat and armed with guns, swords and iron bars assaulted the Norwegian bulk carrier Spar Cetus (pictured) as it steamed offshore on April 13. The ship's captain raised an alarm, and Spar Cetus' crew blasted the pirates with fire hoses in an attempt to hold them at bay. After a skirmish, the pirates overcame the crew and looted the vessel for 50 minutes before fleeing.

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

November 24, 2008

"Somali Pirates in Discussion to Acquire Citigroup"

In case this joke has not arrived in your inbox already, click here.

November 23, 2008

"Builders can't hold prices much longer"

Businessworld has an article which indicates that the damp Diwali sales could leave builders with no option but to cut prices - something they have been desperately resisting.
Developers had hoped Diwali and the festival season would turn their fortunes. Many of them had borrowed funds at very high interest rates — ranging from 20-36 per cent — to complete projects in time for Diwali or to service previous debt. But very few sales have been reported.

...“There is no substantial cut in the builders’ rate cards,” says Arvind Pahwa, managing director of JP Morgan Asset Management Real Estate. “There is some reduction, but considering prices have gone up 300 per cent over three years, this is not good enough,” he adds.

...Some builders have taken the cue and are planning lower prices to move sales. A developer that has several hundred ready residential homes in central Mumbai, disclosed Vakil, has decided to let the broking house do a price discovery and market his project, after witnessing virtually no sales for several months. “We will open sales for the residential project at Rs 11,000 a sq. ft in two weeks in a locality that has seen a Rs 27,000-30,000 per sq. ft market. This will get the market going and hopefully put pressure on others to cut prices,” he says.

Related: CNBC interview with Tushar Poddar of Asia Economics Research unit of Goldman Sachs which has published a new report predicting a 30% correction in the Indian residential 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. Email the author at arun@ventureintelligence.in

November 21, 2008

New speaker from Private Equity Recruitment at PanIIT conference

Ms. Gail McManus, Founder of Private Equity Recruitment, Europe's leading independent private equity recruiter - will join two other expert speakers for the VC workshop at the Pan-IIT conference. See more info here.

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

November 20, 2008

"Killing" of VC Industry to Hamper US Recovery?

ABC's technology industry columnist Michael Malone makes a passionate pitch for freeing of regulations governing IPOs that are "killing" the VC industry in that country.
We are looking at the current crisis in Venture Capital and assuming that it is self-inflicted. But the more likely reason is that the industry has taken so many external shocks in the past seven years -- Sarbanes-Oxley (which has killed new IPOs because of its onerous costs to young companies), full disclosure laws (which have driven smart people away from serving on corporate boards), and options expensing (which has all but erased the prime motive for people to join new start-ups) -- that it can't help but be in bad shape, a once-robust industry reduced to a sick, shrunken shell. [And now, of course, there's talk of raising the capital-gains tax rate again, which will be the final nail in the coffin of venture capital.]

...And the biggest roadblock of all is that they have taken away the all-important liquidation event -- the IPO -- to which VCs, their investors and their companies aspired. With that gone, these players have no choice but to opt for the earlier, and lesser, liquidation event of acquisition

...Kill the venture-capital industry and you kill most new company creation (angel investors and corporate capital won't adequately fill the vacuum). Kill new company creation and you starve the single most important source in the economy for new wealth and new job creation

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

November 19, 2008

The Broker Who Called the US Crisis Right

I like to view and read people who have strong opinions and are, more often than not, right. It therefore found it quite interesting to view a YouTube Video of Peter Schiff, who runs US-based brokerage Euro Pacific Capital, who had forecasted a crash in the US as early as 2006. The especially funny parts in the videos are the ever-bullish views of his co-panelists on various TV shows. (Hat Tip: Paul Kedrosky).

Related links: Here, here, here, here and here.

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

November 18, 2008

Podcast on the Wall Street Bail Out

An interesting podcast titled "Bailing Out Wall Street" here based on a panel discussion organized by the Commonwealth Club. I especially liked the comments of Prof. Jonathan Berk from the Stanford Univ. who speaks about the long term "moral hazard" damage that the bailouts have caused. He says the inevitable regulations that follow the crisis would do better to focus on providing the right incentives rather than trying to "outsmart" investment bankers. For instance, if Lehman Brothers and other mega IB firms were still partnerships (which meant unlimited liability for the partners), it would have ensured far better self regulation by their owners.

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

November 17, 2008

Denominator Effect Triggers Boom in Secondary Deals

Fortune has an article on the boom in secondary deals.
The problem is straightforward. Portfolio managers have strict guidelines for asset allocation (Harvard's endowment, for instance, is offloading $1.5 billion in private equity to get back to its 13% target.) As the public markets have collapsed and the prices of liquid assets have plummeted, the value of the overall portfolio, or the denominator, has shrunk. But allocations to venture funds, buyouts, and real estate, which aren't priced often, have held - at least in theory. So a slice that once accounted for 10% of a portfolio now might suddenly account for 15%.

..(The unwinding of PE portfolios) is starting to happen, with Harvard, Duke, and others unloading alternative-asset portfolios or portions of them. If they aren't already, say industry insiders, practically every big endowment or pension fund soon will be putting something up for sale.

...Some buyers are bidding as little as 50 cents on the dollar; earlier this month, according to industry sources, Lehman Brothers sold part of its $3 billion private equity portfolio at a 50% discount. As prices fall, the volume of these transactions is soaring. Larry Allen, managing member of NYPPEX, estimates that there will be some $27 billion in private equity secondary deals this year, up from $18 billion in 2007.

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

VC Workshop at PanIIT Conference

The PanIIT Association and the Indian Venture Capital Association (IVCA) are organizing a conclave for partners of VC/PE firms titled "Building the human side of a VC/PE firm - The institutionalizing steps"

The workshop will be conducted by

- Prof David Brophy, Director of the Center for Venture Capital & Private Equity Finance, Univ. of Michigan, Ann Arbor

and

- Ms. Anne-Maree Byworth, a veteran private equity investor who earlier worked with CDC Group.

When: December 18th, 2008, at Park Sheraton, Chennai from 8:30am to 6:30pm.

For Whom: For partners of private equity, venture capital, real estate, and similar funds. Institutional LP's are also welcome.

Click Here for more information.

November 16, 2008

Foundation Course in Private Equity & Venture Capital

ADVERTISEMENT

Indian Venture Capital Association
in partnership with
European Venture Capital Association is conducting a
Foundation Course in Private Equity & Venture Capital

December 1-3, ‘08; Delhi

• Develop your professional skills
• Learn from the experience of senior industry practitioners
• Build relationships with other professionals

As part of IVCA’s role to facilitate professional development among participants in India’s venture capital and private equity industry, and building on the success of last year’s training program, we are pleased to announce the second annual premier training program sponsored by IVCA and the European Venture Capital Association. Career development is an important component of IVCA’s mission to facilitate the development and professionalization of India’s venture capital and private equity industry. Our partnership with the EVCA is part of that commitment.

The IVCA & EVCA Foundation Course for Investment Professionals will be held from December 1-3, 2008 in Delhi. The modules of this course have been specifically designed to offer participants an overview and a broad understanding of the different milestones and processes in the investment cycle.

For more details, please visit http://indiavca.org/Training_Program.aspx


Contact: Dolly Goklaney at dolly@indiavca.org or + 91-98109-29984

November 14, 2008

"Indian Recovery to be Faster"

In his "Cautiously Optimistic" post, Arun Uday of HSBC PE points out why "India is far better positioned to be first off the blocks on the path to recovery".

If one considers the five major relevant economic blocks – US, EU, Japan, China and India, the former three are plagued by severe systemic issues (such as excessive leverage, low savings rate, inordinate consumption levels etc) that will take a long period of time to get resolved. Now, in comparison to China, India has some significant characteristics that will play in the latter’s favour. For starters, as is oft repeated, exports form a far smaller component of India’s GDP compared to China’s.

Apart from this, India also has a lower operating leverage in comparison to China. China’s model has always been to build huge capacities, which worked very well in boom times, enabling it to attain economies of scale and enjoy great cost savings. However, in times like this, excess capacity can become a millstone around your neck and result in higher fixed costs.

The fact that India is primarily a services led economy in contrast to China being a manufacturing economy also helps. The other areas where India scores over China are greater capital efficiency and also deeper management expertise in dealing with capital constrains of the kind we face today. (Merits to add here that the one area where China scores over India is its superior balance sheet (forex reserves and also budget surpluses), which afford it with the option of spending their way out of the crisis of the kind recently announced).

Also, one of the key constraints, which has affected economic activity in the recent past, which is the shortage of credit should also get resolved in due course given the absence of any systemic problems. In fact, credit from domestic institutions has actually registered a 30% increase last quarter and it is the lack of availability of global credit, which has been the cause of paucity of capital. With the global credits slowly limping back to normal and also given the interest evinced by the debt FIIs in recently announced SEBI registrations, the availability of credit should improve with time. Finally, and this is the most important point – the falling commodity (esp. oil) prices are bound to have an immensely positive impact on our 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. Email the author at arun@ventureintelligence.in

November 13, 2008

BRIC Entrepreneurs Debate Impact of Financial Tsunami

Knowledge@Wharton has an interesting discussion (available also in audio) featuring entrepreneurs from BRIC countries - Shiv Khemka of the India- and Russia-based SUN Group; Silas Chou of HK-based Novel Holdings and Odemiro Fonseca of Brazil's Viena Rio Restaurantes.
Khemka: From an Indian point of view, clearly export sectors will be affected. The real estate sector has taken a very severe downturn because of credit issues in the market. And naturally, demand domestically will fall. And so that's another sector that one needs to be careful about because of this heavy leverage. Any sector which has a lot of leverage would be a sector to watch carefully. In Russia, you know, the oil price being down where it is today means that the bonanza of the last few years, the boom times, are perhaps coming to an end. The savings that the Russians have wisely made over the last few years need to be now invested thoughtfully in the future. But given the strong commodity base, and the lack of adequate diversification of the Russian economy, I think all the focus will be on the commodities sector. Energy and mining.

...Chou: In China, this so far is not too bad a thing. On the contrary, because China's economy is growing too fast, the preoccupation of the Chinese government for the last few years [has been] how to cool down the economy. So this crisis has slowed down everything around the world, and China is affected. As far as China can, it is trying to move away from too heavily relying on the exports sector of the economy to more domestic consumption. This can be an opportunity for China to cool down its economy a little bit, to [lower] inflation and to have a smooth transition to a domestic consumption economy. Of course, as the crisis develops now in the West, [things are getting] kind of out of hand. This affects everybody. So we hope that the United States and Europe are [exercising] strong leadership to solve the crisis in a quick and sensible way.

...Fonseca: Clearly there is no decoupling of the capital markets. The fundamentals of Brazil haven't changed, but the stock market declines at 40%. The credit market stopped. So there is no decoupling in the capital markets, in the financial markets, even for a country as isolated as Brazil. Unfortunately, there will be decoupling for the wrong reason for Brazil, because 94% of what is consumed in Brazil is produced in Brazil. So Brazil is very isolated. I would like there to be no decoupling for Brazil. But there will be, because Brazil is much smaller, and has much lower per capita income. And it's going to grow less. It will look like decoupling, but for the wrong reason. I'd like to export 20% of the GDP of Brazil to the United States. [Laughter]

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

Valuing Dotcoms in Today's Environment

Alok Mittal has triggered a discussion on VentureWoods on valuing Internet start-ups in the current environment when the enterprise value of a leading listed player like Rediff.com is just $24 million.
As a bellwether for Indian internet industry, these numbers reset expectations on the entire sector and near term expectations. Naukri is just over $200M on EV, which I do believe is healthy because of their earnings (P/E ~ 20).

I also wonder what series B valuations for Internet companies would be now - till 12 months back, companies with less than 200K users and zero revenues were getting $24M valuations…

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

November 10, 2008

"Infrastructure investments will lead recovery"

Pankaj Dhandharia, Partner,Transaction Advisory Services, E&Y writes in The Economic Times how pent up infrastructure demand and attractive valuations will lead a slow-but-steady pick-up in PE investments.
With significant investment needed, the Indian infrastructure segment offers great opportunity. There are several infrastructure projects which are yet to achieve financial closure. As the valuations correct, infrastructure deals will attract investors. Similarly on industrials, several expansion projects have been put on hold because of the scarcity of capital and the uncertainty as to when demand growth will start to pick up again.

As demand picks up and liquidity improves, these projects will come back. The activity is likely to rebound in India much faster than that in the western markets. In addition, the Indian rupee is probably at its lowest levels and any appreciation in the rupee is likely to make the returns even sweeter.

Given all of this, India still is an attractive market for PE investors. However, given the volatility in equity markets and the overall uncertainty on when demand growth will pick up, investors will take a more cautious approach. Though small and select investments will continue to be made, it will be some time before we will see the same level of activity, which we saw in 2007.

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

"Climate for PE investments more attractive"

Sandeep Singhal of Nexus India Capital, which has recently closed its second fund, writes in the Economic Times how VC investors are now facing far less competition.
Short-term earning hits from capacity expansion or MTM hedging losses, or selling due to redemption pressures, are less relevant for PE. Marginal and less value-added capital has departed and a more rational and less competitive investment environment has led to valuation expectations become more reasonable. Consumption and business investment, although moderated, still remain at very attractive levels.

Large opportunities do exist in the domestic market, and in exports, with greater global integration and trade flows. A young population with high aspirations, both in urban and increasingly in rural markets, India is a great destination for companies with ‘Bottom of the Pyramid’ solutions.

The strength and availability of world class talent, enhanced by NRI returnees and managers with global exposure, give Indian companies a talent advantage in global markets. A traditionally tough domestic environment gives Indian businesses an edge over their counterparts in developed countries facing the global challenges. Companies that execute well in tough times become market leaders when the economy
improves.

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

Social Networking, anyone?

Business Today has conducted a survey on the usage of social networking sites in India.



...there are already an estimated 17 million Indians who visit or use social networks. “This number is bound to grow once Orkut starts actively marketing in India. So, India is not yet in the top 10 globally, but should be by next year,” says Mahesh Murthy, Founder, Pinstorm, which is an independent digital marketing firm with seven offices in six countries.

Despite this—and despite the media hype over the social networking phenomenon— ad spends, the major, and often the only, source of revenue for social networking sites, remain small (at an estimated Rs 20 crore) in absolute terms. “Our audit in 2007 showed that the digital marketing spends (Internet+mobile) in 2007 in India was around Rs 450 crore. We think that this market will grow almost 100 per cent this year to Rs 850 crore,” says Murthy.

...“The interesting thing to watch is that almost 57 per cent of online users are part of social networks,” says Leroy Alvares, Country Head, Tribal DDB India, the digital arm of the Mudra Group.
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

Will UTV's new businesses fire?

Business Today has a profile of the new initiatives of media group UTV.



(Interactive, gaming & Internet) is a relatively new business for UTV, and it has grown through acquisitions. In 2007, it bought out UK-based Ignition Entertainment and the India-based Indiagames. Ignition develops and publishes games for leading consoles, whereas Indiagames is a mobile and online gaming player. More recently, the company picked up a majority stake in US-based True Games Interactive.

...Analysts say UTV’s presence across many segments de-risks its business model, but it can expect competition as big Indian players seek foreign partners and new markets. Screwvala is not perturbed: “We are not looking at a competitive market because we believe that today everyone is challenged to grow the market… Before we start talking of serious competition we need to first grow the 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. Email the author at arun@ventureintelligence.in

ET interview with ChrysCapital's Sanjiv Kaul

Economic Times has an interview with ChrysCapital MD Sanjiv Kaul, who is also an expert on the pharmaceuticals sector.
Valuations across most sectors now look attractive for a prospective PE investor. But entrepreneurs still need to reconcile to the changed paradigm of a downsized market capitalisation. With debt instruments being scarce and costly, IPOs not being the current flavour of the capital market, and the FCCB experience not positive in today’s environment, entrepreneurs have now realised the need and importance of raising smart capital and PE is all about providing smart and dependable capital. I am quite optimistic that we will see a significant jump in the number of deals transacted in 2009.

...Sectors like pharma and healthcare were not the beneficiaries of the past-market exuberance. In fact, there was a significant market cap correction in the pharma index with P/E multiples dropping from 26 in 2004 to 17 in 2007. Investments will take place in these sectors not because these are safe and defensive but primarily due to strong industry fundamentals and vibrant domestic and export opportunities.

...Most of them have done it to clean up their balance sheet and in the process get a better valuation for the parent company as well as attract primary investments in the demerged research entity. They have realised pharma research is a costly, a risky proposition and a long haul. While Indian pharma has the basic chemistry and pharmaceutics skill-set, it still needs to invest in innovative technology and more importantly cultivate a different mindset to what made them good while making generics. We still have a long way to go but doing innovative research is the only long-term sustainable value creator for Indian pharma.
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

November 04, 2008

Blackstone COO on investing in India

The Economic Times has an interview with Hamilton James, President & COO of Blackstone.
Yes, valuations in India are down by almost two-thirds. Besides, many companies, which wanted to go public earlier can’t do that, as the stock market is down and many companies will have a hard time borrowing. So, this is a good opportunity for private equity (PE) companies like us for investments.

...We have a global fund of $20 billion and we invest across the world with that fund. We started in India three years ago with an investment of $1-billion, spread over five years. We have already surpassed that investment by twice that much. The next six months give us a good investment window. But there are concerns, as general elections are coming up. India has some geo-political issues with Pakistan. I think, India is on track of good economic growth with a burgeoning middle class. We are here for long term.

...In the real estate sector, a huge amount of supply is now coming in the market and inventories will now go up. It will be hard for developers to get money. Prices in real estate will fall more before they become attractive to us. Media is another sector which we like, especially the local language newspapers which are growing. We are also looking at infrastructure sectors like ports, nuclear plants, healthcare. The companies providing affordable and high-quality healthcare could be a good area for investment. We are looking at a number of energy related deals to help India to become energy independent. That could be power, oil and gas, drilling, transportation. All parts of energy chain are quite interesting for us.

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

November 03, 2008

U.S. Bailout Tombstone

Via Paul Kedrosky



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

November 02, 2008

"2009: The Year of Collapse for Indian Real Estate"

Stock market investor and trader Deepak Shenoy who had a very accurate prediction for markets in 2008 has come up with another for 2009.

Here are some of his going forward predictions:
  • If 2008 was about world drama, 2009 will be about the collapse of the Great Indian Real Estate Story. Prices will start coming down, though it may take a full year for panic to set in. At least one real estate company - of the big ones - will go bust. At least one bank will face serious threat of collapse due to high exposure to RE. In all likelihood, the government will rescue the banks. Commercial real estate will be in the doldrums, with distress sales reducing prices even more dramatically. NRIs who invested in India and thought they will keep their properties for a good day will call their brokers to sell, at any price. Banks will refuse to lend to real estate. Some may even try to give homeowners margin calls, but that will fail as political pressure will force them back.
  • The dollar, after a small rise, will fall hugely against the rupee. People who hedge in the 50s will be treated as heroes.
  • ...India, along with the world, will go into a severe recession. This means contracting GDP (no more 7% growth), unless there is a black-money-amnesty scheme set up, with dramatic tax cuts.
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