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December 29, 2009

Bajaj FinServ's bet on consumer finance

Business Standard has an article on the topic.
Where Bajaj Finance hopes to make the real difference is in service: It wants to disburse loans faster than its peers, allow customers to pre-pay loans from their desktops and return documents on loans against property in less than five days — an industry record. Of course, customers have round-the-clock access to its call centres.

The plan seems to be working. “The company is now stimulating demand for 8 to 10 per cent of LCD televisions sold in the country every month, a reflection of the strategy to pursue affluent customers,” says Jain. The loan book grew to Rs 3,500 crore at the end of September 2009 from Rs 2,500 crore a year ago. While it’s hard to look too far ahead, Jain is hoping to grow the book by 30 to 40 per cent over the next 18 to 24 months. Though provisions might depress profits in the current year, the business should become more profitable from next year onwards as costs come off their peak and spreads improve in a better macroeconomic environment.

Bajaj believes unsecured loans can fetch rates of 22 to 24 per cent, while loans against property can bring in 13 to 14 per cent. So given the cost of funds at 8.5 to 9 per cent, the spreads could be as high as 1,000 basis points for some products.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

December 23, 2009

Gujarati snack maker who cocks a snook at Pepsi

The Economic Times has a profile of Gujarat-based snack maker Balaji Wafers which controls 70-90% of the state's Rs.600 crore market for wafers and namkeen leaving Pepsi-Frito Lays and North Indian snack giant Haldirams far behind.
Indeed, Balaji products like Chataka Pataka, Ratlami Sev and Sing Bhujiya, among others, suit the tastes of a specific market. The company offers masala wafers to cater to the Gujarati palate, chaat masala for the Maharashtra market and a range of spicy snacks for Rajasthan. Here, it scores over Haldiram’s, which too has flavours to cater to the North Indian palate, by a better understanding of the Gujarati consumer. Balaji’s pampers the Gujarati’s sweet tooth by keeping its khatta-meetha less spicy.

...Balaji MD Chandu Virani says volumes help him offer such prices. The pricing plan drove PepsiCo’s Kurkure down the same path, he says, adding that his rivals had to offer similar schemes to retain consumers. This strategy of marrying price, flavour and distribution is estimated to have catapulted the group to a 90% share of the state’s wafers market and 70% of the namkeen market. After beating local brands like Samrat & Real, Balaji has since spread to Maharashtra, Rajasthan and Madhya Pradesh, eyeing a bigger bite of the Rs 3,000-crore branded snacks market.

...PepsiCo has since been trying to convince Mr Virani for a sellout. The group is against the idea, focusing instead on an expansion overdrive. Plans are afoot to expand the snacks range and cater to the global markets.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Forbes India profile of security services company Topsgrup

Extract from the profile
“We want to become the Shah Rukh Khan and Narayana Murthy of the security industry — humble, accessible and down to earth. And our aim is also to do $10 billion in revenue by the year 2020,” says (Diwan Rahul Nanda, Chairman of Topsgrup).

...Acquisitions are the standard operating procedure for most large security companies going global. Because security is a very local, relationship-led business, customers are loathe to entrust their security to a new entrant. Acquiring a local security provider is often the only way to expand into other countries.

Secondly, large multinational corporations prefer to give consolidated contracts spread across multiple countries. This helps them standardise vendor and contract management as well as drive down costs by dangling the volumes carrot before vendors. Therefore an India-only Topsgrup was unable to even bid for large security contracts of MNCs in India.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

December 18, 2009

Debt-and-equity structure to encourage angel investments

Entrepreneur turned angel-cum-venture investor Alok Mittal has proposed a new funding structure that will help catalyze more angel investments. The framework aims to ensure that the angel investor receives an equity upside if the venture becomes highly scalable; if, however, it turns out to be "only" a "lifestyle" business (i.e., not scalable enough to generate an great exit for the equity investors, but nevertheless generates good cashflows), the investor would receive a good rate of interest for his risk.

You can view Alok's proposed framework and the discussions around the various likely scenarios as part of his post on the VentureWoods blog.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Forbes India profile of Opto Circuits

Forbes India has a profile of Opto Circuits, probably the only pure play listed medical devices company in the country. The company's stock incidentally has appreciated 10 times since January 2005.
Until now, Ramnani has made his living, mostly by selling “non-invasive” medical devices like electronic patient monitors and medical sensors. But it is Opto’s “invasive” product line, stuff like stents and balloons that go into patient’s bodies, which holds significant promise.

...The second reason Ramnani is where he is, is because he made some smart acquisitions. Apart from EuroCor in the invasive medical devices category, Opto acquired Bangalore-based companies Devon and Ormed. In the non-invasive category, which is where Opto started, Ramnani acquired Hindustan Lever’s digital thermometer division, the patient monitoring business at US-based Palco Labs in 2002 and Bangalore-based Altron Industries. In 2008 he acquired US-based maker and distributor of patient monitoring devices, Criticare Systems, for $70 million.

...Its decision to move back manufacturing of Criticare products from Taiwan (where it was being contract-manufactured) to Bangalore has already given it a 20 percent saving in costs. It also has plans to start manufacturing stents in India, an ambitious task no doubt, but one that can help it bring down the cost of each stent below its global counterparts.

...Continued investments in R&D — 12 percent of its income in 2009 alone — are beginning to pay off. Its drug-eluting coronary balloon, DIOR, launched in January this year was the first of its kind in the world. The company says DIOR’s potential market is 40 percent of the overall stent market with 25 percent coming from patients whose existing stents start failing and 15 percent from those who develop infections around an implanted stent.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

December 15, 2009

Will Metahelix Bt Cotton plan succeed?

Forbes India has an article on how the VC-backed agri-biotech company is taking on the big daddy of the Bt Cotton space (Monsanto).
Sometimes in the midst of all these technologies we forget that farmers don’t grow cotton to kill pests, but to get a better yield,” says Narayanan. If Metahelix can engineer a hybrid that can grow faster, utilise nutrient-s more effectively or produce a better yield, that might be its differentiator. This opinion is shared by Suman Sahai, convener of rural advocacy group Gene Campaign. “The success of Bt. cotton in India owes as much to the hybrids developed by Rasi and Nuziveedu, as to Monsanto’s technology. In fact, Mahyco Monsanto Biotech (MMB)’s initial seeds which were the first to get government approval were spectacular failures,” she says.

...when it goes to the market next year, its strategy will be two-pronged: Convince farmers using Bollgard-1 cotton (the first generation of Bt. seeds) to upgrade to Metahelix’s seed which offers added protection against pests, and demonstrate to Bollgard-2 (second generation Bt. seeds) farmers how their hybrid varieties offer better yields while offering the same level of pest protection.

In order to do this it is organising demonstrations of its cotton crops in over 250 locations around the country, where farmers will be allowed to examine Metahelix’s claims through live crops. It is also combining this with village-level meetings where company representatives will explain the benefits of their products over the competition.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

December 13, 2009

HomeShop18's deal with Korean firm

TV18 Group's television and online retailing venture HomeShop18 recently sold a 15% stake to GS Home Shopping, a Korean retailer. In this context, Businessworld has an interview with Tae Soo Huh, president, GS Home Shopping (earlier called LG home shopping), Raghav Bahl, founding-promoter and MD of Network18 and Sundeep Malhotra, CEO of HomeShop18.
You launched in April 2008 with a bang, but the business does not seem to have gained much traction...
Sundeep Malhotra: We started when there was a lot of scepticism because of the poor response to teleshopping. But HomeShop18 is not teleshopping. Initially, we had little domain knowledge about the market, and we did not know whether to focus on the metros, or the tier-II and III cities. Today, we are doing a sale every eight seconds with sales of Rs 1 crore a day. We are serving 2,750 towns and cities with 20,000 products and 600 employees.

Raghav Bahl: In the first year, with a commission-on-sales of 23.5 per cent, we made a net income of Rs 50 crore on sales of Rs 250 crore. We would have been happy with even half that figure...Home shopping did not click initially because the environment was not there. Average annual income has only recently crossed the $2,000-mark and it is now discretionary spending — which is what home shopping is all about — has taken off. The opportunities will be huge as India moves to become a $4-5 trillion economy.

Do people in Korea shop more on television or online?
Tae Soo Huh: Initially, 24 hour-television was the main platform, and then came e-commerce. The current sales mix is: television, 50 per cent; on-line, 35 per cent; catalogue buying, 15 per cent. But the products we sell online are typically different from those on television because the consumer is different. The high sales on internet show Korean society is highly wired-up. In India, too, we hope to ramp up e-commerce, and we will expand the product categories to focus on cosmetics, kitchen appliances, services and health and beauty that are currently missing. We will aim for the high-income households that will yield higher margins.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

December 09, 2009

"Capvent keen to seed mid-market PE teams in India"



Varun Sood of Capvent

At a time when the fund-raising environment for Private Equity and Venture Capital funds is difficult across the world even for established groups, Europe- and India-headquartered investment house Capvent is actively scouting for opportunities to invest into India-dedicated PE/VC funds. In an interview to Venture Intelligence, Capvent Co-founder & Managing Partner Varun Sood said the firm was even keen to make seed investments into first-time funds. "We like to be contrarian in our approach," Sood said. "As a house, we are very focused on first- and second-time funds."

Founded in 2000, Capvent invests in the private equity asset class globally with a special focus on Europe, USA, India and China. It has 19 investment professionals in India across its offices in Bangalore and Mumbai, which are headed by Sood and fellow Managing Partner Rohan Ajila. Outside of India, Capvent has offices in Zurich and New York. The firm currently has investments in 14 PE/VC funds operating in India. Capvent runs its pan Asia operations out of India. "We feel Capvent's on the ground presence affords us real insight into markets that require local intelligence. This offers us a competitive edge over investors that are based out of the 'expat cities' of Singapore and Hong Kong," Sood remarked.

While there are far fewer teams attempting to raise capital currently, an encouraging trend is the emergence of smaller groups which are going in for specialisation (for example, funds focussed on the Education industry, etc.), Sood said in the interview. While its sweet-spot is mid-market growth PE funds, Capvent would also consider select VC opportunities.

(The detailed version of the interview will appear in the Venture Intelligence PE Roundup 2009 report. For more information on Capvent, visit http://www.capvent.com)

December 08, 2009

Deal Alert: HSBC PE, existing investors invest Rs.70-Cr in FINO



Edited extracts from the Press Release:

HSBC Private Equity and existing shareholders Intel Capital and IFC have invested Rs. 70 crores into Financial Information Network and Operations (FINO), a company that provides technology solutions to financial services firms operating in rural areas. As part of the deal, HSBC PE and Intel Capital have purchased the entire stake held by existing investor Legatum Ventures. Avendus Capital was the exclusive financial advisor for the transaction.

James Savage, Investment Director of HPEA in Hong Kong said, “FINO is a market leader and pioneer in providing technology solutions to financial institutions for reaching out to the under-served and unbanked sector in India. With more than 135 million households unbanked, the market has potential for exponential growth. We believe that FINO is well positioned to benefit from this opportunity.”

Alok Gupta, Investment Director of HSBC Private Equity Advisors (India) Limited in Mumbai said, “Financial Inclusion is a key component of our corporate sustainability initiatives and includes areas such as education, livelihoods and microfinance. We intend to work with FINO to further develop opportunities in financial inclusion, particularly with corporate agencies and business entities.”

“Fino is pioneering the use of technology in the banking industry, and we expect them to become a widely used platform for rural banking and NREGA payments,” said Sudheer Kuppam, Managing Director, Intel Capital India, Japan, Australasia & South-East Asia. “The FINO management team has demonstrated great operational skills in building a scalable business model, which works very well in the highly complex and dispersed Indian market environment. We believe FINO's technology and operational skills will be relevant in other developing markets where similar demographics exist, and we expect to support the company in its overseas expansion plans.”

From the Venture Intelligence Private Equity Deal Database : In January 2007, FINO had raised $20 million from IFC, Intel Capital, IFMR Trust, Legatum and other investors.

December 05, 2009

Securitization Enters Microfinance

Nachiket Mor of ICICI Foundation has triggered an interesting discussion via a blog post (on Ajay Shah's blog) on the importance of securitization for microfinance companies.
Over the years, the demand for funds in the microfinance industry has outpaced the growth in investment by banks. In addition, banks are not the ideal place for these assets, given the nature of cashflows and maturity of micro loans. Hence, even though MFI assets are part of priority sector lending, the excessive focus on bank capital has effectively raised the cost of capital for MFIs. The upstream funding for microfinance needs to be diversified to harness a diverse array of borrowers, so as to avoid the constraints and unique compulsions of any one source. However, at present in India, MFIs are not permitted to mobilise deposits, or borrow from international lenders, or from MIVs (Microfinance Investment Vehicles).

The ideal financing channel for them, in this environment, is securitization. Through securitization, a pool of loans across many borrowers (and ideally across many MFIs) would be turned into a tradeable securities that are targets of investment by a diverse array of investors, with different beliefs and compulsions.

In response to a (to be expected) comment on the "dangers of securitization" on the same forum, Mor replies:
There is no question that any such effort needs to be handled with a great deal of care and attention. We also however need to remember that while there are clearly lessons for us in India from the financial markets crisis in USA our markets are at a very different stage of development and our experiences with securitisations have thus far been quite positive.

We also need to be careful about what are the implicit alternatives we have in mind if we are concerned with these developments -- limited financial access, deposit taking by under-capitalised financial institutions to finance their assets, large institutions seeking to do direct origination using credit scoring without ever meeting the customer, much wider coverage of deposit insurance amounting to transfer of all risks to the tax-payer.

Related: See a detailed note by IFMR Capital on this topic here

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

December 04, 2009

"Sushil ji or Hi Sushil?"

In an article for The Economic Times, Jaspal Singh Sabharwal of Future Capital, provides some interesting views on how Private Equity firms can deal better with promoters of Indian SMEs.

On why SMEs?

In India, if you want to invest in a cricketer, go to the Ranji trophy venue (equivalent of junior league in football). Stop chasing the established international players because they are just too expensive and you won’t be able to influence the outcome. Imagine if you had put in your money on Sachin 20 years ago.

On PE-SME Alliances
A successful PE-SME alliance calls for very high degree of caution and due-diligence. First thing first - companies should get into PE alliances only when they need to, when going it alone will take too long or cost too much or when one is seeking very specific capabilities. Too many PE alliances are built on the assumption that a good business case will compensate for differences in values, style or culture. A good business case is not really good until the softer factors are folded in, even more in the case of family run businesses. Secondly, for any partnership to endure, cultural adaptation must take place and it is often more difficult to define.

...Imagine a 30-year-old investment banker calling a 55-year-old head of an Indian business by his first name—Hello Sushil! How are you doing? Shri Sushil Gupta is Sushil ji for the entire world and these unintentional gestures wreak havoc on the relationship (unintended consequences).

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

December 03, 2009

What went wrong at Champagne Indage?

A Forbes India article on the big troubles at listed wine maker Champagne Indage pins the blame on foreign acquisitions made by the company.
In June, Chougule admitted that sales volumes had fallen 60 percent since September 2008. Its stock price has crashed from Rs. 853 in November 2007 to Rs. 55 now. The company has stopped supplying to hotels. Salaries at the company have been delayed and on September 1 this year, 250 of the company’s 450 employees resigned en masse, underlining their disgust for a company that had not paid them since November 2008.

...Indage relied heavily on foreign currency loans for foreign acquisitions. A former employee in senior management at Indage said that 40 percent of its current debt is in foreign currency.

...Can Indage come back? The Chougule family recently pledged almost 98 percent of its 25.42 percent stake in the firm, proving it doesn’t think the show is over. On June 10, Indage announced its board had approved a plan to raise Rs. 2 billion ($42 million) via a rights issue. However, there has been no progress on that.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

November 30, 2009

Deal Alert: Motilal Oswal PE to invest Rs.40-Cr in Power Mech Projects



Edited extracts from the Press Release:

Motilal Oswal Private Equity (MOPE), via its India Business Excellence Fund, is to invest Rs. 40 crores in Power Mech Projects. Religare Capital Markets acted as the exclusive financial advisors to Power Mech for the deal.

Started in 1999, Power Mech is a leading player in the erection, testing and commissioning of Boilers, Turbines and Generators (“BTG”) for thermal and gas based power plants and has been making strong foothold in the overhauling and maintenance of these power plants. Its revenues and profits have grown by 80% and 133% CAGR respectively over the last four years marked by strong unexecuted order book of Rs.15000 mn.

According to S.Kishore Babu, Chairman & Managing Director of Power Mech, the company would be investing around Rs 40 Crores over the next 1-2 years towards building own equipment bank for increased mechanization in the process of erection & commissioning and flexibility in the system to fast track the mobilization of new sites. The new investment will consolidate Power Mech’s leadership position in the BTG segment and act as a stepping stone
to further propel the growth in the untapped BOP & EPC segment.

"Companies like Power Mech which have established a strong goodwill over the last 10 years, will hugely benefit from the growth in the power sector. The company had been able to showcase tremendous growth in the past and has built a very strong order book enabling strong visibility for the next 2 – 3 years," said Raamdeo Agrawal, Chairman of MOPE. "The entrepreneurial ability and vision of the promoter to successfully execute large size projects in a difficult terrain and environment provides testimony of the potential of the company."

About Motilal Oswal Private Equity

Motilal Oswal Private Equity Advisors Pvt. Ltd. is a wholly owned subsidiary of Motilal Oswal Financial Services Ltd. (MOFSL), a global, diversified financial services group with businesses in securities, commodities, investment banking and venture capital.

MOFSL has launched the India Business Excellence Fund (IBEF), a US$ 125 million India focused Private Equity Fund being managed by MOPE. IBEF has an investment focus of providing growth capital to Small & Medium Enterprises (SME), typically in the range of US$ 5-15 million, across sectors. The Fund has already made 8 investments in companies across sectors such as bulk packaging, Power transformers, ITES, financial services, EMS, FMCG etc.

November 29, 2009

Why is NDTV exiting its entertainment channels?

Businessworld has an article on NDTV which recently sold a majority stake in NDTV GoodTimes to Scripps Networks and sold a 76% stake in NDTV Imagine to Turner Broadcasting.
Two years ago, NDTV decided to go beyond news and launch a slew of entertainment and luxury channels. The aim was to bring in higher revenues, and help the company turn the corner. But now, NDTV is set to exit entertainment to save what it knows best — news operations.

...While the split with Star helped NDTV ramp up to a multi-channel broadcaster, its financial performance dived. Except for FY2005, when NDTV made a profit after tax of Rs 29.2 crore on a turnover of Rs 152.9 crore, it has been steady downhill since. For FY2006, the company’s net loss was Rs 6.25 crore, Rs 14.5 crore in FY2007 and Rs 189 crore in FY2008 (see ‘Burning Cash’). In FY2009, it booked a net profit of almost Rs 120 crore on the basis of the Rs 643-crore stake sale to NBC Universal. In fact, the operating loss was a humongous Rs 520 crore on total income of just Rs 492 crore. In the current financial year, NDTV, in spite of all its cost-cutting measures, has notched up a loss of a little over Rs 170 crore by 30 September.

...NDTV’s group CEO Rao, who spoke at length to BW, is conscious of the financial challenge, but pins the blame on external factors. He says advertising revenue was poor with news operations bringing in lower-than-expected Rs 350-375 crore a year. Coupled with this was the high carriage fees charged by cable and DTH operators, which was costing them Rs 70 crore a year. This has serious financial implications, as programming costs for Hindi entertainment channels are astronomical. Senior NDTV sources estimate the cash burn on running NDTV Imagine at Rs 85 crore a quarter, while ad sales are returning only Rs 35 crore a quarter. This means the channel is seeing gestation losses of Rs 180-200 crore a year.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Will the latest attempt at "Stock Exchange for SMEs" take off?

Economic Times has a feature on the prospects and challenges of SEBI's recent decision to create a separate stock exchange platform for Small- and Medium-sized Enterprises (SMEs).
Ashish Gokhale, VP, capital markets at Edelweiss Capital believes that merchant bankers will come in depending on the company and its credentials.Edelweiss usually considers an issue size over the Rs 20 crore mark. But he does not completely rule out smaller issues. “The effort will surely be lesser in this case. And unlike large issues, since one issue can be managed by a single merchant banker, we might be able to work out the economics,” says Gokhale.

Bang adds that a number of new investment bankers are getting into merchant banking and will be setting up separate divisions for handling SMEs. “The need for adhering to Clause 49 (appointment of independent directors) could be a big impediment too as most SMEs businesses are family-owned or proprietor owned with old processes and systems,” he says...But the question that..a number of other stakeholders have is: how much liquidity will this platform be able to create? “If liquidity is not tradable , there might be a problem,” says Rathi. Alok Mittal, general partner at VC firm Canaan Partners agrees. “We will have to see how much liquidity is available. It will be critical to attract quality institutional investors and analysts,” he says.

While maintaining a minimum lot of Rs 1 lakh is necessary to bring in serious investors, it can also reduce liquidity. Retail investors and day traders who are essential for providing liquidity will stay away because of this move and it will be up to the merchant banker to make the market for three years.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

November 27, 2009

The changing face of Nadathur Investments

Forbes India has a profile of Nadathur Investments, the decade-old investment firm started by Infosys co-founder N.S.Raghavan.
Raghavan’s two sons – Sriram Nadathur, 37, and Anand Nadathur, 35 – both left their careers in the US (Sriram in 2003, Anand in 2000) at their father’s calling, to join Nadathur Investments. Their plans include creating new entities and reshaping older ones. They are changing the way Nadathur Investments works. They have formed a separate entity Ojas Ventures that will invest in pure information technology investments and will work as a professional venture capital firm.

...Further, the new Nadathur Investments that will become a creator of synergistic ecosystems. Such firms used to be called incubators in the past. Nadathur will have mostly lifesciences and healthcare investments. “Anand and Sriram are literally becoming owners instead of investors. They are building physical assets for the group much like what Tatas did a 100 years back,” says Nitin Deshmukh, head, Kotak Private Equity.

As the new order takes over, the genteel and old-fashioned way of Nadathur Raghavan will disappear...There is an increased focus on exits, especially from companies where the brothers don’t see long-term value. “In three years, we will exit all the legacy investments, like Cades, that are not being managed by Sriram or Anand,” says Raghavan.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

November 23, 2009

Publishing industry on an upswing

Businessworld has an article on how the Indian English-language publishing industry is on an upswing.
The Indian publishing industry was once a midget on the global stage. Most authors were considered lucky if they racked up sales of 3,000, and a book was declared a bestseller if it hit 10,000. But a new page is being turned. The industry is turning into a force to be reckoned with. The four or five biggest players are bringing out larger numbers of books, and even novice authors are selling in bigger numbers.

...Fuelling the growth of publishing are the chain stores such as Crossword, Odyssey and Landmark, and even Reliance’s new chain, Time Out. They are all on expansion drives, defying even the economic slowdown that gripped the industry between September 2008 and this July.

...Nandan Nilekani’s Imagining India sold about 50,000 copies, and was the star performer of 2008 for Penguin India. This year, the Infosys tag has again proved a winner, with the company’s chief mentor N.R. Narayana Murthy’s book coming up trumps, and selling almost 45,000 copies. That is a phenomenal number, especially considering it is a collection of speeches given by Murthy, and not an overarching state-of-the-nation report like Nilekani’s magnum opus.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

November 18, 2009

Why LinkedIn's founder joined Greylock

The Deal has an interview with Reid Hoffman on why he signed up as a partner with the Silicon Valley VC firm, rather .

We both believe that the key thing is the entrepreneur. The entrepreneur is the person who is massively driving the business. The venture firm's role is to be a really good partner -- not a softie that's asleep in the back seat, but someone who is fundamentally collaborating on the business, asking the hard questions and working with you on solving problems. The expectation is that the relationship will last for the next 20 years, and so you have to be up-front and transparent. When there are conflicts, you have to work through them to provide a basis for a decades-long relationship. When we tackle problems, David will clearly identify where Greylock's interests are and where the startup's are. He puts it on the table and doesn't try to persuade you that Greylock's interest is necessarily the same as the company's.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Indian Medical Devices Cos making a mark

Economic Times has an article on how Indian medical devices companies have started to make a mark on the global market.
The US produces half of the world's medical devices and consumes approximately 40 % of the world's output. Indian manufacturers have leveraged their cost advantage to offer world-class quality at affordable prices. Opto, for instance, makes most of its monitors and sensors at its Indian facilities in Bangalore, Vizag, Chennai and Himachal Pradesh where production costs are lower. It also pays zero taxes due to its EOU status.

Imports of medical equipment and supplies by India were valued at around $12 billion in 2007. “This can be significantly reduced when domestic products are used,” says Puri, whose company plans to make Rs 150 crore by next year.

However, at present, most of them are looking to capture the lucrative markets in western Europe and the US...Here, Indian companies took the inorganic route. Opto acquired EuroCor, a company with proprietary technology, manufacturing facilities and distribution network for 11 million euros in December 2005, which now has the coveted CE (Communit√© European) mark. The company then bought US-based maker and distributor of patient monitoring devices, Criticare Systems, for $70 million in 2008. “This way, you are not spending time developing a product and going through numerous trials. You get the approvals as the target company had done the hard part,” says S Srinivasan, professor at IIIT Bangalore, who’s working on medical and IT technologies.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Business Today profile of Financial Technologies

Business Today has a profile of Financial Technologies, which has recently set up a stock exchange, after making a mark with its commodities exchange MCX.
(Jignesh) Shah’s vision—as he sees it, arguably a bit grandiosely—is to become the Toyota or Sony or Microsoft of the financial ecosystem. Shah wants to make FT an international name by doing what Toyota, Sony and Microsoft have done: Provide the best products at attractive prices.

...Even through its stock exchange venture, FT plans to reach out to farflung areas. The plan is to take the battle to the leader, National Stock Exchange (NSE). The NSE had operating profit margins of almost 75 per cent and a net profit margin of 50 per cent for the year ended March 2008 (which is the latest data available).

Analysts say if the MCX Stock Exchange is able to cut charges by half, it will still make money even as it eats into the NSE’s share. Another plan for the equity exchange is to have an exchange for the SME segment. “Our plan is to add better technology and service at a better price,” says Joseph Massey, MD & CEO, MCX Stock Exchange. It also plans to leverage on the reach of MCX and its over 2,000 members (the NSE has over 1,000 members).

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

November 16, 2009

Rising Opportunities thrown up by Online Testing

Businessworld has an article on the topic:
To overcome this (question paper leakages), many organisations are switching over from pen and paper to computer-based testing (CBT). According to a CLSA Asia Pacific Markets 2008 report on the education sector, the market for CBT, valued at $150 million (Rs 735 crore), is expected to grow to $750 million (Rs 3,675 crore) by 2012 in India.

As awareness levels grow, a rising number of service providers are entering the field — from established players such as Bangalore-based firm Eduquity, Aptech’s Attest and MeritTrac to new giants such as Pearson Vue and Prometric. “Keeping everything tamper-proof and safe is the most important component of testing,” says Uday Kulkarni, executive vice-president of Aptech and national head of the company’s testing arm, Attest.

At present, only a small percentage of combined entrance tests after senior secondary are computer-based, but the numbers are set to go up massively with the government’s increased focus on information and communication technology (ICT) for schools, and its plans to convert part of the school examination system to CBT. The Central Board of Secondary Education is also working on introducing virtual testing at the Class X level, where board examinations were recently replaced with an optional, on-demand testing system. In time and with the right pricing, it is expected that all small, skill-based tests, such as the driving test, can also be converted into the CBT format.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

November 15, 2009

Shakeout in Indian PE imminent?

As part of his newly launched blog, PE industry professional Varadharajan has a post on the reasons why:

Lack of focus/segmentation: I am yet to see more than 6-8 funds that pridethemselves on their focus - geography, verticals or deal types (venture, growth, buy-out, restructuring). Everyone's favourite sector seems education, healthcare and all else where India's per capita consumption is woeful. Where are the proprietary deal flows, where is the ability to construct a deal (and not study an IM for its pros and cons), where is the network of relationships ?

Impending battle for exits: This is going to be fun to watch. All the excesses from 2007 and 2008 have resulted in PE invested companies being valued at astronomical valuations (favourite whipping boys being retail, education, aviation where there is no evident route to a profitable scale-up with the exception of a honourable few). Case in point, a company that was invested into by a PE fund was valued at Rs. X in Jan '09 when the PE fund sold their stake to a counterpart. Now, I hear the going value is Rs. 2 X with hardly a change in fundamentals. Basic laws of economics point to the fact that in any free market arbitrage opportunities vanish fairly quickly. Hopefully, it would happen here as well.

Forward integration by LPs: if your friendly Mutual Fund told you that he did nothing with your money all year long and knocks off 2% off the corpus as ostensible "management fee", would'nt you be mad at him ? Ironically in an immature market like India, it does not take one too much of an effort to hire a couple of smart traders and generate a return of 15-20% from public markets. If so, what is the big deal in getting a 25% IRR from an illiquid asset class over a 5-7 year time period.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

IIM-A announces Business Plan Showcase

IIMA is organizing a Business Plan Showcase as part of its Finance Conclave 2010.

Entrepreneurs from following sectors are invited to submit their entries:
  • Clean Tech & Renewable Energy
  • Telecommunications and Mobile Services
  • E-commerce & Web Portals
  • Electronics
  • IT/ITES Services
  • IT Software
  • Power
Registrations for the Showcase

Registrations start on the 10th November 2009. To register your team, please send a mail to leverage@iimahd.ernet.in with the following details:
  • Name of Team Members
  • Contact Details
  • Category of the Business Plan
Please use the following as the subject line: "Showcase 2010: Registration for ". On registration, you would receive a mail confirming your registration within 24 hours.

Important Timelines
  • Registration Begins: 10th November, 2009
  • Submission of Round 1 Executive Summary: 25th November, 2009
  • Result of Round 1: 30th November, 2009
  • Submission of Round 2 Business Plans: 7th December, 2009
  • Final Shortlist for Presentation on Campus: 14th December
  • Business Plan Showcase at IIM Ahmedabad: 8th January 2010
For more information, visit http://www.ciieindia.org/?page_id=108

November 12, 2009

The Mint's profile of MapmyIndia

The Mint has a profile of VC-backed MapmyIndia.
The company today has 500 enterprise customers including Hindustan Unilever Ltd, Godrej Consumer Products Ltd, Bharat Sanchar Nigam Ltd and Bharti Airtel Ltd, ensuring a steady stream of revenue as it works on improving maps for consumer applications...As India’s younger generation gets more comfortable using location-based services on cell phones and in cars, MapmyIndia believes this could account for a major chunk of revenue in a few years...Last year, four million devices were sold in Russia, and Verma believes that the market in India would grow to about 50,000 this fiscal.

...With the entry barriers in the business being high, often a map-making company’s main competition is with itself. A poor experience can turn customers off, making them reluctant to try digital maps again. That’s why the company has between 300 and 400 surveyors on its rolls at any given time. Extensive checks are done every few months and the changes recorded.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

"China is no friend of India’s"

In an article for Businessworld, Omkar Goswami provides one of the stronger opinions - by a business/economics person - on China-India relations.
Let’s have no doubt about a few things. China will always support Pakistan, come hail or high water. It will sooner or later start damming the Tsangpo (which becomes the Brahmaputra in India) and the Sutlej. My unlettered guess is that the work is about to start, or has just started — especially across the Sutlej. It will continue to make strident claims on Arunachal Pradesh. It will significantly strengthen its capabilities to move troops, artillery and other fire-power along its borders with India — both across Ladakh, Himachal and Uttaranchal in the west and Arunachal in the east. It will incessantly complain about the Dalai Lama if he visits border areas. It will never allow India a hope in hell of a permanent UN Security Council seat. And block any move that gives India a greater role in today’s league of nations.

China is no friend of India’s. It is, at best, an occasional bedfellow that can suddenly leave you in the lurch. China cares only for China, and if India helps in furthering China’s interests, it can tag along. Otherwise, it will be cut out. We can’t think of allying with China with any degree of permanence. Unfortunately, we still don’t seem to understand that. One day, we will. Hopefully, before it is too late.

The solution is to be real. To realise that we need to significantly strengthen our borders; call their bluff with credibility; focus on rapidly growing the economy; and build strong relationships with the US, Russia and certain key nations in Asia. And to never shirk from telling them to back off when they intrude into our affairs. That requires a strong state with a sophisticated veneer. Can we get there? You decide.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Audacity: China's winning edge

Arvind Singhal of Technopak has an article in the Business Standard comparing India and China.
Both got their independence around the same time, had similar scale of economies and challenges, and then both lost a few decades due to misplaced ideology. China started its reform process in 1978, while India did it in 1991. Yet, today, even the most optimistic on India would not claim that India in 2022 will be where China is in 2009.

If a single word can explain the difference between China and India.., it is “audacity” in case of China, and lack of it when it comes to India. At different stages in its history, Chinese rulers have dreamt audaciously and executed their dreams resolutely and ruthlessly. At different stages in Indian history, the rulers have chosen to negotiate, compromise, take the path of least resistance, or have left things to divinity. Post-Independence, we have even misinterpreted the Gandhian notion of austerity to justify our very “small” thinking, and have taken shelter behind “democracy” for our inaction or lack of spine. While China demolishes the old to make way for the new, we regularise illegal encroachments of public land. While China built world-class manufacturing capabilities, we kept our industry reserved under small-scale for decades. While China builds world-best, pan-nation, highly-futuristic infrastructure, our visionless politicians squabble over naming of small “flyovers” in their names.

India’s challenges are humungous, and, therefore, we urgently need audacious politicians, audacious bureaucrats, audacious entrepreneurs, and audacious thinking matched with resolute, sometimes ruthless execution.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

November 04, 2009

Deal Alert: TVS Capital invests Rs.65-Cr in retail firm Landmark

Edited Extracts from Press Release:



TVS Capital, via its TVS Shriram Growth Fund I, is taking a significant minority equity stake with an investment of Rs.65 crores in Landmark Limited, a leading book and music retail chain. Landmark, which is a subsidiary of the Tata Group retail firm Trent Limited., currently operates over 20 stores over 2 lakh square feet of retail space. For the year ending March 31, 2009, Landmark had gross revenues of Rs.196 crores.

Noel N. Tata, Managing Director of Trent Limited and Chairman of Landmark, said, “We are excited about the equity investment into Landmark, and look forward to partnering with TVS Shriram Growth Fund in our journey to scale up the Landmark’s retail business.”

Gopal Srinivasan, founder and Chairman of TVS Capital said, “Landmark is a marquee investment for us and we are excited to enable the next wave of growth at one of the leading specialty retailers in India. Under the leadership of Mr. Noel Tata, we believe Landmark is well positioned to expand further across India. We are delighted to be associating with Trent from the Tata Group.”

TVS Shriram Growth Fund is targeting consumer consumption driven opportunities, like organized retail businesses, and Landmark is the first investment of the Fund in retail segment.

November 02, 2009

Will Indian IT Services cos. be acquirors or targets?

In the wake of IT Product companies like Xerox and Dell buying their way into the IT Services world through multi-billion dollar deals, Reuters - quoting industry analysts - has an article that lists significantly India-based companies like Cognizant, WNS, ExlServices among the list of "attractive acquisition candidates". (Other companies on the list include Sapient, CSC and Amdocs.)
Possible acquirers could be tech giants such as IBM , Hewlett-Packard or Cisco, European players like BT or Deutsche Telekom and Asian companies like Hitachi , Fujitsu or NEC, analysts said. "There's definitely going to be some strategic acquisitions -- there's no doubt about that," Goldman Sachs analyst Julio Quinteros said. "It's just, how much are you willing to pay? And would you rather wait for the market to come back a little bit?" The recurring revenue stream that IT services firms have gives them more visibility and stability.

... One group of services firms that are likely to be involved in M&A are the Indian outsourcers. While most analysts say they are more likely acquirers, Goldman's Quinteros sees it both ways. "I can also make the case that they could be takeout candidates because they have not done an effective job in really moving up the food chain, bringing the value-add competency to the skill-set table," he said.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

October 29, 2009

The 'Beating Street Estimates' game

The Associated Press (via NY Times) has an article explaining how so many US companies regularly manage "to beat analysts' estimates":
Corporate America has a habit of low-balling the earnings forecasts used by analysts to determine their estimates. That way, the bar is lower, and companies can easily jump over when the quarter's results are announced -- even if profits and revenues have fallen off a cliff.

...Beating expectations generally gives share prices a quick lift, but the news can mislead investors about the real state of the business -- and just how far this economic recovery has to go. In fact, of the companies reporting third-quarter results so far, 60 percent have posted lower net income compared with a year ago.

...A study of stock returns from 1994-2007 concluded that analyst forecasts were the second-most influential force on price movements. Management forecasts topped the list, according to Beverly Walther, an accounting professor at Northwestern University's Kellogg School of Management who co-authored a newly released report.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Have women on your board? Here's the cash...

From The New York Times:
Naissance Capital, based in Zurich, will start the Women’s Leadership Fund in January, which will invest in companies whose boards include women. It also plans to take minority stakes in companies without women on their boards and to use its ownership to encourage changes.

R. James Breiding, a co-founder of Naissance Capital and a former director of Rothschild Corporate Finance, said the fund was created after several studies showed a correlation between the number of female directors and a company’s performance.

...Naissance has lined up $200 million from institutional investors and individuals to invest in 30 to 40 companies around the world, and plans to increase the size of the fund eventually to about $2 billion. The minimum investment for the fund is $100,000. Naissance, which was founded in 1999 and specializes in what it calls “niche investment opportunities,” is one of a handful of firms that have created funds over the last three years to invest in companies with female senior executives.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

"It's all coming together for Reva"

The New York Times has an article on electric car maker Reva.
Last month, the company won an important stamp of approval when General Motors said it would use Reva’s technology in the electric version of its Chevrolet Spark, a small car whose conventional gasoline version G.M. sells here already. The electric version of the Spark is expected to go on sale in India by the end of next year, according to G.M. officials.

...Mr. Maini said electric cars have to be small and affordable to succeed in places like India and Europe, where most car trips are short and involve stop-and-go driving, unlike in the United States where commuters can drive 50 miles or more a day, mostly on highways...In Europe, the higher-end model (of the NXR) will sell for about 15,000 euros, or $22,000, not including batteries, which the company will lease for a monthly fee.

...“I have been doing this for 15 years, and I have never seen everything come together like I have” now, said Mr. (Chetan) Maini, the 39-year-old vice chairman and chief technology officer of Reva. The company is jointly owned by his family; AEV L.L.C., a small technology company based near Los Angeles; and two venture capital firms.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

October 27, 2009

Deal Alert: A2Z Maintenance acquires controlling stake in CNCS Facility Solutions

Edited excerpts from Press Release:

Gurgaon-based facilities management and EPC firm A2Z Maintenance and Engineering Services has acquired a controlling stake in CNCS Facility Solutions, a Mumbai-based facilities management services company. One World Resources acted as the sole financial advisor to CNCS in this transaction.

The investment will allow A2Z, whose investors include India Equity Partners, Beacon India Private Equity Fund and Rakesh Jhunjhunwala, to expand the presence of its facilities management services business in Western India.

ContentSutra interview with Nimbus' Harish Thawani

ContentSutra interviewed Nimbus Communications' Chairman Harish Thawani, in the context of the PE-backed firm's renewal of its contract to broadcast test and one-day cricket matches played in India.

What is the per match rate you are paying and is the case that this time there are fewer matches?


Again, it depends on the exchange rate and other factors, but it is about Rs31 crore. The number of matches are about 15% lower at this stage. The schedule is subject to change and we have left enough flexibility in the deal to work around future changes.

What does the deal mean for Nimbus? Are you looking to raise cash?

We are not looking to raise money. We had a third round of investments in 2009 by our existing investors 3I, Cisco and Oman International Fund. The focus is on growing Neo Cricket. The channel will soon be available also in Europe and North America. We already have a very strong presence across Asia. We are also planning two new channels.

Do you think that ODIs will suffer due to the popularity of the 20/20 format?

That is the biggest myth ever. Cricket between countries have a 150-year history. You cannot replace that with a few seasons of a new format. The fad of 20/20 cricket will pass. Ratings show that IPL season 2 was 17% lower than the first edition. And you know what is happening with Champions League T20. So there is no question about diminishing popularity of ODIs.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

October 26, 2009

Forbes' profile of the Co. behind Mainland China

Forbes India has a profile of Speciality Restaurants, the company behind Mainland China and other restaurants.
(Anjan Chatterjee) has 52 restaurants (spread across eight brands including Mainland China, Sigree and Oh! Calcutta) across 11 cities including three abroad — Beijing, London and Dhaka. Now he wants to spread to tier-II towns and in some ways be a pan-Indian fine-dining restaurant chain.

Chatterjee’s company Speciality Restaurants Pvt. Ltd. (SRPL) and SAIF Partners (Softbank Asia Infrastructure Fund), an investor in SRPL, are busy scripting the new plan. They are looking at a listing on the stock market next year. It depends on the number of acquisitions. They want to expand the chain to 100 restaurants before the initial public offering.

...Apart from processes, fine-dining restaurants have to deliver an experience rather than just a meal. “If a restaurant can make Rs. 800 on an average bill, then the margins can be 20-25 percent, else they drop to 10-15 percent. Also, very few locations in India are both lunch as well as dinner places. So a restaurant has to make its money from one dining occasion,” says Milind Kothare, CEO, mKons Consulting, a hospitality consulting company.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Deal Alert: Nutraceuticals firm Deccan Healthcare raises Rs.15-Cr from Nexus Ventures

Edited extracts from the press release:



Deccan Healthcare, an innovative products company in the Indian health and wellness market, has received a Rs 15 crore investment from Nexus Venture Partners. Sandeep Singhal of Nexus Ventures will join the Deccan Healthcare board.

Deccan Healthcare has developed, through intensive R&D, a variety of nutraceutical products which boost immunity and address chronic ailments. The key products include a flaxseed-based vegetarian Omega-3 which they sell under the OxyFlax and Nulife-ISB brand. It is useful for cardiac care, bone health, diabetes prevention, and is also anti carcinogenic and anti-inflammatory.

Speaking about the funding, Mr Minto Gupta, Founder & CEO, Deccan Healthcare said, “We at Deccan Healthcare are happy to be associated with Nexus Venture Partners. The funding will help us enhance our R&D efforts and our expansion plans. Deccan is launching a variety of nutraceuticals addressing specific life-style problems and will also explore export opportunities.”

Sandeep Singhal of Nexus Venture Partners said, “The Indian nutraceuticals market is over a billion dollars growing at 30-40% per annum. Mr. Gupta is a passionate entrepreneur who has built Deccan into a leader in the Omega-3 market and is now expanding into a variety of nutritional supplements.”

October 22, 2009

Forbes India profile of Gitanjali Gems

From the Forbes India profile:
He is aiming to be the world’s biggest jewelry retailer, growing bigger than Tiffany, which had net sales of $2.86 billion last year and has over 200 exclusive stores; at the same time, create a group full of well known brands, something on the lines of LVMH, which owns 50 brands netting it over 17 billion euros in revenue in 2008. For Gitanjali, Choksi unabashedly talks of revenues of $5 billion from his 60-odd brands, from the current consolidated sales of $1.2 billion in the next “few years.”

...Though most of the growth in the jewelry business came in recent years, Choksi saw the writing on the wall pretty early. Choksi realized that he was in the lowest end of the value chain, whereas more than 70 percent of the additional value accrued to the companies that sold those diamonds in branded jewelry. According to the International Diamond and Jewelry Exchange, or IDEX, in 2006-07, rough diamonds of $7 billion in the mines were worth $19.8 billion after they were cut and polished by the likes of Gitanjali. They value increased exponentially to $73 billion when they got sold in stores across the world.

The initial public offering (IPO) in 2006 was a particularly difficult affair. Its two lead managers, known names in the financial world, backed out in the last minute citing “reputation” problems with the diamond industry. Gitanjali went ahead with the IPO with a new lead manager and mopped up the targeted Rs. 330 crore. A year later, the same two lead managers came back and asked to be part of Gitanjali’s latest fund raising initiatives — a $110 million foreign currency convertible bond and a $180 million global depository receipt. They were politely refused. Gitanjali had made a statement.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

October 21, 2009

Deal Alert: Evolva Biotech raises $28-M in first closing of Series B financing



Evolva Biotech, a Switzerland- and India-based drug discovery firm, has raised CHF 28 million (about US$27.8 million) in the first closing of its second round ("Series B") financing round. The financing is part of Evolva’s preparations to merge with Swiss stock exchange listed company Arpida, though the funds are committed independent of the proposed merger. The Series B financing is led by current investor Aravis and new investors Auriga Partners, Vinci Capital-Renaissance PME and Wellington Partners. BioMedInvest and an undisclosed private investor participated as co-investors in the first closing, as well as Evolva's existing investors Astellas Venture, Dansk Innovation, Novartis Bioventures and Sunstone Capital.

In 2005, Hyderabad, AP-based APIDC Biotech Fund (now Ventureast) had participated in Evolva's first round investment. Other investors in the round included Novartis Ventures, Astellas Ventures, Danish Innovation Investment, Seed Capital and Sunstone Capital.

More information is available in the Press Release.

"Real ARPUs are 25% higher"

In an article for Business Standard, Unitech Wireless's Chairman Sanjay Chandra says that despite the profitability issues in the short-term, the industry's size will double in five years.
ARPU numbers as reported by players currently are understated. The historical subscriber-linked spectrum allocation methodology used by the regulator in India incentivises operators to take advantage of flexibility in reporting churn and hence overstate the number of subscribers. The real subscriber number in India is estimated to be 20-30 per cent lower than that reported. This implies that the real ARPU is 25-35 per cent higher than that reported. At a 25 per cent higher ARPU, the per subscriber and per tower economics suddenly seem much more viable.

Two, the total size of industry in terms of revenue is expected to more than double from the current $22-25 billion to over $50 billion in five years. In addition, the cost of new operations is much lower now than that of existing operations because:
1. a matured industry offers a much more aggressively outsourced model for passive infrastructure, IT, GSM equipment etc;
2. further cost efficiencies are being tapped (through active network sharing, for example). Hence, the annual revenue threshold for running a profitable venture has come down significantly. Even a 5-8 per cent market share of the $50 billion industry can easily support a profitable pan-India operation with current price trends.

Finally, pricing and subsequently margin pressure in an industry that has 12-plus operators only means that consolidation is imminent. In addition, the economics of scale for spectrum usage at the 4.4 MHz level that new operators have been initially allotted are tremendous. Doubling spectrum from here much more than doubles the subscriber carrying capacity. Therefore, spectrum consolidation will change value economics substantially. As a result, consolidation will lead to emergence of viable and much more value-creating operations.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

MediaNama interview with CEO of Mobile TV firm Apalya Tech

MediaNama has an interview with Vamshi Reddy CEO of Hyderabad-based Apalya Technologies, which recently closed a round of venture funding.

What are your key costs? How much are you looking to invest in infrastructure?

Our key costs are primarily spread across R&D and infrastructure, and most of our expenditure will be on network, infrastructure deployment for the 3G rollout and R&D. Out investment on 3G rollout depends on when 3G takes off. We are loking to invest anywhere between 25 to 30% of the money raised in the next one year.

..how does the revenue model work in this space?

Revenue models are purely on a revenue share: there is a share between us and the operator, and we, in turn, have all the agreements with all the content providers. We have currently a partnership with almost 70 TV channels.

What do you think would be the size of the mobile TV market in India right now?

If you look at today it’s not big enough but we are expecting that to dramatically change with 3G coming in. With our scale we are able to sustain. We are a team of almost 40 – 50 people in Hyderbad and we have a whole backbone set-up in India where we are delivering the content to operators. It is not minuscule, but definitely not big enough for what we foresee with with 3G coming in. In fact if you look at the recent Champions League, Mobile ESPN which has been the perimeter brand involve there and the commercials were running of mobile ESPN was completely powered by us .

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

October 19, 2009

K-12 spells big bucks

As part of its Cover Story on Education, Business Today has an article on how private ventures are now increasingly targeting the K-12 segment.
Six months ago, Manipal K-12 broke new ground by taking over Sharada School, Mysore. “We offer two choices to managements of schools that fit our business model. They can either pay us to manage their schools professionally or transfer management responsibilities,” says (CEO Meena Ganesh). The firm has also taken over four schools in Nepal recently. She plans to manage 100 K-12 schools and set up six International schools in the next five years.

...The K-12 (Kindergarten to Class 12) is estimated to be worth half the $42-billion (Rs 2,01,600 crore) private education market in India and growing fast enough to double in a decade. Analysts expect the share of average household spend on education to increase from the present seven per cent to nine per cent by 2018. Technopak, a consulting firm, sees enrollments in K-12 growing to 351 million, requiring an additional 34 million seats by 2018. This equals Rs 3,91,000 crore at Rs 1.15 lakh a seat. Brokerage firm IDFC-SSKI Securities is more bullish: it expects private spending on education to grow by 14 per cent, creating a $80 billion (Rs 3,84,000 crore) market by 2012.

With such numbers in the air, the K-12 space has attracted big names like Educomp, IMS Learning Resources, Career Launcher and Shamrock. Like retail chains on an expansion spree, they have even set targets for buying out schools or building new ones.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Key Issues in Education Ventures

At a time when Education has become the hottest sector for private investment, Raghav Gupta of Technopak Advisors highlights, in an article for Business Today, the key issues to evaluate when venturing into this field.
Market Assessment: A pragmatic assessment of the “catchment” in each segment of education is important, from the standpoint of achieving required student enrollment, before planning an investment. The catchment (in this case the travel time to and from the institute) for a pre-school student should be 30 minutes, for a K-12 day school 60 minutes, and for a residential school, this would be five hours. Demand for a vocational training institute originates from within city premises, with few students travelling across cities for enrollment. A university or a higher education institute would ideally attract students from all parts of India as well as South Asia, the Middle East and Africa and, therefore, matters would be being dictated by the quality of education on offer and the reputation of the institute.

Key Financials: Setting up an educational institution requires access to large amounts of capital. A regular K-12 school, built over 2 acres of land with a capacity of 2,100 students, would require an investment of around Rs 15 crore and so would an MBA institute spread over 1.5 acres with a capacity of 240 students. An engineering college with a capacity of 1,600 students spread over 10 acres of land, on the other hand, would require an investment of Rs 100 crore. Similarly, the project cost for setting up a private university over 300 acres of land, with a capacity of 40,000 students, may be around Rs 1,500 crore. In these ventures, financial returns are attractive, with EBITDA levels of over 30 per cent and project IRRs ranging from 25-35 per cent levels.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Price of Education sans Enterprise

In an article for Business Today, Gopal Jain of PE firm Gaja Capital, makes a passionate case for encouraging private enterprise in Education.
The education sector is reserved for not-for profit (NFP) entities and this ensures adverse selection by blocking conscientious entrepreneurs who are unwilling to operate for-profit (FP) businesses under the guise of NFP as most currently do.

...The cap on revenues through price controls on fee and constant government sponsored inflation of expenses by obligating compliance with pay commission hikes, etc., are huge stumbling blocks...Institutional funding is unavailable: NFPs involve huge off-balance sheet settlements, rendering them out of bounds for institutional lenders and financiers.

...We can argue endlessly, but we don’t have 300 years to perfect a welfare state, like the western countries did. India’s poor understand that education is the mantra behind their emancipation and they are not willing to wait. Some 175 strife-riddled districts in India are proof of their impatience. Are we waiting for more?

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Profile of facilities management firm BVG

Business Today has a profile of PE-backed facilities management firm BVG India.
(Hanmant R Gaikwad) is the man who founded Bharat Vikas Group (BVG) India, one of the country’s largest facilities management companies based out of Chinchwad near Pune. BVG India provides non-core activities such as mechanised housekeeping, landscaping & gardening, and security services to private and government institutions with the help of a 16,000-strong ready-to-move and trained and pan-India workforce.

...At Tata Motors, Gaikwad would on a regular—and informal—basis supply the company with youth from Satara whenever it was looking for people. The breakthrough came when Tata Motors was on the look out for a housekeeping contractor for its mintnew Indica plant. Gaikwad proposed that the contract be given to BVP. Tata Motors agreed. That’s when BVP began operations in 1997 as a housekeeping company with just eight employees.

In three years, BVP had grown into a 200-strong outfit, with Tata Motors as its only client. In 2000, Gaikwad called it a day at Tata Motors, converted the foundation into a deemed limited company, renamed it BVG India and extended its operations to include services such as landscaping & gardening, security services and transport & logistics.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

October 15, 2009

Interview with Rishi Navani of Matrix Partners India

Venture Intelligence recently spoke to Rishi Navani, co-founder and Managing Director at Matrix Partners India. The firm, which has a special focus on domestic consumption, has announced three investments in the past 12 months – a new Rs.100 crore investment into education firm FIITJEE and follow on investments into online classifieds firm Quikr (a spin out from eBay India) and prepaid cash card firm ItzCash (part of the Essel Group).


Venture Intelligence: In the post-financial meltdown scenario what is your reading of both the growth equity and VC space?

Rishi Navani: In the growth equity segment, we are in a situation where capital has dried up - particularly from hedge fund investors and investment banks. For companies that are profitable there is definitely capital available, but there are less pockets but the pricing has certainly rationalized compared to 2007.

In the VC segment, lots of people have invested in companies where they have to spend a lot to time to see if those companies go anywhere. While the environment is picking up, it has become lot more strained particularly in VC and it is very hard to get early stage funding right now.

VI: Will we see the sheer number of funds in the market returning to the 2007 levels any time soon?

RN: On the VC side specifically, there is a higher degree of skepticism around the venture asset class, which will reduce the appetite for VC in India. Also, the biggest pocket of capital for the venture capital industry is mainly the US and there has been a significant retreat and retrench in venture capital there. Earlier, people were able to raise $600-800 million funds in the US; those are now becoming $300 million dollar funds. It was really the excess $300 million they were allocating to India, China and other geographies. Now that the excess does not exist and they have limited capital for the US market, they may not want to stretch out into India and other places.

VI: On the growth equity side, what are the key challenges?

Rishi: Valuations are still a challenge, but that will only subside over a period of time and there are more people building companies and the depth in the market increases. The amount of money and the irrationality has definitely reduced. Lot of the irrationality in growth equity was driven by hedge funds and investment banks. That capital has retreated significantly.

VI: There has always been an interest in Education but now we are seeing deals come through. Do you see any danger of overheating as the theme is played up?

RN: That’s a constant danger in India. But just because five more people are interested doesn’t mean the sector is going to grow that much faster.

VI: Beyond education what other sectors do you feel are attractive?

RN: We are focused on basic need sectors such as healthcare, education, financial services and infrastructure.

VI: Does infrastructure fit into your broad consumer theme?

RN: Our theme is consumption; power consumption, for example, very much fits into our theme. The way to think about is, if India is consuming in any shape, size and form we are interested. How much infrastructure would we end up having in our portfolio? I don’t know – but if I had to guess, I would say 10-20%.

VI: In most of your first round investments, you have been the sole investor. Is that something that you will continue to do going forward as well?

RN: There has to be a capital need that justifies bringing in another investor or there must be a specific value-add that the investor brings to the table. Otherwise, there is no reason to bring in outside investors right at the outset.

VI: Another contrasting feature about Matrix is that you have stayed away from the listed universe? Will that change?

RN: It’s not a no-no, but we have stayed away from it consciously.

VI: Is Early Stage something that you have moved completely away from? For instance, would you invest in another Asklaila - in terms of the company’s stage of development?

RN: It is unlikely we would be first round investors in Early Stage companies. So, we would do an Asklaila equivalent - but a couple of years post the stage when we entered that company.

VI: From your point of view, what is unique about Matrix’s positioning vis-√†-vis attracting dealflow?

RN: There are various parts to positioning - the people, the culture you create, how you interact with entrepreneurs; it’s a variety of things. We work really hard to find good investment opportunities and we work very close with entrepreneurs post investment. And we tend to be very independent in our thinking of what we want to and what we don’t want to do. We don’t spend a lot of time on what others are doing.

The full version of this interview appears in the latest Venture Intelligence India Roundup Quarterly Private Equity Report

Interview with Kranthi Vistakula, Founder of Dhama Apparels

One of the more interesting start-ups to receive VC funding this year has been Dhama Apparel Innovations which provides apparel with variable heating / cooling to people living and working in difficult climatic environments. N. Sriram of Venture Intelligence recently spoke with Kranthi Kiran Vistakula, Dhama’s Founder & CEO who is an alumnus of the Massachusetts Institute of Technology.




Venture Intelligence: You have a biotech and engineering background from MIT. Why did you switch to doing an apparel start-up?


Kranthi Vistakula:
While living in Boston (USA), the weather was either cold or hot…I never felt comfortable. Since I could not find any functional apparel in the market, I started developing one for my use. That is how the whole idea started.

VI: Dhama is now targeting to sell temperature-controlled apparel to defense forces. Don’t soldiers have these kinds of apparels already?

KV: They do have. But they are very heavy. Our apparel weighs around 1 kg. The apparel soldiers wear now weighs about 5 kg. We are reducing their weight for better performance.

VI: How did you fund your company initially?

KV: Dhama Apparel Innovations was founded in January 2008. Initially, we got a government grant through the techno-entrepreneur promotion programme of the DSIR (Department of Scientific and Industrial Research). We got almost US$130,000 through the grant. The VC funding happened in 2009.

VI: Why did you decide to go for VC funding this year?

KV: We decided to commercialize the product. VC funding helps here because VCs bring in good networking and contacts. The VC funding will be used to expand the product line, finishing testing trials, etc.

VI: How easy or difficult was it to raise the VC round?

KV: We started to look for VC funding in November 2008 and we were able to successfully raise funds in June 2009. We made multiple presentations to many firms but when Reliance Technology Ventures and Mumbai Angels came in, the funding was wrapped up in a month.

VI: What was the most challenging task when you were raising funds?

KV: Not much seed level funding happens in India. Being a start-up, that was the biggest challenge. The other challenge was that there are few product development companies in India. VCs find it easier to fund service companies. When you are a product development company, they perceive high risks.

VI: Is the funding hesitation because products that look great in the research lab lose their sheen when they actually hit the market?

KV: That could be one of the reasons. The other reason is that the risk factor is pretty high. Even if the product is extremely good, the market adoption may not be as good. In service industry, you can revamp your strategy overnight. In a product company, you cannot do that. It’s a time-consuming process. If I change my strategy, it will take at least 3-4 months to be effective and there is a lot of risk involved in that process. I see this as a major risk.

VI: Besides money, what other value do your VCs bring to the table?

KV: They are helping me in marketing, and are providing lots of support in terms of contacts, etc. We went to Reliance Tech Ventures and Mumbai Angels because they are aggressive and not hands off.

VI: What has been the key takeaways for you so far (both in launching the business and VC fund raising)?


KV: One key lesson I have learnt is you always overshoot the budget by 20-30%. Unexpected costs pop up in every direction, every month. Initially you might think this is not significant, but it will turn out to be significant. Secondly, choosing the right investor is critical. It is not all about the money; it is the support that counts.

VI: Do you have any advice for entrepreneurs in fund raising, - particularly for companies in the product development area?

KV: If the VC is taking too much time to decide, let go of him. Find someone else. If they take two months or more to respond, it is really unlikely that they will fund you. Selecting the right investment partner is crucial for an entrepreneur in product development.

This interview appeared originally in the quarterly edition of the GIVCA-Venture Intelligence India Venture Capital Report

Why Gold Loans are shining bright

The New York Times has an article on why Gold Loans are far from being anachronistic in India. So much so that international PE/VC firms like Sequoia Capital are invested into Gold financing companies.
Pawnbrokers and money lenders have long operated in India’s back alleys, making loans against jewelry to families in distress, at interest rates of 30 percent or more. But gold loans made by banks and finance companies are different. Rates are lower — 14 to 30 percent — and their businesses are regulated.

...Manappuram, a pioneer in the business, made $730 million in gold loans last year — up from $397 million a year earlier. Muthoot Finance, a privately held firm, says its lending is growing at 60 percent a year. By contrast, total outstanding bank loans to the private sector increased 16 percent last year, year over year, and have been essentially flat so far this year.

...Gold loans, so far at least, have very low defaults — companies say fewer than 1 percent of borrowers fail to repay. Most jewelry is reclaimed in less than four months....Executives say their business has grown because new financing methods and economic liberalization have made it easier for them to raise money. Securitization has made it possible for lenders here to quickly “redeploy” money.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

October 13, 2009

The Need & Opportunity for Vocational Training

In an article for Business Standard, Arvind Singhal of Technopak points out why the real transformational opportunity in Indian Education is in the vocational training segment.
Vocational training, unfortunately, does not enjoy the same glamour and, therefore, it is very likely that despite having the largest young workforce in the world, India will be faced with chronic shortages in just about every category of skill-based trade jobs. Even more tragic, from India’s perspective, would be the missed opportunity in being the number one supplier of skilled trade labour to the developed and some developing countries even as many such countries, especially those in Western Europe, are faced with rapidly aging populations and fast declining birth rates, leaving them woefully short of all kinds of labour—farm workers, electricians, plumbers, masons, fitters, healthcare givers, machinery operators, cooks/chefs and the like.

It would help to look at some hard data to put this challenge and the big opportunity for India, should it choose to grasp it, in the right perspective. Of the estimated 455 million jobs in India in 2008, almost 90 per cent (about 410 million) were skill-based. About 255 million of these are related directly to farming, but then the rest (about 155 million) include myriad vocations relating to retail trade, manufacturing, construction, travel and tourism, hospitality and food services, and healthcare. These statistics by themselves are not remarkable at all. The first of the many shocks that follow is the fact that as many as 87 per cent of these 410 million skill-based workers received no vocational training at all, either formally or through hereditary channels. Just about 2.35 per cent have received some formal vocational training. Worse, just about 1.30 per cent of the current workforce are enrolled in some kind of formal vocational training. About 3.75 per cent receive their training through hereditary sources, but this will also drop as the future generations may not want to pursue their family vocations.

These dismal statistics are due a totally inexcusable dereliction on the part of Central as well as state governments, decade after decade and government after government, of their responsibility to create trade-based training infrastructure across the country. The current landscape of vocational training in India comprises just about 5,500 Industrial Training Institutes (ITIs) and 1,745 Polytechnics, compared to 500,000 similar institutes in China. Further, the US boasts about 1,500 trade training programmes compared to India’s measly 171. India’s current vocational training infrastructure caters to just 2.5 million annually, whereas the country is adding almost 18 million to its population every year. Even more critically, India has to move millions from farming jobs to non-farming jobs if it has to give itself any chance of improving the plight of the 255 million desperately poor engaged in farming. It is estimated that only 5 per cent of the youth are vocationally trained in any single skill in India, compared to 96 per cent in Korea and even 22 per cent in Botswana.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in