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March 31, 2009

"India's Most Promising Entrepreneurs"

Businessworld has a cover story that profiles the shortlisted five high-potential entrepreneurs (selected by a 4-member jury consisting of executives from GE, Philips, Intel and HCL Tech):

1. Shashin Mishra, Masplantiz (Remote monitoring tech)
2. N.N. Sreejith, ROPE (Sourcing products from rural areas)
3. Phanindra Sama, redBus (online bus tickets)
4. Sandeep Maheshwari, Mash Audio Visuals/imagesbazaar (online photo mart)
5. Lekh Joshi, Mango Technologies (tech for mobile phones)

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

March 30, 2009

Rural to the Rescue?

Business Today has a cover story on how marketers are hoping to tap the relatively buoyant rural economy for their companies' growth.
It’s probably this resilience that’s prompting companies such as Airtel, facing slower urban sales following the global financial meltdown, to make a dash for the hinterland despite the lack of basic infrastructure. “We started focussing on the rural markets about a year-and-a-half ago, and today 60 per cent of all our new consumers are from the rural areas,” says Sanjay Kapoor, Deputy CEO, Bharti Airtel. That means 1.68 million new rural customers a month. Airtel has been adding some 2.8 million subscribers every month since the past one year.

...“Earlier, we had a lot of decentralised rural marketing efforts, which were largely dealer-driven. Now, they are more centralised. This includes a 500-strong sales force on the full-time rolls of our dealers to target rural sales specifically,” points out Anil Dua, Senior Vice President, Marketing, Sales and Customer Care, Hero Honda. The company, in end-2007, also launched a rural vertical Har Gaon, Har Aangan (Every village, every house). According to soft data, its share of rural sales has gone up from 38 per cent in 2007-08 to 40 per cent in 2008-09.

Maruti Suzuki’s foray into the heartland was a direct consequence of the slowdown. “We started it as a test case in 2007—driven by the slowdown, which impinged on the urban consumer’s propensity to opt for vehicular loans,” says Mayank Pareek, Executive Officer, Marketing & Sales, Maruti Suzuki. He says that in contrast to the urban market, where 80 per cent of the vehicle’s cost is financed, rural consumers pay cash for up to 60 per cent of the price tag. (A rural consumer does not share two big headaches of his urban counterpart—house loan EMI and transportation costs).

For the companies, the initial results have been encouraging. While Maruti Suzuki has seen the share of its rural sales jump from 3.5 per cent of the total in 2007-08 to 8.5 per cent in 2008-09, Bharti Airtel’s rural penetration has increased from 6 per cent in 2007-08 to 12.6 per cent, according to data available till February 2009. Airtel’s average revenue per user (ARPU) in the rural regions has increased from Rs 100 to Rs 150 in the same period.

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

March 26, 2009

Roadblocks for PE investments in infrastructure?

In an article for Economic Times, Srivatsa Krishna makes a fervent case for freeing up hurdles in the way of Private Equity investments in India's infrastructure sectors.

The one possible way ahead is for PE funds focused on infrastructure, of which there are now at least 20 large ones globally with combined funds under management of almost $130 billion, to invest in Indian infrastructure in a big way. India, at the highest levels of government, needs to dedicate a small core group to woo these funds into India. PE is one of the few asset classes, which does not face redemption pressures and though there is a shortage of capital around the world, yet there still are a fair amount of PE funds focused on infrastructure looking for good deals.

...However a number of strategic, regulatory and operational reasons are forcing these funds to keep away from Indian infrastructure projects, especially when many of them get an assured 12-14% post-tax return in mature brownfield projects such as railroads in the US or in Australia.

Extremely poor governance, absence of clarity and predictability in bid documents and procedures, constantly shifting and unclear concessions and multiple authorities, lack of viable ‘good’ deal flow, unrealistic valuations expectations of Indian developers, the inability to ‘manage’ a rapacious Indian political system keen on rent-seeking alone, the unwillingness to leave a lot of the potential upside on the table to future uncertain ‘renegotiations’, the absence of a corporate bond market, incomplete contracts and poor quality of contracting, and the enormous execution/construction risks some of which are peculiar to India, ensure that foreign PE firms shy away from large infrastructure projects.

Further there is simply not enough deal flow in the $150-300 million big-ticket equity category, which would attract funds with big muscle that are simply not interested in smaller deals. Given some of these risks mentioned above, most of the larger funds are looking for brownfield investments, even at a lesser rate of return (such as in the low to mid teens).

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

March 24, 2009

Hedge Fund selling isn't over yet?

Investors in hedge funds believe the industry will see even bigger withdrawals this year than 2008, according to new survey by Deutsche Bank. As if last year's carnage wasn't enough, the LPs believe 1 in 5 hedge funds will go out of business this year.

From a Bloomberg report based on the survey:
“If 2008 was a story about performance of hedge funds, 2009 is very much going to be a story about restructuring,” said Sean Capstick, Deutsche Bank’s London-based global head of capital introduction. “Our survey indicates redemptions will continue as a phenomenon for the foreseeable future.”

...Investors worldwide pulled $155 billion out of hedge funds in 2008, marking only the second full-year of net outflow since Chicago-based Hedge Fund Research Inc. started tracking the data in 1990. The withdrawals helped pare hedge-fund assets 27 percent from a mid-2008 peak, HFR said. Because many funds only allow redemptions once a quarter, “there is a lag time consistently in outflows in the industry versus performance,” Capstick said. Investors will also seek to redeem when funds lift curbs on withdrawals, he added.

Sixty-five percent of the investors surveyed by Deutsche Bank, including funds of funds, family offices, consultants to banks, pension funds, endowments, governments and insurers, expect at least 20 percent of hedge fund managers to go out of business this year.

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

Why is the dollar getting stronger?

At Venture Intelligence's Annual Private Equity conference in February, a leading PE fund manager remarked how investors were now forced to pay more heed to currency movements than their portfolio companies' operational performance. The US dollar's dramatic appreciation in recent months has indeed astounded many.

In an article for the Economic Times, Sunil Kewalramani, provides some reasons why the currency of the country in the middle of the global financial mess - and, according to several predictions, in the midst of a multi-year slowdown - is actually appreciating.
A number of analysts had predicted the continued demise of the US dollar, thanks to the financial-sector bailout and weakening economy but its sharp upside has surprised many. The dollar’s recent climb is part of a massive reversal of long-standing investing trends (due to the global economic slowdown) such as buying emerging-market stocks or wagering on rising commodity prices.

...Aside from the actions of global reserve managers, activity from US mutual funds shows an unwillingness to increase their allocations to
foreign markets. This matters because US fund managers hold $30,000 billion of domestic and foreign securities, compared with the estimated $7,000 billion of foreign currency reserves managed by the world’s central banks.

Having increased their share of overseas assets from about 12.5% at the start of the decade to a high of 26% last summer, risk averse US funds reduced that share to 23%, where it has remained so far in 2009. I see further reductions in the proportion of their portfolios held in overseas markets and the subsequent repatriation of capital will help the US to continue to fund its current account deficit and thus support the dollar this year.

Besides, long-term portfolio allocation data for all US investors shows global shocks historically have caused US investors to steer away from overseas markets for several years. This time risk-averse American fund managers are unlikely to behave any differently in their response to the global economic slump.

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

March 22, 2009

New entrants in the BS 1000 listing

Business Standard has profiles of new entrants in its latest BS 1000 listing of companies. The new entrants include OnMobile Global, Page Industries, Indage Vintners, Educomp, Shriram EPC, Temptation Foods and Cairn India.
Vinit Kumar though doesn’t worry too much that he’s not shedding the extra pounds. A self-confessed foodie, the chairman and managing director of Temptation Foods quit Reliance Industries in 1996 to pick up a stake in the ailing company. He bought out the owners for about Rs 1 crore – the company’s losses at the time were in the region of Rs 5 crore—and restructured it. Working in Reliance, he says, inspired him to become an entrepreneur and armed with a 13 per cent stake, he’s now in the midst of a takeover battle with the Arora family for control of Kohinoor Foods.

Kumar, who enjoys Italian and Japanese food, as much as the ‘thali’ at Golden Star on Mumbai’s Charni road, wants to sell processed and ready-to-eat foods and create brands for spices, snacks, frozen vegetables and rice. Currently, nearly 85 per cent of the products are exported and the company’s looking to earn revenues of close to Rs 1,000 crore in 2009-10 which would be a three fold increase over the Rs 328 crore posted in 2007-08. “Several super markets and retailers overseas already stock our products,” he observes. If there’s something that he’s more passionate about than food, it’s art. Kumar, whose apartment is full of paintings, believes that the secret to success lies in hiring good people and retaining them.


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

March 17, 2009

Is risk appetite "walking back" to the markets?

Kathleen Hughes, a manager of money market funds at JPMorgan Asset Management, has an interesting description for the change in risk appetite of investors: "Risk appetite leaves on a horse but comes back on foot," she said at a Reuters funds summit. The report from the conference points to data from fund trackers EPFR Global (for the second week of March) to indicate signs of growing risk appetite.
Commodities, technology and energy sector funds as well as global emerging market equity and non-Japan Asia funds all saw net inflows. Perhaps most noteworthy, money market funds, the bellwether for investor risk aversion, had net outflows of $381 billion in the week.

Hughes says she has seen something of the same. The size of the safest-of-safe segment of her money markets funds — the short-dated U.S. Treasury paper bit — has halved since the fourth quarter of 2008.

So there is some walking going on even if the horse remains in the stable.

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

March 16, 2009

Business Today's Hottest Start-ups List

Business Today's has come out with the latest update to its annual listing of "Hottest Startups in India". The list includes VC-backed companies like Inbiopro (backed by Accel India), Carnation Auto (Premji Invest), AskLaila.com (Matrix Partners), Ayurvaid (Acumen Fund) and Orange Cross (Lumis Partners).

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

Healthcare cos. to ride out the recession

Business Today has an article on how healthcare firms are planning to accelerate their growth plans - never mind the recession.
“A slowdown is the best time for health care to consider growth,” avers G.S. Rao, Executive Director at Yashoda Hospital in Hyderabad. Rao is doing just that. He has set up an integrated and advanced cancer treatment center involving investments to the tune of Rs 100 crore; this includes over Rs 17 crore on installation of, what he calls, Asia’s first Rapid Arc Linear Accelerator, which is used for radiotherapy.

Rao also plans to invest Rs 250-300 crore on super-speciality services by 2010. His growth plans are driven by the fact that there is constant demand and it is only during a slowdown or recession that input costs come down. Funding isn’t an issue either, with Rao claiming that banks are vying with each other to offer good rates.

Yashoda is not the only hospital that’s using the headwinds of a downturn to take off. Industry major Apollo Hospitals is equally upbeat and is busy implementing its plans to add new hospital beds across various locations. The plan is to add 2,536 beds—to its existing 7,543 beds— by December 2010, including 900 in tier II and tier III cities. For this Apollo has drawn up a Rs 1,586 crore investment plan. “We had already put some of our funding in place pre-recession,” says Suneeta Reddy, Executive Director (Finance), Apollo Hospitals Group. She adds that over the past year, patient volumes are up 12 per cent. Net profits for the third quarter are up 27 per cent over the previous year’s December ended period.

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

Belt tightening at BCCL

Contentsutra has an interesting package on the salary cuts at Bennett, Coleman & Co. Ltd (BCCL), India’s richest media company that publishes The Times of India and The Economic Times. It includes a copy of the letter sent by BCCL CEO Ravi Dhariwal to employees announcing salary cuts, an interview with him and an analysis of what went wrong.

From the letter:
Starting May-June last year, the first road bump in the form of newsprint prices hit us. We started paying between 60-70% more for newsprint than we had been paying previously. This depleted our profitability to less than half of what we had enjoyed previously. We saw some of it coming, and took necessary steps to mitigate it as much as possible. Small cover price increase, rationalization of pages, strictly incurring only necessary costs were our focus then. By doing these, we were able to keep ourselves profitable though at a reduced level during the first three months of August, September and October. Actually October was our best month in the history of BCCL in terms of revenue, though our profits were at half the level of what we had originally expected. All because of the higher newsprint costs. At that stage, we thought we will be able to cut more costs and restore the company to its original financial health. Profit is like oxygen – if we don’t have it, the company and its employees eventually suffocate. We needed to ensure a level of profitability which provided enough cash for us invest in future growth. Till October we were confident that we would be able to do so.

The last four months have turned out to be very challenging. Instead of growing like in the previous three months, we saw advertising decline by almost a quarter, and, because over 90% of our revenue comes from advertising revenue, this has been huge barrier for us. I am happy that we took precautionary steps to reduce the costs, but, unhappy that these have not been enough to restore our profitability. I am happy that we have not eroded our competitive position, in fact we have become even better, but unhappy that we have had to borrow money significantly to continue our capacity expansion. I am happy that all our colleagues have risen to the challenge, but unhappy that the challenge seems to be lasting longer than a few months. Frankly, I have not seen anything like this in my working life.

From the interview:
(Our Subsidiaries - TV and Internet) face a different set of challenges. There is no newsprint there. Yes, the ad slowdown is having an impact in some cases. Times Global Broadcasting is a different story. Times Now has been doing so well, it has consistently been the No1 English news channel for the past 36 weeks. There are issues with high distribution costs, but we are working on that as well. We haven’t decided on any such steps at our subsidiaries.

...The nature of the Internet business is such that when you start 10 verticals, only 6 may work. So you have to shut down some of them.

From the analysis:

BCCL is in a bind because of the aggressive expansion it undertook in the past few years and the debt it took on to fuel it—some Rs1,700 crore in a nearly Rs5,000 crore balancesheet (calculation based on the company’s 2007-08 balancesheet plus information from our sources). It’s hard to be critical of that. Expansion into new territories and media segments was the right thing to do then and the company doesn’t have very high debt levels—just that it has traditionally been debt-free. Its projects are executed well and its marketing machinary has proved unbeatable thus far.

...BCCL’s consolidated balancesheet also bears the weight of the London acquisition of Virgin radio and the massive dimunition in value of its Private Treaties portfolio, apart from several subsidiaries that are turning in losses.


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

Recession Proof Businesses?

Business Today has a cover story profiling publicly-listed companies that are doing fine despite the economic recession. The listing includes some large cap companies like Bharti Airtel, Hero Honda and L&T as well as smaller companies like Everest Kanto Cylinders Opto Circuits and AIA Engineering. Other companies in the list include Sun Pharma, Allcargo Logistcis, Simplex Infrastructure and Mundra Port.



So, what sets these winners apart from the rest of the pack? Plenty, actually. Let’s begin with the sheer benefits of size and pedigree. Corporations like Bharti Airtel, Larsen & Toubro and Hero Honda are all leaders in their sectors. They’re also the only companies in their sectors that have been notching smart growth even as their rivals flounder. They also prove that being an early bird helps in getting the worm—even during a downturn. Then, there’s a company like Sun Pharma that has countered the downtrend in the pharma sector by perfecting, over the years, a four-pronged strategy for balanced, profitable growth. Some of the names on this list are lesser-known. Some of their businesses are hardly glamorous—gas cylinders anybody? But the uniqueness of these promoters is their business model. Companies like AIA Engineering and Everest Kanto are among a select few, not just in India, but also the world over. Replicating their operations isn’t easy because of the high entry barriers to these businesses. We have also included Mundra Port, although there is no comparative growth for the September quarter (as the company got listed recently) because analysts expect it to be the fastest growing port in Asia till 2011.


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

March 14, 2009

New Drug Discovery Cos. Making a Mark

Businessworld has an article on a new crop of drug discovery companies - most of whom are Private Equity-backed - that are promising to represent the version 2.0 of the Indian pharma story.
Today, NovaLead is at the doorstep of a destiny that India’s pharmaceutical Goliaths — Ranbaxy Laboratories, Dr. Reddy’s Laboratories and Glenmark Pharmaceuticals, among others — wandered into and faltered despite a decade of research: discovering a new drug. Deshpande has 11 molecules in the pipeline, for conditions varying from cancer to acne, and claims his first drug, a diabetic wound treatment, could hit the market in the next two years.

As the great Indian generic drug success story loses steam, Deshpande and some other pure-play drug researchers could well become the next generation of Indian pharma companies to make their mark globally. Apart from Deshpande, this list includes Sundeep Dugar, who started Sphaera Pharma in Haryana last year; Sunil Bhaskaran, who set up Indus Biotech in Pune in 1997; and Swaroop Kumar, Glenmark Pharmaceuticals’ former R&D chief, who set up his own research firm, Incozen Therapeutics, in Hyderabad last year.

“The great Indian generic drug story is over. Several companies are already on their death bed,” says Nitin Deshmukh, head of the Kotak Private Equity Group (KPEG), the private equity arm of Kotak Mahindra Bank, which has already invested in NovaLead and Indus Biotech. “The next big opportunity is in new drug research.”

The risks involved are enormous. New drug development is costly, success rates are low and investments take a long time to pay off. But a single new drug could generate annual revenues on a par with that of the total sales of an average mid-cap pharma company in India.

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

March 12, 2009

Interview with CEO of B2B Internet firm IndiaMart

MediaNama has an interview with B2B Internet firm IndiaMart's CEO Dinesh Agarwal.
I think the latter part of the upturn affected us more than the downturn. We were highly cashflow positive business, and towards the end of 2006-2007, there was market frenzy. Our costs were going up unnecessarily and the whole business model started to look non-feasible in the medium or the longer term. If costs were to grow at 30-40-50% growth, I didn’t see the businesses flourishing in the long run. That is when I decided to raise the money. We would never thought of raising money otherwise.

...Intel is probably going to complement it (BCCL's ads-for-equity deal) with money. BCCL has media properties, but for a larger market pull, you need to invest across various media…and you cannot do private treaty deals with 7 different media houses.

...I met different venture capital companies over the last two years. Intel matched better with us, they had a longer horizon, and are less impatient than some of the pure VC firms. Some of them think that you have to burn faster to run faster. Somehow my companys DNA does not match with that, we have been a slow, steadily growing company. We are not at that stage where we are a small company, and we not do need a day to day guidance. I mean, we have been able to grow sustainably to a thousand people team.

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

March 09, 2009

Will commodities spike again?

In his column for the Economic Times, Ruchir Sharma argues why it would take a long time for the commodities ‘super cycle’ to revive.
Expectations of ever rising oil prices are reflected in both the forward curve and in analysts’ consensus expectations. For example, oil for delivery in three years’ time is trading at close to $70 a barrel compared to the spot price of around $45 a barrel. Meanwhile, oil analysts forecast the price to be even higher at $90 a barrel in 2012.

..However, China suffers from an over-investment problem, with an investment-GDP ratio running at a very high level of more than 40% for many years. Much of the investment is directed towards the sagging export sector and therefore Chinese investment demand is highly unlikely to revive anytime soon. China needs to reorient its economic model more towards domestic consumption and reduce its reliance on exports and investment. Japan was able to successfully make that transition in the early 1970s when its per capita income was similar to China’s current levels. Regardless of whether China takes this route or not, it’s likely the commodity intensity of its growth model will decline from the prevailing lofty levels.

For oil, where arguably the maximum residual bullishness exists, Chinese demand is not so paramount anyway. China consumes 9% of global oil production while the OECD area represents more than of 50% of world demand. The demand for oil is highly sensitive to global growth and given the expected contraction in global GDP this year, oil demand is expected to shrink by more than a million barrels a day in 2009.

It’s no surprise then that Opec spare capacity is fast rising back to 2002 levels, reducing the cartel’s pricing power. While compliance regarding production cuts by Opec members has reportedly been good so far, the incentive for producers to cheat and increase revenues remains high in the challenging global environment. Outside of Opec, countries such as Russia would obviously like to produce at maximum capacity to earn some badly needed dollars and ride out their credit crisis.
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

Telecom Towers: A bit shaky?

Businessworld has an article on the economics of independent tower companies.

Tower companies are now discovering that higher valuations, lower rentals and poor tenancy ratios could stretch payback periods up to 15 years. In comparison, most sectors have a payback period of five-seven years. “We believe that the return generated by 1-1.5-tenant towers, at current rental rates, is not enough to drive current valuations for tower companies,” says James Taiclet, CEO of American Tower Corporation (ATC). Take, for instance, the SBA Communication-TowerCo Llc (US) deal and the Quippo-WTTI (India) deal that happened at an enterprise value of $451,163 and $151,817 per tower, respectively. When this is compared to the ballpark revenue per tower of $60,000 (Rs 30 lakhs) in the US and $10,000 (Rs 5 lakhs) in India, one would find that the payback period would be 7.5 years for the US buyer and 15 years for the Indian buyer. It costs approximately $250,000 to build a tower in the US, compared to $70,000 in India, says Manoj Tirodkar, chairman of GTL Infrastructure.

Interestingly, unlike in the US, where independent tower firms such as ATC and SBA Communications own 60 per cent of towers, in India, telcos dominate with 90 per cent market share. This is the root cause of lower tenancy ratios, which is the number of clients a tower firm is able to bring on board to share its infrastructure.

The lease rentals are not encouraging either. “We have to cope with lower lease rentals,” says ATC’s Taiclet. “Currently, it is $10,000 a year in India, almost one-sixth of that in the US.” While industry estimates the requirement of 6,70,000 cell sites by March 2011 — which neatly fits the planned tower population of 3,40,000 to give the preferred tenancy ratio of 2 — not all is hunky dory


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

Why did Sony Entertainment Television's CEO quit?

Businessworld has a cover story on the corporate battle that resulted in Kunal Dasgupta, the CEO of Multi Screen Media (formerly Sony Entertainment Television), quitting just a few months before his contract was due to end.
Dasgupta’s abrupt exit was the culmination of six years of tension between majority shareholder Sony Pictures Television International (SPTI) that owns 61 per cent of MSM, on one hand, and Atlas Equifinn on the other, which is a consortium of Indian shareholders (Singapore-based Rakesh Aggarwal, World Media Group director Sudesh Iyer, Shemaroo Entertainment Managing Director Raman Maroo, MobiApps Holding’s Jayesh Parekh, B.R. Sule, Sushil Shergil and actor Jackie Shroff ) holding 32 per cent. Capital Japan and some financial institutions own the rest 7 per cent. And of course, the third protagonist is Dasgupta, who walked a tightrope and managed to keep his job for over 14 years despite the fact that neither group of shareholders was too happy with him.

Very little information has trickled out of the unlisted MSM, many of whose promoters are based offshore. But there has been continuous jousting between Sony Pictures and the minority Indian partners since the company’s inception. Sony Corporation does not enter into joint ventures as a policy. However, Sony Pictures Entertainment needed a JV in India because in 1995 it represented an opportunity to enter India early when the law then did not allow foreign-owned broadcasting companies. But the relationship between Atlas Equifinn and the Indian investors has been far from easy

With Sony and Atlas at loggerheads, it was Dasgupta’s job to play the balancing act. “He was sometimes the good guy, sometimes the bad. Kunal kept telling Kaplan that he was the only one who could handle the Indians (promoters). And Kaplan believed Dasgupta for quite a while,” says Chris McDonald, currently CEO of Ten Sports and a veteran of cricket broadcasting.


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

March 05, 2009

Can RBI correct its mistake on interest rates?

It was interesting to see the Reserve Bank of India's tripping up on interest rates featuring in this video of a lecture by Harvard Economics Professor Martin Feldstein on the US-triggered global economic crisis. Despite the goof up on the interest rate front, the Prof. feels quite optimistic about the prospects for the Indian economy going forward.

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

March 03, 2009

Why everyone is Twittering

Here's what a venture capitalist at one of the firms that invested $35 million recently in non-revenue generating Internet & mobile app firm Twitter told The Deal.
"Most people don't realize the actual scale of Twitter," IVP general partner Todd Chaffee tells The Deal. "It already has millions of users and thousands of applications that have been built upon its platform, and the company is less than three years old. It's rare to find a company with such rapid growth, and the business is starting to accelerate now that they have hit the inflection point in their growth curve."

Here's what Jon Stewart of the Daily Show on Comedy Central thinks of Twitter's growing power.



Hat tip: The Deal


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

Floriculture: Wilting a bit

Business Today has an article on how the recession in the West is taking a toll on the Indian floriculture industry.
But for the Indian floriculture exporters, the party was over—at least for this year. This is because roses account for 99 per cent of total Indian flower exports, which, according to Agriculture and Processed Food Products Export Development Agency (APEDA), aggregated to Rs 340.14 crore ($84.49 million) in 2007-08. “Traders held back the orders due to uncertainty. One of the leading traders, who normally buys six million roses for Valentine’s Day, had firmed up orders for just one million by February 6,” says Ramakrishna Karuturi, Managing Director, Karuturi Global, one of the largest players in the industry, with a presence in both India and Africa. Adds Anne Ramesh, Chairman, Suvarna Florex, and a veteran in the industry: “Every year, we used to get firm orders for 70 per cent of the export quantity by February 1. This year, even as late as February 9, we had orders for less than 20 per cent of the volume. This meant that a huge quantity went into auction and prices, naturally, came under pressure.” If at all the exporters managed to liquidate the stocks, it was at the cost of realisation, which fell by 15-20 per cent, the sharpest decline ever since the industry began to export flowers some 15 years ago.

This development has a much larger impact on the sector as the ideal climatic condition for producing best quality roses in India is between December and March. It is only during this period that the flowers effectively compete, in quality terms, with other foreign firms in the global market and the exporters can earn maximum value. In fact, the money they make during this period helps them compensate for lower income during rest of the year. Inability to make money during the Valentine’s Day celebrations will impact the industry’s efforts to expand, develop infrastructure and experiment with newer varieties. Economies of scale are crucial to defray fixed costs. Indian farms are small and fragmented compared to those in Africa. Infrastructure facilities such as green houses, cold room and refrigerated vans need constant investments. More importantly, offering newer varieties is crucial for better prices. But it is a costly proposition as it involves paying royalty fees as high as Rs 50 a stem to the breeders. In fact, lack of new varieties is one of the reasons (apart from recession in Japan and competition from Kenya) that India lost the demanding Japanese market. In 2006-07, floriculture exports from India to Japan was Rs 325.54 crore. It crashed to Rs 32.77 crore in 2007-08.

...Local demand is good and is growing at around 15 per cent annually. The problem is the price, which is not only volatile, but half that of exported roses. “We need to build the local market in a big way. Once local demand increases, prices will move up, too,” chips in Ramesh. “I want to export out of choice and not compulsion. The domestic demand is clearly on the rise. Local orders for this year’s Valentine’s Day exceeded one million roses for us,” says Ahmed. “Domestic market growth is the key to the future,” sums up Karuturi.

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

March 02, 2009

Profile of Citi's Vikram "Boy with the Golden Touch" Pandit

New York magazine has a longish profile of Citi CEO Virkam Pandit titled "The Most Powerless Powerful Man on Wall Street". The article traces his career including via Morgan Stanley, his hedge fund Old Lane, to the present day crisis at Citi. According to the article, when Pandit was born, an astrologer told his family that “whatever this boy touches will turn to gold.”
(Robert) Rubin and Citigroup were eyeing Old Lane as an acquisition—not for high-yield returns, but for Pandit, a potential candidate to one day run Citi. In April 2007, Pandit sold Old Lane to Citi for $800 million, a price tag that boggled the minds of Wall Street observers. Pandit personally reaped a huge bounty, what amounted to $165 million in cash. With his windfall, he bought a ten-room, $17.9 million co-op apartment on Central Park West, the former home of the late actor Tony Randall. Rubin made little pretense about why Citi had spent so much money: He publicly called Pandit “a genius.”

...In September, the markets plunged along with the collapsing credit markets, and the foundation of Citigroup began to crumble. While Pandit had managed to accrue $60 billion in capital to shore up finances, it wasn’t near enough. Pandit was smart enough to know what needed to be done: He had to secure more access to cash, lots of it. As banks began to fail, he bid $1 a share for the commercial bank Wachovia, which the government was hoping to quickly marry off and save from dissolution. It was a cheap way to get access to cash deposits that could shore up Citi’s credit problems. As a deal drew near a close, Pandit appeared confident that he had achieved a much-needed victory.

Perhaps a little too confident. Pandit and Citi had relied on what amounted to the legal version of a handshake to secure the deal with Wachovia. And they dragged out the process while trying to separate Wachovia’s wealth-management division from the rest of the company, feeling it had too much overlap with Smith Barney. (Lew Kaden told a private group, “We’ve got 15,000 complainers, we don’t need 15,000 more.”) Pandit left just enough room for Wells Fargo to swoop in with a bid for $7 a share and snatch the bank out from under Citi.

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

Wall Street Meltdown - Part 2

Here's the follow up to the funny video titled "Wall Street Meltdown" - set to the soundtrack borrowed from Billy Joel's “We Didn’t Start the Fire”.



You could see Part 1 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

"Foreign investors to react to new govt's moves"

In his column for Business Standard, Akash Prakash points why the new govt's moves, post election, would be a key determinant of foreign fund flows into the Indian market.
We have to recognise that India has no God-given right to receive billions in capital; we have to make our policy framework attractive to capital, and build confidence in global financial investors that the country means business. We have to be able to convince long-term investors that we can take the hard economic decisions which are needed to sustain our long-term growth. We will have to compete for the limited capital which is available with many other attractive emerging markets. Global investors have to once again get excited about our structural growth rates and ignore the macro-vulnerabilities. I sometimes think we are too complacent, we feel investors have to be in India: While partly true for FDI, there is no such compulsion for financial capital. No investor has to be in India. Investors will only go where they see returns.

The only way to tackle the structural fiscal deficit issue is either to aggressively target our expenditure and subsidies or undertake significant disinvestment and creatively sell government assets like spectrum. In the absence of these moves we will be stuck with a double-digit deficit, high interest rates, poor infrastructure and a potential sovereign credit downgrade. We could easily spin into a negative loop, with the poor fiscal causing a credit downgrade, which would further spook investors, reduce capital inflows, lower growth, spike rates —and the cycle would feed on itself.

However, lest I sound too pessimistic, all is not lost. If the new government moves ahead decisively to tackle the fiscal and delivers on second generation reforms in areas of education, labour policy, financial system etc, then we can regain investor confidence and claim our rightful share of global capital flows.

India is actually very well-positioned for the new post-US consumption world. We are a large economy with very little dependence on exports. Consumption is about 65 per cent of the economy, our demographics suggest it will remain strong. Our banking system is solvent. Capital investment will lead to huge productivity gains. We have good entrepreneurs and as the government share of the economy falls, there are huge growth opportunities in the domestic market. We do not need a growth model change like in China, which has to move away from exports/capital investment and towards consumption as its growth driver.

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

March 01, 2009

Capvent China-India Private Equity Summit 2009

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CAPVENT (www.capvent.com), a global Fund of Funds organization and an active investor in China and India is organizing its 2nd Annual China-India Private Equity Summit in Goa from April 01-03 2009 (http://www.capvent.com/conf-08/index.html). Leading Fund managers from China, India and other Asian and western markets will be attending the Summit.

The main topics of discussion of the Summit will be:

Planning for Post Crunch Scenario: The world is a dramatically changed place since last year. While touted as the new global growth engines until 2007, today investors are seeking a high premium on investments in China and India. As growth slows down in the world’s two growth engines, what changes do PE investors anticipate in their investment horizon and how are they adapting to these changes?

Business Models and Opportunities in China and India: The investment opportunities, new business models, and opportunities for synergies evolving in specific sectors in China and India such as Food & Agribusiness, Education, Consumption, Manufacturing, Semiconductor, Infrastructure, Clean Technology, Pharma & Healthcare etc.

Difference in PE in China and India from US/Europe: The private equity model has evolved to match the market requirements in China and India and differs significantly from its western counterpart in terms of control over portfolio companies, use of leverage, etc. This forum will talk about increasing buyout activity, increased control and covenants, operating partner models and sector/regional focused funds in China and India.

For details/ registration, contact
Aarti Koya: ak@capvent.com/ Tel: +91 22 26489551/2
Bernice Almeida: ba@capvent.com/ Tel: +91 832 6647331/2