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May 30, 2009

Venuture Intelligence is looking for Sales & Marketing Managers

As a reader of this blog, you would be aware that Venture Intelligence has been (since 2002) a leading provider of information and analysis on Private Equity and M&A deals in India. Our research and analysis is used extensively by PE/VC investors, deal industry practitioners and the media. We also provide a bouquet of services to entrepreneurs.

We are now looking to hire experienced (2+ years) Sales & Marketing managers for our existing and new products. In case you are interested in applying, drop us a short note about yourself (<1,000 words; no attachments please!) by email to arun@ventureintelligence.in.

Please note that, if interested in your profile, we will revert with a short written assignment that you need to complete before we will consider your resume.

Thanks!

"One Way Ride for Commidities: Down"

Morgan Stanley's Ruchir Sharma was recently given the cover of Newsweek to explain in detail why commodity prices can only head down in the long term.

Yet the fact is that the world has faced all these issues before, and for the past 200 years, commodity prices have been trending downwards, thanks to new technologies, greater efficiency in extraction and the substitution of one commodity for another (which explains the high correlation between commodities prices). Bank Credit Analyst, a research firm based in Montreal, has data showing major industrial commodity prices are 75 percent below where they were in the year 1800, after adjusting for inflation. Despite all the worries over "peak oil," the fact is that the major bear markets in oil have been demand, rather than supply led. And when demand eventually picks up, there's usually some new alternative (nuclear energy, natural gas, green technologies) waiting to pick up some of the slack. The real price of oil today is now at the same level as in 1976 and, before that, in the 1870s, when oil was first put to mass use in the United States. This long-term price decline is due mainly to the constant discovery of new fields and greater energy efficiency, making nonsense of the idea that the world is rapidly running out of oil. The experience of the 1980s is instructive in the current context as well.

Japan and Europe continued to grow strongly in the 1980s, and yet oil consumption remained essentially flat through that decade as both the regions strived to achieve better fuel efficiency and switched to alternative sources of energy, such as nuclear power. Similarly, 90 percent of the growth in new oil capacity since 2004 has come from biofuels, synthetic oil and natural-gas liquids. As countries get richer, their per capita consumption of commodities declines. It's a myth, then, that the boom in China and India will inexorably drive up oil and other commodity prices.

...The reason oil prices did not spike higher is simple: demand for any commodity is price-elastic, which means that once the price goes too high, consumers stop buying it or make heroic efforts to find a substitute. In the 1960s and '70s, the revival of manufacturing in Japan and Europe propelled prices for industrial metals like copper and nickel higher, until the buyers couldn't take it anymore. Total spending on copper peaked at 0.45 percent of the global economy in the mid-1960s, and on nickel at 0.2 percent in the 1970s. Once copper prices got too high, aluminum was used as a substitute in many functions. As commodities are inputs in themselves, they can justify only a certain share of the total costs before it becomes prohibitive to consume the end product.

...(History) shows that only one commodity rises in an inflationary environment: gold. Other commodity prices tend to bloom only during the mature stages of a boom when the global economy overheats and demand briefly exceeds supply. At the moment, supply for nearly all commodities far outweighs demand, and likely will decline for at least the next couple of 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

May 27, 2009

Towards better LP meets

"Super LP" Chris Douvos has some "crowd sourced" suggestions for GPs on how to organize better annual LP meets.
* Sometimes it's hard to get a really good sense for company progress, especially during the staccato sprint through 30 company slides in 15 minutes. Sure, the EBBS (Earnings Before, ahem, Bad Stuff) margin at one firm is up 23 basis points from last year, but how is that company doing? Sometimes the torrent of numbers crowds out the analysis and handwriting atrophy that arises from all the typing we do prevents us from scribbling notes as fast as we once did. A couple of folks suggested using a consistent green/yellow/red rating system for portfolio company assessment. The slides could even break out the ratings along critical dimensions: strategic positioning, team development, execution, progress to exit, etc.

* I love fund CFOs and I appreciate that they should get some airtime, but there are some who do little more than recap the data from the most recent quarterly report. Assume we read the QR; please peer instead into your crystal ball to tell us something about expectations for the fund going forward. The best such discussions explore what you need to believe to get the fund to a given return threshold.

And a good annual meeting can improve intimacy. In addition to the obvious information gathering, the tone of the meeting and what is not said can be as important as what is said. When I was surveying folks, a handful of LPs wished out loud that some of their GPs had showed some humility and had taken more responsibility for their portfolio struggles, rather than blaming "the environment." Even in the best of times, the markets can be a humbling place, sometimes favoring the lucky, but mediocre investor at the expense of the unlucky but good one. A bit of candor and self-reflection goes a long way towards creating durable goodwill while obfuscation and buck-passing makes people crabby. Don't be afraid of bad news; it's an opportunity give your partners a peek behind the curtain. After all, we're in this together

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

May 25, 2009

Goldman evolves alternative to bond ratings

From the Reuters report on Goldman Sachs Asset Management's (GSAM) move to use credit market movements - instead of ratings from agencies like S&P and Moody's - to assess the credit risk of corporate bonds:
GSAM's approach is to segment credit spreads into five groups, to assess how issuers are trading in relation to their peers, (GSM global co-head of fixed income and currency Andrew Wilson) told Reuters in an interview. "So the widest 20 percent are the most risky, regardless of the rating," he said. "That has helped us identify risky names and react in a timely fashion, as the market is a much better guide. Credit spreads widen immediately on bad news, whereas it might take a while for the ratings agencies to reflect that."

... Wilson said that relying on names which are rated 'triple B' and above - the traditional way of framing investment grade mandates - had not been that helpful. "Ratings agencies are good at static analysis but they are less good at forecasting," he said.

Related: Debate at FT Alphaville on GSAM's move.


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

May 22, 2009

What could go wrong?

Now that the stock markets have received the positive surprise from the elections with such a strong thumbs up, the focus shifts to whether the new government delivers on the heightened expectations. Writing in the Business Standard, Akash Prakash of Amansa Capital points out what - if not delivered upon - could end up disappointing the stock markets.
What can go wrong? Obviously, the new government can fail to act and continue dithering on policy action. If we see no action and just continued setting up of committees and groups of ministers, then that would be extremely unfortunate and set us up for huge disappointment.

Sign posts that investors will be using to calibrate the heightened expectations begin with the new cabinet....The next important milestone will be the budget itself. What is the game plan to tackle fiscal issues, better targeting of subsidies, infrastructure funding, the GST, etc?

Independent of the government being indecisive and frittering away the mandate, the only other negative in this scenario is the huge and almost inexhaustible supply of paper in the pipeline. Corporate India has already raised about $2 billion in the last 10 days, and the tap is now wide open. Combined with some disinvestment from the government, we could easily see $8-10 billion being raised in equity capital this year. This will act as a natural cap on the markets, though it will be great in boosting domestic capital formation and growth.

Valuations are not really cheap either, though earnings are likely to get upgraded, and this can also cap the markets upside, at least in the short term.


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

May 20, 2009

“Private Equity firms scouting Indian hinterland for Healthcare investment opportunities”

Diagnostic Services, Medical Devices, Hospital Chains and Wellness Products to attract the most investments, a survey of PE & VC investors by research firm Venture Intelligence reveals.

Private Equity and Venture Capital investors, who have invested over $2 billion into Healthcare & Life Sciences (HLS) companies in India over the last five years, are keen to step up the pace of investments in this industry. Over 42% of PE & VC investors surveyed by Venture Intelligence, a leading research firm focused on Private Equity and M&A deal activity, felt there was a strong opportunity to tap the market for healthcare services in semi-urban and rural areas. The investors also identified Diagnostic Services, Medical Devices / Equipment, Hospital Chains and Wellness Products and Services as their favorite sectors for investments within the HLS industry. The detailed results of the poll will feature in the Venture Intelligence “Private Equity Pulse on Healthcare & Life Sciences” report to be published next month.

“Given the fragmented nature of both the hospitals and pharmaceuticals sectors, investors also see potential for tapping into consolidation opportunities in partnership with growth-oriented entrepreneurs,” points out Mr. Arun Natarajan, CEO of Venture Intelligence. “The HLS industry did not participate significantly in the bull phase of the Indian public and private equity markets during 2005-2007. With about 20% of new PE/VC fund corpuses expected to be invested into HLS going forward, a revival is clearly on the cards,” he adds.

Despite the overall optimism, PE/VC firms also have some specific concerns relating to investments in the HLS industry. The Venture Intelligence poll lists long gestation periods, scalability and talent shortage as among the top concerns for investors when it comes to the healthcare sector. In the Life Sciences segment, investors’ concerns are focused on the high risk of failure (especially in new drug R&D), stiff competition from inside and outside India, as well as patent-related issues. Lack of clarity in regulations and corporate governance standards were listed as common concerns across the industry.

Apart from the survey results, the “PE Pulse on HLS” report will feature articles by top PE/VC funds, advisory firms and leading corporate law firms. For the convenience of entrepreneurs, the report will also provide a listing of Private Equity and Venture Capital funds keen to invest in this industry. A directory of investment advisory firms, who provide value-added intermediation services with a special focus on HLS, will also be included.

For more information, please contact Venture Intelligence at info@ventureintelligence.in or +91-44-45534303.

About Venture Intelligence

Venture Intelligence, a division of Chennai, India-based TSJ Media Pvt. Ltd., is the leading source of data and analysis on Private Equity, Venture Capital and M&A deals in India. Our products include Databases, Newsletters and Reports - all focused on tracking deal activity in India. Our subscribers include top executives at Private Equity and Venture Capital Firms, Investment Banks, Limited Partners, Law Firms, HR Services Firms and Consulting Firms in India, USA, and the Asia-Pacific. For more information, visit http://www.ventureintelligence.in.

May 17, 2009

Investors rejoice the end of Third, Fourth and other Affronts

The 2009 election results, which have largely crushed the pipedreams of the left parties and other blackmail-focused riff-raffs at the national level, has delighted stock market investors which is evident from CNBC-TV18's two part video interview with Rakesh Jhunjhunwala of Rare Enterprises, Manish Chokani of Enam and Samir Arora of Helios.
Jhunjhunwala: Let us look at the positives one from the market point of view, one from the long-term point of view. I think the biggest positive is Indian democracy is now maturing. I heard MJ Akbar say on TV channel that people are voting for governance -Muslims are not voting for Muslims, Hindus are not voting for Hindus, people are voting for governance. Where you get good governance you are getting votes.

...Arora: I think this seriously is a big thing for India to imagine to not see Mr. Karat (General Secretary of the CPI-M) on TV that itself is worth 500 points...But in general this change in outlook will be bigger.

Chokhani:If I am a fund manager who has to allocate money over here, I want relative out performance and these are typically the four sectors which will outperform – banks, infrastructure, telecom, and real estate in my view and in our house view.


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

May 15, 2009

Masters of 'tuck in' deals

At a time when giant busieness groups are struggling with their global acquisitions, Business Today has a cover story on a group of 10 mid-sized firms who have successfully pulled of several outbound deals.
Now cut to a company like the over Rs 3,500-crore agrochemicals firm United Phosphorus Ltd (UPL). It hasn’t made any billion-dollar deals, but the 26 acquisitions (including products) it has pulled off since 1994—a decade in which going global was considered extreme rather than the norm— would easily cross that number. UPL is unlikely to figure in consultants’ case studies of bigbang acquisitions. But consider what UPL has achieved: A global footprint that covers 23 countries (which in turn allows it to address customers in 86 countries), a broad range of operations that includes agrochemicals, seeds and biotechnology and significant entry barriers in countries that it has entered. And yes, most of its buyouts are working well. Reason? UPL doesn’t wait for more than three years for them to yield results. They usually do.

Like UPL, a host of Indian companies have over the years made sub-billion-dollar acquisitions that have begun yielding benefits that go beyond size and scale. A few have found assured supplies of raw materials, some have been able to lay their hands on high-end talent, and others have been able to ride on new opportunities that would have taken years to start from scratch. Many of these companies operating in niche areas have gone on to become world leaders in their respective areas via the buyout route. Rain Commodities, for instance, has become the world’s largest maker of calcined petroleum coke, a raw material that’s needed to make aluminium and titanium dioxide.

The companies BT has looked at have made acquisitions in the $10 million-$600 million range. The smaller ticket sizes have ensured that they haven’t burnt holes in their balance sheets. However, many of these firms have used foreign currency convertible bonds (FCCBs) to fund their buyouts and a few of them will be challenged at conversion time if the stock markets continue to stay bearish.

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

Impact of slowdown on the Media sector

Businessworld has an article on the impact of the slowdown on media industry.



On television, the advertising volume in November last year fell sharply to 45.31 million seconds compared to the previous month’s 55.37 million seconds — a fall of 18 per cent in a single month. The print industry’s pain was worse. From a high of 20.99 million column centimetres of advertising in October last, ads fell 45 per cent to just 11.59 centimetres in November. Radio advertising, too, declined by 30 per cent from 9,176 seconds in October to 6,515 seconds in November.

The actual fall in ad revenue would be far larger considering that advertising rates have crashed between 15 and 30 per cent across all mediums. From November onwards, too, television advertising has continued to decline marginally. On the other hand, both print and radio ad volumes have been inching up. The April-May Lok Sabha elections are, however, expected to arrest the downward trend. “We expect an infusion of Rs 800 crore – Rs 500 crore in national media and Rs 300 crore on regional platforms,” TAM Media’s CEO L.V. Krishnan said.

...What is the forecast for calendar 2009? Estimates vary. The Pitch-Madison survey expects a flat scenario. After a heady 17 per cent growth to Rs 20,717 crore, total ad revenues are expected to inch up just 2 per cent in 2009. WPP’s media arm Group M on the other hand is more optimistic forecasting a 8.9 per cent growth to Rs 24,900 crore by the end of 2009. In this, television is expected to grow faster at 11.4 per cent to Rs 9,353 crore as compared to the print medium that is expected to log a 7.4 per cent growth rate to inch up to Rs 10,770 crore.

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

Measuring the Middle Class

Rajesh Shukla of NCAER has an article in the Economic Times with the latest statistics tracking the Great Indian Middle Class.
Accordingly, the group that was classified as middle class (households with annual incomes of Rs 2 to Rs 10 lakh at 2001-02 prices) in 1995-96 was just 25 million-strong, has grown to 126 million in 2007-08 and further 153 million by end the decade. Our estimates show that in 2001-02, middle class households were around 6% of all Indian population and expected to grow to 13% in 2009-10, an annual growth rate of nearly 13%.

More importantly, while the middle class forms just 11.4% in 2007-08 of the total Indian households its share of total income is nearly one-fourth and saves more than 55% of its income. The growing clout of the middle class becomes even more apparent when one looks at the ownership patterns of household goods. Nearly 49% of all cars are owned by the middle class, compared to just 7% by the rich. Similarly, 53% of all airconditioners are owned by middle class homes. Nearly 46% of all credit cards are to be found in middle class households.

...While only 24% of rural middle class homes own a car, more than 40% do so in urban India. Televisions too are to be found in 90% of all urban middle class homes compared to 62% in rural middle class homes. Though this is an opportunity for marketers, it’s clear that addressing the middle class with a one-size-fits-all mindset is unlikely to work.

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

May 11, 2009

Analysis of K-12 market for multimedia content

Sanjoy Sanyal has an interesting post analysing the market for multimedia content for schools in the context of a new entrant: the Manipal Group.
The key proposition is simple enough: use technology to deliver top quality standardized learning at low cost independent of the physical location of the student. It is a thought that has been at the core of technology-aided learning. There is considerable interest in this market. Educomp with its Smart class, Everonn with its ViTELs, NIIT with its Interactive Classroom and IL&FS Educational & Technology Services are direct competitors. Smart class accounted for 60% of Educomp’s Rs. 145 cr (USD 29 mil.) revenue in the quarter ended Dec 09 (source: website).

How scalable is this business? Consider the following facts.
India has about a 1 million schools out of which 75,000 are private schools. The private schools are further classified into:
• Approx. 30,000 Government aided schools with an average monthly fee of Rs. 450 (USD 9).
• Approx. 30,000 un-aided “standard” private schools with an average monthly of Rs. 750 (USD 15)
• Approx 15000 un-aided “premium” schools with monthly fee upwards of Rs, 1250 (USD 25)

At this point, the key addressable market is the 45,000 private unaided schools. According to a IDFC-SSKI report the reach of the key players is about 1000 schools each for Educomp and NIIT and 1000 schools for Everonn and IL&FS combined. That leaves a lot of room for growth.

Incidentally, my company recently produced a report on the Private Equity investors' take on the Education market. You can download the free report 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