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September 24, 2009

"SKS struggling with balance between social & commercial goals"

Forbes India has an article, accompanied by an interview with founder Vikram Akula, on how SKS Microfinance is struggling to strike a balance between its soscial and commercial goals.
Ever since private capital began to course through its veins, the culture at SKS too has started transforming. With Akula often visiting the US, the second-rung leadership which ran the company brought in lot more changes. Somos Krishnan, who spent nearly a year and half at the MFI, recalls how the informal mojo gave way to the stifling air of buttoned-down formality. “We often had debates about whether self-congratulatory emails on reaching certain milestones (number of clients) were the best ways to motivate employees.”

...“Professor Yunus believes microfinance should be a social business — you get social capital and you return no profit. Grameen Bank reaches 7 million clients and that’s amazing. On the other hand, it took Professor Yunus took 35 years to do that… Can you imagine how many generations it will take to reach 150 million poor households in India if we took that approach? We have to scale more rapidly, and only commercial capital will meet our huge funding requirements. The only way to get that is to be not only profitable but extremely profitable,” he says.

...An IPO by SKS will set crucial benchmarks for the microfinance industry. Rival Share Microfin is also considering an IPO in the next two years. This year, the company has received an equity infusion of Rs. 250 crore from investors. Udaia Kumar, managing director of Share Microfin believes investors are here to stay. “There is great need for organised forms of banking which cater to the bottom of the pyramid.”


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

September 15, 2009

Deal Alert: Manipal Group acquires Kerala-based education firm Tandem

Edited excerpts from the press release:

Manipal K-12 Education has acquired Tandem, a Kerala-based education and preparatory services provider. Tandem has a network spanning 39 centers in Kerala, Tamil Nadu and one overseas centre in Dubai and offers services primarily targeted at segments ranging from high school to the corporate training level. Centrum Capital was the sole advisor for this transaction.

Manipal K-12 currently has a chain of 30 Edurite tutorial centers in Karnataka and 6 in Kerala offering coaching for high school and entrance examinations.

September 14, 2009

Can't afford an IPL team? Buy one at KPL or MPL

Business Today has an article, titled "IPL Copycats", on new state level 20:20 teams in Karnataka and Maharashtra.
The KSCA, however, is not the first to have launched a 20-20 league of their own. The Maharashtra Cricket Association (MCA) has already done it, roping in the Sakaal Media group for the Maharashtra Premier League (MPL) in April-May this year. The MPL, with a prize money of Rs 10 lakh, had eight franchisees who played a total of 31 matches in 14 days. But the player of the tournament had to be content with two wheels, not four: a Yamaha motorcycle. The total cost of organising and playing the games was a measly Rs 1 crore.

Just as in the IPL, the MCA teams, too, have catchy names—Devgiri Emperors, Sinhagad Supremos, Sindhudurg Sailors and Torna Tigers. But, unlike the IPL’s mish-mash, no players from other states played in either league. Also, the players in the local leagues have three-year contracts and a franchisee owner has to buy all the 14 players within a budget of Rs 6 lakh.

This kept player bids at reasonable levels, compared with the bankruptcy-inviting numbers at the IPL, where the likes of Kevin Pietersen were bought for a record Rs 7.5 crore. So, Aditya Dole, the first player to be auctioned by the MCA, was bought for Rs 65,000 by Pratapgad Warriors. Ameya Shrikhande, Vishal Bhulare and Sangram Atitkar were bought for Rs 1 lakh each. The MPL had its stars: 10 players fetched over a lakh each.


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

"India to lag in outbound M&A action"

In an article for Business Today, HBR Senior Editor Anand P. Raman says companies from China, Brazil, and Russia - which are cash-rich and less leveraged than Indian companies - will take the lead in future outbound M&A transactions.
Chinese and Latin American companies will use M&A to internationalise rather than globalise. They will try to buy several businesses in the same country or in neighbouring countries instead of hankering after one company with worldwide operations...In 2008, Brazilian companies acquired 23 more enterprises to create pan-Latin American leaders, or multi-Latinas.

Three, companies will acquire more small and midsize businesses overseas instead of acquiring giants. Indian companies may not have much of a choice; they’re busy digesting the big companies they took over before the financial crisis erupted and so will focus on small and strategic acquisitions. The shift has also become perceptible in China since global acquisitions left both TCL and Lenovo with hangovers.

Emerging giants will also experiment with new ways to strike up partnerships overseas, particularly to secure raw materials in other developing countries. For instance, China’s banks have been buying stakes in or extending loans to foreign companies. China Development Bank recently lent $10 billion to Brazil’s Petrobras in exchange for a long-term supply of oil.

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 L&T's strategic investments

What's common to Kalindee Rail Nirman, Astra Microwave and City Union Bank? Answer: They have a common strategic investor: engineering conglomerate L&T. Extract from the Business Today article on L&T's investments:
The big imponderable, of course, is how ‘strategic’ are some of these purchases; do L&T’s ambitions stop at the vendor-relationship level, or would it consider going the whole hog and acquiring a majority stake in any one of these companies? Consider Kalindee Rail Nirman (Engineers), for instance, which executes signalling & telecom and gauge conversion projects for the railways. L&T’s stake in this company, via subsidiary L&T Capital Co, is precariously close to the 15 per cent threshold, at 14.9 per cent. L&T, meantime, has been sharpening its focus on the railways, and in the recent past has bagged major orders in track-laying and electrification. An acquisition of Kalindee will prove a perfect fit, and also assist a quick ramp-up in this relatively new business.

..Rather curiously, L&T has also acquired just under 5 per cent in two private banks. Does L&T, which has a non-banking finance company (NBFC) in L&T Finance, expect banking regulations to be liberalised in the near future, which would allow for corporations to have banking operations? That may be jumping the gun a bit.

Deosthalee explains that it’s only about exploiting existing synergies and not much more. Here’s how: L&T’s NBFC finances purchases of construction equipment; buyers of such equipment need services like bank guarantees, and personal loans for this purpose. That’s where the banks come into the picture. “Our objective is to have a complete offering and exploit the synergies,” says Deosthalee. By buying stakes in three southern banks—City Union, Federal and Catholic Syrian—L&T is in a position to guarantee customers services it can’t otherwise provide— like working capital and bank guarantees.

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

Five faultlines in education

Extract from the speech of Manish Sabharwal, Chairman of TeamLease, at a discussion organized by Businessworld,
There are basically five faultlines in education but the interesting part is that these five faultlines — quantity versus quality, repair versus prepare, price versus cost, funding versus delivery, and excellence versus inclusion — don’t only apply to higher education...How we handle the trade-offs in these five faultlines will actually decide the difference (between growth and underdevelopment).

...Finally, we have to deal with excellence versus inclusion. John Gardner, then secretary of education, US, asked a profound question: can we be equal and excellent at the same time? That’s an important question in the context of reservations, but now I think about it in terms of quality versus quantity — the entry gate versus the exit gate. So, you can be like the IITs and IIMs, with tight entry gates and wide open exit gates. Or you could be like the Chartered Accountants’ Institute, with the wide open entry gate and a tight exit gate.

Today in vocational training, the entry gate and the exit gate are both wide open. So the system has no efficacy. Education has two values: education has a learning value and education has a signalling value. The signalling value of vocational training is very low. I would argue that the signalling value of an AICTE-certified MBA is also pretty low beyond the top 40-50 institutions who don’t talk about accreditation — they have got an independent standing.

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

September 06, 2009

Vinod Khosla ramps up bet on cleantech

bloggingbuyouts has an article on Vinod Khosla's two newly raised cleantech funds.
While other VCs have frowned on so-called science experiment investments that explored unproven and technically difficult technologies, Khosla sees these types of investments as a core function of venture capitalists that was somehow lost, according to the New York Times article. In addition, many Silicon Valley venture capitalists have turned their backs on cleantech investing, according to VentureBeat. Venture capitalists fear that cleantech companies generally require large amounts of startup capital. High-funding demands are a clear obstacle during a time of wholesale shrinkage in the VC sector.

For his part, Khosla has not shied away from cleantech to date and, rather, has poured his own money into his own private investment fund. In that still running fund, Khosla pledges profits to charities. In the present fund, Khosla is looking for pure profits and is accepting limited partners -- that is, outside money.

The $1.1 billion actually will go to two closely related funds. The larger is a $800 million fund that will place investments of $5 million to $15 million in more established technologies. The other is a fund of $275 million that will be used to make smaller investments of $2 million in earlier stage technology companies.The fund is the largest launched since 2007 and one of the largest ever launched for cleantech. Khosla and several partners have invested hundreds of millions of their own money in the fund, a point that was likely key in attracting outside investors.

Khosla's resolve is admirable, particularly in light of the dark winds sweeping the venture capital landscape and the economic difficulties facing many cleantech companies in the photovoltaic solar cell market and biofuels sectors. For sure, a billion bucks can pick a handful of winners, particularly when Khosla has the pick of the litter in cleantech startups due to the reticence of so many of his peers.

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 vs. India in Africa

Forbes India recently had a cover story on the race by Indian and Chinese companies to set up a foothold in the Dark Continent. The package includes interview with executives with some of the early movers - including Apollo Tyres, NIIT, Tata Steel and Skipper Energy - talk about their experience and an interview with Professor Vijay Mahajan of The University of Texas at Austin and author of the book Africa Rising.
One slice of the opportunity is a middle class numbering anywhere between 350 million and 500 million, larger than India’s. And per capita income is growing. The continent clocked an impressive growth rate of 5.2 percent in 2008. Of course, with recession and a crash in commodity prices, the growth may taper to 2 percent. But its trade links with China and India hold out hope that it could recover in tandem with these countries, says a recent article in the Harvard Business Review (HBR). Besides (as Professor Vijay Mahajan) says, “When you look at [opportunities in] the world, and take out India and China, so where do you go next? The logical answer is Africa.”

But it isn’t as if the risks have disappeared. In fact, sudden regime changes, violence and logistical nightmares continue to slow down businesses. But for the most part, it remains a high-risk, high return game. “In Africa, any country depends on the leadership of the right person. Uganda, for instance, is becoming more open to foreign investment due to President Musevani who is all for an open economy and free trade,” says Madhvani.

...Indian businessmen agree that reducing the gap with the Chinese will be tough. “We are nearly five to seven years late,” admits Prashant Ruia, group CEO of Essar. “Competing with the Chinese is impossible, to be honest. They are building roads, airports and projects as a grant. They are taking a 20 year investment risk — something private companies like us cannot do. We do not have the kind of backing that the Chinese have, they are present on a much larger scale too. They have had a head start and have been there for the past 10 years,” adds Ruia. This state-driven strategy to give infrastructure and take natural resources is the hallmark of China’s African policy. Take the $9-billion deal it struck in Congo. China will build roads, rail networks, hospitals and schools in return for access to cobalt and copper.

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

Interview with IDFC PE's Luis Miranda

Outlook Profit has an interview with IDFC PE CEO Luis Miranda on recent trends in the PE space.

On Increased Due Diligence in the new environment...
We had made an investment in a company some years back assuming that gas would be available for that particular power plant. When we did the technical due diligence, the main concern was will the gas be available? We spoke to the company, we spoke to GAIL, the gas producers, the ministry, electricity board, and everyone said supplies would commence. But the reality is that the gas never came. Now it’s a separate issue that the investment actually was a very profitable one for us. But now we may not take that for granted and will seek solutions rather than just assurances. Today, possibly, we would not made that investment and, as a consequence, also that kind of returns. So, if a company says that traffic will grow at ‘ x’ amount a year, we will do a bit more of our own analysis and question that more.

...On IDFC PE's exit from GMR Energy by swapping its stake for a stake in the listed parent firm GMR Infra
Let’s put it this way, at the end of the day we have to give money back to our investors. It’s was six years since we invested in GMR Energy and the company had not come out with an IPO because it was not there in their plans. If we’d have stayed on and not swapped our stake, it would have been six years and we would have been still holding on to that investment. But there are other companies where we invested in 2005 and we are still invested. So part of it is opportunistic. If the markets help with a higher return we will take it, but otherwise we go back to what our original holding plans are.

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

September 02, 2009

Deal Alert: Sutures India to raise Rs. 35-Cr from Evolvence India Life Sciences Fund

Evolvence India Life Sciences Fund (EILSF) has committed to invest upto Rs. 35 crore in Sutures India, a Bangalore-based company specializing in the manufacture of surgical consumables.

Sutures India manufactures a range of wound closure products such as natural and synthetic absorbable and non-absorbable sutures, surgical needles, staples, tapes, hernia meshes, and disposable surgical gloves. For more information on Sutures India, visit http://www.suturesin.com

Other companies that the $150 million EILSF has invested into include Hyderabad-based pharmaceuticals firm Gland Pharma, Bangalore-based oncology hospital firm HealthCare Global Enterprises and Chennai-based pharmaceuticals company Anjan Drugs.