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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