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August 29, 2011

International hotel chains target mid-market

Extract from Business Today article
A range of leading global hotel chains have planned massive investments in India's midmarket segment - or hotels with a room tariff of around $100 (Rs 4,500) per night in big Indian cities - in the next four years. Starwood Hotels and Resorts Worldwide, which owns brands like Le Meridien and Sheraton, intends to set up 100 hotels in India by 2015. It already has 32, most of them five-star brands like The Luxury Collection, Le Meridien and W, but its current thrust is overwhelmingly on its midmarket brands like Aloft or Four Points by Sheraton. "India is our fastest-growing market after China," says Frits Van Paasschen, President and CEO, Starwood Hotels.

...Accor, another top global hotel chain, which at present has nine hotels in India under the brands Mercure, Ibis and Novotel, plans to raise the number to 90 by 2015. Though some of its five-star brands will also make their debut in India this year, Accor is pushing hard its budget and mid-market brands, Ibis and Novotel: seven new Ibis hotels will open this year, 13 more Novotel hotels in the next three years. It has also set up an investment fund with global travel services firm Interglobe to further its India programme.

...Eschewing five-star indulgences and deluxe amenities, mid-market hotels - a notch above budget or economy hotels - offer clean, comfortable rooms equipped with TV and Internet, and breakfast included in the room tariff. The total current shortage of rooms has been estimated at 150,000 by the tourism ministry, according to the Deloitte report, most of it in the mid-market segment. Just 15 per cent of the existing hotel rooms in India fall in the mid-market segment, compared to 43 per cent in the United States and 35 per cent in Britain. "The room supply structure in India is like an inverted pyramid," says Patu Keswani, founder of the indigenous Lemon Tree brand of mid-market hotels. "There are more five-star rooms, though rising demand is in the mid scale sector."

Venture Intelligence is 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.

"Thought for Food"

Business Today has an article
on the aggressive expansion by MNC food services firms like Sodexho and Compass Group in India's food contract and support services sector.

Venture Intelligence is 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.

"A Stake In Everyman's Dreams"

Business Today has a profile of Ventureast's Micro Equity Fund which invests in a variety of small businesses that don't get looked at by traditional VC investors.

The fund has so far invested into companies like Akshara Print Forms Pvt. Ltd, a manufacturer of pre-printed business forms and stationery such; Murugesan Silver Casting Works, a manufacturer of jewellery based; Rex Miller Garments, a garment manufacturer; Studio Essential, a unisex salon and V Cube Automations, which markets a device that automatically turns off motors pumping water into overhead tanks when they are full.

"These entrepreneurs are often from the lower middle class, with limited savings and little parental help. Their personal assets are secured with banks against working capital loans. They also take personal loans at high interest rates to make up for the deficit," says Sarath Naru, founder and managing partner of VenturEast, a venture capital fund.

.."Suppose a microfinance institution has $100 million (Rs 450 crore). It will disburse it among thousands of impoverished people, while a typical venture capitalist will, perhaps, invest the same amount in 20 enterprises. We will look at financing a few hundred people," explains Naru. Adds Snigdha Rao, the fund's chief operating officer: "The people we target do not have unique business propositions. They belong to an eco-system where hundreds like them compete for attention. Their businesses often survive on volumes for which they need to be adequately capitalised."

Rao and her team have had to face their share of challenges, beginning with the shortlisting of clients. "It took us six months to exercise due diligence to get our first investee and two years to get the first five clients," says Rao. The experience provided important lessons to the team. "Now the evaluation process takes just 30-45 days," says Rao.

...Over the next 12 months, Naru hopes to get a working model ready for every type of business. After that, it will be 'plug and play', he says.


Venture Intelligence is 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.

August 25, 2011

"The good and the bad of IT firms listing in the US"

Extracts from article by Sudheer Kuppam of Intel Capital in The Mint

Investor frenzy around the anticipated future listing of other Internet category leaders, such as Groupon (deal-of-the-day site) and Facebook (social media), is at a level not seen since 2000. While some debate that this is a sign of a tech bubble, the fact remains that many of these business models have generated unprecedented revenue growth.

It seems US investors understand the dynamics of investing for growth versus profitability, to claim and retain a leadership position in any given category. The primary reason for considering a US listing for Indian Internet and social media companies is that US investors understand the risk-return profile of these deals and can price them better than Indian investors.

The US listings of Chinese Internet companies Dangdang (an online retailer), Renren (a social networking site) and Youku (a video site) have vastly exceeded expectations, and this data can now be used as a proxy benchmark for Indian companies.

The biggest obstacles to a listing in the US are the legal and tax implications of changes to the shareholding structure of a company. Particular care has to be taken with respect to tax implications for company founders and Indian investors as the combination of restructuring and a share sale can trigger taxable events

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 electronic security products firm Zicom

Economic Times has a profile of the entrepreneurial journey of the founders of listed electronic security technology firm Zicom Security Systems 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

Group Buying in Real Estate

Extract from The Economic Times article
Group buying is typically a good strategy, be it for travel deals or buying consumer durables, as it can help you get discounts ranging from 5% to 25%. More recently, companies such as Groffer.com and Home Buyers Combine (HBC) have taken the lead in extending this principle to real estate.

...Why do developers offer such attractive deals to group buying firms when they are unwilling to do the same for standalone buyers even as a bait during a slump? It's simple. Group purchasing brings a ready, not to forget substantial, cash flow to the developer and simultaneously generates business without him having to advertise any kind of discount. It's similar to the set-up that developers share with speculators who generally buy in bulk. Such investors are able to get discounts of 30-40% since they come in at a stage when the project has not yet started and typically pay 50% of the property's value upfront and in cash. Group buying companies prove more beneficial for developers as the latter get away with providing lesser discounts to them.

According to Sandeep Reddy, co-founder of Groffr.com, discounts on group buying vary from 5-30% depending on the location of a project and its construction stage. "Consider the pre-launch stage, when future sales are uncertain. This is the time we're able to get the maximum discounts, ranging between 20% and 30%," says Reddy. The developers, on the other hand, enjoy a guaranteed number of flats sold, which reduces the risk quotient substantially for them. Similarly, as the construction is nearly complete and most of the sales are done, developers need help in clearing out the remaining flats and there is a high possibility of a good group discount.


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 KKR 's Sanjay Nayyar on mezz funding

Extracts from the Economic Times interview
As firms like Everstone and Goldman Sachs, or Apollo and ICICI get more active, we will see the growth of a mezzanine market.

We in KKR are in no hurry and will focus on quality deals. There will be an increasing need for alternate capital and we see that even the government is relaxing norms to facilitate capital-raising. We have just had the new takeover code, relaxation of ECB norms and we might see some headway on the FDI side too. These are all positives to ensure long-term capital flow into the economy.

We are dealing with promoter/companies with who you need to identify the best terms as they have many options. At the higher end of credits you have lesser bargaining power. But we make sure we structure the deal in a way that the company pays a minimum coupon, with some kind of floor to total returns and sharing some upside, driven by EBIDTA and equity. We find this as meeting both parties' objectives. So we have invested in companies with whom we have equity and also there are companies who prefer to opt for debt capital.

It won't increase the demand of credit but it will institutionalise the process. We are looking to establish an alternate asset class. What's prevalent nowadays is promoter financing at two times share pledge. So what we want to do is institutionalise the mezzanine market in the country at holding company and operational company level. This is how it began in the US a few years ago, and it would be a fresh source of capital in addition to banks. A lot of mid-size companies will need this as banks cannot always lend to them because of unsecured lending limit or capital market limits. In the long run, we can also develop a secondary market space, but it is a long-term game plan. And the regulators should be happy as this funding goes into creating long-term assets rather than just capital market activity or real estate.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Deal Alert: Multiples invests in drilling equipment firm Sara Sae

Edited excerpts from the Press Release

Multiples Private Equity has made an investment in Sara Sae Pvt. Ltd. (earlier know as NOV Sara), a Dehradun-based manufacturer of drilling equipment. The financing will be used for the buyout of the 76% held in the company by National Oilwell Varco (NOV) in the company and to fund its growth plans. Sara Sae will enter the oil field equipment services business and also expand into other high potential product lines. Avendus Capital was the financial advisor to Sara Sae and its promoters.

Founded by its Chairman V.K.Dhawan in 1980, Sara Sae manufactures hi-tech drilling equipment and jack-up rigs like BPO Acculators, hydraulic tongs, hammer unions and swivel joints. The company has manufacturing facilities at Dehradun and Faridabad and a sales cum warehouse setup in Houston, USA. Exports account for more than 85% of the turnover of the company. In August 2007, National Oilwell Varco, which is a global drilling equipment company, acquired a 76% stake in the company, post which it was renamed as NOV Sara.

his is the first investment for Multiples Private Equity Fund, which has recently raised its maiden fund from reputed international and local investors. Renuka Ramnath, CEO of Multiples said “Sara fits in completely with Multiples investment philosophy of backing proven entrepreneurs with products and services which can match the best global standards.” Preet Mohan Singh, Executive Director at Avendus said, “On the back of its technical prowess, Sara enjoys a very unique position in the global oil field equipment market which is dominated by large players. This investment will help them further strengthen their position and implement their growth plans”.

August 24, 2011

Deal Alert: Nexus Ventures leads $12-M 2nd round funding for Druva Software

Edited extracts from the Press Release:

Enterprise laptop backup and retrieval software firm Druva has received $12 million in a Series B round of funding led by Nexus Venture Partners with participation from existing investor Sequoia Capital India. The funding will be used to expand both the product offering and sales and marketing in North America, EMEA and Asia Pacific.

“As the explosion of data continues, and so does proliferation of endpoint device types and the mobility of the workforce, Druva has demonstrated a unique capability to address the challenges associated with enterprise backup and endpoint data protection,” said Jishnu Bhattacharjee, Principal, Nexus Venture Partners. “Druva's disruptive innovation reduces the storage footprint and bandwidth requirement for backup by orders of magnitude compared to other industry solutions. With wide adoption of its on-premise and cloud-based solutions, the fast-growing company is racking up an impressive list of reference customers. We are very excited to partner with the Druva team to help create the next standard in enterprise backup.”

“We are very impressed with Druva's early success in over a dozen countries, the foundation of which is a superior technical approach to backup and an enterprise-grade product that is very easy to use,” said Shailendra Singh, Managing Director at Sequoia Capital. “Even more, the team has done a tremendous job in the last two years in creating a cutting-edge product suite that includes on-premise and private-cloud-based enterprise backup, support for mobile devices, and remote data-protection features that are unmatched in the industry. We now expect the company to invest significantly in sales and marketing to grow the business in what is a high-growth segment of the backup industry and a multi-billion-dollar market opportunity.”

Druva, founded in 2007, has amassed more than 750 customers and protects more than 300,000 endpoints worldwide. Its InSync product is an industry-first application that delivers near-instantaneous automated backups of laptop computers – with ten times the speed of competitive offerings – while enabling simple one-click restores of any file or backup volume from a Web browser or iPhone/iPad/Android device. The product offers unobtrusive backups over any network – LAN, WAN or VPN – and is WAN-optimized for the mobile user. InSync’s global, source-based deduplication reduces bandwidth and storage by 90 percent while providing 100 percent accuracy for Microsoft Outlook and Office applications.

“Most solutions providing backup for data stored on endpoint devices don’t offer an optimized solution that is capable of scaling to meet the ever-changing needs of a growing enterprise,” said Jaspreet Singh, CEO of Druva. “VCs invested in Druva because we have demonstrated the ability to deliver an unmatched solution and have the vision to deliver even greater value in the near future. This round of funding allows us to expand our product portfolio and footprint in existing markets and penetrate new markets.”

From the Venture Intelligence PE Deal database: The company had received $5 million in an initial round of funding in March 2010 from Sequoia Capital India and the Indian Angel Network.

About Nexus Venture Partners

Nexus Venture Partners (www.nexusvp.com) is India's leading venture capital fund, with offices in India and Silicon Valley. It has $320m under management and an active portfolio of over 30 companies across technology, internet, media, consumer, business services and rural sectors. The Nexus team plays an active role in helping entrepreneurs and management teams build market leading businesses. Some of the companies that Nexus has invested in include Cloud.com (acquired by Citrix), Gluster (Open source storage), Pubmatic (Publisher Ad revenue optimization), DimDim (Open Source Web Conferencing acquired by Salesforce.com), snapdeal.com (ecommerce), Mapmyindia (Digital Navigation), Netmagic (Managed Services and Cloud), Komli (Online ad network), Deccan Pharma (Neutraceuticals), Prana (Animation services), Suminter (Organic farming) and Yebhi (E-commerce). Investors in Nexus include leading university endowments, foundations and sovereign funds.

August 10, 2011

August 04, 2011

New Fund Announcement: WestBridge Crossover Fund raises $500 million

WestBridge Capital today announced that it has successfully raised a new $500 million investment fund, WestBridge Crossover Fund, LLC. The Fund has been fully subscribed and is not open to new investors.

The new fund, a long-term investment vehicle, will invest in both public as well as later stage private companies. The WestBridge team’s four advisory principals – KP Balaraj, Sumir Chadha, Sandeep Singhal and SK Jain - have successfully invested in India for more than a decade, and enjoy a track record of success at the top of the Indian private equity industry.

Investors in the WestBridge Crossover Fund include leading university endowments and major foundations.

About WestBridge Capital:

WestBridge Capital is a leading investment firm, with a strong track record of success at the very top of the private equity industry in India. WestBridge is a long term investor and an active partner in companies that are market leaders with strong defensible business models, led by ethical and transparent management teams. WestBridge’s sectors of interest include financial services, consumer services, healthcare and IT.

Some of the companies that the WestBridge team has successfully invested in include: Applabs, Celon Labs, Coffee Day, Comviva, Eclerx, Equitas, Indecomm, InfoEdge, Interactive Avenues, JustDial, Dr Lal Pathlabs, GlobalLogic, Mannapuram, Pangea3, Paras, QuickHeal, Tutorvista, Nazara, StarHealth, StoveKraft, Vasan Healthcare, SKS Microfinance and Via.

August 01, 2011

AZB & Partners, Ernst & Young, Avendus Top H1’ 2011 League Tables

Corporate law firm AZB & Partners continues to top the Venture Intelligence India League Tables as the Most Active Legal Advisor for both Private Equity and M&A deals – advising a total of 51 transactions - in the first six months of 2011. Ernst & Young topped the Most Active Transaction Advisor Table under Private Equity and Avendus Capital topped as the Most Active Transaction Advisor under M&A for the six months ended June 2011.

The Venture Intelligence League Tables, the first such initiative exclusively tracking transactions involving India-based companies, are based on volume of PE and M&A transactions advised by Transaction and Legal Advisory firms.

Private Equity Deals


Among PE transactions, AZB advised 30 deals during the period including Bain Capital’s investment in Hero Investments and the investment by GIC in GVK Energy. Other legal advisors who advised a significant number of PE transactions during the period include Indus Law with 22 deals and ALMT Legal with 16 deals. Nishith Desai Associates and Trilegal advised 9 deals each, while DSK Legal and Khaitan & Co. advised 8 deals each.

Ernst & Young advised 9 PE deals during the period, including Sun-Apollo’s investment in Parsvnath Developers and Kitara Capital’s investment in TVS Automobile Solutions. Other transaction advisors who advised a significant number of PE deals during the six months ended June 10 include Avendus Capital (with 4 deals) and o3 Capital and Religare (with 2 deals each).

M&A deals

Among M&A transactions, AZB advised 21 deals during the period, including the Pearson’s acquisition of TutorVista and Vodafone’s acquisition of Vodafone Essar. Other legal advisors who advised a significant number of M&A transactions during the six months ended June ‘11 include Khaitan & Co. (15) ALMT Legal and DSK Legal (7 deals each) and J Sagar Associates with 6 deals .

Avendus Capital advised 8 M&A deals during H1’11 including the iGate Global Solutions’ acquisition of Patni Computers and Serco’s acquisition of Intelenet. Other transaction advisors who had advised a significant number of M&A deals during the six months ended June 11 include PwC (4), Ernst & Young (5) and MAPE (3).

The full league tables can be viewed online at http://ventureintelligence.in/league.htm

About Venture Intelligence

Venture Intelligence, a division of Chennai, India-based TSJ Media Pvt. Ltd., is the leading provider of data and analysis on Private Equity and M&A transactions in India. For more information, please visit http://www.ventureintelligence.in