August 20, 2015

Logistics: The "Shovels & Pickaxes" of E-Commerce Gold Rush?



Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

IT Deals Dominate M&A Landscape



Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

Snapping the Deal

It all seems to have started with Snapdeal's Kunal Bahl and Mr Ratan Tata (in Aug 2014)

     Source: NBW

And then Paytm/One97's Vijay Shekhar Sharma took it international with Alibaba's Jack Ma (Feb 2015)

     Source: FirstPost

According to Economic Times, the latest $500 million investment in Snapdeal (led by Foxconn, Alibaba and SoftBank ) - which has been reported about for several months now - faced "protracted negotiations" over the company's valuation. Another angle journalists might want to consider (for such delays) is how long it takes to synch up schedules of international personalities (who seem to call all the shots in Indian E/M-Commerce these days) to line up something like this:

     Snapdeal founders with Alibaba's Jack Ma and SoftBank's Nikesh Arora

The Venture Intelligence PE/VC Deals Database currently captures 25+ data points for  private company transactions - with valuation multiples enjoying pride of place. Going by the trend of deals getting linked to photo ops, looks like we now need to add a new multi-media field as well - titled (what else?): Deal Snap!

PS: Which Indian Entrepreneur is going to be the first to Deal Snap with the man who started it all for Indian E- & M-Commerce funding: Lee Fixel of Tiger Global?

PPS: Other Key Deal Snaps (via Google Images):

Paytm's Vijay Shekhar Sharma with Tata

Ola's Bhavish Agarwal with  Tata

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

August 18, 2015

On Indian E-Commerce Valuation

In an interview to Mint, Aswath Damodaran - the well known US-based valuations expert  - has opined that India’s e-commerce and consumer technology start-ups "may be collectively overvalued". "The size of the macro story may not justify the micro-valuations," he says.

Economic Times (in its Corporate Dossier supplement) had earlier featured the views of two local practitioners - Sharad Sharma, Angel Investor and Jacob Mathew, Founder of MAPE Advisory - on the same topic.

Sound Byte from Sharad Sharma:
"Unfortunately, due to just one individual - Lee Fixel of Tiger Global - Flipkart has gone from being a poster child to being the single biggest risk to the technology ecosystem." 

His main argument:
Right now, Flipkart is valued at about $500 per transacting user. This is comparable to what Vodafone paid for Hutch in 2007 - the most expensive mobile operator acquisition ever. Built into the Vodafone offer at that time was a belief that the hockey stick subscriber growth would happen in the coming years. And indeed, that did take place. The Vodafone subscriber base has grown from 22 mn in 2007 to 173 mn today. E-commerce players like to point to this mobile growth story to justify their current sky-high valuations. India is not China. There are only 50 mn households in India with disposable income of Rs 3 lakhs or more. And, offline retail isn't going away like landlines. It's a lot stickier than we imagine. In US, even today 10 of 11 dollars are spent offline and this share isn't shifting dramatically. Given all this, further valuation growth in Flipkart from here would be in completely uncharted territory. After all, Flipkart is already at a 2-3X multiple on GMV compared to Alibaba's 0.7X. 
Sound Byte from Jacob Mathew (quoting a friend) :
"Earlier, enterprises were about selling to consumers and giving dividend to shareholders; current mood is all about selling to shareholders and giving dividend to consumers." 
His main argument:
Valuations are too much into the future and are based on humungous assumptions. You can justify the Flipkart valuation if you assume that by 2020 the Indian online market will be $100 bn and they have 60 per cent market share and that they are making EBITDA margins. Will the current $5-6 bn market actually jump to $100 bn in 5 years? Will the leader have 60 per cent market share and that too in a market like India where not much consolidation is happening? Will the topline hold when you are charging all costs plus a small profit margin to the customers? 
Forget valuation, at times the business model itself is problematic. Will buyers pay 2 per cent commission for buying/renting a house in India where the touch point is only online? How can you use a car to home deliver restaurant food with ticket sizes of less than Rs 500/order? Just because somebody has downloaded your shopping app in his/her smart phone, can you start talking about the lifetime value of a customer? 
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

August 14, 2015

Where's the Best Growth Among Privately Held Companies?



Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

August 10, 2015

Will Private Equity Exit Party Last Till Year End?

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Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

August 06, 2015

Recommendations for Email Marketing by VCs

Anand Sanwal, Founder of US Venture Capital databased firm CB Insights, has an interesting critique of email pitches he receives from VCs (which, going by number of email types he's quoting, happens quite a lot. Ah, the US market!).  Extract:
Strategy 4: The Warning
Hey Anand,
Joe here from Scary Partners.  Love CB Insights and what you guys are doing.
I know there has been a lot of companies getting funding in your space so was wondering if you have more seriously begun to think about fundraising.  I know you’ve grown out of revenue to-date but as competitors get funded, raising might make some sense to ensure you stay ahead of them.
I would love to chat.
Thanks,
Joe

The Review 
....Cons:
For us, someone else raising doesn’t mean much. We’ve seen a bunch of companies come and go in our space with a lot more money than us. The new entrants will be the same.  And so while this email gets a response, it doesn’t do anything to frame why the firm might be an interesting partner and assumes we’ll raise out of some perceived fear from challengers.
If we were 100% motivated by fear, this pitch might work, but it doesn’t show how the firm would do anything to make us better. The pitch is effectively, some of your upstart competitors have cash. You should have cash too.
Recommendation: Solid start. Tie back why raising money from their firm would be good, i.e. “With more capital, we think we can help you scale the sales organization in a way that materially grows top line and squashes these other cockroaches.”
OR
“We think there are some interesting M&A opportunities for you the space which we think we can assist with in addition to providing you with capital.”
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

Justdial's Mani on Making Real Money Online

In an interview to Mint, local search firm Justdial's founder VSS Mani talks about building an Internet business that actually charges customers enough money to make an actual positive bottom line :
It would be fair to say that Mani comes across as a contrarian; one who doesn’t believe in the view that an e-commerce business must lose money. “JD did Rs.600 crore of revenue last year. That is equivalent to roughly Rs.60,000 crore revenue of an e-commerce company in terms of GMV,” he says. Gross merchandise value, or GMV, is a term used in online retailing to indicate total sales of merchandise through a particular marketplace over a certain time frame. "Commerce means making money. You cannot have deep discounts; you cannot buy things for Rs.100 and sell at Rs.80. Or (give) cash back." 
..."we are extremely worried about the way things are,” says Mani. “Today we have the talent pool. In the dotcom days, it was a big challenge. People used to join organizations at double or triple the salary. It is another matter they all lost their jobs in the next six months. They all quit big companies to join Internet companies and most of the time they used to while away in the canteen thinking of all kinds of domain names. That is exactly what is happening today. People are flirting with apps. It doesn’t work like that.”
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

July 27, 2015

Where Indian Private Equity investors can tread without fear - well almost!


Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

July 14, 2015

Khaitan & Co. Tops League Table for Legal Advisors to M&A Transactions in H1 2015

AZB & Partners, Shardul Amarchand Mangaldas complete the Top 3 slots

Khaitan & Co topped the Venture Intelligence League Tables for Legal Advisors to M&A transactions for the first six months of 2015 advising deals with a value tag of $2,237 million (across 14 qualifying transactions). Khaitan & Co. was followed by AZB & Partners which advised deals worth $1,970 million (across 16 deals); Shardul Amarchand Mangaldas ($1,353 million across 9 deals). Amarchand & Mangaldas, before its split, had advised M&A deals worth $1,084 million (across seven deals).

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

The Khaitan & Co. advised M&A deals during the period included the $315 million buyout of Crompton Greaves Consumer Electricals by Advent International & Temasek and the $400 million acquisition of Freecharge by Snapdeal. Transactions advised by AZB included the $800 million acquisition of womens health business of Famy Care by Mylan Laboratories and the $400 million acquisition of Freecharge by Snapdeal. Transactions advised by Shardul Amarchand Mangaldas included the $404 million strategic investment by Alibaba in Paytm parent One97 Communications and $258 million acquisition of Kesh King by Emami. Amarchand & Mangaldas advised deals included the $200 million acquisition of TaxiforSure by Ola Cabs.

Cross-border firm Convington Burling was an advisor to two deals totaling $925 million: the buyout of InBev India International by Anheuser-Busch InBev from its JV partner RJ Corp and the $800 million acquisition of womens’ health business of Famy Care by Mylan Labratories

The period also saw a lot new entrants like Veritas Legal and Patanjali Associates enter the Venture Intelligence Legal Advisors for M&A league table.

The full league tables can be viewed here

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.