Skip to main content

Posts

Showing posts from 2005

Global telecom equipment makers looking at manufacturing in India

Businessworld has a cover story on how and why global telecom equipment firms are beginning to manufacture in India.
One of the driving factors behind this growing interest is, without a doubt, India's emergence as the fastest growing telecom market in the world (in absolute numbers, China still takes the cake). India got that distinction in early 2004 when its telecom market growth touched 67.73 per cent compared to 26.75 per cent for China, which it relegated to second place.

Equally significant has been the role played by Dayanidhi Maran, the Union minister for communications and information technology. Over the past 12 months, he has been hotfooting around the globe, and positioning India as a telecom manufacturing destination amongst investors.
Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

Bennett Coleman portfolio crosses 40

The tally of companies in which Bennett, Coleman & Co. (BCCL), the publishers of Times of India and Economic Times, has acquired stakes has crossed 40, according to a Businessworld article.



In fact, it has become one of the biggest portfolio investors with Rs 700 crore already deployed in a clutch of companies that will earn it a neat packet when they go for their IPOs. And it's still buying.

The article goes on to explain how BCCL's "private treaties" work:

In the portfolio investments, BCCL seems to be picking high-growth SMEs headed for IPOs. They need media space to build their brand and corporate image. BCCL, says Rajshekhar, is "helping emerging companies realise the power of advertising". He heads a division called 'private treaties'. The typical deal is a cash payment for a small equity stake, say, 5-10 per cent. The deal size varies from Rs 9 crore-100 crore. So far, BCCL is dipping into its considerable cash reserves of Rs 2,379 crore to …

New Seed Funds: Right time, Right Place, Right Model

On Monday (Dec 19), I attended the soft launch of Mentor Partners, a unique technology-focused seed fund, in Bangalore. The firm plans to initially invest $1 million each in 10 product-focused companies in the IT and telecom space: around $500,000 as seed investment or "bridge loan" and the remaining as part of the first round investment along with other Venture Capital firms.

With two partners on the ground in Bangalore (Ravi Narayan who earlier co-founded Nextone Communications in the US and V.Prabhakar, a co-founder of Bangalore-based software testing services firm RelQ), Mentor Partners will help its investee companies get access to top companies in India, the US and other markets via its about 35 other members in its network. The network includes those who are either operating managers (like Vish Narayanan, Head of Telecom Operations at General Motors in Chicago) or "been there, done that" entrepreneurs (like Rosen Sharma who has founded several start-ups like…

What ails buyouts in India?

Why is it that despite several months of trying, large buyout funds have not been able to close any significant deals in India? The answer seems to be the lack of a strong “theme’ favoring deals in this segment, plus the inability to include leverage (debt) as part of buyout deals.

Industry experts believe that privatization-of both Central and regional government companies-in China will be a predominant theme that is set to accelerate buyout activity in that country. In India however, beyond the now-on-now-off privatization attempts as well some shedding of non-core businesses by old business houses, there is no dominant theme that favors buyout activity. "Partnering Indian companies wanting to acquire overseas is the only theme we see in India. Everything else is just opportunistic," said Anurag Mathur, Principal of CCMP Capital Asia (formerly JP Morgan Partners Asia), at a panel discussion on buyouts at the recent Asian Venture Capital Journal (AVCJ) forum in Mumbai. CCMP…

Are India's listed cos. prepared for Clause 49?

Knowledge@Wharton has an article on how India's public companies must meet a January 1, 2006, deadline to comply with sweeping new corporate governance standards.

Extracts:

The reforms, ordained by the Securities and Exchange Board of India (SEBI), are laid out in amendments to Clause 49 of the companies' listing agreement with Indian stock exchanges, a section that pertains to corporate governance.

...Infosys pays its directors one of the highest annual retainers in India -- nearly $45,000 a year. In return, it demands a lot of its directors, including requiring them to participate in a peer review and an annual self-assessment of their contributions to the company.

...Harbir Singh says that one key area in which Indian companies generally lag the best international standards is in "the amount of disclosure of strategies and priorities" to shareholders. He attributes that to a corporate culture in which Indian chief executives have greater longevity and therefore wiel…

VentureWoods becomes a group blog

VentureWoods a blog started by entrepreneur-turned-VC Alok Mittal has since turned into a platform with multiple contributors (including yours truly) from the Indian VC-Start-up eco-system.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

TCS steps on the gas

Businessworld has a cover story on TCS' growth strategies post its IPO. Here is an extract relating to the acquisition strategy of India' top IT services firm:Apart from HCL Technologies, TCS has been the most systematic player in the M&A game. In December 2001, the company put in place a specialist M&A team that would function as a think-tank on strategic acquisitions both in India and overseas. The team was led by Mahesh Bhandari and Debasis Pottdar, both former M&A specialists with Arthur D. Little and Arthur Anderson respectively.

Over the last four years, the M&A think-tank has guided TCS's spree of acquisitions, including the critical consolidation of its BPO holdings. It sold its stake in Intelenet, a joint venture with HDFC, and merged the Tata group's holdings in Airline Financial Services, WTI and Phoenix Global Solutions to create TCS BPO last year. In addition, it has also helped rationalise TCS's various joint ventures across the globe. …

"Sequoia-Indiatimes deal off"

Sequoia Capital has decided against partnering WestBridge Capital in their proposed investment into Times Internet which operates the Indiatimes.com portal and e-commerce service, reports Businessworld.
It was planned that a consortium of WestBridge Capital Partners and Sequoia Capital will take up 15 per cent of Indiatimes' equity. But the deal did not go through. Now only WestBridge has taken a 2.9 per cent stake.

...Earlier, Indiatimes was keen on the 15 per cent stake sale as it wanted to list directly on the Nasdaq in the US. It reckoned that the experience and network of Goldman Sachs-backed WestBridge and Silicon Valley-based venture fund Sequoia Capital would have been valuable for the company in getting a strong valuation.

However, a recent guideline by the finance ministry has undone its plans. The ministry tightened the guidelines for foreign currency convertible bond (FCCB) and global depository receipt (GDR) issues to align them with the Securities and Exchange Board of …

Will Glenmark's new drug propel it to the big league?

Businessworld profiles Glenmark's early success with its new experimental drug oglemilast meant to treat asthma and chronic obstructive pulmonary disease.

The deal with Forest Labs is worth $190 million (Rs 836 crore) in all, the largest by any Indian drug maker - including the biggies in the swanky campuses. (The largest before this was the $65-million partnership between Ranbaxy and Bayer for the former's extended release version of Bayer's antibiotic Cipro.) Even the deal with Teijin, worth $53 million (Rs 233 crore), is substantial for a company the size of Glenmark. And a third deal is being negotiated with a European partner.

...While the size of the deal is impressive by itself, the circumstances in which it was struck are more striking. Forest came in even before the drug was tested on humans. For Glenmark, it was the first molecule to be licensed. Yet, the deal dwarfs those struck by bigwigs more than twice Glenmark's size. "Forest must have seen something…

Opportunities and perils for Indian cos. hunting for global auto part makers

"Plenty of global auto part makers are up for sale. And the money is not hard to find. But there are big risks, and Indian companies need to choose their targets well," says a recent Businessworld cover story.



Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

Forbes on the new boom in India's textile industry

Forbes has an article on the new boom in India's textile industry.

Some extracts:The industry accounts for 30% of India's exports. China does a much larger dollar volume in textiles, but still the sector accounts for only 18% of China's exports.

India, like China, chafed for decades under quotas that limited how much it could send to the U.S. and Europe. In January those quotas were lifted and exports from both countries shot up. In the first five months of this year China's exports of cloth and apparel to the U.S. jumped 54% to $9.9 billion. India's volume was up 29% to $2.3 billion, according to the International Labour Organization, a UN adjunct.

...Last year the Indian government finally cut duties on imported textile machinery. In a further effort to boost the industry's competitiveness, the government this summer announced plans to spend $150 million creating (with private partners) 25 textile parks by 2008--enough for 500,000 new jobs. Each park will clust…

Refreshing "Web Two Point Oh!"

In case you track the Web 2.0 scene/debate (aka by some as "Bubble 2.0"), check this site out.

Just refreshing the page will get you new "VC friendly" Web 2.0 company name and business model.

Here are a couple of examples it generated for me:

Your company name: Seconoorb Your company product: tag-based blogs on the desktop
Your company name: Seckoroll Your company product: geotag-based blogs via flash

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

Paul Graham weighs in in favor of founder sales

In August 2005, I made a post saying why I thought it might be a good idea for VCs to actually insist on "limited founder sales" when they invest in a company - i.e., a *part* of the investment amount goes towards buying the shares owned by founders, rather than into the company.

I had said:I think this will help reduce the all-too-famailiar clashes between founders and their VC backers post the initial honeymoon period. Letting the founders take "a little bit off the table" reduces their risk in doing what VCs what companies all their investee companies to do: grow faster.
Now, in a new essay titled "The Venture Capital squeeze", Paul Graham - a co-founder of ViaWeb (acquired by Yahoo for $50 million) - warns VCs that "if (they) are frightened at the idea of letting founders partially cash out, let me tell them something still more frightening: you are now competing directly with Google." Click Here to read Graham's very interesting article…

US recruitment firm specializes in "angel employees"

With Internet-based services companies back in favor among US VC investors (a phenomenon aka "Web 2.0" or "Bubble 2.0"), can service providers and wannabee start-up executives be far behind?

Scripps Howard News Service has an article on PeopleConnect, an exectuive search firm that actually has a branded program called "Employees Without Paychecks" that focuses on placing executives and tech professionals who are willing to work at start-ups without pay until the clients' VC funding comes through.

PeopleConnect is the first search firm to market a program of recruiting employees who will work for equity. "A friend of mine calls them 'angel employees,'" (PeopleConnect CEO) Max Shapiro, said, comparing them to angel investors, who fund early-stage companies.

... Shapiro markets the Employees Without Paychecks program to early-stage companies that, like Commendo Software, are just a few months away from seeking venture funding. He selects …

Debate on the investment "sweet spot"

Anand Sridharan of Bessemer Venture Partners-India and Roshan D'Silva, Managing Partner of Middle East technology incubator One Nine Three (and co-founder of IIT-Bombay incubatee MyZus Infotech), have an interesting debate going on Anand's blog on whether late-stage, non-tech investments will score over early stage tech focused investments.

Some Extracts:

Roshan: India needs early stage capital today. The market is large and is ideal for an investor who can cherry pick the companies who he can back. I see no reason to sacrifice returns and join the crowd....I just feel there is more money to be made in the long run by building a very traditional Silicon Valley-ish Venture Capital firm investing in india.

Anand: Where is the actual investment opportunity, specific to the Indian market? Non-tech, growth capital opportunities outnumber tech, venture capital opportunities by an order of magnitude. Possibly even higher, if you apply a quality filter. Indian IP/tech startup scene is fa…

BlueRun Ventures' Vineet Buch launches blog

Vineet Buch, a Principal at BlueRun Ventures, has launched a blog titled Venture Explorer

Update: Buch recalls how he was hired away in March 2005 by BlueRun Ventures when the firm invested in Ojos (now Riya.com), the online photo search technology company that he co-founded.
John Malloy at BlueRun asked me to join his firm and work with Ojos as an investor...

...Munjal Shah (Ojas Co-founder and CEO) and I sketched out a strategy for Ojos over a year ago, in terms of product, markets, hiring, burn rate, etc., etc.

...Ojos set up India operations two months after the US, everybody hired in India showed up for work and is still there, and the India team was productive on their second day on the job. (Those who know the Bangalore hiring climate today will be shocked to hear this).


Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India …

Entrepreneur-turned-VC launches blog

Alok Mittal, the co-founder of JobsAhead.com (acquired by Monster.com in 2004) and now a venture capitalist with Barings India Private Equity, has launched a blog titled VentureWoods.

In one of his early posts, Mittal talks about "Band of Angels India", a group of successful entrepreneurs and executives (of which he is a member) with a passion to invest in and mentor early stage businesses.
The application process to BoA involves sending in an executive summary to any of the members (yes, investors themselves take decisions here, there are no “investment managers”) and convince them that what you have is a potentially successful business. The member than “sponsors” the proposal to the whole group. Members in the group make individual decisions on whether to invest in any particular opportunity — for example, 4 members may decide to fund a given venture. The members continue to be involved in the mentoring process.

Typical deal size at BoA is less than Rs 2 crores. We expect hi…

Warburg Pincus-Bharti saga ends; Nets $1.324 Billion for PE firm

The Investment (1999-2001)

Between September 1999 and July 2001, Warburg Pincus invests $292 million in Bharti Tele-Ventures in return for a 19% stake, the first tranche being invested in September 1999. Dalip Phatak and Pulak Prasad of Warburg joined Bharti's board.

Company Valuation: $1.537-B

The IPO (January 2002)

Bharti goes public (which, I assume, diluted Warburg's stake to 15%.)

The Exit (2004-2005)

August 2004: Warburg sells a 3.35% stake for about $208 million.

Company Valuation: $6.210-B

March 2005: Warburg sells another 6% stake for $560 million, marking the largest ever equity deal in a single scrip on an Indian stock exchange.

Company Valuation: $9.333-B

October 2005: Warburg sells its final 5.65% stake to UK-based Vodafone for $847.5 million.

Company Valuation: $15-B or 10 times that when Warburg invested in the company five years ago.

Warburg's total realization: $1.616 Billion - i.e., over 5.5 times its investment amount.

Arun Natarajan is the Founder of Venture Intel…

Digital distribution of feature films picks up momentum

Businessworld has an article on the various players that have introduced the digital distribution of movies to cinema theaters across India.



It emphasises more firmly than ever India's position as the digital cinema laboratory of the world. There are now more than half a dozen players trying to roll out digital systems. At over 135 theatres, India is by far one of the largest digital cinema countries in the world along with China and the US. UFO Movies, the brand name under which Valuable hawks its service, has a target of 2,000 theatres by March 2008. If it meets that, it will become the largest film retail chain in India.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

EMS firms beeline to India

Never mind infrastructure issues. Leading global contract Electronics Manufacturing Services (EMS) firms are opening plants in India at a rapid pace. The latest addition to the list is Sanmina-SCI, the third largest, reports Businessworld.





Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

"Real Estate Investment Opprtunities in India"

Why are PE and VC firms scurrying to set up real estate focused funds in India?

The streaming video of the presentation on "Real Estate Investment Opprtunities in India" by top executives from Kotak Realty Fund - S Sriniwasan, Executive Director and V. Hari Krishna, Chief Investment Officer - at the TiE Silicon Valley office in July 2005 provides the answers.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Why Warburg Pincus prefers PIPEs

Knowledge@Wharton has an interesting article explaning why Warburg Pincus is bullish on India. After the usual tale and numbers about the firm's investment and hugely profitable partial exit from Bharti Televentures, the article goes on to talk about how and why Warburg prefers to stick to investing in alredy listed companies - aka PIPE (Private Investment in Public Enterprises) deals.

Warburg's other notable holdings in India include Rediff Communication, the country's largest consumer web portal; Gujarat Ambuja Cement; Sintex Industries, an industrial plastic-goods manufacturer with a 60% share of the market for water-storage tanks; Kotak Mahindra, a financial services conglomerate; Nicholas Piramal India, a major pharmaceutical company, and WNS Global Services, a business process outsourcing company.

As the list shows, Warburg's bets in India are hardly reckless. The firm generally sticks to the tried, true, big and stock-market listed. That is rarely a winning strate…

Lessons a VC learned from a good exit

Bill Burnham of Celsius Capital has a great post on the lessons he learned from investing in Datapower, a company that was recently acquired by IBM.

The entrepreneur "sometimes" knows his market betterJust after Datapower had launched its first product, a performance oriented appliance, Eugene lobbied for the company to accelerate the launch a second security oriented product that had been planned for a quarter or two in the future. At the time, I remember cautioning Eugene on the potential distractions and costs of having two immature products in the market at the same time. Eugene lobbied hard to take the risk and thankfully he won the day. I say thankfully because not only did the company land a $300K order that quarter for the security product, but it was able to establish significant mindshare in the security space well ahead of its competitors. To this day the security space continues to have the most robust market demand and competitors that failed to quickly launc…

"The Infosys of auto components"

Business Today has a detailed profile of Baba Kalyani-led Bharat Forge, including nominating the firm as "the Infosys of the auto components sector".



I couldn't get past a couple of paragraphs myself, but I link it here since auto components is a favored sector among Private Equity/VC firms these days.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Low cost airlines in China and other markets

Of course, everyone knows about the low-cost revolution in the US skies thanks to pioneers like Southwest Airlines and more recent entrants like JetBlue. But how about other countries? Did you know for example, that the Mexican government is set to license five new budget airlines - which would essentially look at competing with long-distance buses? And that in Brazil, low-cost carrier Gol Linhas Aéreas Inteligentes has captured a quarter of that country's air travel in just four years?

A recent Knowledge@Wharton provides a great international perspective - including from the US, Europe and China - on the dynamics of low-cost airline industry.

Some extracts from the article's section on the action in China:
Over the last six months, China's airline industry, which for a decade hadn't registered any new members, showed sudden signs of growth. Three private airlines -- Okay Airlines, Spring Airlines and United Eagle Airlines -- made their debut. Even more notably, Shanghai&…

What motivates a corporate VC?

Until 2004, Intel Capital was probably the sole active corporate VC investing in the Indian technology sector. 2005 has seen the VC arms of Nokia, Cisco, IBM, TI and other hi-tech companies - begin to actively scan the Indian market for potential investments. Add to this, the star of 2004 – contract manufacturer Flextronics – and the active investments by business groups like Godrej and Reliance Capital, it certainly seems as if corporate VCs are going to play an increasingly important role in the Indian technology landscape.

In this context, it is important for Indian entrepreneurs to understand the factors that drive corporate VCs vis-a-vis pure financial investors. A recent Knowledge@Wharton article, quoting the work of Gary Dushnitsky from Wharton and Michael J. Lenox of Duke University, provides some useful pointers.

The authors feel "venture capital is an essential tool available to a corporation to increase its innovativeness".
Corporate venture capital is one leg of a …

Korea fines five US Private Equity firms

Korea Times reports that the Korean National Tax Service (NTS) has fined five foreign funds - The Carlyle Group, Lone Star, Goldman Sachs, AIG and Westbrook - a total of 214.8 billion won ($209 million) for evading capital gains taxes on profitable exits in the country. The agency also plans to refer several high-ranking officials at these funds for prosecution.

The NTS imposed a 147.3 billion won in taxes on foreign funds with regard to their capital gains from sales of local assets by operating through tax havens abroad and evading taxes by abusing the double taxation avoidance treaty.

Currently, Korea has signed with 62 foreign countries to avoid double taxation. The majority of foreign private equity funds have invested in local equities and real estate properties through their subsidiaries in tax havens, including Malaysia’s Labuan, even though the country is signatory to the international treaty, to avoid paying capital gains and other taxes.

It also imposed 67.5 billion won in pen…

Why Bessemer cooled to tech investments in India

Anand Sridharan, Associate at Bessemer Venture Partners’ Mumbai office, has laid claim to the title of “India’s first VC Blogger”, by kicking-off "Seriously Clueless", a new blog at http://radventure.blogspot.com.


Anand Sridharan
(Photo Source : Business Today)

Anand has made a great start by providing readers an insider’s account of how he and his colleagues have localized their firm’s approach to investing in India.

The easy answer would have been to continue doing what we do in the US – invest in early-stage, IP-led, technology companies. As we spent time on the ground, we realized that the ecosystem for such companies – seed funding, mentors, a thriving domestic tech market, critical mass of people with product-lifecycle experience – doesn’t yet exist. At the same time, domestic demand growth is fueling several successful companies in a range of non-tech sectors. These aren’t necessarily IP-led companies, but are certainly built on strong execution and process capabilities.

Jaz Banga's Feeva to benefit from San Francisco's free Wi-Fi network

As you might know, the City of San Francisco has invited proposals to set up a community wireless broadband network. Bidders include investor and Internet God Google and ISP firm Earthlink.

One of the bidders is an interesting company called Feeva, Inc. (formerly UnwireNow Inc.) which "is hoping to be able to partner with whichever company wins the city contract", according to a SiliconBeat report. Feeva's software platform allows WiFi providers to serve targeted advertising to users - based on their location. "It's one way that a company such as Google could recoup its costs," the report adds.

According to the SiliconBeat report, Feeva already has a partnership with Google on the two free WiFi hotspots - at the San Francisco Public Library and at Union Square - that it already runs in San Francisco.


Feeva’s Founder & President Jaz Banga with San Francisco Mayor Gavin Newsom at the launch San Francisco’s second official WiFi network at the San Francisco Pu…

Silicon Valley Bank completes one year in India

The Santa Clara, CA-based Silicon Valley Bank celebrated the first anniversary of its Indian operations by throwing a great dinner and networking event at its Bangalore office. From Silicon Valley VCs to wannabee tech entrepreneurs, all were present in strength.

SVB India Advisors Pvt. Ltd., the Bank's second international subsidiary, has acheived a lot in these 12 short months. With some dozen VCs setting up shop at SVB's Bangalore office, the firm has managed to ensure that the series of US VC delegations that it led (along with TiE) in 2004, translated into some real action. While some of the VCs - like Battery Ventures and Bessemer Venture Partners - have already made their first direct investments in India, more deal-making is set to follow.

SVB, with its special cross-border strengths and its Silicon Valley style alacrity, has made its mark as a valuable new player in the Indian VC-entrepreneur ecosystem.

Arun Natarajan is the Founder of Venture Intelligence India, which t…

The opportunity in the pathology labs business

Businessworld has a roundup of the consolidation and rising investor interest in the pathology labs business.
The Rs 2,000-crore industry in India is going through major change. When Businessworld looked at the pathology industry a year back ('Still In The Lab', 12 July 2004 edition), there were six clear leaders. Now there are four in that league. The top two - SRL Ranbaxy and Metropolis - have increased their lead over the rest, and Pathnet has been bought over by Metropolis. Of the rest, Dr Lal's Path Labs and Wellquest have expanded their reach. The sixth, Thyrocare, has moved off the top table. In the last one year, the number of its collection centres has fallen from 545 to 312.

...The top two groups are also trying their hand at clinical trials. While SRL Ranbaxy has instituted the 80-bed Oscar Clinical Research Centre at the Sunflag Hospital in Faridabad, Metropolis has set up a site management organisation to handle clinical trials at Sri Ramachandra Medical Colleg…

Global IT services firms and Indian firms face off

The bagging of the $2.2 Billion outsourcing order from ABN Amro Bank by Indian IT services firms TCS, Infosys and Patni, has prompted Businessworld to put the "the Indian IT services firms versus global majors" on its cover.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Business Today's list of Cool Companies

Business Today has published its second annual listing of "Cool Companies" that "are not just successful, but hip and happening".

The list includes wine maker Sula Wines, online advertising services firm Pinstorm, leather goods maker Hidesign and temp workforce provider TeamLease.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Businessworld interview with Blackstone's Akhil Gupta

Businessworld has published an interview with the Akhil Gupta, head of the Blackstone Group's Indian operations:

Which sectors do you find most attractive in India now?
We are looking at companies across all sectors. As big-ticket players, we will not look at any deal below $25 million. The BPO space for private equity participation is saturated. Thus, going ahead, one might see a lot of private equity participation in pharmaceuticals, real estate, export and infrastructure.

What is Blackstone's USP vis-a-vis other private equity players in India?
A clear differentiator is that we will only do the big-ticket deals. Second, we have the largest portfolio companies as compared to our colleagues in the private equity space. So we position ourselves as catalysts for cross-border activities and as partners for growth over a long term. Even for a sector like telecom, which is essentially local in nature, we bring in our global expertise about process knowhow, etc., to enhance performance…

InfoTalk's Podcast with Sequoia's Mark Kvamme

InfoTalk has a great podcast with Sequoia Capital's Mark Kvamme. Some sound bytes (some of which might be paraphrased):

It's a myth that we invest only in companies who are referred by someone known to us. We've recently invested in a company that cold-called us.

If we can build a world-class business, the liquidity (exits) will take care of themselves. In fact, in today's crazy world of Sarbanex-Oxley, it makes sense to stay private for as long as possible.

We want people to know that we can make $100,000 investments, that we invest in 18-19 year-olds and we invest in ideas that are not yet fully-developed.

My phone number is 650-854-3927 and email address is kvamme@sequoiacap.com. We love to hear new ideas and new entrepreneurs. !!!
How about that for an accessible VC?

Arun Natarajan is the Editor of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence …

MIT's Deshpande Center wins praise

Brad Feld has high praise for the Deshpande Center for Technological Innovation at MIT. He feels "it’s an awesome example of a university program that funds novel, early-stage research, connects innovators with the business creation infrastructure – including VCs and entrepreneurs – and actively helps new startups to be created out of fundamental early stage research".
As the Deshpande Center enters their fourth grant cycle, they just released the data on what happened with research teams that they have funded to date.

* 44 teams have been funded since 2002
* $4.9m of grant money has been awarded
* 9 companies have been formed
* $23m of angel and first round VC funding has occurred
* 7 other teams are forming new companies and actively raising money

This is an incredible hit rate – 20% of the teams have already started companies and 36% of the teams that received grants have either started or are starting companies. Congrats to all these teams, Charles Cooney …

India's Web 2.0 companies?

Business Today has featured a list of "dotcom" survivors - from Automartindia.com to YourManinIndia.com - as part of its recent Cover Story.

Arun Natarajan is the Editor of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

How much will CIFC and ChrysCapital make from the Suzlon Energy IPO?

Business Standard calculates how much the two late-stage PE investors stand to gain from the wind energy turbine maker’s forthcoming IPO:

Citicorp, which had invested in Suzlon in April last year, effectively paid Rs 21.6 per share, and will now get at least Rs 425 per share, since the price band for the IPO has been set at Rs 425-510.

That is a huge 1872 per cent return on investment in a period of less than 18 months. If the issue gets priced at Rs 510, Citicorp's return will jump to 2266 per cent.

Of course, Citicorp will not realise this return entirely, since it is selling only a small portion of its investment in the company through the IPO.

Suzlon's initial public issue of 29.34 million shares includes an offer for sale of 2.58 million shares by Citicorp. That will still leave Citicorp with 20.6 million shares.

In fact, Citicorp is not the only player that has benefited in a big way. ChrysCapital, another private equity investor, bought shares in August last year at an effe…

While IT services cos. are acquiring overseas, product firms are getting acquired by foreign firms

This week, I contributed to an article on M&A in India's IT services sector in the The 451 techDEALMAKER. I'm posting below some of my responses to a well compiled list of questions from The 451 Group's Fred Linden.

What trends do you see in M&A involving India-based technology and communications companies?
While product/IP-driven companies based in India are finding willing buyers and investors among foreign companies (examples include the recent Oracle-I-flex deal and Flextronics’ string of acquisitions in 2004), services-focused firms are capitalizing on the booming capital market to acquire overseas companies.

Based on the successful exits, technology-focused VC firms are now more bullish on backing product/IP-driven firms rather than IT services firms (except for niche/specialized players).

Within services, it has been quite fascinating to witness how much more rapidly the Indian BPO services sector grew and matured – including in terms of attracting M&A inte…

Making merry until the IPO party lasts

In an article for the Financial Express, I highlight how late-stage companies are tapping Private Equity investments just a few months before filing for an IPO.October 2004: HT Media raises private equity capital from Citicorp International Finance Corporation, following an earlier investment from Henderson.

August 2005: HT Media's IPO is oversubscribed.

May 2005: ABG Shipyard raises funds from Merlion India Fund and IL&FS VC.

August 2005: ABG Shipyard files for IPO.

May 2005: Telecom R&D firm Sasken raises a reported $9 million from US-based VC firm, NEA, and files for an IPO almost simultaneously.

See a pattern here? Welcome to the world of pre-IPO Private Equity deals. As long as the IPO window in India is wide open we can expect the pre-IPO PE financing to gather momentum. (After all, right now, the only difference between one IPO and another is how many times each one is oversubscribed). Investing in mature companies just before their IPO – which sets a nice healthy valuat…

Why all this buzz around media?

The latest issue of Businessworld magazine has a cover story on the heightened deal-making in the media and entertainment sector in 2005.

Here's my take on the Private Equity action in the Media & Entertainment sector (some parts of which were featured in the Businessworld article):

For almost three years since the 2000 downturn, PE and VC firms focused whatever little investments they were making into the Information Technology and BPO services sectors. The media & entertainment sector, which was reeling under the impact of the sharp decline in advertising spends, never got a dekko.

September 2003 witnessed two major investment announcements in the media & entertainment sector: Henderson Global Investors' $27.8 million investment in HT Media for a 20% stake and ICICI Ventures' $22.2 million buyout of the Tatas 50% stake in Tata Infomedia. HT Media went on to raise a further $15.3 million from CIFC (a part of Citigroup) and Henderson in October 2004 - the only si…

Citigroup launches "venture lending" service in India

This week, Citigroup announced the first customer - Chennai-based Secova eServices - for its new "venture lending" service to Venture Capital-backed companies in India. Apart from providing a term loan, as part the Venture Lending transaction, Citigroup will also acquire a small pledge of stock warrants which would entitle it to invest and acquire equity shares in the customer company at a predetermined price.

The service is aimed at early- and growth-stage companies which have already raised a round of VC funding. Secova, for instance, raised its first round financing from the Tamil Nadu IT Fund (managed by IL&FS VC). By using debt financing from the Venture Lending service to finance fixed-asset purchases or working capital, entrepreneurs can employ their VC funding in areas such as accelerating product development or in making key hires. This way, entrepreneurs can achieve a better valuation for their companies before going in for the next round of equity dilution.

More…

“Regulators need to watch out for Private Equity firms”

In the context of the launch of large buyout-focused PE funds like Blackstone and The Carlyle Group in India, Raghuvir Mukherji, a consultant with the Financial Securities Group of Infosys Technologies, stresses, in a Business Line column, the need for urgent regulation in three areas: The level of gearing expected (including, if necessary, mandatory credit ratings for these firms) to prevent them from creating an asset bubble;

Publishing of data on activities of these firms and those they take-over, to prevent them from using the latter to do things that fall within the grey areas of the law;

Minimum lock-in period for these equity firms to prevent them from asset-stripping the companies they promise to turn around.

Does it pay to be an iconoclastic VC?

Extract from a recent The Deal.com report:(Tim Draper, Managing Director of Draper Fisher Jurvetson) is best known for self-promotional stunts such as singing at conferences, dressing up as Batman on the floor of the New York Stock Exchange and generally, just making really silly public statements that attract attention. While VC investing may require brains and native shrewdness, Draper's rebound may show that success can also come through a willingness to take risks on new geographies and sectors. And if self-promotion and buffoonery are an inseparable part of that risk-taking proposition, so be it…

For all this ridiculousness, Draper still sits on a significant stake in one of the world's more promising startups that happens to be located in Eastern Europe. Tallinn, Estonia-based Skype was founded by Niklas Zennström and Janus Friis, the engineering duo behind file sharing technology KaZaA. Skype offers PC-to-PC Internet telephony calling that is free for registered users an…

Indiabulls on the rampage

Business Today has a fascinating profile of PE-backed stock broking and financial services firm Indiabulls

(A) striking feature of Indiabulls is its ability to raise money. In 2000, it had managed to raise venture capital from Infinity Ventures, Harish Fabiani of Transatlantic, and LN Mittal Internet Ventures, all of whom put in a total of Rs 43 crore. The next rounds happened in 2004 and 2005, when Farallon and Amaranth brought in a total of Rs 310 crore. Now Indiabulls is clearly among the top 100 capitalised companies, with Rs 700 crore in equity capital.

An U-turn at i2?

Sanjiv Sidhu founded supply chain software i2 Technologies seems to have emerged back from the brink, says this BusinessWeek article, providing a lot of credit Michael McGrath, who took over from Sidhu as CEO.

Sidhu moved up to chairman of the maker of supply-chain-management software, and McGrath went into Bob Vila mode. For starters, he stopped picking up the tab for cell phones for the entire staff. Then he cut all corporate travel unless it was billable to clients. And he laid off 13% of employees -- most of whom were in upper management. "In the past, layoffs were all done at the worker level. We had way too many VPs and higher-paid executives," says McGrath.

In a little more than a quarter, McGrath has managed to get i2's stock relisted on the Nasdaq, raise nearly $40 million to shore up its balance sheet, and dramatically cut costs -- by $20 million in the second quarter alone.

...Some of i2's recent tech improvements have been helping companies predict how diffe…

Profile of ChrysCapital's Ashish Dhawan

Business Today has published a detailed profile of ChrysCapital co-founder and Sr. Managing Director Ashish Dhawan, who has managed to successfully transform his firm from an early-stage, Internet services focused investor to a predominantly late-stage (mostly PIPE and non-tech) one within just a few years.
Says a Delhi-based VC who knows Dhawan closely: "If Dhawan hadn't survived the (dotcom) crash and had not managed to raise his second fund, he would have ended up as a middle-level manager in one of the investment banks."

Fact is, Dhawan did not just survive but went on to thrive. With his second fund, he built what could be described as his comeback portfolio. He's picked up stakes in hot new companies like IVRCL (an up-and-coming infrastructure player), Yes Bank and Suzlon Energy. For instance, he paid a measly $5 million (Rs 22 crore) for a 7.5 per cent stake in Yes Bank (it works out to Rs 14 a pop). That investment today is worth $15 million, or Rs 66 crore, th…

Why founder sales are actually a good idea

Venture capitalists never like deals where their money is used to buy the shares owned by founders and other early investors. They like their money to go "into building the company" - ie, towards hiring people, building a product, etc. Unless, that is, they are desparate to get in on the deal.

Gary Rivlin of The New York Times reports that such "founder sales" deals are now becoming more common in the US. Companies like eHarmony, Webroot Software, Fastclick, etc., have witnessed the founders "using venture deals to cash out some of their equity without the bother of a public offering or an acquisition".

If the VCs are so hungry for the deal, why then do the founders want to cash out early? Are they not as confident as the VCs about the success of their businesses?

The reason, as Woodside Fund partner Thomas Shields explains in the NYT article, is because a founder is typically "stock rich but cash poor". Shields feels such a situation is actually …

The players in India's gaming software sector

Business Today has a good article on India's gaming software sector and its players.
Mobile telephony! That's what's driving mass gaming in India. Telecom operators say subscribers are downloading 500,000 games every month from their GPRs or WAP portals (Reliance through its R-World); this is likely to cross 1.5 million by the end of the year. "Mobile phones are making gaming a mass market phenomenon," says Pravin Pinto, GM (Marketing) at LG's CDMA Handset Division. Nasscom estimates that the Indian gaming industry will tot up revenues of $500 million (Rs 2,200 crore at current exchange rates) by 2010. In much the same vein, research agency In-Stat/MDR says the Indian mobile gaming market alone will touch $336 million (Rs 1,478.4 crore) by 2009...

...Says K. Rajesh Rao, CEO, Dhruva Interactive, who worked with Microsoft Gaming Studio for an Xbox game, Forza Motorsport: "Global biggies now seek us out and want to do business with us. It's a nice positio…