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Showing posts from December, 2006

The mysterious diamond trade

Businessworld has an article on how the diamond jewelry sector and its "mysterious" practices.
Sightholders are a mysterious order of diamond merchants. De Beers’ Diamond Trading Company (DTC) largely sells its rough diamonds only to the sightholders who, in turn, process and release them to the market. They are a crucial and powerful link in the chain of brokers, cutters and wholesalers who drive the $56-billion global retail jewellery trade.

There are 93 DTC sightholders worldwide. Thirty seven of these are Indian. They account for 60 per cent of DTC’s global sales. (DTC controls 50 per cent of the global diamond trade.) They are an exclusive and influential lobby. And they are in the middle of a major metamorphosis. (Shreyas Doshi), for several reasons, is one example of the paradigm shift in the business of diamond trading in India. Unlike the archetype, his business is not based out of Opera House, the diamond district of Mumbai. His firm, Shrenuj & Co., is profession…

Profile of Tutor Vista

Businessworld has a profile of online tutoring firm, TutorVista, which has quickly attracted $12 million in two rounds of venture funding.
Tutor Vista now has around 2,200 students, most of whom are in the US. It has around 90 students in the UK, and a few scattered in countries including Finland, Turkey, Japan, South Korea, Australia and Canada. Tutor Vista has over 200 tutors as well, largely living in India. Almost all the teachers work from home. Tutor Vista’s office in Electronic City now has 60 people; this team will expand to 100 by the end of the month. It is the equivalent of air traffic control. They work round the clock and monitor the teaching sessions, help in scheduling a session with a teacher, organise standby teachers in case one drops out at the last minute, and also make sure the information technology infrastructure is ready and running all the time.

Ganesh has kept the costs of tuition ridiculously low $100 a month to learn as many subjects as the student wants (Obv…

Chip Kaye interview to Businessworld

Businessworld had an interview with Charles R. Kaye, co-president of Warburg Pincus, who is credited with hiring the highly successful India team.
We have got 15 people on the ground here and a portfolio well in excess of $1 billion. India represents the largest single exposure we have outside the US. It is probably 10 per cent of the firm’s investments. However, despite some success today, it is still pretty early. The money required to build the infrastructure — residential and commercial — is huge and the number of manufacturing industries that are going to migrate here, especially those with engineering intensity, is also significant. Broadly, the opportunities for investment are huge. It dwarfs anything the private equity industry could ever think about.

...The opportunity in real estate was greater than what we could cover within the scope of our existing private equity fund, especially in the Asian region. So, we have created a separate real estate entity. It will house all our r…

TV9 treads a different path

Businessworld has a profile of iLabs-backed TV9, the regional language news channel with an unusual positioning.
For those who are wondering what TV9 is and why we are writing about it, check out the rankings for the top 10 news channels over the last two years (see ‘Where TV9 Stands’). TV 9, set up in 2004, is there along with channels that serve much larger audiences — such as Aaj Tak or NDTV India. This means it has managed to get more people to watch Telugu news than other languages. In the Rs 700-crore (advertising) news broadcasting market, that is a big deal. The Rs 30 crore (approx.) ABCL will now test its mettle in many other national and international markets. It will invest about Rs 60 crore in the new domestic channels and Rs 200 crore in the African one. “Several private investors have expressed their interest. We also intend to go public in the next financial year,” says Prakash. Currently, 80 per cent of ABCL is held by iLabs (a venture fund) and Unified Group. Prakash a…

Market for duty free shopping opens up

Businessworld has an article capturing the opportunity (and action so far) in the setting up of duty-free shops at the newly privatized airports.




Arun Natarajan is the Founder of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Will Spentex's big bets pull off?

Following Business Today, Businessworld has a detailed profile of aggressive textiles firm, Spentex Industries.
The process of acquiring the largest capacity has also turned it into a highly leveraged one. This year alone, Spentex has raised Rs 360 crore in term loans and Rs 200 crore in equity. In August, it raised Rs 46.6 crore from the first-ever qualified institutional placement (QIP) in India.

Investors were hopeful that the acquisition spree would drive their investment in Spentex to appreciate sharply in the currently bullish market. Indeed, the news of the Tashkent acquisition had driven Spentex scrip up to almost Rs 73 from the early August level of about Rs 50. But by first week of December, the scrip had fallen back to below Rs 60.

Such indifferent performance is attributed to the sluggish bottomline of the company. “Spentex is growing rapidly but its distributable profits are still not there because of almost Rs 500 crore worth of debt,” points out Sangeeta Tripathi, analyst,…

The Naukri story

Business Today has a profile of Sanjeev Bikhchandani, Founder of Naukri.com, post his company's highly successful IPO.
In March 1997, still operating out of his father's garage and with his brother paying for server space in the us, Bikchandani's text-only Naukri.com went live. India had a total of 14,000 internet connections those days, and most of those were text-only connections. Yet, at the end of a year of operations, Naukri had made Rs 2.35 lakh and by the close of 1998-99, it made Rs 18 lakh. Bikhchandani and his collaborators knew they were onto something.

But late in 1999, Bikhchandani started facing new challenges. The internet was on everybody's lips and other companies had begun to enter the sphere of online job listings. Realising that Naukri was competing with rivals with far greater financial muscle, Bikhchandani, who had initially never wanted funding, decided that some money would be essential to survive. Despite several funding offers, he settled on ICI…

Founder sales gets formalized

San Francisco Chronicle (via Venture Beat) reports on how The Founders Fund has formalized the process of a partial buyout of founders by VC investors through a new class of founder stock called the "FF Class" Stock. (See my earlier posts on this topic here and here.)
Inspired by his personal frustrations as a startup founder, (Sean Parker) came up with a novel arrangement that he hopes will benefit other founders as they build their companies: a new type of stock that allows founders to cash out a small percentage of their stake in a funding round so they don't have to wait until the company is sold or goes public.

Pell, who maxed out credit cards, deferred salary and considered taking out a second mortgage until he could raise serious money and interest from the right investors, says he's relieved that he and his fellow founders don't have to feel rushed to sell the company to get some return on their investment of energy, time and money.

"There is often a te…

"What about India and China?"

Check out this hilarious multimedia holiday card from Blueprint Ventures featuring a successful entrepreneur who thinks he has a good idea of what it takes to be a VC.

Arun Natarajan is the Founder of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Second wave of corporate hospitals

Businessworld has a Cover Story on the second wave of corporate hospital chains - with a special focus on the Max, Fortis and Wockhardt groups - who are aggressively expanding their footprints based on the learnings from their initial forays.
Fortis decided to set up its first hospital at Mohali, Chandigarh, a market that didn’t have any other large, tertiary care private hospital. The idea was to attract patients from Himachal Pradesh, Haryana and Punjab. Simultaneously, it planned secondary care centres in other locations, which would be linked to the big Mohali hospital. It was a classic hub and spoke model.

Soon, Fortis realised that though the population in Chandigarh was prosperous, it wasn’t ready to accept a privately run hospital. Patients were used to visiting Post Graduate Institute of Medical Research (PGIMR) or else go to Delhi and sometimes even abroad, for treatment. Equally, the fact that in year one Fortis was just a cardiac care hospital didn’t help. People expected la…

The new Indian MNC

Catalyzed by the wave of acquistions, Business Today has a Cover Story on "India Inc.'s new Indian MNCs". The article includes a profile of Spentex Industries which has grown rapidly through the inorganic route. Three years ago, its promoters weren't even in the textiles business, running a profitable trading house called CLC Global. Today, Spentex Industries has a total manufacturing capacity of nearly 570,000 spindles in India and Uzbekistan, edging out erstwhile leaders Mahavir Spinning (550,000 spindles). Nearly 85 per cent of that capacity, or 484,000 spindles, has been added via six acquisitions in the past three years. And roughly 40 per cent is accounted for by one overseas buyout, in Uzbekistan, of 220,000 spindles (plus 236 airjet looms). Mukund Choudhary, Managing Director, Spentex Industries, who is credited with much of this creation, shares his rationale for inorganic growth: "Nine out of 10 people who set up greenfield projects fail." More im…

ISB to conduct Venture Capitalist Development Programme

The Indian School of Business in Hyderabad is organizing a 6-day Venture Capitalist Development Programme in March 2007 aimed at developing future venture capitalists.

The programme is organised by the Wadhwani Centre for Entrepreneurship Development and the Center for Executive Education at the ISB, in cooperation with the Wadhwani Foundation and the National Entrepreneurship Network.

Faculty: John Mullins, Gerry George (Both professors at London Business School)

Targeted Participants: Professionals seeking to make a career shift to VC; Analyst and Associates at VC/PE firms; CPAs and Lawyers servicing VC/PE firms and their clients; Professionals in commercial banks, insurance companies and other similar fund-of-fund organizations, who manage or advise investment into VC/PE funds.

Dates: March 23-28, 2007, ISB Hyderabad

Fee: Rs 50,000 (after partial scholarship to all. The actual course fee per participant is Rs 150,000 and Rs 100,000 is funded by Wadhwani Foundation). A few need based …

Tax holidaying in Mauritius

With the little island nation of Mauritius repeatedly being reported in the pink papers as "the largest investor in India" and so many PE and other investors "headquartered" in that country pouring billions into Indian companies, it was bound to attract attention. Especially since some folks in the India government have started to fret about the revenue losses and making noises about reviewing the 'double taxation avoidance treaty' with that country.

Now, in a cover story, Businessworld describes the how and why of operating several shell companies out of "India's favorite tax haven".

Over the past few years, more money has come through the Mauritius route to India than through direct investments from almost any other country. In April-June this year, a total of Rs 4,165 crore came in through Mauritius to India — as against Rs 1,105 crore from the US. By the end of the year, the money flowing in from Mauritius to India could be as high as Rs 15…

Is Unitech for real?

As part of a profile of Unitech, the Real Estate company behind the skyrocketing stock, Business Today provides an overview of this booming sector.
In India, real estate companies have traditionally either not listed on the bourses or if they have, then found the discipline required for quarterly reporting of earnings a bit too much. Remember, the other National Capital Region or NCR-based real estate giant DLF delisted from the Bombay Stock Exchange in 1982 and from the Delhi Stock Exchange in 2003. And even the few that remained listed, such as Unitech (it has been listed for 20 years now), attracted poor investor interest. In other words, few scrips, low free floats coupled with the overall opaqueness of the sector and restrictive policies made real estate stocks backbenchers in market performance. Indeed, the Unitech stock was languishing between Rs 100 and Rs 300 for most of 2004.

Easing of policy and regulatory bottlenecks changed the scenario. Allowing foreign direct investment (…

Changing face of investment banking in India

Businessworld has a cover story on the investment banking industry which is riding high on the wave of global shopping by Indian companies.
The ‘India is hot’ story is attracting international investment banks, all with deep pockets and strong balance sheets, like bees to a honey pot. Some big names include Goldman Sachs (after parting ways with the Kotak group earlier this year), Merrill Lynch (which increased its stake in the Indian JV to 90 per cent from 40 per cent), Lehman Brothers (after leaving the country at the turn of the century) and Credit Suisse (which has had some run-ins with the regulators in recent times).

Meanwhile, the home-bred players, from Kotak to Kampani to Karvy, are leveraging the increased integration with global markets, a new-found freedom in structuring and financing cross-border transactions and a booming domestic economy to find new, profitable opportunities. These are culminating in deals like Thomas Cook where Indian i-bankers straddled the entire trans…

Real Estate Connect

Venture Intelligence organized Real Estate Connect, a roundtable focused on opportunities and challenges for Private Equity investing in Real Estate Projects, on November 23 in Bangalore. The conference brought together Private Equity funds and developers that have raised or are planning to raise Private Equity capital.

Check out the post event newsletter and photos (slideshow and individual snaps)

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