Skip to main content

Posts

Showing posts from September, 2007

Riding the Rising Rupee

Knowledge@Wharton has an interesting article on the rising rupee on the Indian economy in general and another on how Indian IT companies had better change their business models in order to cope.
Instead, Indian firms should take advantage of this opportunity to adapt their business models. How can they do that? While the details of the two industries are quite different, the Japanese automobile industry can suggest some answers. Consider what leading Japanese firms like Toyota did as the yen strengthened against the dollar. For product lines where they made the highest margins, such as the Lexus, they continued production in Japan. However, for lower-priced models -- where their profit margins were lower and would have been eroded further by the rising yen -- they moved production to the U.S. They protected their margins on non-premium products by moving production -- and therefore shifting costs -- into dollar-denominated areas. They also reduced their vulnerability to further appreci…

VC Market

The following companies are seeking capital for starting-up / expanding their operations:
07-09-19-1: Bangalore based GIS maps-based local business information website seeks <$5-M for product development and marketing.

07-09-19-2: Bangalore based stealth-mode retail marketing firm seeks >$5-M for product development and launch.

07-09-19-3: Mumbai based public relations and corporate communications firm seeks <$100 K for development and expansion.

07-09-19-4: Chennai based Media Solutions Company providing Content Creation, Online Distribution, Online Exhibition & Advertising seeks <$5-M for product development and marketing.

For more information about any of these companies, investors - who are subscribers to the Venture Intelligence service - can email the company code to vcmarket@ventureintelligence.in. To learn about our subscription services for investors, please visit our web site.

Are you an entrepreneur seeking capital? List your company in the Venture Intelligence V…

IT Services & BPO: Are the best years behind us?

There are now several voices raising concern on the future of the Indian IT Services and BPO sectors. Business Standard has kicked off a four part article series on the topic.
Rising wage costs, competition from countries like China, the impending withdrawal of tax incentives under the STPI scheme, the slowdown in the US and the rising rupee have all punctured the optimism of the industry.

With the dollar falling below Rs 40, the margins of IT companies have been cramped even more. Ashish Basil, a partner with professional services firm Ernst & Young, says the falling dollar has impacted the BPOs more than software services exporters because all their costs are borne in India.

“Most software firms have a large number of employees abroad. A falling dollar reduces the salary burden of these employees to that extent,” he said, adding, “For a two per cent fall in the dollar, the margin of a software firm will go down by 0.6 per cent and of a BPO outfit by 1.5-1.6 per cent.”
How are PE/VC …

Real Estate funds begin to tap retail investors

Businessworld has an article on how more and more real estate funds are tapping retail investors (with Rs. 25 Lakhs as the minimum investment amount).
Realty fund deals are being downsized. They kicked off with great fanfare in 2005 as platforms for big ticket investors, but are now going retail. The latest domestic scheme, aiming to raise Rs 700 crore, from the Ajay Piramal-promoted IndiaReits, allows for a minimum investment of Rs 25 lakh. Two earlier schemes — a domestic realty fund of Rs 430 crore that closed in September 2006, and an offshore fund of $200 million (Rs 820 crore) — had minimum investment norms of Rs 1 crore and $200,000 (Rs 82 lakh) respectively. The new IndiaReits fund has also created a Rs 30-crore pool to purchase units from investors in case they want to sell earlier.

Two other new realty funds have also gone ‘retail’. The Rs 150-crore ‘Milestone’ Fund promoted by Ved Prakash Arya, a former associate of Kishore Biyani of the Pantaloon Group, first went to the mar…

VC Market

The following companies are seeking capital for starting-up / expanding their operations:

07-09-05-1: Delhi based Biotechnology Research & Training Institute seeks <$1M for expansion and marketing.

07-09-05-2: Sawai Madhopur, RJ based supermarket chain seeks <$100,000.

07-09-05-3: Ahmedabad based online travel portal seeks <$10,000 as seed funding.

07-09-05-4: Bangalore based aviation technology start-up seeks $1-5 M to develop products and towards manufacturing and marketing expenses.

07-09-05-5: Chandigarh based training and recruitment company seeks <$100,000 for marketing.

For more information about any of these companies, investors - who are subscribers to the Venture Intelligence service - can email the company code to vcmarket@ventureintelligence.in. To learn about our subscription services for investors, please visit our web site.

Are you an entrepreneur seeking capital? List your company in the Venture Intelligence VC Market using the form here

VC Market

The following companies are seeking capital for starting-up / expanding their operations:

07-09-12-1: Trivandrum based 500 person IT Services & KPO company seeks <$100,000 for expansion and research on embedded products.

07-09-12-2: Ahmedabad based media firm seeks <$1-M for expansion of publishing venture and cinema production.

07-09-12-3: Mumbai based website for car listings seeks <$100,000 for marketing expenses.

07-09-12-4: Bangalore based agriculture consultancy company seeks <$1-M for expansion and promotion of further projects.

07-09-12-5: Ranchi based online tutoring start-up seeks >$5-M for setting up operations and marketing.

For more information about any of these companies, investors - who are subscribers to the Venture Intelligence service - can email the company code to vcmarket@ventureintelligence.in. To learn about our subscription services for investors, please visit our web site.

Are you an entrepreneur seeking capital? List your company in the Venture …

Moving first in Tier II

Business Today has an interesting article on companies that have successfully launched their operations in Tier II cities rather than the metros.
It's not just in China that global retailers are flagging off operations with forays into tier II and tier III cities instead of focussing on the big metros. In Russia, French retail giant Carrefour has announced its plan to enter the country via tier II cities by early 2008. Back home, a clutch of companies-both foreign and Indian, and not just retailers-is using small-town India as a launch pad for their products and services. These include players in financial services, broadcasting, and retail to name just three sectors.

Vishal Retail has over 50 stores in 18 states under the brand Vishal Retail Mega Mart. The cities where Vishal Retail has a presence include tier II and tier III outposts like Surat, Raipur and Siliguri. Then there's Prozone Enterprises, a retail infrastructure services provider that's a subsidiary of ready-mad…

Going for broke

Business Today has an article on the flurry of deal activity in the stock broking sector.
Underlying the frenetic deals in the industry is the realisation that the traditional model of broking, which was based on discount broking, doesn't work anymore. For one, broking commissions are down from 1 per cent to as low as 10 basis points (or one-tenth of 1 per cent). For another, customer needs aren't just increasing, but becoming more complex. More often than not, a brokerage firm is expected to provide all products and services at a single window. What do brokerages need to expand and add services? You guessed it: money. "The business has become highly capital intensive, and with competition increasing you have to be well equipped to offer all the financial services to your clients," notes Regi Jacob, Managing Director, JRG Securities.

Last month, the Kochi-based JRG Securities offloaded nearly 45 per cent stake to Baring Private Equity Partners India (BPEPI) for $35 mi…

FirstSource's acquistion of MedAssist

Businessworld has some numbers on the $330 million acquisition of the US-based healthcare BPO.
Louisville-based MedAssist is one of the largest revenue management service providers to the US healthcare industry. It caters to about 1,000 clients, including hospitals, physician groups and alternate site providers. It handles billing and patient screening for their eligibility to government medical schemes. Nearly $700 million is spent in the US in this domain annually.

MedAssist has revenues of $99 million, and is growing at 8-10 per cent per annum with operating margins of 22-24 per cent. These margins are higher than Firstsource’s (20 per cent), but MedAssist also has to bear a 40 per cent tax burden.
The acquisition values MedAssist at 12.5 times its EBIDTA and more than 3.3 times its revenues.

...To fund the acquisition, Firstsource will be raising a debt of $270 million. It already has cash reserves of around $80 million, which will be used to part-pay the deal. “The debt is in various…

Can you build a product company in Bangalore?

Riya.com's winding up of its Bangalore development center has created a lot of discussion online.

Now, there's going to be a interesting panel discussion on the same topic offline at the TiE Silicon Valley office on September 20.

The panel titled "Can you build Facebook in Bangalore?" will be moderated by Sandeep Sood of Monsoon Company and will feature Vaibhav Domkundwar of BetterLabs, Munjal Shah of Riya, Rashmi Sinha of Slideshare and Gary Swart of oDesk.

It’s a simple question.

You’re a CEO. An investor. A project manager. Maybe a developer.

In some capacity, you are building a remarkable software product or service. And you need a few good people. Or, maybe, a lot of good people.

Maybe you should use a global team. Thomas Friedman thinks it’s a good idea, right?

There’s a lot to think about. Just consider a few of the issues:
Location location location
Costs savings vs. migraine headaches
Making it work in a world of rapid iteration, quick launches, user participation…

Nasscom, ICICI Knowledge Park to launch early-stage fund

NASSCOM and ICICI Knowledge Park have promoted the NASSCOM ICICI Innovation Fund (NIIF) to stimulate technology innovation in India through providing seed capital funding for opportunities in emerging technologies. The fund corpus will be Rs. 100 crores in the initial round, with an expansion of another Rs.100 – 150 crores in additional rounds.

The primary objectives of NIIF include:

· Promote innovation in emerging or frontier technologies through patient investment

· Encourage entrepreneurship through providing market access and mentoring

· Enable innovative start-up companies to reach a stage where they can attract follow-on venture capital funding

NIIF will focus on Intellectual Property (IP) asset creation in emerging or frontier technologies. A key criterion for identifying investment areas is the presence or expected emergence of sophisticated demand within India for either the core technology or applications based on the core technology.

Some of the technology areas presently id…

Old Lane's performance

Bloomberg has an article on how the Vikram Pandit-founded Old Lane (which was acquired by Citigroup recently) has performed post the sub-prime crisis.
Old Lane LP, the hedge-fund firm acquired two months ago by Citigroup Inc., lost 5.9 percent in August, quadruple the industry's average decline, as bond and emerging markets fell.

The drop left funds run by Old Lane with a 1.9 percent gain for the year, according to an investor report that was obtained by Bloomberg. The New York-based manager, which oversees $4.4 billion, trailed the average 1.31 percent loss for all hedge funds last month, the industry's worst performance since May 2006, according to Chicago-based Hedge Fund Research Inc.

...Pandit, 50, who founded Old Lane last year after leaving New York-based Morgan Stanley, became head of Citi Alternative Investments in July as part of the bank's purchase of his firm. The Citigroup division oversees about $59 billion, including real estate and private-equity assets. It ha…

A new model of outsourcing?

Helion Ventures-backed Anatara Solutions has attracted a lot of media buzz including in a Businessweeek column around its "second generation" outsourcing model.

Extract from the Businessweek column:
They call their model Second Generation Outsourcing. Here's how it works: Anantara operates as a prime contractor and the interface with clients. It puts together a "solution," including strategy, business proceses, technology, and performance management. The company, with just 40 employees, has an ecosystem of 25 other companies, with a total of 2,500 employees, who are specialists in everything from Java coding to software testing. It draws on their skills to deliver the solution. Rather than focusing just on India, Anantara's ecosystem also includes companies from Russia, China, and Singapore. And it plans on expanding into additional countries. Anantara gets the advantages of high-level skills from Russian companies and very low programming costs from some in …

Filling the "makaan" need of BPO workers

I recently came across an interesting angel-backed company, Woodstock Ambience, which has launched a residential hostel in Bangalore to provide accommodation specifically to bachelors who work at BPO/IT Services companies.

The Woodstock web site explains how such an special accommodation benefits both employers and employees.

Employer:
*The fleet management system also not coping well with scale and changing customer demands. Wide dispersal of employees over the entire city and outskirts adds to turn around times for fleet managers
* Equal opportunity employer – inability to attract more women from outside work city
*Diffident to increase exposure to liability by taking on employee housing but not left with many options
* Inability to attract OoT’s (Out of Towners) due to lack of proper accommodation availability
* Inability to find accommodation solutions for employees who are primarily short to medium stay (6 to 18 months)

Employee
* Need accommodation that is furnished and managed
* Quality…

Organized retail vs. the middlemen

Businessworld has an article providing a spirited defense of organized retail against the violent protests and lobbying by the middlemen.
Traditional traders and middlemen are angry about the way organised retailers are changing the age-old rules of their business. For one, the retailers sell superior products at competitive prices in air-conditioned stores in which housewives are happy to spend time. At the other end of the supply chain, the companies’ willingness to pay farmers quickly and fairly for their produce is also cutting out the traditional middlemen. “Most farmers borrow from middlemen at high interest rates,” says C. Sushant Darekar, a farmer in Lonikhalbor near Pune. “They fall into a debt trap of unending repayments if the crops fail.” Darekar says he has doubled earnings since he started selling directly to the Wadhawan Group’s Spinach retail chain and avoiding the price cartel of middlemen in the APMC’s yards. In addition, Darekar is getting guidance on cropping patter…

VC Market

The following companies are seeking capital for starting-up / expanding their operations:

07-08-29-1: Bangalore-based diversified group seeks > $5 M for investing in Hospitals, Mining Wind Farm, Hydel Power, & Reality Sectors.

07-08-29-2: Bangalore-based real estate developer seeks $1-5 M for a residential project en route new international airport.

07-08-29-3: Chennai-based product development firm seeks <$100 K.

07-08-29-4: Chennai-based custom software developer for Financial services clients seeks <$1M for marketing and new hires.

07-08-29-5: Old Westbury, NY (USA) based event management company, which produces Bollywood-focused events in North America, seeks $1-5 M for entering TV production.

For more information about any of these companies, investors - who are subscribers to the Venture Intelligence service - can email the company code to vcmarket@ventureintelligence.in. To learn about our subscription services for investors, please visit our web site.

Are you an entrep…

The towering opportunity in telecom infrastructure

Businessworld points out how Indian telecos are cashing in by spinning off their tower businesses.
For Indian companies, this serves two purposes. One, it unlocks the value that is stuck in these towers, which can be reinvested in expanding their subscriber handling capacities. This would also help them improve their profit margins, which have been under pressure as the average revenue per user has been falling.

At present, companies allocate about 40 per cent of their capital expenditure on these towers (each tower costs between Rs 12 lakh and Rs 35 lakh). The hiving off of the tower business makes it an independent company, whose assets can be shared by different telecom players. Such sharing reduces capital expenditure and operational costs, including maintenance, for companies. Besides, adding more subscribers will increase the topline.

Sharing towers also facilitates quick rollout of networks in rural India, where the density of cellphone users per square kilometre is much lower. Bu…

"Forget software, the real opportunity is in exporting healthcare"

Are Indian companies going to be able to provide enough jobs for the increasing millions of young Indians that are going to graduate each year? If not, the oft spoken about "demographic dividend" is likely to turn out to be more of a "demographic curse".

In this context, Businessworld has an interesting article pointing out that the big opportunity in exporting healthcare workers from India to more advanced whose populations are ageing fast healthcare costs are zooming.
As critics of the demographic dividend thesis point out, the focus is all on the supply of labour, while very little is said about demand. Admittedly, the additional supply of labour does offer the potential for employment and growth. But there is no guarantee that demand would match supply and lead to more jobs and production. The fact is, India will have to provide employment for 15 million job entrants every year and not 10 million as estimated earlier. “We haven’t done even 10 million yet,” points…