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Showing posts from October, 2009

The 'Beating Street Estimates' game

The Associated Press (via NY Times) has an article explaining how so many US companies regularly manage "to beat analysts' estimates":
Corporate America has a habit of low-balling the earnings forecasts used by analysts to determine their estimates. That way, the bar is lower, and companies can easily jump over when the quarter's results are announced -- even if profits and revenues have fallen off a cliff.

...Beating expectations generally gives share prices a quick lift, but the news can mislead investors about the real state of the business -- and just how far this economic recovery has to go. In fact, of the companies reporting third-quarter results so far, 60 percent have posted lower net income compared with a year ago.

...A study of stock returns from 1994-2007 concluded that analyst forecasts were the second-most influential force on price movements. Management forecasts topped the list, according to Beverly Walther, an accounting professor at Northwestern Unive…

Have women on your board? Here's the cash...

From The New York Times:
Naissance Capital, based in Zurich, will start the Women’s Leadership Fund in January, which will invest in companies whose boards include women. It also plans to take minority stakes in companies without women on their boards and to use its ownership to encourage changes.

R. James Breiding, a co-founder of Naissance Capital and a former director of Rothschild Corporate Finance, said the fund was created after several studies showed a correlation between the number of female directors and a company’s performance.

...Naissance has lined up $200 million from institutional investors and individuals to invest in 30 to 40 companies around the world, and plans to increase the size of the fund eventually to about $2 billion. The minimum investment for the fund is $100,000. Naissance, which was founded in 1999 and specializes in what it calls “niche investment opportunities,” is one of a handful of firms that have created funds over the last three years to invest in comp…

"It's all coming together for Reva"

The New York Times has an article on electric car maker Reva.
Last month, the company won an important stamp of approval when General Motors said it would use Reva’s technology in the electric version of its Chevrolet Spark, a small car whose conventional gasoline version G.M. sells here already. The electric version of the Spark is expected to go on sale in India by the end of next year, according to G.M. officials.

...Mr. Maini said electric cars have to be small and affordable to succeed in places like India and Europe, where most car trips are short and involve stop-and-go driving, unlike in the United States where commuters can drive 50 miles or more a day, mostly on highways...In Europe, the higher-end model (of the NXR) will sell for about 15,000 euros, or $22,000, not including batteries, which the company will lease for a monthly fee.

...“I have been doing this for 15 years, and I have never seen everything come together like I have” now, said Mr. (Chetan) Maini, the 39-year-old…

Deal Alert: A2Z Maintenance acquires controlling stake in CNCS Facility Solutions

Edited excerpts from Press Release:

Gurgaon-based facilities management and EPC firm A2Z Maintenance and Engineering Services has acquired a controlling stake in CNCS Facility Solutions, a Mumbai-based facilities management services company. One World Resources acted as the sole financial advisor to CNCS in this transaction.

The investment will allow A2Z, whose investors include India Equity Partners, Beacon India Private Equity Fund and Rakesh Jhunjhunwala, to expand the presence of its facilities management services business in Western India.

ContentSutra interview with Nimbus' Harish Thawani

ContentSutra interviewed Nimbus Communications' Chairman Harish Thawani, in the context of the PE-backed firm's renewal of its contract to broadcast test and one-day cricket matches played in India.

What is the per match rate you are paying and is the case that this time there are fewer matches?

Again, it depends on the exchange rate and other factors, but it is about Rs31 crore. The number of matches are about 15% lower at this stage. The schedule is subject to change and we have left enough flexibility in the deal to work around future changes.

What does the deal mean for Nimbus? Are you looking to raise cash?

We are not looking to raise money. We had a third round of investments in 2009 by our existing investors 3I, Cisco and Oman International Fund. The focus is on growing Neo Cricket. The channel will soon be available also in Europe and North America. We already have a very strong presence across Asia. We are also planning two new channels.

Do you think that ODIs will suffer …

Forbes' profile of the Co. behind Mainland China

Forbes India has a profile of Speciality Restaurants, the company behind Mainland China and other restaurants.
(Anjan Chatterjee) has 52 restaurants (spread across eight brands including Mainland China, Sigree and Oh! Calcutta) across 11 cities including three abroad — Beijing, London and Dhaka. Now he wants to spread to tier-II towns and in some ways be a pan-Indian fine-dining restaurant chain.

Chatterjee’s company Speciality Restaurants Pvt. Ltd. (SRPL) and SAIF Partners (Softbank Asia Infrastructure Fund), an investor in SRPL, are busy scripting the new plan. They are looking at a listing on the stock market next year. It depends on the number of acquisitions. They want to expand the chain to 100 restaurants before the initial public offering.

...Apart from processes, fine-dining restaurants have to deliver an experience rather than just a meal. “If a restaurant can make Rs. 800 on an average bill, then the margins can be 20-25 percent, else they drop to 10-15 percent. Also, very few…

Deal Alert: Nutraceuticals firm Deccan Healthcare raises Rs.15-Cr from Nexus Ventures

Edited extracts from the press release:



Deccan Healthcare, an innovative products company in the Indian health and wellness market, has received a Rs 15 crore investment from Nexus Venture Partners. Sandeep Singhal of Nexus Ventures will join the Deccan Healthcare board.

Deccan Healthcare has developed, through intensive R&D, a variety of nutraceutical products which boost immunity and address chronic ailments. The key products include a flaxseed-based vegetarian Omega-3 which they sell under the OxyFlax and Nulife-ISB brand. It is useful for cardiac care, bone health, diabetes prevention, and is also anti carcinogenic and anti-inflammatory.

Speaking about the funding, Mr Minto Gupta, Founder & CEO, Deccan Healthcare said, “We at Deccan Healthcare are happy to be associated with Nexus Venture Partners. The funding will help us enhance our R&D efforts and our expansion plans. Deccan is launching a variety of nutraceuticals addressing specific life-style problems and will also…

Forbes India profile of Gitanjali Gems

From the Forbes India profile:
He is aiming to be the world’s biggest jewelry retailer, growing bigger than Tiffany, which had net sales of $2.86 billion last year and has over 200 exclusive stores; at the same time, create a group full of well known brands, something on the lines of LVMH, which owns 50 brands netting it over 17 billion euros in revenue in 2008. For Gitanjali, Choksi unabashedly talks of revenues of $5 billion from his 60-odd brands, from the current consolidated sales of $1.2 billion in the next “few years.”

...Though most of the growth in the jewelry business came in recent years, Choksi saw the writing on the wall pretty early. Choksi realized that he was in the lowest end of the value chain, whereas more than 70 percent of the additional value accrued to the companies that sold those diamonds in branded jewelry. According to the International Diamond and Jewelry Exchange, or IDEX, in 2006-07, rough diamonds of $7 billion in the mines were worth $19.8 billion after …

Deal Alert: Evolva Biotech raises $28-M in first closing of Series B financing

Evolva Biotech, a Switzerland- and India-based drug discovery firm, has raised CHF 28 million (about US$27.8 million) in the first closing of its second round ("Series B") financing round. The financing is part of Evolva’s preparations to merge with Swiss stock exchange listed company Arpida, though the funds are committed independent of the proposed merger. The Series B financing is led by current investor Aravis and new investors Auriga Partners, Vinci Capital-Renaissance PME and Wellington Partners. BioMedInvest and an undisclosed private investor participated as co-investors in the first closing, as well as Evolva's existing investors Astellas Venture, Dansk Innovation, Novartis Bioventures and Sunstone Capital.

In 2005, Hyderabad, AP-based APIDC Biotech Fund (now Ventureast) had participated in Evolva's first round investment. Other investors in the round included Novartis Ventures, Astellas Ventures, Danish Innovation Investment, Seed Capital and Sunstone Capit…

"Real ARPUs are 25% higher"

In an article for Business Standard, Unitech Wireless's Chairman Sanjay Chandra says that despite the profitability issues in the short-term, the industry's size will double in five years.
ARPU numbers as reported by players currently are understated. The historical subscriber-linked spectrum allocation methodology used by the regulator in India incentivises operators to take advantage of flexibility in reporting churn and hence overstate the number of subscribers. The real subscriber number in India is estimated to be 20-30 per cent lower than that reported. This implies that the real ARPU is 25-35 per cent higher than that reported. At a 25 per cent higher ARPU, the per subscriber and per tower economics suddenly seem much more viable.

Two, the total size of industry in terms of revenue is expected to more than double from the current $22-25 billion to over $50 billion in five years. In addition, the cost of new operations is much lower now than that of existing operations be…

MediaNama interview with CEO of Mobile TV firm Apalya Tech

MediaNama has an interview with Vamshi Reddy CEO of Hyderabad-based Apalya Technologies, which recently closed a round of venture funding.

What are your key costs? How much are you looking to invest in infrastructure?

Our key costs are primarily spread across R&D and infrastructure, and most of our expenditure will be on network, infrastructure deployment for the 3G rollout and R&D. Out investment on 3G rollout depends on when 3G takes off. We are loking to invest anywhere between 25 to 30% of the money raised in the next one year.

..how does the revenue model work in this space?

Revenue models are purely on a revenue share: there is a share between us and the operator, and we, in turn, have all the agreements with all the content providers. We have currently a partnership with almost 70 TV channels.

What do you think would be the size of the mobile TV market in India right now?

If you look at today it’s not big enough but we are expecting that to dramatically change with 3G coming …

K-12 spells big bucks

As part of its Cover Story on Education, Business Today has an article on how private ventures are now increasingly targeting the K-12 segment.
Six months ago, Manipal K-12 broke new ground by taking over Sharada School, Mysore. “We offer two choices to managements of schools that fit our business model. They can either pay us to manage their schools professionally or transfer management responsibilities,” says (CEO Meena Ganesh). The firm has also taken over four schools in Nepal recently. She plans to manage 100 K-12 schools and set up six International schools in the next five years.

...The K-12 (Kindergarten to Class 12) is estimated to be worth half the $42-billion (Rs 2,01,600 crore) private education market in India and growing fast enough to double in a decade. Analysts expect the share of average household spend on education to increase from the present seven per cent to nine per cent by 2018. Technopak, a consulting firm, sees enrollments in K-12 growing to 351 million, requi…

Key Issues in Education Ventures

At a time when Education has become the hottest sector for private investment, Raghav Gupta of Technopak Advisors highlights, in an article for Business Today, the key issues to evaluate when venturing into this field.
Market Assessment: A pragmatic assessment of the “catchment” in each segment of education is important, from the standpoint of achieving required student enrollment, before planning an investment. The catchment (in this case the travel time to and from the institute) for a pre-school student should be 30 minutes, for a K-12 day school 60 minutes, and for a residential school, this would be five hours. Demand for a vocational training institute originates from within city premises, with few students travelling across cities for enrollment. A university or a higher education institute would ideally attract students from all parts of India as well as South Asia, the Middle East and Africa and, therefore, matters would be being dictated by the quality of education on offer a…

Price of Education sans Enterprise

In an article for Business Today, Gopal Jain of PE firm Gaja Capital, makes a passionate case for encouraging private enterprise in Education.
The education sector is reserved for not-for profit (NFP) entities and this ensures adverse selection by blocking conscientious entrepreneurs who are unwilling to operate for-profit (FP) businesses under the guise of NFP as most currently do.

...The cap on revenues through price controls on fee and constant government sponsored inflation of expenses by obligating compliance with pay commission hikes, etc., are huge stumbling blocks...Institutional funding is unavailable: NFPs involve huge off-balance sheet settlements, rendering them out of bounds for institutional lenders and financiers.

...We can argue endlessly, but we don’t have 300 years to perfect a welfare state, like the western countries did. India’s poor understand that education is the mantra behind their emancipation and they are not willing to wait. Some 175 strife-riddled districts …

Profile of facilities management firm BVG

Business Today has a profile of PE-backed facilities management firm BVG India.
(Hanmant R Gaikwad) is the man who founded Bharat Vikas Group (BVG) India, one of the country’s largest facilities management companies based out of Chinchwad near Pune. BVG India provides non-core activities such as mechanised housekeeping, landscaping & gardening, and security services to private and government institutions with the help of a 16,000-strong ready-to-move and trained and pan-India workforce.

...At Tata Motors, Gaikwad would on a regular—and informal—basis supply the company with youth from Satara whenever it was looking for people. The breakthrough came when Tata Motors was on the look out for a housekeeping contractor for its mintnew Indica plant. Gaikwad proposed that the contract be given to BVP. Tata Motors agreed. That’s when BVP began operations in 1997 as a housekeeping company with just eight employees.

In three years, BVP had grown into a 200-strong outfit, with Tata Motors as it…

Interview with Rishi Navani of Matrix Partners India

Venture Intelligence recently spoke to Rishi Navani, co-founder and Managing Director at Matrix Partners India. The firm, which has a special focus on domestic consumption, has announced three investments in the past 12 months – a new Rs.100 crore investment into education firm FIITJEE and follow on investments into online classifieds firm Quikr (a spin out from eBay India) and prepaid cash card firm ItzCash (part of the Essel Group).


Venture Intelligence: In the post-financial meltdown scenario what is your reading of both the growth equity and VC space?Rishi Navani: In the growth equity segment, we are in a situation where capital has dried up - particularly from hedge fund investors and investment banks. For companies that are profitable there is definitely capital available, but there are less pockets but the pricing has certainly rationalized compared to 2007. In the VC segment, lots of people have invested in companies where they have to spend a lot to time to see if those compan…

Interview with Kranthi Vistakula, Founder of Dhama Apparels

One of the more interesting start-ups to receive VC funding this year has been Dhama Apparel Innovations which provides apparel with variable heating / cooling to people living and working in difficult climatic environments. N. Sriram of Venture Intelligence recently spoke with Kranthi Kiran Vistakula, Dhama’s Founder & CEO who is an alumnus of the Massachusetts Institute of Technology.




Venture Intelligence: You have a biotech and engineering background from MIT. Why did you switch to doing an apparel start-up?

Kranthi Vistakula: While living in Boston (USA), the weather was either cold or hot…I never felt comfortable. Since I could not find any functional apparel in the market, I started developing one for my use. That is how the whole idea started.

VI: Dhama is now targeting to sell temperature-controlled apparel to defense forces. Don’t soldiers have these kinds of apparels already?

KV: They do have. But they are very heavy. Our apparel weighs around 1 kg. The apparel soldiers wear…

Why Gold Loans are shining bright

The New York Times has an article on why Gold Loans are far from being anachronistic in India. So much so that international PE/VC firms like Sequoia Capital are invested into Gold financing companies.
Pawnbrokers and money lenders have long operated in India’s back alleys, making loans against jewelry to families in distress, at interest rates of 30 percent or more. But gold loans made by banks and finance companies are different. Rates are lower — 14 to 30 percent — and their businesses are regulated.

...Manappuram, a pioneer in the business, made $730 million in gold loans last year — up from $397 million a year earlier. Muthoot Finance, a privately held firm, says its lending is growing at 60 percent a year. By contrast, total outstanding bank loans to the private sector increased 16 percent last year, year over year, and have been essentially flat so far this year.

...Gold loans, so far at least, have very low defaults — companies say fewer than 1 percent of borrowers fail to repay.…

The Need & Opportunity for Vocational Training

In an article for Business Standard, Arvind Singhal of Technopak points out why the real transformational opportunity in Indian Education is in the vocational training segment.
Vocational training, unfortunately, does not enjoy the same glamour and, therefore, it is very likely that despite having the largest young workforce in the world, India will be faced with chronic shortages in just about every category of skill-based trade jobs. Even more tragic, from India’s perspective, would be the missed opportunity in being the number one supplier of skilled trade labour to the developed and some developing countries even as many such countries, especially those in Western Europe, are faced with rapidly aging populations and fast declining birth rates, leaving them woefully short of all kinds of labour—farm workers, electricians, plumbers, masons, fitters, healthcare givers, machinery operators, cooks/chefs and the like.

It would help to look at some hard data to put this challenge and the b…

Profie of D.light Design

The Mint has a profile of VC-backed D.light Design which markets solar lanterns and other energy-efficient products in India and other developing countries.
Pursuing an MBA at Stanford University, US (2005-07), Goldman took a course in “entrepreneurial design for extreme affordability” at the university’s new design school. As part of a team of five students, he came up with a rough prototype for a solar-powered LED lantern. The big boost came when they won the prestigious Venture Challenge contest for the best business idea and received funding of $250,000 (Rs1.25 crore now) in 2007. Turning down attractive job offers, Goldman, his partner Ned Tozun and three others set up D.light Design, based out of a garage in Palo Alto, California.

Soon, Goldman was coming to India every four months, travelling to villages in eastern Uttar Pradesh. In January 2008, D.light decided to shift its headquarters to India. Their reason—it is a huge and complex market that is evolving rapidly. “It was time…

Tracking Vavasi, the unknown bidder in the $14-B Zain Tele deal

The web site of the Vavasi Group, which is leading the $13.7 billion bid for the Kharafi family's stake in Kuwait’s largest telecom operator Zain, says it was incorporated in India in 2001 and has interests including Telecommunications and Renewable Energy. The Economic Times now has a report based on its journalists' meeting with the little-known group's Managing Director Farid Arifuddin. Extracts from the ET report:
This civil engineer hails from Vavasi at Dharwad district in Karnataka. “We have no turnover as such as we are an R&D set up,” he informs coolly, adding that the group employs about 80 people. The company has two major arms—telecom and renewable energy. It has two telecom firms, namely, Vavasi Telegence and Next Generation Telecommunications India. “We are conducting next-generation (NGN) trials with the government of India in Bhopal. We want the NGN technology to emerge out of India, as GSM came out of Europe,” says Mr Arifuddin. Vavasi Telegence had a…

Deal Alert: Commodity trading software firm Eka raises $10-M from Nexus Ventures

Edited extracts from the press release:



Eka Software Solutions, a provider of software for multi-commodity trade and risk management, has raised $10 million from Nexus Venture Partners (formerly Nexus India Capital). Eka was earlier seed funded by the GP Group, a conglomerate with interests across shipping, manufacturing, real estate development and hospitality.

Talking about the new funding, Mr. Manav Garg, Founder & CEO, Eka Solutions says, “Eka is very well positioned to take advantage of the growing need for commodity trade and risk management software. Our products, technology and team are highly regarded in the market, and the rapid expansion in our customer base is testimony to this. The new funding will allow us to further enhance our technical, support and sales capabilities, and help capitalize on current opportunities to accelerate our growth“.

Eka’s products have been deployed by some of the major players in the global commodity market, enabling them to better manage thei…