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October 19, 2012

VC Fund Manager Interview: Murli Ravi of Jafco Asia


Venture Intelligence spoke to Murli Ravi, Head – South Asia, Jafco Asia, about some of the firm’s portfolio companies that have been in the news recently as well as other trends. (This interview first appeared as part of the latest quarterly Venture Intelligence India Venture Capital report.)

Jafco Asia is a VC investor that is wholly owned by Tokyo Stock Exchange listed Jafco Co. Ltd, one of Japan’s largest PE companies. Ravi, who joined Jafco Asia in 2008, is based at the firm’s Singapore office. He represents the firm on the boards of India-based companies like Microqual (telecom equipment), CustomerXPs (enterprise software), Microland (remote IT infra management), Mistral Solutions (embedded technology) and Vriti Infocom (online education). Prior to Jafco, Ravi had worked at Temasek Holdings, RedPill Solutions and INSEAD.

Venture Intelligence: Microqual has been reported to be close to a liquidity event – either via an IPO or reverse merger with a listed entity. Let us know about your experience with the company and Jafco’s role in helping grow it through the various ups and downs that the Indian telecom industry has faced in recent years.

Murli Ravi: I can’t comment on the liquidity aspect specifically. But in the five years since Jafco invested in the company in 2007, Microqual has shown spectacular growth – in fact, it has grown by more than 20 times thanks to the efforts of the Founder-CEO and the management team. As an East Asian focused investor, we were able to complement the other investors in the company (IndoUS Ventures, BTS India and Headland Capital). Given Jafco’s origin and relationships in Japan - including the fact that some of the investors in our funds are corporate/ strategic investors - we were able to make the right introductions in Japan to Microqual for collaboration and so on. So, the Microqual investment has been a win-win from all sides.

VI: What attracted you to the CustomerXPs Software, your latest India-specific investment? The investment is also unique for Jafco in that it is the only one in your India portfolio in which you are the sole financial investor.

MR: CustomerXPs’ technology has both original IP and is also cutting edge from a global perspective. The founding team comes with top notch experience and their angel investor is one of the earliest employees of Infosys. Last, but not the least, is the huge vote of confidence by the country's largest private sector bank (ICICI Bank) which has chosen to entrust a key part of its IT infrastructure to the company and signed up as the first customer.

On being the sole financial investor, given that I look after a portfolio across the region, only based on your question do I realize that it’s the case with respect to the India portfolio. There is no reason why we will not be a sole investor and in fact, in other regions we have several such companies.

VI: There have been some changes at Vriti Infocom in the recent months – it sold off a portal and hired a new CEO. What are you expecting from company in the near future?

MR: Our investment in the company (in 2010) was clearly as an Education play. Incidentally, this particular portal - which was started as a side project by one of the employees using shared resources from the company - had grown very well in the last couple of years. This is obviously a good thing, but it also brings issues with respect to positioning and focus. The company had to take a strategic call - since it's no longer efficient to rely on shared resources, etc. We considered various options and selling the portal as a business emerged as one that provided a good outcome to all parties.

Anil Pande joining Vriti as CEO is again a growth opportunity by bringing in someone with external experience. For a significant portion of his over 30 years of experience, Pande has launched startup operations within larger organizations like Reliance Communications and before that BPL, etc. We thought that it would be quite valuable to Vriti if he could come on board.

VI: Does the lack of an on ground presence in the country impact your way of operating?

MR: I'm practically in India once every two weeks - so it is not much of an issue from the firm's perspective. From an investee company's perspective, in fact, this question was asked to me recently by a CEO of a company just before we invested. I told him it is a fair question, but in practice, it tends to be a non-issue. The company is based in Bangalore and the CEO told me that he was talking to another investor based out of Delhi. I pointed out that between Singapore and Delhi (to Bangalore), there's hardly any difference in flying time and I'm as available on phone as any other investor.

Sure, I might not be as plugged in to the local gossip as much as an on the ground investor since I can't call someone over for a coffee at short notice. But, on the other hand, the regional perspective I have from being based in Singapore and the interactions I have with my colleagues in Korea, China, Taiwan and Japan bring its own benefits.

VI: Is there a minimum size of investment that Jafco looks at? What is the maximum you would look to put into a company over the life of the investment? 

MR: Across the region, the average deal size varies by country. The sweet spot is $2-4 million. China- and India-based companies can absorb more. Our investments range from less than a million dollars to $7-8 million.

VI: Jafco is clearly one of the very few VCs in India which have not strayed away from IT & ITES investments. Will this continue and are you seeing enough opportunities in India within this sphere?

MR: I would describe our focus as being on Technology rather than just IT - so, for example, we look at Solar, Semiconductors, etc. We are managing five funds till date. Starting from our fifth fund, we may invest in other sectors, but Technology will remain the predominant focus. We will continue to seek out new stuff and not "me-too" type investments. In India, the opportunities in Technology are if anything increasing.

VI: Some of Jafco’s earliest India investments were in the outsourcing space – Microland (2006), Vignani Technologies (2006), Mistral Solutions (2008). Can you comment on the current status of these investments? Would you be open to making new investments in outsourcing companies?

RM: While I don't want to comment on plans regarding specific companies, I don’t see us making an outsourcing based investment in near future.

VI: Beyond focused players like Vriti (in Education) and ApnaPaisa (personal finance), Jafco has not invested in the mass market consumer e-commerce plays which have absorbed lots of capital from other VCs. Any particular reasons?

MR: I would not say we have deliberately stayed away from e-commerce. However, one of the concerns we do have on the mass retail segment is the lack of differentiation between various players, often low margins due to intense competition, and the capital intensity that is required to achieve profitable scale. Another way we may play the sector is to invest in technology providers around e-commerce – whether it’s payments, logistics, etc.

VI: Jafco is one of the few investors to make bets in the Indian semiconductor industry - via Tessolve Services (Apr-08 & Apr-10) and Si2 Microsystems (Feb-09). What attracts you to the sector?

MR: The comfort for the sector comes from our heritage of investing in East Asia including in Japan, Taiwan and Singapore. So, the kind of the knowledge that we have on the semiconductor ecosystem, gives us the comfort in terms of evaluating risks and making investments in the sector.

VI: What other sectors are you looking at actively at this time for new investments?

MR: We prefer to be more bottom up and consider individual companies and entrepreneurs. There can always be good companies in out of favour sectors and bad companies in hot sectors.