Anand Sridharan of Bessemer Venture Partners has a blog post on why his firm (along with New Vernon Private Equity)has invested into Motilal Oswal Financial Services, a leading Indian stockbroking firm.
Sridharan also promises BVP will be a patient - andf truly long-term - investor in the company:
Also check out Sridharan's related post on why BVP decided to go in for a "broader investment focus in India" as against focusing on early-stage, technology companies like it does in the US.
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.
Our thesis is that rising consumer incomes will translate into disproportionately higher allocation of these funds into equities. Right now, under 3% of India's retail assets are invested in stock markets. Cash, bank deposits, real estate and gold dominate the pie-chart on how Indians invest their wealth. As economies develop, this % rises to as high as 30-35% in the US. Further, the stock broking industry is highly fragmented and seeing a gradual consolidation. Motilal Oswal's growth has outpaced that of the industry and the company should continue to gain from this consolidation.
Sridharan also promises BVP will be a patient - andf truly long-term - investor in the company:
The main concern with the brokerage business is cyclicality. Trading volumes drop sharply during a downturn. When (notice that I havent said 'if') the Indian stockmarket enters the next bear phase, Motilal Oswal and its competitors will clearly be affected.
Then what? We wait! Ups-and-downs are a part of this game, and one of values of patient capital is to be able to support a company through a potential downmarket. The secular shift towards greater equity investment will continue and we expect growth across a cycle to be robust. Further, leading firms are better placed to weather a downturn and may even be able to accelerate industry consolidation by rolling up smaller firms that have been affected to a much larger extent.
Also check out Sridharan's related post on why BVP decided to go in for a "broader investment focus in India" as against focusing on early-stage, technology companies like it does in the US.
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.