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Business Today has a special article on the infrastructure sector including the financing aspect. India has started talking about the size of the funds needed to bridge the infrastructure deficit. The size, as can be expected, is gargantuan: $350 billion, or Rs 15,75,000 crore, at last count. How has the figure been arrived at? In the approach paper to the 11th Five Year Plan (2007-2011), the Planning Commission has, perhaps, for the first time, outlined the current investment in infrastructure (including everything from roads to rail to power to airports), and noted that it will need to increase from 4.6 per cent of GDP to around 8 per cent in the 11th Plan period. ...There is a limit to the amount of finance one can mobilise from domestic markets. You have no choice but to go to the international markets," says Ramesh C. Bawa of IL&FS. But as Sanjay Reddy of GVK Group points out, infrastructure finance has become less of an issue especially for ready projects. "We sewe...

From interview with Mitchell Caplan, CEO of E*Trade Financial Corp., in Knowledge@Wharton: E*Trade is eagerly eyeing the corner of the world with the most potential new "drivers" -- the emerging markets of India and China, where economic growth and the popularity of the Internet have created demand for financial services. But Caplan noted that the two booming nations have little in common, except their large size. In India, E*Trade last October became the largest investor in brokerage giant IL&FS Investmart. (E*Trade is now seeking a controlling interest in the company.) Caplan describes India as a country whose culture celebrates and values entrepreneurship."At the same time that Indians are creating markets, they are creating a middle class, and the opportunities are powerful." That is a far cry from China, where the economy is strictly regulated by the government and E*Trade has so far taken only limited steps, such as seeking permission for an information-o...

Venture Intelligence organized APEX ’07, an annual conclave where the Indian Private Equity industry introspects, brainstorms on the way forward and rewards its best, on January 16, 2007 in Mumbai. The event brought together well over 100 participants from Private Equity/Venture Capital firms, entrepreneurs and service providers. More Event Photographs: Slideshow I Individual Snaps The event was made possible thanks to the sponsorship of ICICI Venture Funds, IDFC Private Equity, UTI Venture Funds, Zephyr Peacock India Fund, Evolvence India Fund, Mosaic Capital and Atherstone Group.

Venture Intelligence APEX'07, organized in Mumbai on January 16, witnessed the first-of-its-kind awards for the Indian Private Equity and Venture Capital industry. The jury members included some of the most experienced investors in India-focused funds. Co-ordinated by Mr. Jay Jegannathan of Evolvence India Fund, the jury included Ms. Veronica John of Asian Development Bank (ADB), Mr. Brian Lim of CDC Group and Mr. Iyad Malas of International Finance Corporation (IFC). “The Indian Private Equity and Venture Capital industry has matured rapidly in recent years and emerged as an important partner for Corporate India,” said Mr. Pawan Kumar R, Executive Producer of Venture Intelligence APEX '07. “The Venture Intelligence APEX Awards are a way of recognizing the contribution of the PE/VC industry in helping Indian companies and entrepreneurs achieve newer peaks.” ICICI Ventures team accepting the award for the Best Late Stage firm. (Left-Right): APEX'07 Keynote Speaker Sanjeev ...

Private Equity- and Venture Capital-backed companies are also adding significantly well-paying jobs to the Indian Economy, the study by Venture Intelligence shows. Private Equity- and Venture Capital-backed companies are growing significantly faster compared to their non Private Equity-backed peers as well as market indices like the Nifty and CNX Midcap, according to a study released by Venture Intelligence. The Private Equity Impact report, showcasing the findings of a first-of-its-kind study measuring the Economic Impact of Private Equity and Venture Capital on the Indian economy, also shows that wages at PE/VC-backed companies are growing at a significantly higher rate compared to their peers who are not PE-backed. Sales at publicly-listed PE-backed companies grew at 22.9% over the five year period between 2000 and 2005, compared to 10% at non PE-backed listed firms and 15.8% at Nifty Index companies. Wages at publicly-listed PE-backed companies grew at 32% over the five year period...

Business Today has an article profile of UTV and its founder Ronnie Screwvala, who, after selling "the teenager-focussed entertainment channel, Hungama TV, to Walt Disney for Rs 135 crore, is already onto his next big venture: a 24X7 Hindi general entertainment channel that will target India's post-teen youth market straddling an age band of 18-25." But Screwvala is more than a serial media entrepreneur. He's one of the few pioneers who spotted the potential of the television medium in India as early as the 1980s. In 1981, Screwvala launched a three-hour video channel that began showing movies cabled into a clutch of apartments in south Mumbai's affluent Cuffe Parade area. Cable TV was a novel idea then and Screwvala was clearly a first-mover getting into it nearly a decade before others. There hasn't been any looking back. By the late 1980s, Screwvala had moved into the back end of TV-producing content (then mainly for Doordarshan) as well as selling airtime...

Business Today has an article on "India Inc's tryst with joint ventures". To be sure, right from the Godrej-Procter & Gamble joint venture that came apart in 1996 to the more recent Tata-Birla partnership in Idea Cellular (see JVs that Fell Apart) Indian promoters have walked a thin line between control and losing it. "I think JVs last only for short periods of time. The reason for getting into a JV is that you are looking for an advantage that you do not possess," explains Godrej Group Chairman Adi Godrej. Over the past decade, Godrej was involved in two significant JVs-one with GE for home appliances and the other with P&G for soaps. Both the JVs didn't last, yet Godrej has few regrets. "In the case of the JV with P&G, both of us realised that we were better off on our own. From our perspective, we had the experience of working with an MNC while for them it was about the need to have a presence in India," he recalls. Another promoter...

Business Today has a special four part section on the current real estate scene in India here , here , here and here . Devarajan's case typifies the conundrum in the residential sector. And that comprises nearly 90-95 per cent of the real estate sector in India. Commercial realty makes up 4-5 per cent, while retail corners the residual 1 per cent. It is people like Devarajan who fuelled the housing boom in India over the last five years and yet they are now feeling the pinch, the breathtaking rise in prices having outpaced their expectations. Adding to the problem is the supply. There just seems to be not enough new development at the budget end of the spectrum. However, at the same time Rs 1-crore apartments, which were a novelty a few years ago, have lost their shock and awe value. If genuine buyers are being priced out of the market, then is the price rise sustainable? Is there a correction in real estate prices in the offing? If one were to believe Gaurav Dalmia, Chairman, La...

ET-Corporate Dossier section has an article pointing out how VCs like Matrix Partners and Canaan Partners are receiving 50-60 business plans each month. (No link available). Before the alarm bells start ringing and you start imagining a build-up of another boom and bust cycle a la 2000, rest assured that it's a very different game this time with a different set of participants and a very different environment. It's no longer the rookies and greenhorns chasing big money with their post-exit plans ("I want to retire in the next four years") in place even before the first employee is on board. No longer is it the VCs who want the valuations, valuations and valuations, and worked on a model where eyeballs equalled revenue and the investment philisophy was largely assumption led. And no longer is it an environment where every deliverable is linked to future growth, and the Indian market still a promise. The entrepreneur this time is a different animal. Most of the new bre...

The Telegraph has an article profiling Indian "Web 2.0" start-ups. Exciting as all this is, the fact remains that most of these new websites are modelled on popular international formats or rely on providing an interesting mix of various features provided by different popular websites. Take fropper.com, one of the biggest in the Indian social networking space, that aims to provide integration across the popular youth interests: photos, music, videos and blogging. Given the popularity of existing international sites, the way to differentiate yourself is to go local with a vengeance, feels Navin Mittal of fropper.com (backed by the shaadi.com team). Indianising the content and making it simpler for a less sophisticated user-base are some of the tactics used by websites that have adapted global formats. Added features also help. Minglebox, for instance, plans to introduce something called MingleMobile to help users “blog from their mobile, upload photos from their camera phones...

Gridstone Research's Basab Pradhan bemoans the lack of cross-border VCs who understand both the developed world and India well. Why are flat world startups underserved by the venture industry? Like all startups they need capital, connections (customers, partners, senior hires), and counsel. But it is very rare that you will find a VC who is as familiar with the Indian market as he is with the US market. His expertise, his connections are typically more slanted towards one of the two markets, but not both. So if he has spent his entire career in tech companies and VC firms in the US, his networks are in the technology sector in the US and can help in making introductions to potential customers and partners, but isn’t much help in hiring senior tech personnel in India. If, on the other hand, his background is in the Indian corporate sector or one of the early venture firms in India, he can use his connections to hire senior technology or product executives in India but can gain no m...

Hedge fund manager (and former VC) Bill Burnham has an interesting take on why US buyout firms have taken a strong liking for acquiring publicly US software companies. Rather than targeting fast growing software firms, PE shops typically target "mature" software companies as they not only tend to have lots of cash but they also derive a large percent of their revenues from maintenance revenues. These revenues are seen by private equity investors and, more importantly their lenders, as a stable source of cash flow that can be used to finance lots of debt. Seven Steps To Carry The basic private equity software play book goes something like this: 1. Buy software company 2. Do dividend recap in which you simultaneously lever up the balance sheet and dividend out all the cash you just borrowed plus most of the existing cash on the balance sheet. 3. Raise new fund off of massive IRR created by dividend recap. 4. Do lots of acquisitions to make organic growth impossibl...

Ashish Gupta, Managing Director of Helion Ventures, has written an interesting article for ET-Corporate Dossier pointing out the missing pieces in the Indian entrepreneurial ecosystem. (Unfortunately, no online link is available to the article.) For example, tech-entrepreneurs in the US build in an environment of company creation that makes available hundreds of mentors, best-in-the-world talent, sophisticated attorneys who understand company creation, a large pool of ready customers, and so on. While the pace of evolution is faster it will naturally take sometime to bridge this gap in India. The number and quality of entrepreneurs are increasing at a breathtaking pace. Many more senior executives are willing to leave their jobs and start companies. Similarly a lot of people who are willing to leave their jobs and start companies. Similarly a lot of people who are recent graduates are willing to take the risk. However, even now most "mid-level" professionals are unwilling to ...

Ashish Dhawan, founder of ChrysCapital, has written an interesting article for the Corporate Dossier section of Economic Times on why he is bearish in the near-term about returns from Private Equity investing in India. (Unfortunately, no online link is available. Emphasis on the "Real Estate is India's dotcom" (!) para is mine.) India's P/E multiple is a reflection of the fact that risk aversion is at a cyclical low. Fast money can easily leave the public markets to create a buying opportunity. However, private equity money has a long lockin and therefore the supply of capital is unlikely to diminish, leading to an imbalance that gets perpertuated much longer than in the public markets. Margin decline: in aggregate, the top 500 listed companies have grown revenues and net profits at 14% and 24% CAGR respectively over the past five years. We all know that in the long term, revenues and profits grow in line with nominal GDP. But margins are now likely to decline as new...

Businessworld has an article on electric car maker Reva Electric Car Company (RECC) is planning to use its recent $20 million funding from Draper Fisher Jurvetson (DFJ) and Global Environment Fund (GEF) to introduce new models, beef up manufacturing and expand markets in India and overseas. This year, RECC plans to roll out more than one model — it already has five prototypes ready. “DFJ and GEF have provided us with a global perspective and strategic vision,” says Maini. DFJ, with $3.5 billion in capital commitments worldwide, has invested in electric sports car manufacturer Tesla, energy storage device manufacturer Deeya Energy and photovoltaic solar cells maker Konarka Technologies. Timothy Draper, founder and managing director of DFJ, will join RECC’s board along with H. Jeffrey Leonard, president and CEO, GEF (which invests in clean technology and emerging markets). What went wrong in the past five years? In 1997-98, when Reva was in the final stages of conceptualisation, its mak...

Businessworld had an article on how this group company of PE-backed Jubilant Organosys, is transforming from a bioinformatics player into a complete drug discovery services company. 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.

Businessworld has an article on Royal Classic Mills, the Tirupur based make of Classic Polo brand of T-Shirts, which has time and again gone against the in-fashion trend in the Textiles & Garments industry. In the garment export cluster that is Tirupur, the Royal Classic Group (RCG) is a bit of an oddity. It started out as a garment exporter just like the others, but suddenly changed focus to the domestic market in 2001 though it was doing perfectly well with its exports. Then, in an industry where vertical integration is not in fashion, RCG deliberately went down that route. Finally, while most exporters in Tirupur are focusing on supplying foreign brands, RCG is valiantly trying to create its own brand (Classic Polo). Primarily into making T-shirts, the company has now forayed into denim wear and other men’s apparel (while others are now waking up to the trend) to strike it big even in the face of easily available global names. Royal Classic is still a medium-sized company — the...

Mercury News has an article on VCs-turned-Internet entrepreneurs. The biggest plus, say these Web entrepreneurs -- each of whom hopes as much as the next company founder to strike it rich -- is knowing what they'll do differently if they return to venture capital. ``I used to sit and nod and think I could fake my way through another meeting with someone,'' said the founder of the online advertising startup. ``As an entrepreneur, I now see you can instantly recognize who doesn't get it, or care.'' Conrad, who has raised $4 million for Sphere and whose investors include Kevin Compton and Doug MacKenzie of Kleiner Perkins, said he'll be more sensitive. ``I think they're will be a place and time when I'll be a VC again, and I'll remember the clueless things I did before,'' including asking a struggling entrepreneur to meet him at his expensive hotel during a cross-country trip, rather than drive to the startup. ``You don't have to be in ...

Mercury News has an article on US VCs exiting their invstments by selling them to larger Private Equity firms that are flush with money. The extent to which private equity and venture capital may begin colliding remains in question. Rothstein points to Beringea-backed Mergermarket, which attracted eight potential bidders earlier this year, half of which were buyout firms, according to Rothstein. The company, which had raised $12 million in venture capital, ultimately sold in August to the international education company Pearson for $192 million, giving Beringea 18 times its investment. But it might have collected less without the private equity interest. ``Even if a private equity firm doesn't buy one of our portfolio companies, they're in there, stirring up trouble and increasing the (sale) price,'' said Rothstein. Another VC on Sand Hill Road said to expect yet a different approach on the part of private equity firms, suggesting they may begin to ``roll up'' ...

Businessworld has an article on how Coimbatore-based Sakthi Sugars has successfully riden the upward cycle in sugar prices and how it is preparing for the next inevitable downturn. It recorded a turnover of Rs 1,003.8 crore and net profits of Rs 94.1 crore in FY 2006 (July 2005-June 2006). It would, therefore, appear surprising that Sakthi Sugars is hell bent on diversifying and reducing its dependence on the sugar operations. The answer lies in the fact that sugar is a cyclical business and the boom could end soon. “It is a 2-4-4 phenomenon,” says M. Manickam, managing director, SSL. This means two years of boom, four of normal business and four of downturn. If Sakthi Sugars wants to show a healthy bottom line, it needs to cut down its dependence on sugar before the cycle turns downwards. To be fair, the company had realised the need for diversification as early as the 1980s when it tried to get into auto ancillaries business through its subsidiary Sakthi Auto. The logic: when the ha...

Businessworld has a glowing profile of Advinus Therapeutics, a pharmaceuticals research and development company founded by former Ranbaxy Labs scientist Rashmi Barbhaiya and backed by the Tata Group. By August 2006, none other than industrialist Ratan Tata was inaugurating Barbhaiya’s dream project — a drug discovery lab at Pune’s Hinjewadi biotech park. What’s more, the $22-billion Tata Group, among India’s largest, has sunk $30 million for a majority stake in Advinus Therapeutics, which owns the lab. Barbhaiya, with a smaller stake, is CEO and managing director. ...Advinus has partnered with the $22-billion US company Merck in a deal that is potentially worth $150 million in milestone payments. Merck has identified targets (genes, proteins, enzymes, etc., linked to disease) and hits or chemicals that might work on them. Advinus will convert these into experimental drugs and do early human trials on them. Merck will take these trials further. If a drug is commercialised, Advinus gets...

In an interview to Economic Times, Sumir Chadha, Senior Managing Director of Sequoia Capital India, explains why. The year 2006 was very good for most of the private equity and venture capital firms but this is unlikely to be replicated this year. The year 2007 might just turn out to be a low investments one, not just for Sequoia but for the entire industry. Also, with a lot of investments last year, it is important that companies and investors give time for these investments to work out. This year may not witness that many deals but will put some of the deals that happened to test. This year will see how many of the deals, struck last year actually turn out to be intelligent investment decisions. ...From an investment perspective, 2006 has been a good year for us. We have made a number of investments and some of them were late stage deals. Idea Cellular, in which we invested $45 million was a big deal that we struck. In fact, we made an investment of $100 million this year and that i...

Business Today has a detailed profile of life is changing fast for the textile companies in Tirupur (near Coimbatore) two years post the abolition of the global quota regime. Eighty five per cent of India's readymade garments exports went to the quota countries. There was even a thriving trade in buying quotas from countries like Sri Lanka and Bangaladesh, which had quotas but not the capacity to utilise them. However, the end of the quota regime has heralded a new era for Tirupur. ...In the last 12 months, (Eastman Exports) alone has invested Rs 120 crore in capex. It has a spinning mill with a capacity of 50,000 spindles and its factories can manufacture two lakh T-shirts a day. "The opportunities are huge. And this is only the beginning as Indian players are just finding their feet in the global market. The future is even brighter," says a confident (Nachimuthu Chandran, Managing Director of the Rs 623-crore Eastman Exports). ..Not all companies, however, are focussin...