The Venture Intelligence Blog

Edited excerpts from the Press Release Quikr India, the online classifieds site, has raised a Rs. 20 crore second round of funding in led by new investor Omidyar Network and returning investor Matrix Partners India. Omidyar Network is the investment vehicle of Pierre Omidyar, founder of leading US-based online auctions firm eBay. Quikr is the Indian edition of the free classifieds portal, Kijiji, floated by eBay. Matrix had first invested in the company in February 2008. Along with the latest investment, Quikr India has also announced the appointment former Booz Allen Hamilton executive Pranay Chulet as its CEO.

Investment management firm Halcyon Resources & Management has catalysed the launch of the Halcyon Forum comprising of eminent individuals from banking, manufacturing, capital markets and services sectors, to provide advice to businesses on dealing with the economic downturn. Members of the Halcyon Forum include M. G. Bhide (former CMD of Bank of India and MD of SBI), Raghunathan Sankaran (Founder and Chairman of IndGlobal Finance), Nabankur Gupta (Chairman of Blue Ocean Capital and board member of Raymond), Urjit R. Patel (an Economist currently with Reliance Industries and formerly a Consultant to the Ministry of Finance) and Narayan K. Seshadri (Chairman & CEO of Halcyon Group). How the Forum works Companies that apply to the Forum would provide information on their businesses to enable appropriate diagnostics. The results of the diagnostic along with broad options will be presented to the Promoters/Management who will be invited for interaction with the Forum. If necessary...

August 11, 12 & 13, 2009 in Delhi. The modules of this course have been specifically designed to offer participants an overview and a broad understanding of the different milestones and processes in the investment cycle. The Foundation Course looks at: * Academic Tutorials (Fundamentals of VC/PE) * The due diligence process * Intellectual property rights * Legal aspects of private equity and venture capital * Pricing and structuring of deals * Creating value and managing growth * Building Boards * Valuation of portfolio companies * Valuation Guidelines & Reporting Guidelines * Divestments This program aims to provide participants exposure on governance and reporting guidelines in particular. At the end of the course, participants earn a Certificate from EVCA jointly signed by IVCA. For more details, please contact: Dolly Goklaney at dolly@indiavca.org

Bangalore, KA-based Anup S. Shah Law Firm, which has offices in Hyderabad and Chennai also, is to merge with AZB & Partners, Venture Intelligence has learnt. Anup Shah will bring with him two partners and about 15 associates. The total strength of AZB & Partners’ Bangalore office would now be approximately 40 lawyers, including five partners.

Businessworld has an article on the progress (or the lack of it) of the agri-initiatives of various corporate houses. Take Jain Irrigation, which derives Rs 300 crore of its revenues from agri business by aggregating 7,000 acres of farmland to grow white onions and mangoes for Cargill, the global seed company. The fruits and vegetables are processed and shipped to Cargill, which in turn supplies them to retail companies around the world. “We work with 1,500 farmers, and have been working with them from the seed input stage,” says Anil Jain, MD of Jain Irrigation. Aggregation was easy for the Jains given the proximity of farm lands to processing factories that have a capacity of 20,000 tonne per day. But what makes Jain Irrigation’s model of contract farming different is that there are no formal signed contracts with the farmers. The arrangement is based on the strong relationship built by the company by selling drip irrigation systems to these farmers. A similar business model is foll...

In an article for the Economic Times, Bureaucrat-turned-Education CEO Amit Kaushik, calls for "bold new steps" that will encourage private investments in schools. The simplest way to do so would be by allowing private schools to be held under one of two options: schools could either be operated by not-for-profit foundations as is presently the case, with the understanding that such schools would not be allowed to charge high fees and would have to include children from underprivileged backgrounds, or by for-profit commercial entities set up like any other business venture by the corporate sector. The latter entities could be treated at par with other commercial venture, subject to taxes and applicable company laws, but allowed to distribute surpluses to investors as dividends. It is not unreasonable to allow a reasonable return on investment in order to attract that investment in the first place. Naturally, schools set up by private companies would not be eligible for conces...

In a column for Business Standard , Akash Prakash of Amansa Capital, feels the rising fiscal deficit - one of the catalysts for which will be more and more schemes that send money to rural areas - will ensure that that government pushes through economic reforms willy nilly. ..the clear takeaway (from the latest election) has been that success in transferring significant resources into rural India has delivered votes. Spend large chunks of money on social schemes targeted at rural India, ensure reasonable delivery of these schemes and you will get votes. Every political party has understood this message, and this trend of increased resource transfer towards the poor through enhanced social security schemes is here to stay. For example, the NREGA outlay has already moved up to Rs 39,000 crore, this will only increase further as the scheme gets extended to urban areas and wages are maintained in real terms. There is now the imminent launch of the Food Security Act, and we will see more s...

"Super LP" Chris Douvos has proposed a new fee formula for Private Equity funds. Currently, LPs worry that the carry system grants GPs a free option in times of frothy markets; LPs ask: why pay an incentive to people who simply capture beta? GPs on the other hand bellyache about how long-dated carry payouts can be; after all, those wacky hedgies get paid every year (watch those high watermarks, boys). But what if we rethought the way in which carry is paid? What if we instead paid people on a deal by deal basis, but only when they beat the opportunity cost of an appropriate public index? And let's acknowledge that the public markets are a fast rabbit, so we should pay people a substantial portion (25%? 50%?) of the excess return above equity-substitute cost of capital. You would have true-ups every couple of years to ensure that groups didn't get paid more than X% of the net profits on the fund. Something like that could be a win-win: LPs get a formalization of...

Business Today has an article on how PE firms are becoming more hands on with their portfolio companies in the face of the economic downturn. Private equity by nature is—or is at least perceived to be—a pure financial transaction, with the investing firm picking up a stake by putting cash on the table. But it doesn’t have to be that way—not when economic growth is slowing down, demand is softening and earnings are under pressure. That’s when the pedigree and the wealth of experience of the PE player become vital, allowing him to get involved in strategic evaluations at the portfolio company. Decisions involving cost reductions, vendor development, disinvestments and cost-effective sourcing are increasingly being blessed—and in a few cases even dictated—by the PE partners. In recent quarters, senior team members of PEfunds have been known to park themselves in their investee company offices, run marathon meetings to take stock of the financial position and devise strategies to ease the...

Forbes India has an article on how the investor group led by former Pepsi India head Ramesh Vangal is the latest one to struggle to gain control of the Tamil Nadu-based community bank TMB. In TMB’s Tuticorin headquarters sits an equally worried-looking man. Managing Director Nagamal Reddy wants to take a slew of decisions to respond to economic challenges and nudge the business forward. TMB needs to open new branches, finalise a national expansion strategy, quickly hire at least 600 people, issue bonus shares to capitalise its huge reserves, and draw up plans for an initial public offering. He can’t do any of this, because he doesn’t have a board to take these plans to. Well, two nominees of Reserve Bank of India keep him company, but a full-fledged board that has the power to take these decisions has not been allowed to take charge. At stake is not only TMB’s ownership but the larger question about community banks in India. These banks, which combine traditional forms of relationshi...

Forbes India has a profile of Ajay Relan, the former India head of Citigroup's PE arm, who is now raising his own fund. In May 2008, word spread that CVCI India would lose Relan. Thanks to Relan and his team, Jindal Steel had proven a money spinner and so had Suzlon Energy and IVRCL. With such impressive track, it seemed a good idea to launch a new fund. And Relan did just that with CX Partners. Relan was said to have left behind close to $10 million in unrealised compensation. His peers can understand his sense of urgency. “When you are as old as Ajay is, you just want to get working on your next idea quickly. Money left behind is of little value,” says William Comfort, former head of CVCI. ...Within one month of leaving Citi, Relan had secured Morgan Creek Capital which decided to invest $100 million in CX Partners. Relan looked set to tap more investors. “Well, if there is one guy who can go out and raise some serious money then Ajay would have to be it,” Dhawan had said in Aug...

Morgan Stanley's Ruchir Sharma writes in the Economic Times how it is crucial for the global economy - and stock markets - that the US consumer begins to spend again. Unfortunately, the news on the consumption front has been discouraging of late. It appears that the US consumer has used all the additional income from the stimulus packages to just rebuild the savings pool. The household savings ratio has risen from virtually zero in late 2007 to 6% currently. That’s a huge swing in a short span of time although it is still below the historical norm of 8%. No meaningful global economic recovery can shape up as long as the US consumer stays completely focused on increasing the savings ratio. After all, consumption drives growth, not manufacturing activity as the latter is undertaken only in anticipation of final demand. The most important data then to track in the weeks and months ahead are US retail sales numbers. While the US consumer is unlikely to return to the spendthrift ways o...

A new report released by research firm Venture Intelligence reveals PE investors are likely to focus specifically on segments like Diagnostic Services, Medical Devices, Hospital Chains and Wellness Products. Private Equity and Venture Capital investors, who have invested over $2 billion into Healthcare & Life Sciences (HLS) companies in India over the last five years, are keen to step up the pace of investments in this industry, a newly released report by research firm Venture Intelligence indicates. A survey of over 60 PE & VC firms in the report titled “Private Equity Pulse on Healthcare & Life Sciences” shows that the investors are especially keen to tap into sectors like Diagnostic Services, Medical Devices / Equipment, Hospital Chains and Wellness Products and Services. “Given the fragmented nature of both the hospitals and pharmaceuticals sectors, investors also see potential for tapping into consolidation opportunities in partnership with growth-oriented entrepreneur...

Venture Intelligence recently spoke to Suresh Soni of GTI Group, an US-headquartered Private Equity firm. GTI plans to invest about $100 million in India over 3-5 years. The full version of the interview appears in our latest quarterly PE report . Venture Intelligence: We understand that the GTI Group straddles both the VC and PE segments. Tell us more about the firm and how it is structured. Suresh Soni: GTI Group was started by our chairman Dr. Michael Shculhof after having spent 26 years with Sony. During the last three years he was the CEO of Sony-North America. He brought Sony into the music and movie business and is the first non-Japanese to be on the board of Sony. We’ve done about 25 transactions over the past 8-9 years. All of us have operating backgrounds – not only the partners but almost everyone who works here. We now have morphed into building platforms for creating billion-dollar companies. We want to create large companies both through organic growth and acquisitions. ...

N. Sriram of Venture Intelligence recently spoke with Rajesh Srivathsa, Managing Partner of Ojas Ventures , the tech-focused seed fund spun off from Nadathur Holdings & Investments, the family office of Infosys co-founder N.S. Raghavan. Venture Intelligence: What are Ojas’ criteria for investing in a company? Rajesh Srivathsa: Ours is a technology focused seed fund. We have two criteria for investing. First, we look for companies that are predominantly in India. While we make some exceptions, we prefer that both the management team as well as the company is in India. Secondly, we expect the company to have a technology product or solution. We do not normally invest in services companies. We look at consumer services companies as long as they have a technology platform which offers a significant differentiation from the competition. So the underlying theme is that the company has a differentiated technology solution or uses technology to offer a consumer services solution. VI: Withi...

Shailendra Bhandari, who has just quit as head of Tata Capital's Private Equity business, recently wrote an article in the Economic Times on the opportunities and challenges for Indian business groups launching private equity funds. So where would the differentiation come from? The answer to this, perhaps, lies in four strengths enjoyed to various degrees by most conglomerates: Track-record, Networks, Knowledge, and Brand. Track-record: Successful conglomerates know how to create value. For example, a third of both the sensex and Nifty are made up by companies belonging to conglomerates. Not only have these companies rewarded their shareholders over time, they have proved to be tremendous wealth creators for their promoters. Tata Consultancy Services is a case in point. With a share capital (promoter’s equity) at IPO of about Rs 36 crore, the company today has a market capitalisation of over Rs 64,573 crore. Last year, a partial dilution of promoter holding at Tata Tele Services L...

Edited extract from press release: Inventus Capital Partners has announced that it led the second round investment in Pilani Soft Labs Private Limited, the company behind India’s leading bus ticketing service, redBus (www.redBus.in). Parag Dhol from Inventus Advisory Services will join redBus’ board. The round also received participation from first round investor Seedfund. redBus, which offers consumers the convenience of booking bus tickets via the phone, net and through its partners, will use the latest round of financing to further increase its geographical footprint across India. Kanwal Rekhi, co-founder, Inventus Capital Partners, said, “The fragmented bus travel market in India offers a significant aggregation opportunity. In redBus we see a set of young, enthusiastic entrepreneurs addressing a large and largely untapped opportunity. We hope to work closely with the founders, existing investor and advisors to create a unique and valuable brand”. About Inventus Capital Pa...

Manish Chokhani of Enam Securities says in an interview to CNBC-TV 18 that China's actions on its currency will dictate the end game of the current global stock market turmoil. ..it is Japan, China and the oil countries which fund the US. The US currency is not something that someone is wanting to accept longer-term. At the same time while the oil producing countries can adjust their oil prices up and thereby get away with things, Japan doesn’t have that choice, so be it. Therefore the fulcrum of this trade is going to be what the Chinese do. And China to my mind has no business longer-term not allowing its currency to float because you are running the largest hire purchase scheme in the world, you are lending to someone in a currency in which is going to be worthless by the time you get eventually repaid. And you become fairly rich as an economy, you don’t need to be that dependent on exports and you want your population to start consuming more..and you have built up a fairly goo...

Here is a note on the above topic prepared by our knowledge partners There has been a growing demand from investors domiciled in the Gulf Co-operative Council region for investment portfolios to include Shariah compliant instruments. With growing credit crunch, LP defaults in other jurisdictions and other factors that have emerged from the global financial turmoil, the fund managers are evaluating options to tap investors in Gulf, which amongst other things require the fund to comply with the tenets of Islamic laws. This note briefly identifies some basic considerations whilst establishing a Shariah compliant fund. Introduction Many Muslim investors conduct their commercial activities in accordance with an Islamic body of law called Shariah. Shariah, or literally “the way”, is based on the Quran (the religious text in Islam), Hadith (the sayings and actions of Prophet Mohammed), Isma (the consensus of Shariah scholars), Qiyas (reasoning by anology) and centuries of interpretation and...

Edited extracts from the Press Release: VC firm GVFL has acquired a 24.5% stake in return for a Rs. 5 crore investment in chemicals manufacturing firm Sebacic India. The investment was made from GVFL's Rs. 500 crore SME Technology Venture Fund. Gujarat-based Sebacic India's proposed plant in Vadodara will have the an installed capacity of 10000 MTPA of Sebacic Acid, the largest in India. The main product, Sebacic Acid, is a derivative of castor oil and is used as a raw material for Bio degradable plastics, aviation lubricants, wind shield materials, etc. Though China is the largest producer of Sebacic acid with 90% market share, the global production base is shifting towards India because India has competitive advantage over China due to lower castor oil prices in the country and other taxation-related reasons.