The Venture Intelligence Blog

Writing in the Business Standard , Akash Prakash of Amansa Capital points out why, despite the seemingly unbreakable positive run the Indian stock markets have had so far this year, a significant dip is "only a matter of time". The performance of Chinese equities is also a cause for concern, given that these markets have been leading indicators for global markets over the past 18 months. At one stage last week, they were down 20 per cent. The continued decline of the Baltic dry bulk index, despite the stabilisation of the Chinese equity markets, is also a worrying divergence. ...A combination of factors — cuts in GDP growth rates, rising interest rates and stress in rural India — does not equate with corporate earnings upgrades. Commodity prices have also risen in the last six months, which will offset much of the margin expansion we have seen in corporate India in the last quarter. The market is also not particularly cheap. Supply of paper is seemingly limitless, and we have...

Businessworld has a cover story on the rise of specialty hospital chains - most of them Private Equity-backed including eyecare-focused Vasan Healthcare, urology-focused RG Stone and cancer-focused HCG - and the new business models they are experimenting with. There are reasons, however, why things could just click for these protagonists. One, many of them are in specialties such as ophthalmology, day-care surgery and dialysis care involving lower capital expenditure. For instance, a cardiac hospital or a multi-specialty tertiary care hospital costs an average of Rs 60-70 lakh per bed, excluding the real estate cost, says Singh of Technopak. That works out to Rs 60-70 crore for a 100-bed hospital. Cash break-even typically takes about three years. But the set-up cost for these specialties per centre would be within of Rs 10 crore. An important factor is that in-patient stay is rarely required since a number of these are day procedures. This minimises the need for support infrastructur...

Two CNBC TV18 guests - Jim Walker of Asianomics and Adrian Mowat of JPMorgan - present contrasting views on the medium-term outlook for the stock markets. Jim Walker feels while corporate earnings will surprise on the positive side, the RBI is set to raise interest rates as early as in October. And he feels markets in developed countries will be in a bear markets for next 4-5 years and there is no way they will enter a lasting bull phase in just 4-5 quarters. We all know that the Reserve Bank of India (RBI) is not a central bank that will sit back and let inflation takes its grip and will not sit back and let excess liquidity dictate .., they will take action. As a conservative central bank, my expectation (is that) we will see the beginning of the tightening process as soon as October. Here' is Adrian Mowat's very contrasting take: I still believe that central banks are going to continue this aggressive easy policy at this point in time and so is the buying opportunity. ...I...

Business Today has an article on how the Essar Group's outsourcing arm, Aegis, has acquired its way into the top league of Indian BPOs. The ITES onslaught can be traced back to 2003, when the Ruias made their first acquisition, of Aegis Communication Group in the US for $28 million. Another 12 followed in the years to come. Aegis was struggling with some $22 million in losses. The takeover trail hasn’t ended: Last fortnight, the Ruias picked up CCN Group of South Africa for $30 million. Today, Aegis BPO is valued at a billion dollars, with some 35,000 employees and 32 global locations. It is also profitable, say company officials. “Our ambition is to grow as big as we can in the services space… we are a value investor,” says Ruia. ...The core of Essar’s ITES portfolio for some time to come will be BPO, which had revenues of half a billion dollars last year, and which the company claims is the fastest-growing BPO in the world (at a rate of 50 per cent as against the Indian BPO indu...

Business Today has an article on the move to sell the Rs. 1,000 crore Gharda Chemicals, which manufactures agrochemicals, veterinary bulk drugs and high performance polymers, and the hurdles in the way of a deal. Forbes India has an interview with the firm's 80-year-old founder Keki Gharda on the same issue. From the BT profile: Gharda’s life story is one of such innovations that allowed him to make blockbuster chemicals in India, once they went off-patent. And he made them so cheap that often the original manufacturer was eventually forced to buy from Gharda Chemicals and supply to the world. Today, he supplies Chlorpyrifos, an insecticide, to the Dow Chemical Company, and makes a purer product than Dow ever made—even though Dow scientists had invented it. “Instead of the high-temperature chlorination of pyridine, we use a low temperature process and a pyridine derivative,” Gharda explains. ...But Gharda realises that, at 80, the greater part of his journey is done. With no chil...

CNBC-TV18 journalist Menaka Doshi has an interesting blog post on the latest feud between the Ambani brothers. After years of hard work and tens of thousands of crores of rupees invested, Reliance Industries is about to reap a rich harvest from its gas fields - 80 mmscmd by 2010. The KG-D6 find is one of the biggest of its time and a block-buster profit earner for the company. Except that the Government of India has stepped in to decide both the price ($4.20/mmbtu for 5 years) and the customer list. What was meant to be a market determined price (that’s what the NELP promised) is now a government determined rate. And while today some may claim that it favours Reliance Industries , tomorrow it may not! Infact I’d like to argue that the government’s interference in gas pricing is going to hurt, not just Reliance Industries in the long run, but also India’s ability to attract investors in exploration. ...Instead, some misplaced sense of benefaction has turned a business-family fight into...

Mark Dixon of M&A advisory firm the1.com has an hilarious account in the New York Times of his efforts at arriving at the normalized profit (and hence the valuation multiple) for a Chinese company. Generally Accepted Accounting Principles are not generally accepted in China. This is partly because the Chinese have their own accounting rules and partly because rules are for breaking. And it’s not just that some company owners are trying to confuse the tax authorities. It’s that, when they do so, they end up also confusing themselves. The gymnastics they do with revenues and costs are so impressive that the Beijing Olympics should have added an event especially for accountants. Markets with developed gray economies, like Italy, are well known for the practice of keeping one set of accounts for the government and another for the owners so they know what’s really going on. Chinese companies often dispense with the second set, hence the confusion. That’s probably true of other “develop...