VCCircle

Probably for lack of interesting startups in the country, VC funds are these days conceiving business plans themselves and looking for managers to run the ventures. IDG Ventures India is seeking a top-end software executive as CEO for a startup it has conceived and funded in the managed security services space. Sudhir Sethi, Managing Partner of IDG Ventures India, has put out a post on his LinkedIn account for the same. Techgigger has more details.

Hat tip to VC Circle reader Pukhraj Singh. He writes in: "It's a services-based company. This could be really interesting as only a few big outsourcing players had ventured into managed security services space, but due to the confidentiality and legal issues surrounding this industry, things didn't work out well. Outsourcing security has been under a constant debate and is considered to be lagging behind the mainstream security market by 3-4 years. Would be interesting to see how they work all this out and cap on the opportunity."

By the way, the job details are here:

--Build leadership position in a global service niche play for managed security services

--Achieve revenue of $100 million in 6 years with a PAT of 20%

--Build ecosystem for innovators, application developers, and developer community and solution providers

--CEO will report to board

--Interact extensively with the board in ascertaining and in many ways evolving the business plans

--An engineer-MBA from a reputed institute would be the education background

--Attractive compensation plus significant options

--Location: Bangalore

--Targeted joining date is Oct 2007

Apply here.

Here is one company that wants to ride on the Indian multiplex boom. Palador Pictures, a company that aggregates and distributes world cinema (films in non-Indian languages) in India, has raised $6 million from a group of private investors which include noted adfilm maker and director Mahesh Mathai, Srila Chaterjee and Simran Mulchandani (all based in Mumbai), besides from two New York-based NRIs Arun Banerjee and Vishal Aggarwal (see the release). The investors will pick up 15 per cent stake, valuing the company at $40 million.

Starting up

Palador, started some three years ago by ex-adman Gautam Shiknis and creative consultant Mo Polamar, has already invested $4 million to collect rights for some 900 films which include classics directed by legendaries like Chaplin, Keaton, Kurosawa, Kieslowski, Godard, Trauffaut, Kiarostami, Lynch and others. Its DVD collection is called The Olive Collection.

Palador plans to take the world cinema to Indian audiences (urban and rural) via an integrated distribution model that covers an exclusive DVD label, theatrical releases, video on demand and a dedicated television channel. Some 10 films from Palador’s catalogue have been released in India in the first quarter of 2007. The company, which plans to become an integrated media enterprise spanning production, content acquisition, programming and distribution in the areas of film, publishing, internet and radio, is eyeing revenues of $20 million by March 2009. Meanwhile, the company also announced that it has settled a dispute with UTV over the rights and ownership of certain titles.

The trend

Of late, film companies have been attracting investments, and the trend may continue. Says NRI investor Arun Banerjee, “It is important for NRIs to fund start-ups outside the technology construct. Investment in developing media companies is the safest bet for NRI investments.”

In the last few months, Indian film companies like The Indian Film Company of TV18 Group and UTV Pictures had raised $110 million and $70 million, respectively, from the Alternative Investment Market of London Stock Exchange. Bobby Bedi's Kaleidoscope Entertainment could be probably the first entertainment company to rope in classical venture capitalists like Kanwal Rekhi, Saurabh Srivastava, and angel investors like Pradeep Gupta (Cybermedia Group), and late Arun Kumar (of Hughes Software Systems). Late last year, Kaleidoscope also raised Rs 20 crore from the publishing group Anand Bazar Patrika.

Related:

TV18's New Film Venture To Raise $110 Million From London's AIM

Eros Picks Up 51% In Tamil Film Distributor Ayngaran; To Raise $34 Mn More In Stake Sale

Film Maker Shekhar Kapur Plans To Raise $500 Million From Singapore

Blackstone Invests $275 Million In Ramoji Rao's Ushodaya Enterprises

Chennai's Prasad EFX Raises $6.6 Million From IL&FS Investment Managers

Bennett, Coleman & Co Picks Up Undisclosed Stake In Percept Picture Company

Mphasis founder Jerry Rao is backing a legal process outsourcing company in which his son is also reportedly part of. Rao has made an angel investment in Bangalore-based JuriMatrix, an LPO, reports Business Standard.

The company is apparently in the process of raising $12 million in venture capital. It's founded by Sajan Poovayya, the Founder and Managing Partner of Poovayya and Co., a full service law firm based in Bangalore. He is no stranger to the legal circles in India, as he advises tech biggies in Bangalore. Vijay Rao, a graduate from graduate of Dartmouth College in the US, is Director, Marketing.

With Jerry Rao backing the venture and playing the role of non-executive chairman, and with names like Rajat Gupta, former global CEO of McKinsey, and Hema Ravichandar, former HR head of Infosys, acting as advisors, it's only a question of time when JuriMatrix landed funding.

CNBC-TV18 has an interview with Michael Moritz (top) and Sumir Chadha (below), the partners with Sequoia Capital (I missed the live show). Moritz, an ex-journalist with Time magazine, joined Sequoia in 1986. He is known for spotting Google.

Chadha started Westbridge Capital Partners, an India-focused venture capital fund, in 1999, which got merged with Sequoia Capital last year.

Both Moritz and Chadha are upbeat about making investments in India across the sectors and stages. A couple of points of note on the internet media. According to Chadha, there aren't enough online media inventory. He says, "The advertisers are fighting over the immediate amount of inventory and today there are not enough web pages. So, the real problem in the internet today is lack of connections and lack of users and we really need to see the government push some major regulations in terms of broadband reforms to get that going. But advertisers are very excited about internet in India today. In fact, a lot of our companies are seeing very strong ad sales and we expect that to continue."

Moritz adds: "As broadband proliferates in India and mobile telephony expands, internet-based media companies are going to be much more of a force in this country as well." He said that a lot of big media companies like Dow Jones missed the internet bus, and they will have to pay the cost now.

Meanwhile, Chadha dismissed that Minglebox and Fropper are two competing properties. Sequoia Capital India recently invested in social networking site Minglebox, while it already had investment in People Group, which owns Shaadi.com and the dating site-turned-social networking site Fropper. He says: "We do not back competitors, so we look at these properties (Minglebox and Fropper) even that they may appear from the outside to be competitive - they have very different focuses, very different user bases and we are seeing a lot of growth in that sector."

Call it the power of YouTube. Private equity fund Providence Equity Partners is believed to be investing $100 million in a yet-to-be-launched video distributer website. The difference is it's not started by a 20-something startup entrepreneur. The names behind the unnamed website are big media companies - General Electric-owned NBC Universal and Rupert Murdoch-owned News Corp.

Reports suggest that the two companies have reached a preliminary agreement with the private-equity firm to sell a stake - rumoured to be 10 per cent - for $100 million. The website is expected to see light of day this fall. Coming from big media, the content will be copyrighted unlike Youtube, which is currentky fighting a few law suits for carrying copyright infringed material. Reuters reports that the site will feature content from TV shows such as "Saturday Night Live" and "The Simpsons", and hit films such as "The Devil Wears Prada" and "Borat".

The NBC-NewsCorp JV for a YouTube killer was first announced in March this year. It has also hired ex-Amazon exceutive Jason Kilar as its CEO. By the way, Providence Equity has invested $400 million in Idea Cellular.

Delhi-based Band of Angels is going national. Its first step was to rename itself as Indian Angel Network. It has got a new website URL too - IndianAngelNetwork.com. Padmaja Ruparel, the executive director of Indian Angel Network, told VC Circle that they have launched operations in Bangalore already. Their next target is Mumbai, and will spread to other cities too, truly making it a national angel network.

When asked if there was any pressure from the original Band Of Angels in Silicon Valley about the name, Ruparel replied in the negative. However, she said it was likely many (potential) members got confused with the identical names. She said the idea was that they wanted the organisation to get a "pan-India" character. Moreover, it's actually a network and not a fund as many entrepreneurs confuse it to be.

The network currently has some 60 members like Jerry Rao, Saurabh Srivastava, Pramod Bhasin, Raman Roy, Rajiv Luthra, Pradeep Gupta, Alok Mittal, Ranjit Shastri and so on. It also has institutional members like IBM, SIDBI, Naukri, Greylock Partners, and Google.

The network has so far invested in seven companies.

Another prominent angel investing group is Mumbai Angels. They are however focused on investing in early stage companies in Mumbai.

Indian market regulator Securities and Exchange Board of India has issued foreign investment norms for venture capital funds who have registered with the body. First, the SEBI-registered VC funds are allowed to invest only in those companies which have an Indian connection, for example, the companies which have back office operations in India. Besides, the funds cannot invest more than 10 per cent of their corpus in these companies. So if you are $150 million fund, you can't invest more than $15 million in an American company which uses India as a back office.

And SEBI will allow only a total of $500 million a year to be invested abroad. So VC funds have to approach the regulator for approval, and they will be given permission on a first cum first basis till they exhaust the $500-million limit. The guidelines were issued on Thursday. These norms apply only to those funds who are registered with SEBI, and not for those come via Mauritius or Cyprus.

In April, India's central bank Reserve Bank of India (RBI) had approved the proposal of VCFs investing in equity and equity-linked instruments in offshore venture capital undertakings (companies) subject to an overall limit of $500 million and applicable SEBI regulations.

Currently, there are some about 90 domestic and 80 foreign venture capital funds registered with SEBI.

See the full announcement below:

Info Edge India Ltd, the company which owns job site Naukri.com, has finally launched a professional networking site - Brijj.com (Via Watblog). (The name is a variation of "Bridge" - as in connecting between two people). Naukri's new launch comes at a time when professional networking sites like LinkedIn have started gaining a good number of users in India, and it has also been used to generate jobs and business leads. Also, techTribe, a networking site for tech professionals which recently got funded by Canaan Partners, has converted itself into a career networking website.

The fear is that classic job site like Naukri may become redundant over time since potential candidates will get the job leads through a networking site or other platforms. So Naukri had to move into the networking space at least to plug that gap.

A big challenge for Naukri will be to build the user base. Will it take the capital intensive, high octane advertising campaign to garner subscribers, or will it free float it and expect to get users on its own? Probably a few free ipods and iphones can get the initial traction. But will that be a valuable user base? Finally, all depends on what features the site provides (I am yet to take a test drive) and the branding. It's also not clear what will be the target user base.

LinkedIn currently enjoys a mixed userbase of junior-middle-senior tech and finance pros. Unlikely they will shift to a new networking site. A good idea may be to get new users who haven't tried LinkedIn yet.

(BTW: Can we now expect a similar site from Clickjobs (BharatMatrimony Group)?

Here are a few private equity backed IPOs hitting the capital market. The latest is by Motilal Oswal Financial Services (MOFSL), an institutional and retail broking firm, backed by private equity funds New Vernon Private Equity and Bessemer Venture Partners. Motilal Oswal has priced its IPO at a price band between Rs 725 and Rs 825. It intends to sell 2.98 million equity shares of Rs 5 each through a 100 per cent book building process. The Mumbai-based company will raise about Rs 216 crore at lower price band and Rs 245 crore at the higher band. The issue will constitute 10.5 per cent of the post-issue paid-up equity capital of the company.

How much money will the private equity funds make on the basis of the IPO price? New Vernon and Bessemer had picked up 9.47 per cent stake in the company last year for Rs 518.9 a share. The PE funds are in the money at an appreciation of 40-50 per cent already in MOFSL.

MOFSL is the holding company of four businesses - Motilal Oswal Securities Ltd (broking business), Motilal Oswal Commodities Brokers, Motilal Oswal Investment Advisors (investment banking business) and Motilal Oswal Venture Capital Advisors (venture capital advisory). Citigroup Global Markets India is the book running lead manager and Intime Spectrum Registry is the registrar to the issue.

Comment: This issue is likely to do well since there is an appetite for financial services stocks. The stock isn't cheap, though.

Another PE-backed IPO is that of Coimbatore-based textile company KPR Mills. The company is backed by Blue River Capital, Brandot International, Argonaut Private Equity (who together invested Rs 105 crore in December 2006), and Peterson Partners, who invested $3 million in February 2007.

The issue, which closed on August 7, was priced within a band of Rs 225-265, about 12-14 times its 2006-07 per-share earnings. On an expanded equity base, the multiple stood at 15-17 times. The issue constituted 15.69 per cent of the fully diluted post issue paid-up capital of the company. At the lower band, the company would raise Rs 133 crore and at the higher band Rs 156.6 crore. Kotak Mahindra Capital Company Ltd. and and ICICI Securities were managers for the issue.

Comment: The issue got just about subscribed 1.19 times. The retail portion was undersubscribed at 0.6 times. Some HNIs and institutions saved the issue, which has been priced at lower end of the price band - Rs 225 a share.

UTI Ventures and Argonaut Private Equity-backed Zylog Systems had a great close of its IPO recently. The Rs 126 crore IPO was oversubscribed 76.4 times last month. The issue, which was priced in the band of Rs 330-350, received 275.45 million bids compared to the issue size of 3.60 million shares. Zylog is a Chennai-based company in areas like web application, mobile computing, and enterprise infrastructure management. UTI Venture and Argonaut had invested $10 million the company in March 2007.

Comment: Zylog is expected to have a good opening (rumoured to be 40 per cent) when it lists in the next few days.

This just in. Nexus India Capital, the $100-million venture capital fund, has invested over Rs 10 crore or $2.5 million in digital map data company CE Info Systems. It runs MapMyIndia.com, an interactive online map service.

This is the second institutional investment for CE Infosystems, a company set up by entrepreneur couple Rakesh and Rashmi Verma in 1992. In April 2007, it had received an undisclosed investment from Sherpalo, the VC fund of Ram Shriram, and Kleiner Perkins.

Delhi-based CE Infosystems provides services and solutions based on geographic information systems and location-based business intelligence. It claims to be the single largest repository of digital spatial data of India. A press release said that the company released the first version of nationwide GPS-based road network navigable maps in early 2007, which can be used on multiple media including the internet, car navigation, mobile navigation and several other location-based and GIS applications targeting the needs of consumers and enterprises.

The company has also partnered with Yahoo India, Wayfinder, and Airtel to offer mapping services to the internet and mobile users in the country. Suvir Sujan, Managing Director, Nexus India Capital, has joined the board of the company.

Nexus' current portfolio includes mobile VAS company Mobile2win, open source web collaboration software company Dim Dim, and voice SMS provider Kirusa.

Earlier, in February 2007, Bennett, Coleman & Company had invested in Hyderabad-based SatNav Technologies, a company in the similar space. This company was founded by a group of ex-Satyamites led by Amit Prasad, who is the founder MD & CEO.

Related:

Kleiner, Sherpalo Invest In GIS Company CE Infosystems