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.

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.

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.

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

On Tuesday, VC Circle had reported that Sequoia Capital India had most likely invested in former Yahoo India MD George Zacharias' new remote infrastructure management startup. Mint today reports that Sequoia would have committed about $20 million in Zacharias's yet-to-be-named IT company. The capital would be invested over the next 12 months, which includes the funding of an acquisition of a US company too, Mint reports quoting sources.

Sources told VC Circle that C.R. Srinivasan, former head of VSNL - Singapore, might be joining Zacharias in the new IT venture, besides a few ex-colleagues of his from Sify and Yahoo.

How did Sequoia zero in on Zacharias? Sources attribute it to the connection with ex-Sify CEO R Ramaraj, who is currently an adviser to Sequoia. Zacharias was hired as COO of Sify by Ramaraj. Some industry sources suggest that Ramaraj-Zacharias combination could even buy out the data center business of Sify. Only if Raju Vegesna-owned Sify is ready to sell. A two-third of revenues of Sify come from enterprise services like data centre and hosting. The idea, however, is not far-fetched.

Acquisition by Indian companies overseas continue. Raman Roy's Quatrro BPO Solutions has announced the acquisition of mortgage loan processing operations and the technology platform of US-based Preferred Financial Group, Inc. The financial terms are undisclosed.

The deal is considered unique since Quatrro would become the first BPO from India to offer an onsite-offsite model. This path has already been taken by software services firms. "We will be acquiring the technology platform, the people and the origination business of the US partner and that would also enable us to provide end-to-end fulfillment services to mortgage lenders across the US," Quatrro Chairman Raman Roy has been quoted as saying.

Apparently this model will hep Quatrro give services at 30 per cent to 50 per cent cheaper than the US.

The acquisition will be done by Quatrro Mortgage Solutions, a subsidiary of Quatrro. PFG is a privately-held financial services corporation that originates, underwrites and funds mortgage products.

In April 2007, Quatrro had bought a majority stake in Chennai-based KPO firm Scope eKnowledge for an undisclosed amount. It bought out Mauritius-based fund eIndia’s stake in the 500 people firm.

Related:

Quatrro Acquires Majority Stake In Chennai KPO Scope eKnowledge

As rumoured earlier, Wipro Technologies, the global IT services business of Wipro Ltd, has acquired Infocrossing, Inc., a Nasdaq-listed IT infrastructure management company for $600 million in an all cash deal. Wipro will pay $18.70 a share, which is about 13 per cent premium over the six month average of Infocrossing's share price.

The deal, the largest by Wipro and the largest overseas acquisition by an Indian IT company yet (see the table, right), is expected to close by the fourth quarter of 2007. It also needs regulatory approvals. The deal is also significant since it's the first acquisition by Wipro of a listed company abroad, which shows that Indian companies are getting better at wading through the complex regulatory hurdles and disclosure norms. Infocrossing had revenues of $232.4 million and net income of $9.3 million for the year ending March 31, 2007.

The company provides integrated managed infrastructure services to global clients. The acquisition will give Wipro Technologies a strong presence in the remote infrastructure management space, by adding five data center locations and about 900 employees in the US, according to Sudip Banerjee, President, Enterprise Solutions of Wipro Technologies. Infocrossing also brings in expertise in health plan and payer management segments. The company has processed over 175 million claims annually and also provides contracted services to over 90 managed care organisations.

The operating margins of Infocrossing is only in the range of 10-14 per cent as against Wipro's 25 per cent. Apparently, the margin differences will be mitigated in the next 2-3 years, according to company officials. The current global IT infrastructure market is estimated to be around $150 billion, of which the remote infrastructure management services (that can be offshored) will be worth $70 billion, according to NASSCOM.

Wipro was advised on the transaction by Citigroup and represented by the law firm of Wilson Sonsini Goodrich and Rosati, while Infocrossing was advised by Credit Suisse Securities (US) and represented by the law firm Gibson, Dunn & Crutcher.

Prior to this, the largest acquisitions in Indian IT sector were made by Bangalore-based telecom software solutions company Subex Systems (now Subex Azure). In January 2007, Subex bought Canada's Syndesis for $164.5 million, and in April 2006, it bought UK's Azure for $140 million.

Related:

Wipro Closes In On $500-Million Buy Of Nasdaq-listed Infocrossing; Plus Wipro's Past 10 Deals

India's third-largest software services exporter Wipro Technologies is in talks to acquire Nasdaq-listed technology services company Infocrossing Inc., CNBC-TV18 television channel reported on Friday. The deal could be anywhere between $450 million and $500 million. Business Standard adds that the company's enterprise value is around $492 million and its enterprise value/revenue is 2.12 times of its $232.44 million.

Wipro chairman Azim Premji (right) had recently said that his company was looking for acquisitions in Germany and Canada. "We are looking at taking the inorganic route to expand in Germany and Canada. Germany is an emerging market and in Canada we are a late entrant," Premji had said while announcing the Q1 results for the current financial year.

If Infcrossing deal happens, that will be Wipro's largest acquisition yet. The group company Wipro Consumer Care had recently bought Malaysia's FMCG company Unza Holdings for $246 million. In the IT space, Wipro's largest acquisition in the IT space was Austria's New Logic for $56 million in December 2005.

Acquisitions have started contributing to revenues in a big way. Last year Wipro's buys accounted for Rs 501 crore ($125 million) to Wipro's topline of Rs 15,000 crore ($3.75 billion), as against just Rs 50 crore ($12 million) in 2005-06. Wipro is the most aggressive company on the M&A front with some Rs 3,200 crore ($800 million) dedicated for this alone.

Wipro's Past Acquisitions

[Clarification: The earlier post erroneously reported that Pradeep Tagare is the fund manager of the $250-million India fund of Intel Capital. Sudheer Kuppam, the Managing Director of Intel Capital in India, Japan and Australasia, is indeed the fund manager of the $250-million fund. Tagare is part of six investment managers (2 in Bangalore and 4 in Mumbai). The error is regretted.)

Intel Capital, the venture capital arm of chip-maker Intel Corp, has appointed Pradeep M Tagare as a Director in its Mumbai office. He will be one of the six investment managers managing the $250 million India fund. He moved to Mumbai from Santa Clara, US, where he was a senior investment manager for Intel Capital. He joined Intel in 2003, and prior to that was with Xdrive Technologies Inc and Yopa.com.

I bumped into Tagare yesterday at CII's Cleantech Forum in Delhi. He said Intel Capital is going to invest in technology sectors in a broad sense, and they will follow a stage-agnostic approach - starting from seed to private equity (even private investment in public enterprises or PIPE) (see a VentureWood post of Tagare). That's a significant shift in strategy for Intel Capital since it has earlier adopted a "venture" focus. It currently has an active investment portfolio of 20 companies in India.

Earlier, Intel Capital appointed Sudheer Kuppam as Managing Director for India, Japan, Australasia and South-East Asia. Kuppam replaced Kumar Shiralagi, who left Intel Capital to join as MD of NEA IndoUS Vetures. Kuppam, based out of Bangalore, is responsible for Intel Capital investments in India, Japan, ANZ and SE Asia.

Related:

Sudheer Kuppam Appointed Managing Director Of Intel Capital In India, Asia Pac

Harshal Shah was appointed last month as the CEO of Reliance Technology Ventures Pvt. Ltd., which is considered "the eyes and ears of the Reliance Anil Dhirubhai Ambani Group (market cap of $22 billion) for investments into the telecom, media and entertainment and technology sectors". Shah, who currently serves on the board of companies like Reliance Venture Asset Management Ltd, Yatra.com, Telsima Corporation, and Setco Automotive Ltd, was personally handpicked by the chairman Anil Ambani two years ago to look after the technology investments of the group. The process was given a formal shape recently by forming RTVL, which will act as a "corporate venture arm" of the group. Shah has taken lead in group's investments into Yatra.com, early stage fund Seed Fund, and also in Reliance Communications' $300-million acquisition of US ethernet company Yipes recently.

VC Circle talks to Shah about RTVL, and what areas they like to invest in. Excerpts:

What is the scope of RTVL? How does it work?

Reliance Technology Ventures Ltd is a 100 per cent subsidiary of Reliance Capital, which is the investing arm of Reliance ADAG. RTVL is the eyes and ears of Reliance ADA Group. Our mandate is to invest and advise Reliance ADA Group on technology investments. We will focus on sectors like telecom, media and entertainment (essentially from the delivery technology, to software, hardware and all the way to silicon), and the technology sectors.

Today, the capital is available in abundance. But the idea is to provide it from the perspective of how a large group like Reliance can synergise with these investments.

The secret of the sauce is that we have access to a large customer base and large ecosystem of partners, vendors and clients.

Do you have a fund, and do you directly invest?

No, we don’t manage a fund. We draw into group resources like Reliance Capital to make the investments. We have access to unlimited capital, and we have an unlimited timeframe for our investments. We also don’t work on a set target of making X investments in a year.

How did the idea of RTVL come about?

The genesis of RTVL came from the multitude of deals Reliance ADAG was involved with. Then it was felt that there was a need for a single point of contact – a front-facing group – to coordinate the process of sourcing deals, due diligence, and finally deciding on whether an investment should be made. So RTVL is sort of a corporate venture arm with a combination of investment banking. RTVL will also look at how the group’s rest of the businesses synergise with the potential investee company, and how to tap into the group’s customer base, and so on.

What do you look for in an investment?

We are more interested in the quality of the investment, and what is the net present value we are getting from the investment. We are not in a rush to do a deal. There is no dearth of deals. But we have to make sure that what we are getting should be substantial enough. In fact, we recently led the largest VC transaction in India (he refused to name the deal.)

Can you tell us what sort of deals you would be interested?

We would be interested in deals – for instance, within telecom, we would look at value added services, rural telecom infrastructure; in media and entertainment, we would look at newer technologies to deliver content (as we are entering the DTH business), and DTH infrastructure; and in technology if there are interesting silicon companies.

Have you seen some deals in this space?

In the last two months, we have looked at 250 deals. Obviously the strike rate can range from 1/6 to 1/10 to take it to the next stages. Usually, investors want to partner with us for strategic reasons and the insight that we bring into India, and the businesses that we are in, and have Reliance as a co-investor on the board. We are also beginning to be viewed as becoming a global Group with insights outside India as well, because of our global forays such as Yipes and Flag.

How have your past investments panned out?

Yatra.com, the online travel agency, is a fantastic investment. We are very happy with the management team. They have experience in building the hugely successful, multi-billion dollar, ebookers.com out of the UK, so they are familiar with all elements of operations, technology and sales. In fact, Yatra became number one in India, a couple of months ago, in terms of ticket sales. This is within less than a year of us having started our operations.

You have also advised Reliance Communications in its acquisition of Yipes. What was the rationale of this buy?

Yipes is a global ethernet company with substantial EBITDA. It’s a cashflow positive company. The market has been growing fantastically in the last few years. The number of people accessing video and multimedia content has grown dramatically, increasing the demand for the services of companies like Yipes. It has 1,200 enterprise level customers like the New York Stock Exchange, London Stock Exchange and Nasdaq.

Yipes is relevant for India too. There are 488,000 connected buildings in India. The multimedia content usage will go up in India too. So we have synergies in rolling out Yipes in the country. The deal with Yipes came about in a discussion with Norwest Venture Partners (a co-investor in Yatra.com - Promod Haque, Senior Managing Partner of NVP, is on the board of Yatra.com as well, with Harshal Shah). We figured out that we can take Yipes to the next level.

How do you see the opportunities shaping up in India?

In the last couple of years, we have seen a lot of quality people coming from abroad to India to do startups. This will create good opportunities. We are also seeing a lot of ventures in cutting-edge technology products and services – especially in TMT sectors.

How is RTVL constituted?

We are eleven people – and they come from technology, markets, and finance backgrounds. We also have the advantage of tapping into the resources within the Reliance ADA Group for deep expertise and due diligence on products and services. We will be looking at more people with experience in business development, deal closing and also in investment advice.