VCCircle

At least one faction of the Reliance Group has realised IT is an opportunity they missed out on. Anil Ambani's Reliance ADA Group has decided to enter the IT services business by floating a new company - Tech Reliance (does it sound like the IT foray of another major industrial group - Tech Mahindra?).
It plans to provide IT consultancy, business process outsourcing and software development, among other services.
It will initially look at providing services to industry sectors such as telecommunications, financial services, utilities, entertainment and healthcare. The group is reportedly looking at investing $2 billion in the business.
Apparently the company is on the prowl for top management staff from major IT firms in the country, according to a report in Business Standard. Anil Ambani has already hand-picked a core team of 15 members, including employees working within the group, to head the initiative, says the report.
It remains to be seen if Reliance entry can make life tougher to existing biggies like Infosys Technologies, Tata Consultancy Services, and Wipro.

The board of Info Edge India Ltd, the company that owns jobs portal Naukri.com, has decided to raise up to Rs 500 crore using routes like Qualified Institutional Placements (QIPs), Global Depository Reciepts, FCCB and ADR, the company has informed stock exchanges. The board, which met on December 21, also decided to increase Foreign Institutional Investment (FII) limit upto 40 per cent of the paid-up capital under portfolio investment scheme from the current 24 per cent.
It's not clear what the capital is being raised for. When contacted by VC Circle, Sanjeev Bikhchandani, Managing Director of Info Edge, refused to share details. "We are yet to decide the quantum and the type of instrument. We have a 12-month time frame to raise the capital," he said. Bikhchandani also denied a press report which indicated that the money is being raised to invest in its education portal business.
The board has also decided to raise the borrowing limits upto an aggregate amount of Rs 500 crore. It also approved a proposal to the investment limit by Rs 300 crores over and above the statutory limit.

This was probably the reason why Travelguru recently gave $25 million valuation to Desiya. In October, VC Circle first reported about Travelguru acquiring online hotel consolidator Desiya.com. It's the first M&A in Travel 2.0 - the second wave of online travel portals. In 2004, although Kuoni Travels acquired hotel booking engine Resnet from Traveljini, an ICICI Venture funded company, only the industry noticed that deal. But what is striking this time is the valuation of the acquisition. The Economic Times last week reported that the Desiya deal was done at $25 million (in stock mainly and a little bit in cash). If the number is true, this clearly is one of the largest deals in Indian online space, after, of course, Sify's 1999-acquisition of IndiaWorld for $115 million.
The industry reaction is mixed on the deal size. Some say it could be hyperbole, while some say it might not be completely unrealistic. Desiya, founded in 2005, claims to have 1,500 travel agents and 250 travel portals among it's clients. It also claims to have about 2,800 hotels in its inventory all over India, while registering 600 transactions a day (over 500 B2B transactions and 100 inbound hotel bookings). VC Circle spoke to Amit Taneja, 32, the founder of Desiya and a former executive of Expedia in the UK, on the sellout and where the combined business is headed.

Why did you sell?
In terms of our presence, we are still at an early stage in an industry which itself is so nascent. In our own right, we have been doing quite well. By joining hands with Travelguru, we are set for the bigger game.

The valuation of $25 million? How do you explain that?
It's in accordance with the long term potential of the industry. India today is considered one of the fastest growing aviation markets. As internet users grow, the number of people making travel arrangements online is expected to increase substantially. The hotel category operates on a very high margin, unlike 'air' which primarily is a commodity. With similar seating arrangements, and facilities available in almost all the flights, only cost matters to the end user.
The valuation is explained in terms of the gains that could be leveraged from the growth of this category (hotels). After all, we haven't yet seen holiday planning tools and user recommended travel destinations which make life of a traveller easier. Once we start seeing such interactive tools, online travel sites could move beyond being just online booking engines.

Is it an all-stock deal? Is there a cash component?
It is largely a stock deal with a small component in cash. The acquirer would be able to give you more information.

What is your gross merchandise revenue and the commission revenue?
Sorry, we will not be able to share these numbers.

Why did you sell to Travelguru?
We decided to partner with Travelguru after much deliberation, given the company's vision, range of online services, extensive reach across India and its technological capabilities. They had been our clients and we share a comfortable relationship, both professionally and personally. We were able to develop a sense of confidence in each other. They understand this space very well and had expressed sufficient interest in this. We will continue to be run as an independent subsidiary of Travelguru.

What does this acquisition mean to both Travelguru and Desiya?
The acquisition is strategic and should not be looked at merely as a financial acquisition. We thought over it. Joining hands will make the combined entity the no.1 in online hotel consolidation market. The key challenge for local OTAs is the technology platform, mid and back office systems. This is where a company like Desiya with its global experience and expertise, coupled with localised offering would be able to differentiate. The teaming up would mean delivering a great value proposition and good customer service both from a consumer point of view and B2B point of view.

Will you continue to be a hotel aggregator? Any plans to get into airline aggregation?
Yes, I will continue with my plans of being a hotel aggregator and moving up the value chain by integrating with many more five star hotels, structuring the supply chain and consolidating with suppliers. With the kind of revenues, expertise and customer value that we have created, I would rather continue focusing on this (with a high commission revenue basis), and there is more game here than venturing into airline aggregation space. Probably, we are open to airline aggregation space later, but not in the short term.

What will be the new management structure post-merger?
I will continue taking care of the online B2B activities as I have been doing previously. There has not been a major revamp in the organisational structure as Desiya will run as an independent subsidiary to Travelguru. And by very nature of the two businesses, the skillset required is complementary to each other. But new roles will certainly emerge on the managerial side as the business evolves. No short term change as of now.

What is the future course of action?
Integration is the high priority job in hand. Identifying synergies and people integration of the two portals will be completed by January. Technology integration will take around four months.

Is the online space going to witness more consolidation in the times to come?
Yes, as the volumes keep growing, there is much more consolidation and activity to be seen in the online travel space. There are players competing aggressively and waiting to get the larger pie of the internet market. There are international biggies who are doing their homework on this, and watching this space very closely. They might have not made any formal announcements yet, but niche travel sites like Orbitz, Expedia or Viator, Booking are all looking at India. With Travelocity already entering the Indian market, this space will see a lot more consolidation and activity in three to four months from now. Also, there are a lot of offline players looking at online presence, now.

Is there any impact of rupee appreciation against the US dollar on the business?
This certainly will pose indirect implications. There will be an slack in the number of inbound tourists in the overall sector with occupancy of the hotels dipping in the tourist season and India has the most expensive destination hotels in Asia. Hotels in Thailand and Singapore are much cheaper. In terms of rupee appreciation, this does not really matter because our commission on the hotel tariff is actualised as a percentage commission in the Indian currency.

IDG Ventures India, the Bangalore-based early stage technology venture capital fund, has made an undisclosed investment in a technology startup incubated by Stanford University and the city-based Indian Institute of Science (IISc). The company - 3D Solid compression Pvt Ltd (3DSoC) - was co-founded by Fritz Prinz (a Professor in Stanford), B Gurumoorthy (a professor in IISc), Krishnan Ramaswami and K K Venkatraman.
3DSoC is in the 3D content creation and visualisation space. It has developed a patented technology called VIS (Virtual Interactive Solid), which is a concise and lightweight 3D representation, comprising of geometry, text, sound, animation, textures and interaction.
The company claims that the concise nature of the representation makes it very attractive for digital transmission over the network. The value proposition lies in its ability to compress models significantly and allow for interaction at the same time. VIS will find applications in the 3D publishing and visualization space across industries such as automotive, aerospace, heavy equipment manufacturing, marine and offshore drilling, and healthcare to create electronic catalogues, manuals and digital mockups. It can also used in the education, media & entertainment industry to create content in the rich Internet applications space both for recreational and training purposes.
"It is our belief that 3D technology adoption forms the next wave of innovation in digital distribution of content. Whether it be 3D GUI's, rich internet applications, a Second Life like platform or global engineering digital supply chains, our investment in 3D Solid compression is well positioned to ride this wave," Sudhir Sethi, Chairman & Managing Director, IDG Ventures India, said in a statement.
The company's customers in India include some major players in the automotive and engineering verticals who see benefits in leveraging 3D product data in both marketing and the MRO side of the business, due to the highly compressed nature of the files, the release adds.
IDG Ventures India's Sethi and investment advisor Hemir Doshi will join the Board of Directors of 3DSoC. This is the fifth investment of IDG Ventures in India. IDG Ventures India, which has a $150 million fund, has invested in companies like Manthan Software Services, Kreeda Games, Connect M Technology Solutions, and iViz.

The Indian-founded, US (Palo Alto)-based IT company Symphony Technology Group has reportedly received a funding of $1 billion from its founder chairman Romesh Wadhwani and also the Government of Singapore Investment Corporation (GIC). A Times of India report says Wadhwani has put in $500 million in his personal capacity, while GIC $300 million and two unnamed US investors have put in $100 million each.
STG will use the $1 billion fund to undertake organic and in-organic expansion activities across the globe, with a focus on India, the report adds. It plans a Wipro-style string-of-pearl strategy under which it will acquire four to five US, European and Indian software services companies operating in FMCG, retail, healthcare and financial services verticals.
‘‘We realise that increased focus and dependence on India is key to achieve our revenue target of over $5 billion by 2010, against $2.1 billion currently. We will also have an employee base of 25,000 then, up from 12,000 currently,'' Wadhwani told the paper.

Delhi based Pahwa KBS has made an undisclosed amount of seed investment in an India-focussed human powered search engine Antya.com. The search engine is being launched today. Pahwa KBS is the company behind Desimartini, a social networking website which was recently sold to FireFly E-ventures Ltd, the internet arm of HT Media Ltd.
Antya is the first external investment of Pahwa KBS, a part of Delhi-based Pahwa Group which makes dehumidifiers and plastic dryers in the brand name of Bry-Air. They do not have a dedicated corpus for seed investments, but will look at seed funding innovative start-up internet companies, Vivek Pahwa, the CEO of Pahwa KBS told VC Circle.
According to press release, Antya is a simplified search engine aimed at non-internet savvy or advanced users looking for quick, reliable information on the web. To a question if Antya is along the lines of Mahalo.com (the human-powered search engine started by Jason Calacanis), Pahwa said: "Antya is not quite along the lines of Mahalo. Mahalo pre-programmes search results for queries. Antya use humans for building the search index."
Antya focuses on 'discovery', and shows results in a graphical format that has better brand recall, and focuses on variety to users, the release added. "In India, people are not comfortable with typing, they would rather click on the web to get what they want," says Sunny Saurabh, co-Founder of Antya.com. (Read a review of the site on WebYantra)

i2india Holdings Ltd, a technology commercialisation and investment firm focused on creating commercial value out of intellectual property created in India, has raised £1.5 million ($3.09 million) in seed funding from individual investors like DS Brar and Donal Peck of Actis. i2india is the Indian arm of UK's Imperial Innovations Group Plc, a company based out of Imperial College London and listed in the Alternative Investment Market of London Stock Exchange. Imperial Innovations, which has equity holdings in 74 technology businesses, will hold 35 per cent stake in i2india Holdings.
Susan Searle, CEO of Imperial Innovations, joins the board of i2india as a director alongside Chris Mathias, an entrepreneur and co-founder of Conduit Communications, a software and web development company. The seed funding for i2india was raised from a group of investors which include Imperial Innovations, Chris Mathias, and i2india's advisory board members such as DS Brar, Chairman of GVK Biosciences Ltd, Donald Peck, Managing Partner of Actis India, and Graham Wrigley ex-senior partner of Permira, Imperial said in the statement.
i2india would focus on the IP arising from a range of Indian research institutes, universities, research organisations and corporations, organisations with which Imperial Innovations and Chris Mathias, Chairman of i2India, have strong relationships, the release added.

SolFocus, the US based solar panel manufacturing company, has raised a fresh capital of $11 million from the existing investors in a round led by US VC fund New Enterprise Associates, and joined by Moser Baer India, US venture capital funds NGEN Partners and Yellowstone Capital Inc, MetaSystem Group as well as individual investor David Gelbaum.
This $11 million will be added to the $52 million the company raised in September. The $63 million was split between California-based SolFocus and its affiliate SolFocus Europe Inc. of Madrid.
In July 2006, SolFocus had raised $32 million in Series A round led by NEA with participation from NGEN, Yellowstone Capital and Moser Baer. In March 2006, NGEN and Yellowstone Capital had backed the company with $3.5 million in seed money. Moser Baer, which contributed $7 million to the first round, is also the volume manufacturer of the company's products and the exclusive distributor of SolFocus' panels in India and neighbouring countries.
SolFocus is a developer and manufacturer of solar energy equipment, including concentrator photovoltaic, or CPV, systems, as well as trackers and thermal technology.
Moser Baer Photo Voltaic itself had recently raised $100 million from a group of PE funds led by IDFC Private Equity, joined by Singapore's GIC, CDC Group and IDFC.

Ozone Pharmaceuticals, a Delhi-based maker of skin care products (such as 'Nomarks' brand) was in news recently for indigenously developing a protein sequencing instrument. Protein sequencing is done to determine the sequence of amino acids in a protein, and that helps accurately diagnose reasons for the occurrence of diseases and disorders. The instrument can help speed up the drug development process. The global market for proteins sequencing is estimated to be worth $20 billion, and Ozone is taking a bite at that. If all goes well, that can change the fortunes of the Delhi-based small pharma company. The players in the global protein sequencer market include the US-based American Biotech Industries with a dominant market share of over 90 per cent and Hewlett-Packard Co. with a market share of over 6 per cent, according to a report.
The company was founded in 1992 by S C Sehgal, a first generation entrepreneur and a one time market representative with Glaxo. The closely-held Ozone Pharma registered revenues of Rs 56 crore in 2006-07, and the company is targeting a 35 per cent growth this year to Rs 75 crore. They are open to raising capital, and probably an IPO by 2008. VC Circle spoke to Chairman and Managing Director Sehgal about the new product and their expansion plans. Excerpts:.

You recently came up with a protein sequencer technology, a diversification from your existing line of pharma and FMCG products. What does this new product mean for you?
It is a breakthrough technology, developed under Research Frontier in the US, the R & D division of the Ozone group. The study of protein structure and function through this instrument could speed up drug development since protein sequencing helps accurately diagnose reasons for the occurrence of diseases and disorders. Detecting the disease in the body at a fairly early stage, by understanding the patterns of proteins sequencing through a protein sequencer (an instrument used in determining the sequence of amino acids in a protein), will in turn allow pharmaceutical scientists develop drugs with lesser toxicity, to target specific metabolic processes at the cellular level. This will thereby ensure a better and a longer life for people.

By when will it be available in the market? Do you see enough market for the same in India?
It would be made available in the domestic market before March '08. The global market for protein sequencers is estimated at around $20 billion (approximately Rs 79,000 crore). In India, sales of such sequencers stand at around Rs 70 crore.

What are the company's future plans?
We have planned the expansion in two phases. The first phase includes getting into organic farming, which will be the backward integration of all our pharma, ayurvedic and FMCG operations. For this, we have recently bought 68 acres of land in Guawahati, and have already begun with organic cultivation. We plan to make all our products organic in near future. We are looking for more land and are in the process of buying more for our "Health village". It will be a holistic one stop solution for all kinds of heath managements - ayurvedic, magnetic, therapeutic, allopathic etc. In our next phase, we plan to come up with a chain of allopathic hospitals.

What is the investment all this will entail?
In our first phase, which does not include setting up of allopathic hospitals, it is about Rs 100 crore.

How do you plan to raise funds? Are you looking to raise money?
Initially it is being borne through internal accruals. Yes, we are. But we have not appointed any investment banker as of now for the same. But we are open to any good offer.

Any IPO plans in the future?
We plan to come up with an IPO by the end of next year, by December 2008.

Are you looking for any kind of merger/alliance with any company?
Yes. Why not? We are open to an alliance with companies dealing in manufacturing of pharamaceutical products, preferably outside the country.

Do you plan any retail formats?
This is not my practice area, so I will not venture into it. But we do and will keep providing our products to leading branded chain of stores dealing in pharmaceuticals, personal beauty etc. But, we do not have plans to set up exclusive retail shops dealing in Ozone Pharma goods as of now.

Info Edge Ltd, the owners of jobs portal Naukri.com, seems to keeping up with the promise as far as its revenue growth is concerned. It will become India's first internet company to cross revenues of Rs 200 crore (over $50 million) if everything goes well in the remaining part of the fiscal year. Info Edge has registered gross revenues of Rs 58.5 crore (net Rs 52.6 crore) in the second quarter ended September 30, 2007, which is up 80 per cent from Rs 32.5 crore revenues during the same period last year.
For the first six months of this fiscal, the Noida-based internet company's revenues stand at Rs 110.48 crore (net Rs 99.1 crore), compared to Rs 61.8 crore during the same period last year. The net profits for the Q2 2007-08 stands at Rs 15.14 crore up from Rs 3.5 crore during the same quarter last year. The net profits for the half year stands at Rs 26.78 crore, up from Rs 8.77 crore last year.
The company seems to be delivering on the numbers despite the increasing competition in all verticals it's operating - jobs, matrimonial and property classifieds.