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"We Will Look At Opportunities In TMT Sectors; Capital No Constraint

22 March, 2016

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 of US ethernet company Yipes recently.

Earlier, Shah was a Project Manager at an Associate Partner-level at IBM Global Services in the US, where he was also a member of the corporate strategy team and leadership group reporting to Sam Palmisano, CEO of IBM. Before IBM, Shah was with Northstar Global Partners in Boston, the private equity vehicle of Ed Mullen, ex-President of CMGI. He also had a stint as the CEO of Infostakes, Inc., a cross-border investments company in the US and India, where he grew the net worth of the company by 90 times in three years. Prior to this, he worked as a Consultant with Accenture’s (Andersen Consulting) Strategic Services Group in Boston, Singapore and Hong Kong.

Shah has an MBA from The Wharton School of Business, while he has also been a Truman Gray Scholar from the Massachusetts Institute of Technology (MIT) from where he earned two bachelors’ degrees in Management, and Electrical Engineering & Computer Science, with a minor in Economics. Besides this, he has run two New York City Marathons and has also hiked in Patagonia, Chile. Shah lives in Mumbai with his wife, Urja, who is a fashion designer from the Parsons School of Design (New York).

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.

 


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"We Will Look At Opportunities In TMT Sectors; Capital No Constraint

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