The 14th Annual Wharton India Economic Forum (WEIF) brought together over 400 professionals, alumni, students, faculty and speakers to showcase the best of India and to discuss how India continues to position itself in the global environment. The mood was one of cautious optimism as the recent global financial crisis has proved to be a speed bump. Some of the challenges and concerns that were raised include the recent Mumbai terror attacks, the Satyam scandal, the Naxalite movement and problems related to infrastructure, labour and education. Nonetheless, India seems to be poised to be back on track in 2010. Here are some key takeaways, defining trends and industry insight from Indian business captains at the “India: Breaking Boundaries 2010” Conference at Wharton School of Business, University of Pennsylvania.

India, A Hub Of Low Cost Healthcare:  India used to be known only for generics, now it is also known as a hub of high quality and low cost health care, said K J Singh, Global Health, Bill and Melinda Gates Foundation. He added that India is a leader in IT and healthcare but there are still huge gaps, high mortality and low vaccination rates. This space needs financial and local innovation.

Apollo Hospitals To Get More Tech-Savvy: “In India there are islands of excellence in an ocean of inadequacy”, said Sangita Reddy, Director Apollo Hospitals. Reddy asserted that these “islands of excellence” can be scaled with innovation. Apollo started with hospitals and now sees the need to scale up in a non-linear way by using new technologies to improve access to health care.  It is critical to apply innovative solutions to solve healthcare access, she added.  Apollo has partnered with Cisco to build out community service centers for telemedicine.  Mobile penetration also helps and mobile solutions are important.

Insurance Needs Govt Push: Bhargav Dasgupta, Executive Director, ICICI Lombard, said, private insurance covers only 3% of India’s population, total coverage including government plans is 15%. So, 85% of India is uninsured.  Although there is 35% year on year growth in health insurance, private sector alone can’t focus on the mass sector and expansion of insurance coverage needs a government push.  For instance, the National Health Insurance Scheme, a government-subsidized health scheme for the rural market.

Tata HBM Fund Scouting For Opportunities: Homi Khusrokhan, Adviser, Tata HBM Healthcare Fund, said, the Tata Group has been a respectable and traditional group but not necessarily known for innovation but it is changing with products such as the Nano.  Khusrokhan told VCCircle that Tata has put in $20 million into the $150-million fund which is currently being raised. The fund has an open mind when it comes to the sectors and is looking at opportunities in drug discovery, hospitals, diagnostics and medical equipment.  It is not looking at pure venture plays but prefers some proof of concept. They have already invested $10 million in two deals – one is a company which makes treatments for foot ulcers while the other is in the bio space. He added that the fund will look not only at financial returns but also synergies for portfolio companies within the Tata Group. He added that the country offers a huge scope in genomics.

Drug Discovery In Emerging Markets:  Rajeev Dadoo, Partner, SR-One (GSK Venture Fund), said, global pharma companies are taking emerging markets very seriously both from a commercial and innovation/R&D perspective. 

Microfinance Is Key: In the opening keynote, Aditya Puri, CEO and Managing Director, HDFC Bank, said, the banking sector has a role to play in the growth of the Indian economy.  The role of the traditional money lender has to be reduced and there is a need to increase the debt market.

Early Exits Are Better: Srinivas Chidambaram, Managing Director/CEO, Jacob Ballas India said, there is a need to align exits to benefit promoters, management and investors.  Usually problems with the portfolio companies become apparent within six months and it is just best to address them early on. They have exited too early on several occasions and the lesson is that persistence and patience pays.

Rapid growth of portfolio companies May Hide Problems:  Utsav Baijal, Director, Apollo Management, said, rapid growth of portfolio companies may hide problems.  One of the key challenges in India is that promoters don’t want to dilute equity, which can sometimes negatively affect capitalization structure by taking on too much debt/over-leverage. He added that attitudes are changing though and that many investors in Indian banks are FIIs insist on stricter controls. He added that promoters also need to take a haircut if the banks take a hit.  Sector-specific funds will happen in India as the market broadens.

Sector Knowledge Is A Differential: Rajesh Srivastava, Chairman and MD, Rabo Equity Advisors, said, the only way PE funds can strive for differentiation in such competitive markets is by bringing sector specific knowledge to the table and adding such value.

Financial Models Are Not Fool Proof:  Alok Gupta, MD, Axis Private Equity, said, financial models cannot predict the external shocks such as financial crisis and terrorism. While one cannot wish such events away, it must learn to deal with such events with a determination to keep business as usual.

75% of IREO’s Focus To Be On Residential Sector: Anurag Bhargava, Chairman, IREO, told VCCircle that 75% of IREO’s focus is on residential sector.  He added that urbanization of India will continue with which 100m plus people will move into cities which will create more demand.  There is a shortage of quality housing.  Post May 2009, IREO has seen more demand for its project launches.   Real estate prices have come down after the downturn, current uptick in prices looks to be sustainable. He added that earlier many projects had been announced but never started. There has been oversupply in commercial but demand will eventually catch up with supply as the economy improves. IREO is also bullish on the hospitality sector. IREO is also bullish on education, education is part of the infrastructure in its projects.

(Shantanu Surpure, Managing Attorney, Sand Hill Counsel covered the event for VCCircle)

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