Startup funding: Money will not dry up, will look for quality

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

According to Indian Angel Network president Padmaja Ruparel, there has been an increase of 20% in the number of deals but the overall amount has gone up by 12%

While there are concerns about money drying up for start-ups in the country this year, venture capitalists say there is more money coming into the country but it will find its way only into quality ventures.

As a result, venture capitalists are going into a lot more details than before. So no more raising of funds and picking up cheques in coffee shops. And this is not bad, they reckon, as many people were starting up ventures just because capital was easily available.

Indian Angel Network president Padmaja Ruparel said that he has seen an increase of  20% in the number of deals but the overall amount has gone up by 12%.

“There is a huge interest among the investor groups in a variety of sectors. But there is much more diligence on how much money is required,” said Ruparel. There will be much deeper, sharper diligence and unit economics would be in focus, she said at a panel discussion on Raising and Deploying Funds in a Changed World at TieCon Pune, 2016.

Amid this talk of gloom and doom, people have raised huge funds but then they will be deployed carefully, said Sanjay Nath, co-founder Blume Ventures. “There is no rush to deploy funds and more time will be taken on deals,” he said adding, “good companies and quality founders are raising larger rounds of money.”

SAIF Partners MD & Advisor Alok Goel said around $2.5 billion would be deployed in two to three years and all this talk of money not being there was not true. “The most risk averse guys were becoming entrepreneurs just because capital was available and this was a risk. The craziness of the last 15 months of funding was worrying,” Goel said.

Remaining bullish about 2016, he said the consumer pain points were still there and those who could cut through the clutter would get funding.

Goel said the VC industry had seen three distinct phases in the country – prior to 2013 it was all about replicating successfully models of the West here; between 2013 an 2015 ideas were being copied here before even being tested and tried in the US, which doubled the risk in the business and was not going to work. The new phase is about looking at India specific problems and solving them instead, he said.

Qualcom Ventures VP Karthee Madasamy said such ups and downs were part of the cycle and they remain unfazed. “We have done six plus follow-on and new deals last year. We will do the same this year and have no plans to change that,” said Madasamy.

He expects India to do well in the area of hardware in the next few years with lot of start-ups coming up in India in this sector.

Source: http://www.financialexpress.com/article/industry/companies/deeper-due-diligence-precedes-start-up-funding/239822/

Forex reserves hit record high at $359.917 bn

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0
India’s foreign exchange reserves continue to rise to hit a record level of $359.917 billion as on April 8, data from the Reserve Bank of India (RBI) show.

India’s foreign exchange reserves continue to rise to hit a record level of $359.917 billion as on April 8, data from the Reserve Bank of India (RBI) show.

The central bank data show that in the week-ended April 8, India’s forex reserves rose by $157.40 million from the previous week.

As on April 8, foreign currency assets (FCA), which forms a key component of the reserves rose by $159.3 million from the previous week to $335.845 billion. FCA are maintained in major currencies like US dollar, euro, pound sterling, yen, etc. However, the foreign exchange reserves are denominated and expressed in US dollar only.

The movements in the FCA occur mainly on account of purchase and sale of foreign exchange by the RBI in the foreign exchange market in India, income arising out of the deployment of the foreign exchange reserves, external aid receipts of the central government and revaluation of the assets.

Gold reserves, however, remained unchanged at $20.115 billion. Special drawing rights (SDR) from the International Monetary Fund fell by $0.90 million from the previous week to $1.501 billion.

SDR is an international reserve asset created by IMF and allocated to its members in proportion of the members’ quota at IMF. The country’s reserve position in the IMF, however, fell by $1 million to $2.455 billion.

Source: http://www.financialexpress.com/article/industry/banking-finance/forex-reserves-hit-record-high-at-359-917-bn/237598/

Lending for small companies is a $300 million business

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

While bigger SME lending players like Lending Kart and Capital Float aim to close their next funding rounds, a slew of smaller players have emerged in the last year viewing the space as a segment where at least 10 strong players can coexist.

Amongst the new players, Puneet Dalmia-backed CoinTribe, which was launched in February, uses a proprietary algorithm to link up multiple data sources ranging from the credit bureau to social media determining the credit worthiness of an SME within minutes. The startup has tied up with private sector banks that use their platforms to process SME loans.

“Our ticket size for loans range between Rs 30,000 to Rs 20 lakh. We offer an interest rate of 13-18% and receive upto 30 applications on a daily basis,” said Amit Sachdev, cofounder at CoinTribe. The fintech player has an acceptance rate ranging between 25 and 30% for all of its applicants.

Tracxn Labs-backed LoanZen has not tied up with any banking partners yet and focuses on disbursing its loans from the capital raised in its first round. The startup, which claims that it receives up to 20 applications daily, offers loans up to Rs 10 lakh at an interest rate, ranging between 18 to 24%.

“We aim to complete the credit risk evaluation in a matter of minutes and disburse loans within 3 days. Since sectors like kirana stores and budget hotels cannot avail of loans from traditional banks, there is a lot of room for several players to emerge in this space,” said Madhu Sudhan, cofounder of LoanZen. The startup uses an artificial intelligence-based system to carry out the credit risk evaluation and looks at parameters like bank, taxation and accounting data. LoanZen claims to have disseminated loans up to Rs 50 lakh in the month of March.

According to Gaurav Hinduja, the co-founder of Capital Float, SME lending is a very deep vertical in India, despite banks and NBFC’s lending approximately $150 billion to this sector.

The unmet need is still over $300 billion and at least 20% of this can be tapped by new age tech lenders.

“It’s definitely not a winner take all market and we will see several startups attacking different niches in the market. We are likely to see at least 10x growth in fintech alternate lenders. There will also be a growing number of interesting partnerships between institutions and new fin tech lenders,” added Hinduja. Abhishek Goyal, the founder of Tracxn, believes that despite several players entering the SME lending sector, few will survive the current funding climate.

Source: http://economictimes.indiatimes.com/articleshow/51818398.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Private sector lender Federal Bank to support startups

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

Jumping on to the startup bandwagon, Kerala based private sector lender Federal BankBSE -1.38 % is opening incubation centres in Bangalore and Ernakulam exclusively for startups. These would be specialised lounges within Federal Bank branches meant for funding advisory, regulatory support and if required even for direct investment.

“We have a dedicated startup fund worth Rs 25 crore which we would like to use to fund or lend to promising startups. These lounges, named Launchpad, with fast internet connections, support staff from the financial world and advisory mechanisms would be the perfect breeding ground for future entrepreneurs,” said Shyam Srinivasan, managing director, Federal bank.

The lounge would be manned by bank officers who would be capable of dealing with the financial requirements of the startups as well as local specialists who would be able to advise on regulatory issues that entrepreneurs need to handle.

“We are talking to 3 or 4 startups daily. The challenge for a bank is to move away from a conservative credit mind set to a more entrepreneurial mind set and to accept the fact that out of 40 or 50 investments only one might take off. So even we are in the process of understanding how to engage with startups better,” he said.

The bank follows the footsteps of HDFC Bank and Bank of Baroda to integrate their platform with mobile payments application Chillr. The addition that Federal Bank brings to the Chillr app is that they would allow even non Federal Bank users to instantly open a Federal Bank account through a selfie and Aadhar identification number and allow them to receive payments through Chillr.

“This is just another offer in the suite of offerings for the customer. We are in the major discovery process slowly there would be convergence in this field,” said Srinivasan.

How FIIs outsmart domestic investors

by | posted in: Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

Domestic investors have a lot to learn from their foreign institutional counterparts, who seem to have mastered the art of timing, raking in the moolah in the midst of market volatility.

On the other hand, domestic investors mostly buy when foreign institutional investors (FIIs) are booking profits at higher valuations, limiting their own upside.

For example, in the current rally, most of the FII purchases were in 2012 and the first half of 2013, when the price-to-earnings (PE) multiple of BSE 500 companies had hit a multi-year low.

In contrast, most of the accumulation by domestic investors, through mutual funds and insurance companies, occurred in 2015 when BSE 500 companies were trading at a multi-year PE high. FIIs accumulated India’s top-listed companies at an average valuation of around 16 times and offloaded it to domestic investors at around 24 times their value (see chart).


In all, FIIs’ stake in BSE 500 companies was up 550 basis points between March 2012 and March 2015, at an average PE of around 16 times the companies’ combined trailing 12-month net profits. FIIs stake peaked in the March 2015 quarter, coinciding with the peak in valuations of BSE 500 companies. One basis point is one-hundredth of a per cent.

The analysis is based on the end-of-quarter shareholding pattern, market capitalisation and quarterly net profit of BSE 500 companies, beginning the March 2006 quarter. The sample is based on the data for 358 companies where the data is comparable across the period.

Analysts attribute this to the steady nature of fund flows FIIs receive, while domestic institutional investors are at the mercy of inflows from retail investors, which tend to take place late in the cycle.

“When FIIs were buying in 2012-13, insurance companies and mutual funds were still facing redemption, forcing fund managers to sell their holdings even when the valuations were low. Inflows turned positive only in late 2014 and 2015, when domestic retail investors were convinced about the rally,” said Dhananjay Sinha, head, institutional equities, Emkay Global Financial Services.

In comparison, FIIs receive a significant portion of their funds from large institutional investors in Europe and the US, whose investment sentiment remains steady over a long period.

Others also point to differences in the investing styles of FIIs and their domestic counterparts.

“FII investments are largely fundamental and research-driven compared to domestic investors, most of whom tend to get swayed by market sentiment and herd mentality,” said G Chokkalingam, the founder and chief executive officer of Equinomics Research & Advisory.

This explains why a majority of domestic investors fail to make money in the market, he added.

A similar trend was visible in the rally before the global financial crisis, when FIIs were net sellers for nearly two years in the run-up to the September 2008 crash while domestic investors were buyers.

Despite the trends, some analysts differ.

Nitin Jain, the president and chief executive officer of global asset and wealth management firm Edelweiss Capital, said there is no evidence of domestic investors being less smart than their foreign counterparts.

“We should not paint all FIIs with the same brush. Investment flows from exchange-traded funds, which is retail money – as volatile and sentiment-driven as domestic retail and mutual funds flows. FIIs, on the other end of the spectrum, also get pension money and sovereign wealth funds, which are long-term and their investment style is similar to that of domestic insurance companies,” said Jain.

Source: http://www.business-standard.com/article/markets/how-fiis-outsmart-domestic-investors-116032800052_1.html

E-commerce sees major money inflow

by | posted in: Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

It is not only Uber, the American taxi-hailing app, that is going all guns blazing in India with massive investment plans. Its biggest competitor, Bengaluru-based Ola, as well as e-commerce entities Flipkart and Amazon, are all planning to pump in big money to stay ahead, even in a scenario when investors are not as ready as earlier in opening their purse-strings.

Uber India has readied itself for another $500 million (Rs 3,300 crore) investment in the next three months, reports suggest. The app service had only nine months earlier committed $1 billion (Rs 6,600 crore) in India. Uber could not be reached for a comment.

For foreign giants such as Amazon, Uber and Alibaba, this country is a big market they all want to capture. Experts believe this is a trend which will continue, as a global economic slowdown will push a chunk of new investments towards India.

“We can clearly see a slowdown in overseas markets, while India is still managing annual growth of seven to eight per cent. So, companies such as Uber, Amazon and Alibaba want to bet big on India. While Amazon was not able to make a dent in China and Alibaba in Europe, they do not want to lose out on India. We will see this trend through the year,” says Amarjeet Singh, partner – tax, KPMG in India.

Ola, rival of Uber in the same segment, is on track to invest a chunk of its $1.3 billion (Rs 8,650 crore) capital raised so far. The firm recently announced it would invest Rs 200 crore in the Delhi-National Capital Region area over the next six months, “towards innovative green fuel technology, leasing of CNG cars and strengthening the system to catalyse greater CNG adoption in the region”, Rahul Maroli, its vice-president for strategic supply initiatives had said.

According to sources, Ola will further make strategic investments in all metro cities, as well as in Tier-II and Tier-III towns. “The company plans to add at least another 550,000 vehicles by the end of this year,” said one. Ola has at least 350,000 cabs and 80,000 auto rickshaws on its platform across 102 cities in the country.

American e-commerce major Amazon had said in October 2014 it was investing $2 billion (Rs 13,200 crore) in India. Later, its executives said the group had an open chequebook for the market. In February, it bought Noida-based payments services provider Emvantage, its first acquisition. This is aimed to help Amazon accelerate the development of payment solutions for customers.

As for Alibaba, the Chinese e-commerce giant, it already has a foothold in Indian e-commerce through its investments. The group is majority stakeholder in One97Communications, owner of mobile payments giant Paytm. Also, online marketplace major Snapdeal raised $500 million (Rs 3,300 crore) from a group of entities last year which included Alibaba.

The Chinese company now plans to directly enter India.

“We plan to enter the e-commerce business in India in 2016,” recently said J Michael Evans, group president. “We have been exploring very carefully the opportunity in this country, which we think is very exciting against the backdrop of (the) Digital India (programme of the government).”

Indian e-commerce giant Flipkart had, in March, infused Rs 338 crore into its online fashion store, Myntra, documents filed with the registrar of companies stated. Flipkart has so far raised $3 billion (nearly Rs 20,000 crore).

Source: http://www.business-standard.com/article/companies/e-commerce-sees-major-money-inflow-116032800986_1.html

PE inflows from foreign funds in real estate up 33%

by | posted in: Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

Total private equity investments from foreign funds in Indian real estate increased 33%, from $1,676 million (around R11,306 crore) in 2014 to $2,220 million (around R14,974 crore) in 2015, according to latest findings of global real estate consultancy Cushman & Wakefield.

 

Owing to high property prices and high investment potential, Mumbai was accounted for about 35% of the total foreign investments in 2015, followed by Delhi NCR accounting for about 25% of the investments.

Sanjay Dutt, managing director, Cushman & Wakefield India said, “The three large cities; Mumbai, Bengaluru and Delhi-NCR continue to attract the highest investments in India and account for about 75% of these investments.

However, with government initiatives to de-stress these cities, relaxed FDI norms and focus to improve infrastructure across the country, other cities in India are likely to witness rise in PE investments going forward.”

The structured debt deals accounted for almost half (49% in value terms) of the total PE investments in 2015.

The structured deals strategy, though moderated due to increased competition, offers returns in the range of 15% – 17% to its investors.

Source: http://www.financialexpress.com/article/industry/companies/pe-inflows-from-foreign-funds-in-real-estate-up-33/221723/