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Posts Tagged ‘www.indiabusinessreports.com’

Indian handicraft exports are booming

Posted by fairval on May 17, 2017

Our research arm India Business Reports (IBR for short) recently did a note on handicrafts and handloom exports out of India. Good to see that this segment is booming.

Handicrafts exports touched USD 3.66B in 2016-17, a growth of 11% over FY16 in USD terms. In Re terms exports grew 13.8% to Rs245B in FY17, as compared to Rs216B in FY16. These figures does not include export of carpets, which is another sizeable market by itself.

Handicrafts2

(Source: EPCH)

Over and above the handicraft exports, India exported around USD1.8B of carpets an floor coverings. A major portion of this is handmade.

Growth rates for both – handicrafts and carpets – are healthy. Over FY10-17, handicraft exports have grown at ~15% in USD terms. Over FY97-17, a 20 year period, handicraft exports have grown at 10.2% CAGR in Re terms. Growth rate of carpets is slower, but impressive nonetheless. Exports of carpets have grown at 5% in USD terms over the last 5 years, and 13% in INR terms.

In the last 1-2 years, growth rates have slowed down for all sectors, in both domestic markets and exports. In light of that, this growth in exports in handicrafts is commendable, and makes it a ‘growth sector’.

For the full report, you can write to reports@indiabusinessreports.com; also available on Slideshare at  https://www.slideshare.net/IndiaBusinessReports/handicrafts-market?qid=c91002da-202a-47a6-bce5-9592f319fa73&v=&b=&from_search=1

 

Posted in Indian Economy, Trends | Tagged: , , , | Leave a Comment »

India tops JBIC FDI survey for 2016

Posted by fairval on January 14, 2017

For the third year in a row, India has emerged as the most promising country for overseas business, in the annual survey ‘Outlook for Japanese Foreign Direct Investment’ by Japan Bank for International Cooperation (JBIC). 

India replaced Indonesia as the top investment destination in 2014; and has held the position ever since. The table belows shows the result of of the 2016 survey. The survey is published in December. The 2016 survey was the 28th survey.

This is very significant. China held the no 1 position for more than a decades before Indonesia emerged on top for 2 years, and was then displaced by India.

This should result in increased activity by Japanese companies in India. Out of the 230 companies citing India as a promising, 60% (142 companies) do not have a local production base. They survey asks another key question – do you have a real business plan to go to India? In 2016, 40% of the 230 companies which named India also said they are actively working on India entry. In 2015, this figure was 36% (of 168). So there is a clear increase in in active interest in entering India.

jbic-survey

More on India Business Reports (www.indiabusinessreports.com)

Posted in Indian Economy, Trends | Tagged: , , , , , , | Leave a Comment »

VC/PE deal space continues to see slowdown

Posted by fairval on December 14, 2016

Amount of investment in Indian VC/PE (and angel) space continues to see slowdown. This is from data for Jan-Nov’16 (Source: http://www.indiabusinessreports.com)

vcdealsnov16

YTD amount is just over USD8B, down 38% over last year, while deal count is down as well.

The decline is sharpest in internet based businesses, where investment is this year is just about a third of last year.

Posted in Data, PE/VC, Uncategorized | Tagged: , , , , | Leave a Comment »

Article in The HinduBusinessline – Unit Economics explained

Posted by fairval on September 23, 2016

Lately, have been writing a monthly piece for The Hindu Business Like. The latest article was on key metrics an investor should check when evaluating an ecommerce startup.

6 questions for e-com start-ups

Posted in Angel Investing, Uncategorized | Tagged: , , , | Leave a Comment »

How to value angel investments

Posted by fairval on July 13, 2016

My column in Hindu Businessline this Monday focussed on the issue of – how to value an angel deal.

In short – there is no method really to value angel deals. Most investors use absolute numbers within a certain range to invest, without necessarily linking them to business numbers.

For example, Silicon valley entity Y Combinator, which is more of a accelerator than an angel, has a specific, one size fits all formula. It invests $120K for 7% stake, which means it values the startup at $1.71m post money. This is roughly about Rs 10 crore pre money.

Some Indian startup funds seem to follow this also. India Quotient invested Rs 2 crore in one company I know at Rs 10 crore pre-money. Don’t know whether it is their standard formula.

Most HNIs though tend to be stingy. They like to stay in single digits in pre money valuations.

Instead of a flat valuation, it is possible to do a bit of structuring, like discount to Series A. Or take a metric like orders processed, and link valuation levels to few pre-defined ranges of orders processed. These kind of investments will need a cap/floor ideally. Some investors don’t like to keep such metrics for valuations, since it can skew management focus.

 

 

 

Posted in Angel Investing, The Science of Investing, Valuation | Tagged: , , , , | Leave a Comment »

Jan’16 sees USD800m of VC/PE deals

Posted by fairval on February 13, 2016

Better than Dec’15, which say USD667m, but last 2 months (Dec and Jan) are slower than general trend in 2015.

Number of disclosed deals remains robust, at 85.

VCdeals_Jan16

 

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VC/PE investments for 2015 close at ~USD 14B

Posted by fairval on January 12, 2016

VC_PE

Eight years after 2007, when India Inc absorbed ~USD18B of VC/PE investment, the sector once again saw robust activity in the year gone by. Total VC/PE investment hit almost USD14B, the second best year in the history of VC/PE investments in India.

In contrast, in 2014, total reported investment was ~USD9B, from 381 deals. Total reported deals were 556, around 178 did not report amount of investment. In 2015, total deals reported were 881, of which 300 did not disclose amount invested.

These numbers may not necessarily match with figures from some other sources, we have noticed some other numbers which are larger than India Business Reports’ number. The reason could be people are counting within VC/PE  numbers, deals which aren’t exactly what we would call a VC or a PE deal. For example, we don’t see how a strategic investment qualifies as venture capital. Or an investment in a company outside India, even though the source of money could be from India.

 

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What is SEBI doing about Elder Pharma?

Posted by fairval on October 11, 2015

This blog has written earlier about what appears to be a rather large scam afoot at Elder. In Jan’15 we wrote

What is cooking at Elder Pharma?

The basic premise was – Elder got over Rs 1700 crore post tax from slump sale of certain assets to Torrent. But it wrote off Rs 1100 crore of that. WTF? Just before that came out, independent directors started resigning. The CFO resigned soon.

And it is common knowledge that the company has been in a financial mess and has been defaulting.

Now, Mumbai Mirror reports that The Bombay High Court has cleared the prosecution of top Elder Pharmaceuticals Ltd bosses, including TV actor and chief operating officer Anuj Saxena and his brother and chief executive officer Alok Saxena, for the company’s failure to honour fixed deposits worth Rs 155 crore. Full story here —

Elder Pharma bosses face prosecution for not repaying deposits

This is good news. Finally, someone is going after the promoters. But, there are bigger issues ere:

  1. Just who is following up to check if large amounts of money were siphoned off? That is a separate criminal act
  2. What is SEBI doing?
  3. Should auditors etc, who signed the Rs 1000 crore+ write off, be prosecuted as well
  4. Several independent directors resigned. But did they report any of their suspicions to SEBI? Clearly, there was a reason why so many of them resign within a few days of each other

No major paper has followed up this story. So much for quality of journalism here.

Posted in Corporate Governance, Pharma and Lifesciences | Tagged: , , , , , | Leave a Comment »

Is Sun Pharma losing the plot?

Posted by fairval on September 11, 2015

A one-off event can be called an exception; twice, maybe a co-incidence; but when something happens 3-4 times in a row – then it is hard to wish it off. At Sun Pharma, materially significant write-offs seem to be becoming a feature of the business.

Since FY13, Sun Pharma has written off Rs 4025 crore (Rs 40.25 billion or ~USD 700m). To get a sense of how big this is, consider this: it is almost equal to the 2 year net profit (FY14 and FY15) of India’s second most valuable pharma company – Lupin. In the 3 year period, FY13-15, the amount is equivalent to almost 30% of Sun’s reported net profit.

Sun

The write-offs have been due to 3 separate causes so far:

  1. Rs 31 billion or roughly USD 550m was written off over FY13 and FY14 to settle a lawsuit related to acid-reflux drug Protonix, and was paid to Pfizer Inc. Japan’s Takeda Pharmaceutical
  2. The write-off of Rs 2.40 billion or USD 40m in FY15 was on account of Sun’s acquisition Ranbaxy; this was to settle litigation concerning its participation in Texas Medicaid
  3. In Q1 FY16, an amount of Rs 6.85 billion (~USD 110m) has been written off as part of restructuring costs involving Ranbaxy acquisition.  The company has guided there is more to come on this count.

Some of this reflects a problem of size. Sun’s revenue reached Rs 274 billion in FY15 (USD 4.4 billion). Sun has chased growth aggressively in its entire history. Its 3 year revenue CAGR for period ending FY15 was 50%,  while 5 year CAGR was 46%, by far the highest in the Indian pharma sector. The sizeable merger done with Ranbaxy in FY15 of course bumps the CAGR this up. But even without this, Sun is used to growing at 30% plus CAGR.

The increasing larger base makes hyper-growth an increasing difficult problem. Even if Sun was to grow at 20% now, it needs to create almost USD 900m of new revenue.

Pharma sector requires far greater risk taking than most other sectors. Greater risks could mean continuing stumbles, which could reflect in recurring writeoffs. So the current 4 year phase may not be an aberration, but a fact of life for Sun.

In financial terms, the implication could well be that profit CAGR will trail revenue CAGR, unless Sun goes through a phase of strong EBITDA expansion, which would again be tough to pull off at this stage and size.  This is already true. Compare the revenue CAGR posted above against net profit CAGR for the same periods. 3 year profit CAGR was 15%, and 5 year was 27% for the period ending FY15. That is way less than revenue CAGR.

Is the stock market factoring the write offs? To some extent, yes. Sun’s stock is down over 21% between April’15 and now, the biggest loser in the pharma space. Some analysts continue to have a Sell rating on the stock even at the lower price, though there continue to others who are strongly recommending the stock.

A foreign broker’s BUY report rates the stock at 28x FY17 eps. This is effectively 34x FY16 eps. A stock which has given 27% net profit CAGR for the last 5 years, should it get a forward PE of more than 30x? Difficult to justify, unless the assumption is that the write-offs will disappear, and there will no more stumbles. At India Business Reports (IBR), we think that’s tough.

Posted in Pharma and Lifesciences | Tagged: , , , , , , , | Leave a Comment »

VC/PE investment in 2015 overtakes calendar 2014

Posted by fairval on September 7, 2015

Acche din are  certainly here for Angel – VC – PE space.

  • YTD 2015 investment stands at around USD 9.1b, 5% more than the figure of USD 8.7b reported in entire calendar 2014.
  • Monthly investments in private equity seem to have picked up sharply in India. After 91 reported transactions in July, another 80 transactions were reported in August’15
  • The total deal count in Jan-Aug 15 stands at 529, almost 60% higher than the same period last year.

PEdeals_Aug15

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