Striking Gold – Uday Disley

How often do you see our country stand up and take notice of champions who were hitherto unknown strugglers tucked away in some remote unheard of place. It happened recently when we all were glued to our TV’s watching a Krishna Poonia and her team create history, many would have felt the sadness to see a Babita Kumari in tears not having won the gold or a felt a lump in the throat when Achinth Sharath Kamal couldn’t control his tears while singing the national anthem after winning the gold. In a symbolic way what it really meant was that these men and women are not champions because they won, but more importantly because of the odds they have had to beat to reach this pinnacle. In a larger sense the point I am trying to drive home, is the potential of the unheard India that all of us in the ‘mainstream’ (whatever it means to whosoever) tend to ignore or overlook. But that should change and rightfully so.

One might ask why the reference to these athletes; firstly, the sheer number of champions that the CWG 2010 has produced who are from the hinterland of the country; secondly, we at Viedea tend to take sports seriously and draw parallels to it in real life (usually with cricket). If one did a quick recollection of the last few conversations with the investor community, you are more likely to have heard the word ‘bottom of the pyramid’ multiple times. While it wouldn’t take a genius of an analyst to quickly unravel the potential in the rural market, it would definitely take something else to identify ‘champions’ who will succeed in these markets. So what’s our take on this? Well simply put we believe that there are many champions out there (in the unheard India) who have not been discovered, the ones who we believe will strike gold at the ‘bottom of the pyramid’.

So how does one go about finding these champions? Frankly speaking we still haven’t figured it out, and don’t think anybody else has either, but fortunately we have met and worked with some entrepreneurs who will humble you with their understanding of the ‘unheard India’, and their sheer ambition to make things work in towns and villages whose names the ‘mainstream’, may have their tongues twisting over. The potential as seen from their eyes is vastly different from how the vast majority of us look at the untapped potential of rural India. Remember these people like the CWG champions have had to break multiple barriers before even getting into competition, and that’s the difference they bring to the table. As much as cricket from being the domain of urban India, has clearly moved to produce legends from Ranchi and Najafgarh, so have successful entrepreneurs started coming from a Kota or a Belgaum. Maybe this is the dawn of the champions of the bottom of the pyramid, and in the true sense ‘Incredible Inclusive India’.

What makes an Investment Banker good – Deepak Srinath

‘Jack of all, master of none’, I’ve heard that cliché used to describe investment bankers often enough. My reply to those who give me the Jack of all jibe is that we are actually fantastic actors. Everyday we play hustler, charmer, bully, hero, villain, peacemaker, instigator- a range that any Bollywood or Hollywood actor seldom portrays in an entire career.

Jokes apart, Investment Banking is indeed a potion with lots of ingredients, some well known and some secret, which go into making that brew called a star investment banker. At Viedea, we have our heroes in the investment banking community and have been lucky enough to interact and learn from many of them. While there is a high degree of individual personality traits that make them the successful, we’ve had insights into fundamental traits that are essential for any good investment banker. So here goes (in no particular order of importance):

1. Be like a sponge: Sector knowledge is important and most i-bankers have core sectors in which we have fairly deep knowledge. However, the world is evolving rapidly and sooner rather than later ‘sector expertise’ will become obsolete. I-bankers have to rapidly learn about emerging trends and businesses and develop a high level of general awareness and curiosity about our world. The best i-bankers I know are all voracious readers and absorb newspapers, blogs and all forms of information like the proverbial sponge.

2. People skills: This business is all about people skills. The relationships you build with you clients, partners, coworkers, etc, are really the only assets that an i-banker has. If you don’t have a “turn on the charm” button, you have no business being an i-banker. The most hard core, aggressive i-bankers can transform themselves into charmers at will. Of course, it helps if the charm and empathy is real and not put on.

3. Great Execution OR Great Sales & Marketing skills: I believe that most i-bankers fit into one of two slots – ones that have better execution skills and ones that have better sales and marketing skills. Of course, no investment banker can entirely fit into one slot and must do both. However, it is essential that one is clear about what his or her strength is and builds their forte accordingly.

4. Patience and Tenacity: Deals take forever to close. Deals that appear to be done and dusted fall off for the strangest reasons. Unless one has extreme patience and extreme tenacity, it is prudent to take up an alternative profession.

5. Hygiene factors: Financial modeling, valuation, deal structures, legal and regulatory frameworks- I call this the core skill of i-banking. This is the only skill that can be learnt or acquired. Some of it can be taught and some of it comes with experience. Many an Associate in an i-banking firm possesses this skill in ample measure but is unable to make the cut to a client handling role because they do not posses that other traits listed above.

I would also encourage all current and aspiring i-bankers to view this short video by David de Rothschild on what makes a good i-banker (http://www.rothschild.com/Careers/?id=media/video3).

He rates ability to listen, good judgment and focusing on your strength rather than trying to everything as key to being a successful investment banker. And no, neither David nor I have “GREED”, a la Gordon Gecko in our list of must have skills for investment banking.

Franchising the movie art – The Editor

endhiranRecently I was in the USA and I ended up watching the movie “Enthiran-The Robot” in Chicago. When I went in to the cinema, with much compulsion at first, I was humbled by the crowd that had gathered to watch the movie. Obviously all those people were the actor Rajinikant’s fans and I realized that all of them were watching the movie for the second or the third time. The audience was a mix of all ages and I was thrilled at the impact that it had on kids and adults. They went out of the cinema talking about the Robot and were impersonating what the lead character said and did in the movie. It struck me then, sitting there, why the Indian film industry does not create franchises for a movie like the Robot.

I visited a Star Wars store in Disneyworld and realized what a large behemoth of a franchise the movie has become; DVDs, games, animated movies, books, toys, comics and even apparel were being sold. Hollywood’s Studios have perfected this art over a century of movie making while back home we are driven by single movies that are still producer and director led, although we are as old as Hollywood. Now the business opportunity to make franchises out of movies and characters for Studios must be enormous in a country like India with a market that is worth $ 650 million and can go grow to a billion in no time, provided Indian movie makers desire to become a Disney or a LucasFilm. What role does technology have to play in this? The market is in catering to theatricals, games, DVDs, home entertainment and animated series. There a series of firms in each of these genres and these firms lie there for the taking if producers and directors could start their own studios.

I see this market hotting up if entertainment studios, directors and producers create an amalgam of sorts to raise large monies to make grand movies like the Robot. Imagine the amount of work that can be outsourced to emerging entrepreneurs in the digital animation and gaming scene too. These big names however will have to create a business model that can ensure returns not just on the release of the movie, but on the entire distribution gamut of a franchise. For some reasons we seem to have only perfected the art of creating a splash out of the movie before the release, after that it just dies in memory. To refresh such a lost memory, do you remember the movie “KITES” pre-release or post its release? You know the answer to this one, it is the former.

We do a lot of i-banking work for digital media firms and I believe that there is enough digital work to be outsourced locally to make great franchises in India. But currently all big Studios like a Reliance Media Works, Eros ICube and a Prime Focus concentrate heavily on outsourced work from Hollywood. This is common knowledge; they do so because Indian Cinema suffers from credibility in financing and making payments. The economics of making a great franchise in Indian cinema is still a long way away. But the opportunity is just waiting to be taken. Disney and Nickelodeon are yet to figure out their India strategy, properties like “Sponge Bob” are already creating a splash here. Cartoon Network is already the most watched channel. A franchise is important for a movie, just like award ceremonies are important for TV Channels, Newspapers and Magazines. It just brings in the ad-revenues to make their businesses profitable and ensure returns to investors. The likes of Disney, Dreamworks and a Lucas Films are big abroad, will they now take a dip in India if we Indians do not.

Finding supper in “Gateways” – Aravind G R

The last time, I bought a movie ticket queuing up in a theater was three years ago. I have never visited telco offices to pay my bills. If only they had managed to sell clothes and shoes online (in a neat environment though), I would have bought them online as well. I hazarded a guess on how much of our economy today is captured by online transactions, I am trying to include not just ‘e-commerce’ but all ‘online transactions’ such as paying bills, buying airline tickets to transferring money to other bank accounts online. I could not find any ‘authentic’ source to support me on this; however, estimates ranged from 0.2 percent-3 percent of the economy. That throws up a large absolute number -$ 2.4 bn to $40 bn market.

All these transactions go through a ‘payment gateway’. The gateway authenticates and routes payment details in an extremely secure environment between various parties and related banks. It functions in essence as an “encrypted” channel, which securely passes transaction details from the buyer’s Computer to banks for authorization and approval. On gaining the approval, it sends back the information to the merchant thereby completing the “order”, and providing verification.

Payment Gateways in India charge a service fee called merchant discount ranging from 2 percent to 7 percent on every transaction plus annual charges of up to a few lakhs every year. This translates to system wide gross revenue of $ 500-600 mn (range of $80 mn to $1.2 bn based on the absolute number above). Now, one would assume that the market with a size of $ 500-600 mn a year will be severely competitive with a host of companies trying to out-do each other. However, our research suggests that a major share of this market is currently being served by only four major players in the market.

Except for an investment by Greylock, the sector which is quite obviously a greater play on e-commerce growth in India, hasn’t seen a single investment or an M&A transaction in many years. Are investors missing out on a great opportunity? For one, companies are growing at an incredible pace- according to Deloitte Fast 500 list, one of the companies in the space has grown by 350 percent Y-O-Y over the past 3 years on a decent base. Also owning a payment gateway will boost net margins by 2-3 percent. This becomes a very attractive proposition for companies in the internet domain- E.g. an airline aggregator who makes wafer thin margins on large volumes –wonder what Makemytrip would have been valued at, if it was profitable at the time of its IPO?

We at Viedea have been working with a few players in this space and have witnessed significant interests from both the buy-side and the sell-side. With a certain large & harassed ‘pal’ on the lookout in India, we are expecting a ‘crazy’ if not a large transaction in the next few months.

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