Where’s the action going to be: The Viedea guide to deals in 2011 – Compiled by Deepak Srinath with contributions from Uday Disley, Aravind G.R and Alap Bharadwaj

As we take stock of the year that went by and take our collective deep breaths for the year ahead, we’re pondering on the big question- what do we focus on in 2011? As part of our business planning process we asked each team member to send in their predictions for the year…and predictably got some interesting comments.  Uday felt this was akin to predicting whether the Indian team will win the world cup at home and Aravind opined that we should just ask that big brother VC fund (Wily Wonka’s chocolate factory is Aravind’s precise metaphor) with an army of ex-consulting associates to tell us what sectors they’re investing in and pick up mandates from all companies in those sector….The logic being that all other funds will follow big brother and we’ll be sitting pretty. Finally after much persuasion, the team sent in their vision for the year ahead, and we present to you an edited summary of our guideline for 2011:

(Please note- This is limited to VC/PE and M&A activity in the sectors we focus on in the early, growth and mid market space)

1. Internet /E-Commerce – Unanimously elected as a high action sector for the year. Frantic VC  and angel activity will continue for the first two quarters of CY2011, fuelled by the makemytrip inspired billion dollar IPO vision. The Indian consumer finally seems to be buying online and we expect all sub sectors in the ecommerce space to see funding activity. The internet investment frenzy will ease off by the second half. However, we expect strong M&A action, both inbound and domestic consolidation through the year.  The second half will also see Series B and C investments in internet firms that have managed to reach some scale.

2. Education – Last year’s darling, still has some fizz left for this year. Aravind, our in-house education expert believes that funding action will mostly be for mid to large size firms. Lot’s of small M&A deals are expected as PE funded players mop up strong regional brands to consolidate, especially in the tutorial and test prep space.  M&A deals of the size of Tutorvista-Pearson will be more of an exception than the norm. Valuations will remain unrealistic though, and we may actually see a lot of long drawn out deals that take a long time to close. (Note to Aravind – Patience and Stamina, your mantra for the year!J)

3. Mobile/3G/Connectivity – This year’s big focus in the mobile space will be around 3G plays- Video, Optimization, Software products, Cloud, Data Security and Recovery, Gaming (enabling not developing). We expect VC investments in all these areas and the likes of Apalya have already demonstrated this emerging trend.

4. IT/Tech services – Unanimously voted as the ‘not cool’ sector of the year.  As Alap says,”Mid cap IT will see another year of stagnation on the deal front.” There may be some outbound M&A  traction with Indian mid cap companies acquiring in geographies like Australia and South America.  Alap is betting on Infy making a big acquisition this year but the office betting syndicate is not giving it favorable odds yet.       

5. Hardware devices/Tablets – The gadget geeks in the office (everyone except me) want to believe this will be the year of the Indian tablet. Notion Ink has swayed them all, and we’re hoping this is one rock star to emerge from India. However, hardware plays from India remain hugely challenging and we don’t expect much funding activity here. Even the low cost mobile handset plays seem to have peaked and we expected that raising PE funding will be a challenge for new players.

6. Healthcare – Will continue to attract investor attention, both hospitals and services/technologies that enhance healthcare delivery. Rural healthcare providers will attract VC investment. Consolidation will be seen with bigger hospital chains acquiring smaller or regional hospitals.

7. Financial Services – Financial inclusion, the big investment theme in India over the last few years will continue to drive investments this year also. The MFI party will be muted this year, but areas like housing loans to lower income segments will attract PE investment. Mobile banking platforms, combining technology and brick and mortar may attract some investment.

8. Agri and Food – Farm to fork seems to be the theme for this year with supply chains and agri warehouses continuing to attract some serious investments.  Aravind is of the opinion that food processing companies that emerge from the food processing parks set up by the government will attract some investment.

We hope our analysis is useful as you plan your year. Thank you.

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Is India ready for the Tablet PC revolution? – Uday Disley

It will not be long from now that all of us will have a tablet pc in our hands, much like what we would have experienced with a smartphone few years ago, only this time the adoption will be much faster. While Steve Jobs may feel happy about this, but as usual he waited for an year, before he officially launched his Ipad in India. He may have been ill advised not to launch in India, but will Mr Jobs regret, maybe yes, here are some points that he may have missed

A)     3G/ Broadband access: For a country where last mile connectivity has been one of the biggest issues when it comes to internet penetration, 3G/ wireless broad band access should solve the problem. The penetration will be aided by access which will become cheaper as competition increases. There is already talk within the industry that RIL, which has a pan India license for broadband, will do what RCom did for mobile telephony with its prices when they launched, and the rest as they say is history.

B)      Entertainment: When your mother-in-law is active on facebook, you know that social networking is really working in the country. I wouldn’t be surprised if she opted for a 500 gms device which pretty much covers more than her computing needs. Besides this, there is enough and more data on the increase in consumption of entertainment over the internet to substantiate the need for a hand held device. With a tablet, you can literally carry entertainment around with you, as opposed to lugging a 3 kilo laptop (for doing the same things).

C)      Price: Well all of us want the coolest thing that we own, to be the cheapest (price). The tablet’s are at an ‘early adopter’ stage, but there already seems to be a price war (thanks to Steve Jobs for an aggressive pricing on the Ipad). Our prediction is that the price of tablets will drop drastically over the next year or so. The reason is simple, thanks to Google’s android, the hardware is more or less commoditized. Recently I met an entrepreneur who plans to sell Android based tablets at about Rs.10K, while his landed price being Rs.6K (no points for guessing where it is landing from). Now you can expect the second round of handset wars between the likes of Spice, Micromax, Karbon and other homegrown brands. While you may never get the snob value of carrying an Ipad, but I believe that a majority of Indian consumers out there couldn’t care less.

D)     ‘I still have my doubts’: While many may argue that a combination of access, low price, and a ‘better than PC’ user experience is not a sure shot recipe for success, analyse this; you like and use your mobile more than your PC/laptop (and always had a freakish desire to throw it away when it hung); you are a compulsive social network user (you have facebook on your mobile and access it at least 3 times in a day) and last but not the least you wished the laptop was mobile enough to accompany you to the ‘pot’. If you still are in doubt you might just be missing out on the next big wave.

So is the tablet going to change how we do our computing, guess it will not, but it has the potential to be as disruptive as digital music players (thanks largely to ipod), has had an impact on how we access music and the music industry at large. You may still have PC’s, laptops and tablets co-existing, but the way we use all of this will change drastically. So the question really is ‘which side of the opportunity are you on?’

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