Archive for August, 2007

The Marwari entrepreneur community

Friday, August 31st, 2007

Marwaris comprise of a community of entrepreneurs who originally belonged to the state of Rajasthan in India. In the last 100 years, Marwaris migrated from Rajasthan to various parts of Indian sub-continent. Known for their business acumen, they founded several businesses, trading houses and manufacturing units in various parts of Indian subcontinent including Myanmar, Nepal and Bangladesh. Examples of a few billion dollar business houses started by Marwaris include the Birla Group (Aditya Birla Group, Zuari Agro, Hindalco, etc.), Mittals (Arecleo Mittal, Bharti-Airtel), Bajajs (Bajaj Auto, Bajaj Allianz), Singhanias (JK Group, Raymond), Ruias (Essar, Hutch Telecom, SK Group), Piramals (Crossroad Mall, Nicholas Piramal) etc.
GD Birla, the legendary industrialist and the patriarch of the Birla Empire, is a well known Marwari. He was a close associate of Mahatma Gandhi and was a major campaign contributor to Indian National Congress during the pre and post independence days.
Marwaris have created a large number mid to small size businesses all over India, with high concentrations in Kolkata, Siliguri, Chennai, Hyderabad. Marwari businesses have been run by families with newer generation succeeding and taking over the reins at an early stage and expanding it further. A large majority of first and second generation Marwaris have limited the education for themselves to high school or less and got involved with the family business early-on.
The Marwari business style has been Hands-on, Know-the-Business-Basics style, which can also be compared to the value investing style of Patels, as treatised in Mohnish Pabrai’s The Dhandho Investor. Marwaris have always been considered conservatives, however, with rapid urbanization of India, the Gen X and Gen Y Marwaris from the traditional entrepreneur families have been venturing into politics, policy management (e.g. Bimal Jalan, former RBI Governor of India), operations, etc. A large number of Gen X and Gen Y Marwaris are also breaking away from traditional businesses and taking up positions in local and international corporations in India and abroad. Only time will tell whether the new generation of Marwaris will go back to their ancestral entrepreneur roots or chart a new territory.

YouTube launches Video Ads

Tuesday, August 21st, 2007

YouTube launches Video Ads
Read More at:
Mashable: YouTube Reinvents Video Ads
Search Engine Land: YouTube Initiates Monetization Strategy With Transparent Video ‘Overlays’
Search Engine Journal: YouTube to serve overlay ads
Analyzing YouTube’s Video Ad Revenue: Running the Numbers

Is India heading for a financial crisis?

Tuesday, August 21st, 2007

Take 1. High Real estate prices. I was traveling to Bangalore last month and got a chance to meet a few entrepreneurs who are looking at the food services sector for new businesses. The thing which was stopping them was the prohibitive cost of real estate as part of their total operations cost. The slice of real estate expense could be easily between 20% – 30% which leaves little wiggle room for product pricing, labor costing and equipment.
Take 2. India Inc.’s overseas acquisitions. Indian companies’ appetite for acquisitions has increased drastically. In the first 6 months of 2007, India Inc. has struck more than 500 deals worth $55 billion. This started with $5 billion in 2005, $25 billion in 2006 and aiming to cross $100 billion in 2007. How are these buyouts funded? Simple, the companies leverage their balance sheet, the price of the equity in the stock market and a very positive credit rating for India. In the Tata-Crous deal, Tata Steel cobbled together a loan of £3.5 billion ($6.8 billion) from Standard Chartered, Credit Suisse, ABN Amro and Deutsche Bank. Smelling the success of past deals like this (a la Warburg Pincus making $700m from a $300m investment in Bharti-Airtel), big-name U.S. Private Equity firms like Blackstone Group, Carlyle Group and General Atlantic Partners, etc. have started pouring money in India. Only yesterday, Blackstone has coughed up $165 million for a 50% equity stake in Gokaldas Exports, which supplies to Gap, Nike, London Fog, etc.
Take 3. Inflation and credit crunch. Due to over-investment in non-organic areas, the money is flowing to non-core sectors like real estate and stock market further fuelling the cycle of increased cost of living and increasing salaries. The prices of essential commodities are rising faster than the rest of the developing countries. An upward march of rupee vis-à-vis dollar by 8% has curtailed the inflow. However, the flipside to the rupee appreciation was the wrath export units are facing with competition from other cheaper destinations like Pakistan and Bangladesh. To further control money supply, banks have increased interest rates — which have helped control inflation, but tighten the credit to businesses.
Take 4. Global subprime mortgage crisis. A lot of banks and Private Equity players are part of the subprime downward spiral in the US and Europe, also happen to be the players in India Inc.’s growth. The subprime losses are being touted at $150 billion in US alone. The clear outcome of the subprime crisis is a change in risk appetite of banks and FIIs who are pouring money in India and tightening of the money supply to cover their subprime losses.
India’s GDP is being pegged at around 10% but this has not made any dent for the common man. Government’s monetary policies are very cyclical without any insight into longer term plans for expansions and fiscal policy. This day all the factors are working in favor of India Inc. any cyclic change or even a 20% drop in stock market (it had a 200% run-up in last 2 years) would reverse India’s fortunes in the shorter term.

Proud to be an Indian

Wednesday, August 15th, 2007

Today is August 15th. 60 years ago in 1947, India gained Independence from United Kingdom which was a culmination of more than 100 years of freedom struggle. Quoting India’s first Prime Minister, Jawaharlal Nehru in his famous Tryst with Destiny speech, I salute to the nation.

“At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom. A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends, and when the soul of a nation, long suppressed, finds utterance….. We end today a period of ill fortune, and India discovers herself again. “

At 60, India is rediscovering again with it’s GDP at 10%, Per Capita Income at $734, and literacy rate at 65%. There’s a long road ahead.