Monday, June 18, 2007

When the tide turns

Shocking to see how the tide turns.

Reality seems to be playing out now. To directly compete with VC firms, cash-rich large cap Indian companies in diverse fields like healthcare, manufacturing and retail are also creating PE funds to tap the SME business investment opportunity. Ranbaxy now has Religare Securities, Dalmia (Cement) group has Landmark-Holdings, Pantaloon Retail (Future group) has Future Capital adding to the crowd of strategic investment majors like Intel Capital, Siemens VC , Applied Ventures etc.

Earlier startups could never meet the stringent norms and soon VC firms began deserting them to focus on expansion stage companies in the SME segment that matched their `no-risk’ instincts. Government of India reacted to this shift in attitude (that turned many a risk taking VC into speculators) and duly pulled the rug from under their feet by withdrawing (pass through) tax concessions granted to them.

In business, good times last till competition catches up. Particularly in Fund management, opportunities last only till the strategy is kept under wraps. Normally others sense it well before the buck rolls in.

More number of players is good. Will there be enough quality deals for all of them ? Perfect condition for a shakeout…Oops…they call it `consolidation’ perhaps !

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