Corporate: Indiainfo's VFM strategy

STRATEGY
Indiainfo's VFM strategy

The wannabe portal chalks out an ambitious gameplan to overtake its rival, and India's Net numero uno, Rediff. First stop: higher valuation.

By E. Kumar Sharma

There's an apocryphal story about the genesis of Indiainfo. Raj(kumar) Koneru, a self-styled ''fast-track technology entrepreneur,'' who made his fortune in the US by setting up Intelli group-an infotech business solutions company in the ERP business, and now focusing on asp and e-technology markets-had always harboured hopes of setting up a Net company that would rule the roost in India. So, in early 1998, he paid a visit to Rediff's Ajit Balakrishnan. His mission? To buy rediff.com. Balakrishnan, so the story goes, refused, and a miffed Koneru decided on starting his own portal. Madhu Kodali, Co-founder and president (e-Commerce), Indiainfo, says the meeting between Balakrishnan and Koneru was just to explore the possibilities. but the anecdote does highlight the latter's combative streak that now characterises the company he runs.

The one-year-old Indiainfo boasts revenues of $13 million in 1999-2000, and has already snapped up six companies. Says the 30-year-old Koneru, whose designation reads founder-chairman: ''We are looking for more acquisitions to supplement our business model of providing the right mix of content and commerce.'' The aggressiveness isn't restricted to acquisitions: Indiainfo was the first Indian portal to offer a (sub-)menu for mobiles in December, 1999, and the first to offer Instant Messaging Service in February, 2000.

Yet, the company seems incapable of shaking off its wannabe tag. In the Outlook-MDRA opinion poll of Net users conducted in February, 2000, Indiainfo does not figure in the top 20 Websites. And neither a tie-up with Videsh Sanchar Nigam Ltd (VSNL)-for a 30 per cent stake, it has made Indiainfo the default homepage for its 350,000 subscribers-nor a 5 per cent equity sale to Morgan Stanley for $11.5 million, has changed that. Says Sanjiv Agarwal, 34, Head (Internet Group), Ernst & Young India: ''Despite being hyperactive in developing and acquiring content, and forming alliances, Indiainfo isn't really talked about. Probably because its promoters are not well-known.'' How does Koneru plan to change that?

The content route

Since March, 1999, when Koneru took a hands-on role, Indiainfo has acquired six companies including visual interactive, musicurry, Kodenet, Justdial, and India Abroad. Building up content through acquisitions makes sense. And the currency of most dot.com deals is stock, which doesn't impact the acquiring company's cash-flows. Concedes Koneru: ''Acquisitions boost capability, scalability, and skills, and help us with time-to-market solutions.'' Seconds Neeraj Bhai, 44, CIO, sharekhan.com: ''Indiainfo has found the ideal solution, but if everyone offers the same services, there will be little to differentiate them.''

This difference, claims B.G. Mahesh, the 33-year-old co-founder and CTO of Indiainfo, will derive from the content: ''Our USP is original content. A large part is developed in-house, and the acquisition of India Abroad will help.'' But not everyone shares his view. Says Amit Rathi, 26, Director, Anand Rathi Securities: ''As far as content goes, I still think Rediff has the edge over all other Indian sites.'' The numbers speak for themselves: for March, 2000, Rediff claims page-views of 70 million; Indiainfo claims page-views in the region of 20 million for April, 2000.

The valuations game

If there's a pattern to Indiainfo's strategy, it is an emphasis on valuations. Admits Koneru: ''In February, 2000, when Morgan Stanley picked up the stake, our value was $150 million. Since then, we have struck a deal with VSNL and acquired India Abroad. Our value is likely to be much higher now.'' Others see its deals, like that with VSNL, as just a bid to boost valuation. The deal does seem loaded in VSNL's favour. The fine-print? VSNL gets a 30 per cent stake in Indiainfo, and Rs 200 crore or 20 per cent of the revenues, for making it its default homepage.

Sounds great; only, subscribers can easily set up their own default homepages. Although research shows that only advanced Net-users change their original options, they constitute the very segment companies like Indiainfo wish to target. The reason? This segment is more amenable to on-line transactions. Avers Ernst & Young's Agarwal: ''Accomplished Net-users change their default homepage. It's a done thing unless there is hard-coding.'' But, Indiainfo believes VSNL gives it access to a certain number of users.

The revenue-driven approach

Morgan Stanley's infatuation with Indiainfo could have something to do with the portal's $13-million revenue stream, and the fact that a rise in its valuation ups the value of Morgan Stanley's stake. Claims the executive from Morgan Stanley: ''Revenue streams are critical. Valuation models are shifting from being based on eyeballs to earnings.'' Indiainfo claims to have eight revenue streams-b2b commerce, b2c commerce, advertising, sponsorship, web-solutions, hosting, travel, and financial services-and 20 sub-streams. Says R. Ramraj, 49, CEO, Satyam Infoway: ''Only the right revenue model can ensure sustainability.''

Indiainfo plans to list on NASDAQ and raise $100-150 million through an Initial Public Offering (IPO). The money will fund its manpower, capital, and promotional expenditures. There's another reason why Indiainfo would like to list on the NASDAQ before the year-end: if its IPO happens after December, 2000, India Abroad can convert its stock-and-cash deal into an all-cash one. That could impact Indiainfo's cashflows and hurt its valuation. Again, that nine-letter word, but hasn't that been the refrain of Koneru's efforts thus far?

Issue Contents Write to us Subscriptions Syndication