BPEP India's Rahul Bhasin: New beginning

Two months after CDC capital partners announced that its management and staff would buy out 60 per cent of the ownership to form a new private equity firm called Actis, Baring Private Equity Partners, a London-headquartered firm with investments in excess of $1.5 billion, is following suit. BT learns that Baring Investment Bank, part of the ING Group, wants to get out of the private equity business and is allowing its partners world wide to buy management of the fund. However, only six of its several managing partners will be allowed to continue using the Baring name. One of them is an Indian. Accordingly, the ownership of Baring Private Equity Partners (BPEP) (India) will pass on primarily to its partners, who include Managing Partner Rahul Bhasin and Investment Partner N. "Subbu" Subramaniam.

Since 1998, BPEP India has invested more than $38 million in a clutch of ventures including Jerry Rao's MphasiS, Jyothy Laboratories (a Mumbai-based FMCG company), and SlashSupport, an India-based-but-San-Jose-headquartered BPO that offers technical support services. Although BPEP's investment portfolio in India is small compared to that of others like Actis, Warburg Pincus, or Citigroup Venture Capital International, it has one of the better performance track records in the industry. Over the last six years, BPEP India has clocked an annual internal rate of return (IRR) of 42 per cent. Its investment portfolio, largely courtesy MphasiS, is now valued at about $200 million.

But why are private equity fund managers, one after another, buying their institutional parents out? Apparently, due to investor pressure. Private equity investors, who typically are large pension funds, insurance companies and high networth individuals, want the 20-odd per cent management fee to go to the managers, who make or break the investment, and not the parental institution, whose role often is confined to lending its name to the managers. In the US, manager-owned firms have always been the norm, and Europe is now merely following suit. (In the case of CDC, the British government, which originally promoted the firm, wanted to get out of the business of private equity investment.)

While for Messrs Bhasin and Subramaniam the buy-out means more share in the profits, it also means their having to go out and raise funds on the strength of their own names.

-R. Sridharan

TECH
ONGC's ''Third Eye''

ONGC is going hi-tech with a vengeance. It has lined up Rs 600 crore in investment to wire up all its operations, including drilling. There are just a handful oil companies in the world that use virtual reality to simulate drilling. ONGC is one of them. It already has three "Third Eye" virtual reality centres and is planning to add several more. The move could save ONGC, which has a supercomputer on its shopping list, crores of rupee. Drilling costs of a rig range from Rs 15 lakh to Rs 20 lakh per day, and just a two-hour delay in drilling can, then, mean a loss Rs 4 lakh or so. By simulating real-time drilling, besides beaming in pictures, Third Eye Centres allow senior executives to take decisions from their corporate offices. That also means a blacker bottomline.

-Sudarshana Banerjee

A Pharma Dark Horse?
A little-known Dishman Pharma debuts on BSE with a bang.

Dishman Pharma's promoter J.R. Vyas: Dream debut

If you let its funny-sounding name deter you, well, too bad. For, Dishman Pharmaceuticals and Chemicals, an Ahmedabad-based company, has gotten off to a flying start on the Bombay Stock Exchange. On April 22, the stock was issued for Rs 175 apiece, but listed at Rs 301 and by the time the markets closed that day, it had climbed to Rs 542. At the time of writing, the stock was trading at Rs 461. And, oh, did we mention that the issue was oversubscribed 39 times?

What's so hot about the peculiar-sounding company, promoted by J.R. Vyas, a chemical technologist? "Contract research and manufacturing," answers Jigar Shah, Head of Research at KRC Securities. Two out of Dishman's eight manufacturing facilities in Balwa (near Ahmedabad) are dedicated to contract research and manufacturing for Solvay Pharmaceuticals BV of the Netherlands. This is Dishman's first long-term contract in this area (which suddenly seems to be hotting up with bigger players like Nicholas Piramal getting into it) and the stockmarket expects more such alliances to materialise. That it may be a lucrative route to follow is beginning to look obvious. Dishman's share of revenues from contract research and manufacturing is up from 5 per cent to 35 per cent (as on September 31, 2003). Although the asset-turnover ratio (revenue as a per cent of tangible assets) is pretty low (0.77), it is expected to improve in the coming years. "Dishman has heavily invested in fixed assets and the revenues from that should show up in 2004-05," says Shah of KRC Securities. Given Dalal Street's infatuation with the pharma sector, almost all its stocks look as smashing as Angelina Jolie.

-Narendra Nathan

Indian Oil On The Prowl
Armed with $2 billion, the oil major sets out for acquisitions.

IOC's M.S. Ramachandran: In M&A mode

In its quest to become a fully integrated oil company, present at every point of the hydrocarbon value chain, Indian Oil Corporation (IOC) has set aside a $2-billion warchest for acquisitions. So what oil companies will it be? There are just a handful of potential targets, including Hindustan Oil Exploration Corporation, Gujarat State Petroleum Corporation, Nicco and Cairn Energy. The first two, HOEC and GSPCL, are far too small to interest IOC. That leaves Nicco and Cairn Energy. According to analysts, Nicco will be a difficult customer simply because it already has entered into joint ventures with Reliance Energy for exploration and IOC wouldn't want to upset the applecart.

So that leaves Cairn Energy, the £1.3 billion British giant, which makes a perfect target for IOC. Some 5,000 to 10,000 barrels of oil will start flowing from Cairn's wells in Rajasthan, and the flow will increase to 50,000 barrels a day by 2007. Last but not the least, Cairn has some exploration activities in South East Asia, a market that IOC has been trying to enter for sometime now. Will IOC go for the jugular? Right now, your guess is as good as ours.

-Ashish Gupta

Q&A
"Our Focus Is On China"

Promoted by Alok Kejriwal's online brand marketing portal Contests2win.com, the $3 million Mobile2win is the pioneer in mobile marketing and mobile gaming in India and China. BT's Priyanka Sangani met up with the China-based coo of the company, Irene Wu, previously associated with brands like Bayer and Gillette, who was on a short visit to India.

How does Mobile2win rank against other similar service providers in Asia?

In terms of market position, we are number one, with a market share of 75 per cent.

What sort of potential does mobile marketing have?

India and China together have 326 million mobile phone users, so there is great potential to reach an increasing number of people through wirefree marketing.

How does the Chinese market compare with India?

The biggest difference is in terms of sheer market size. China has 300 million mobile phone users and India, 26 million. There is tremendous potential for growth in both the markets.

How profitable is it to run such an enterprise?

We are a 13-month-old company and we managed to break even within six months of our launch. Our projected revenue for next year is $10 million.

What are your plans for the future?

Right now 90 per cent of our focus is on China. We do get a lot of enquiries for partnerships (from elsewhere in Asia), but we need to find quality partners.

Crossed Wires
Billing snafus hit Reliance Infocomm.

Reliance Infocomm: Teething trouble

Call it the telecom jinx. Almost every time a new service provider hits the market, the launch is inevitably followed by billing chaos. It happened to BSNL and MTNL when they launched their mobile services, and now it is happening to Reliance Infocomm. Reliance India Mobile (rim) subscribers are being hit by billing-related problems, ranging from delivery of bills to the wrong address to incorrect billing. Have problems and stories, true or false, will spread. In Reliance's case, it includes rumours that some customers in Mumbai were being threatened with disconnection of electricity (group company Reliance Energy is one of the power distribution companies in Mumbai), where the mere threat of disconnection of cellular service doesn't work.

Meanwhile, the company has pinned down the billing errors to three factors: data entry, courier service and mischief makers. The data entry errors, according to the company, were caused by the stupendous increase in the customer base. For instance, in the first 10 days of Reliance Infocomm's "Monsoon Hungama" offer, it got a million subscribers. Now, the company has switched to the good old Indian Postal Service, and has identified some sub-agents who were providing mobile connections on fake documents.

As for handling customer complaints, Reliance Infocomm has plenty of bandwidth. Its telecom hub, the Dhirubhai Ambani Knowledge Centre (DAKC), can field 35,000 calls an hour (and it gets some 5 lakh calls a day). To keep in step with its growing customer base, the company is planning to set up additional call centres regionally, starting with the south and east India. Hopefully, the increase in the call centre capacity will be accompanied by a drop in angry subscribers.

-Swati Prasad