Four years later: Chandrasekaran's Bluetooth blitz

Come September and apple will release the latest version of its bestselling iPod. And the employees of a small company located in Bangalore's verdant J.P. Nagar borough will uncork the bubbly. A Bluetooth (a wireless technology that enables devices to talk to each other) solution developed by the company, Impulsesoft, is at the core of the wireless stereophonic headphones that will accompany the iPod.

Success has been a long time coming for Impulsesoft, founded in 2000 with a $1-million (Rs 4.7 crore at the then exchange rate) infusion by angel investor N.S. Raghavan, a co-founder of Infosys Technologies. In 2001, when the company hadn't sold anything to anyone, this magazine picked Impulsesoft as a company to watch (see 10 for Tomorrow, Business Today, June 7, 2001), but there were times, in subsequent months, when that opinion seemed incorrect. The company's founder and chairman M. Chandrasekaran claims he never lost heart. The first few years go into research and development for all product companies, he explains, adding that the revenues start trickling in much later. Circa 2004, Impulsesoft has broken even and has a small profit to show in its books: revenues of $1.42 million (Rs 6.39 crore) and a net profit of Rs 11 lakh for 2003-04. "We are generating three streams of revenue," he says. "One is through licensing our IP, the second is royalty payments, and the third is from non-recurring engineering customisation."

The iPod connection falls under the first category. In 2003, Impulsesoft licensed its Bluetooth stereo technology to TEN Technology, a California-based developer and manufacturer of products that enhance existing consumer tech products. And TEN supplies headphones to iPod, which boasts a third of the worldwide global portable digital player market. Bluetooth has effectively replaced infra-red as the ideal short-range technology that can help devices communicate with each other: unlike the latter, it has no line-of-sight constraints and is not impacted by noise, temperature or ambient light fluctuations.

Impulsesoft has already developed several Bluetooth solutions for communication and entertainment (think gaming) including one that can help a Bluetooth-enabled car radio system pipe different stations to different people in the car. "The potential is limitless," says Chandrasekaran who is now looking to raise $3-5 million (Rs 13.5-22.5 crore) in the next 12 months. "A lot of companies were born in the 2000-boom," he adds. "But few product companies have survived and thrived." Even as Chandrasekaran and his 40-member team focus on moving to the next level, they must be praying that the new version of the iPod sells even more than the older ones.

-Venkatesha Babu

The eBay Effect
The India-imperative makes eBay create a few more internet millionaires.

India focus: eBay's Penchina

Prod Gil Penchina, vice president (international) of eBay, the world's largest online marketplace on the single-biggest reason for the e-behemoth's $50-million (Rs 230 crore) acquisition of Indian auction site Baazee and he proffers the usual arguments about the size of the Indian market and its happening nature. Prod some more and the platitudes give way to, er, the single-biggest reason: the need to put overseas merchants in touch with Indian suppliers, especially in businesses like gems and jewellery. Penchina claims Indian jewellery merchants dominate eBay's gems and jewellery marketplace and says that the Baazee acquisition will "make it easier for a merchant in the Netherlands to source jewellery from cheaper destinations like India". An efficient global marketplace, such as the one the World Trade Organisation seeks to create, will address such imbalances but till such time, reaching out is the only way ahead for a company like eBay (which too, strangely enough, wants to create an efficient global marketplace). That could explain eBay's plans for China-if Indian merchants set prices in the global jewellery market, Chinese ones do in the electronics and furniture markets-its acquisition of German mobile.de earlier this year, and its recent purchase of Baazee. The adventitious fallout: original promoters Avnish Bajaj and Suvir Sujan are reported to have made a cool packet (they won't say how much).

-Priya Srinivasan

Q&A
"India Is The Second Most Important Market After China"

He has just taken charge as the president and CEO of the Asia Pacific region for Royal Philips Electronics (Philips), and the quote on top indicates why Andreas Wente deems it fit to get a feel of the Indian market and meet with Philips' employees in the country right now. The 48-year-old Wente met with BT's Priyanka Sangani in Mumbai for a quick tete-a-tete.

How is Philips doing in India?

Over the past two years, the company has grown at a rate of around 10-12 per cent. The turnover last year was over Rs 1,600 crore. This year we expect to grow at 20 per cent.

How important are the Indian operations to the company?

The new business process outsourcing unit that we have set up in Chennai deals with the global operations of the brand unlike the one in Kolkata which concentrates on the India activities. Philips Design in Pune works partly on product and spatial designs for our products globally. A large part of our software development happens at the Software Design Centre in Bangalore.

There will be increased investment in this centre which presently employs 1,200 people. This will go up to 2,500 people by the end of 2006. We will shortly be expanding the BPO unit in Chennai as well. We are looking at doubling our sales figures in India over the next few years.

What's your assessment of the Indian market?

India is the second-most important market in the region after China, and it is a priority for us because of its potential to grow and the encouraging GDP growth of the country. We are looking at doubling our sales in India over the next few years.

Anchors Aweigh
Female TV reporters are everywhere.

Leading ladies: Women TV reporters are the rage

Seventeen. That's the number of television commercials aired over the past 12 months which have a television reporter as the female protagonist. From detergent powder Ariel to fairness cream Fair & Lovely to car-battery Exide Freedom to Birla Sun Life insurance policies, the new role model has hawked a variety of offerings. One dark-complexioned cricket buff uses Fair & Lovely and lands a job as a cricket commentator alongside real-life commentator (and former cricketer) K. Srikkanth. Another young TV reporter who gets her vitality from Dabur Chyawanprash helps a woman injured in an accident. Clearly, the increasing number of television news channels hasn't just created more jobs, it has engendered a new species of that elusive genus, the role model. "TV reporting has emerged as a desirable profession, especially for women," says Santosh Desai, President, McCann Erickson India. "It's the confluence of many desired qualities." Then, it is easier to relate to a TV reporter than a woman working as say, Executive Vice President (Operations). Given that actress Preity Zinta plays a TV reporter in Bollywood's wonder-of-the-moment Lakshya, the species has well and truly arrived.

-Swati Prasad

The Maturing Of Private Equity
India-focused funds gear up for newer kinds of deals, including buy-outs.

Eyeing India: Vernon's Arshad Zakaria The biggest buzz right now in the private equity industry is not about those firms that have closed $100 million or $200 million funds, but about Arshad Zakaria, a former Merrill Lynch honcho forced out in a power struggle, WHO's said to be cobbling together a gigantic fund. Its size? Anywhere between $750 million and $1 billion. Phone calls and e-mails to the US-based Zakaria, who has roped in ex-Antfactory India founder Rajiv Sahney to head India ops, did not elicit any response. But Sahney told BT that India's share of the fund could be about $250 million. Zakaria apart, there several more firms raising funds, including GW Capital, Kotak, and Udayan Bose of Lazard. "Will there be too much money chasing too few opportunities?" wonders K.P. Balaraj, MD, WestBridge Capital Partners. "It's not like you have 500 companies that are all world beaters." Eventually, they'll find out. -R. Sridharan

By the third quarter of 2004-05, Actis, a Delhi-based private equity firm spun out of CDC Capital Partners, will have in place its India fund of $250 million, besides its second South Asia regional fund of $150 million. That, however, isn't the big news. What is? The fact that probably for the first time in India, a fund has been set up with a mandate to do buy-outs. Says Donald Peck, Managing Partner, Actis: "Investors want us to do it. (Buy-outs) make good money in the rest of the world." So much so that Actis is even considering joining hands with ING Vysya Bank to set up an asset reconstruction company that will acquire distressed corporate assets-to start with those of ING Vysya. Another private equity firm in India, Baring Private Equity Partners (BPEP), which has just been spun off by ING Group and is raising a $150-million fund, could also consider buy-outs, as could ChrysCapital, which will have $250 million in third fund by July this year. That apart, there are others such as CVC International, Warburg, GAP, Newbridge, and Temasek who are known to do different kinds of private equity deals and, therefore, could chase buy-outs more aggressively if Actis strikes pay dirt.

However, it's not as if buy-outs are happening for the first time. As far back as 1994, ICICI Ventures funded the buy out of Godrej Group's engineering design software division, which went on to become Geometric Software Solutions. BPEP bought out a majority stake from the Bangurs in software company BFL, which in 2000 merged with Jerry Rao-promoted Mphasis. More recently in July last year, CDC Capital Partners bought out the Punjab government's stake in Punjab Tractors. But unlike in the past, there's greater willingness among promoters-courtesy the new Asset Securitisation Act-to restructure their businesses by either selling ailing companies or spinning off unprofitable divisions. Besides, with the stockmarket cooling off, valuations are once again looking attractive to private equity investors. Says Renuka Ramnath, MD & CEO, ICICI Ventures, which has a third of its funds devoted to buy-outs and last year bought out Tata Infomedia: "We are open to doing buy-outs across sectors, provided the management is good and the sector is growing."

But there are some regulatory hurdles in the way of buy-outs. The best-known variety of buy-outs, the leveraged buy-outs or LBOs, are done by raising debt in a new specially formed entity against the acquired company's cash flow (hence the word leverage). But current regulations do not allow foreign-owned special entities to raise debt in India, which means the buy-outs will have to be funded by equity. Also, Press Note 18, which requires foreign firms that have an Indian partner to obtain a no objection certificate before setting up their own fully-owned subsidiary in a related field, could deter strategic investors from participating in a buy-out deal.

The need for such deals, though, clearly exists. Bankers want them and promoters want them too. Missing in the picture was serious money. That's now come in. Owners of distressed assets, say cheese.

-R. Sridharan