KPCB's Doerr (left) and Sherpalo's Shriram: Better late than never

Maybe you've heard this from a hopeless dotcom investor before: In the next four to five years, there will be at least two Indian internet companies that become global players. Your reaction: Yawn. This time around, you'll be ill advised to ignore the prognosis. For, making the pronouncement is not a starry-eyed dotcommer, but two men who are near gods of dotcom investing: Kleiner Perkins Caufield & Byers' (KPCB) John Doerr, and Sherpalo Ventures' Ram Shriram, an early investor in Google and who ranks #3 on Forbes' 2006 Midas List of best venture capitalists (VCs). Doerr, of course, is the man behind a host of companies such as Compaq (now merged with hp), Netscape, Sun Microsystems, Amazon, and Google.

To prove they mean it, Doerr and Shriram are putting their money where their mouth is. They've picked up a stake in Naukri.com, a leading jobs portal that raked in Rs 8 crore in profits on revenues of Rs 45 crore last year. Besides, the duo has struck a deal with travel portal Cleartrip.com. The size of the investment and other details of the two deals have not been made public yet.

Apparently, Naukri and Cleartrip are the first investments KPCB has made out of the US. According to Doerr, KPCB never looked beyond the 30-mile radius of its office in Menlo Park. But now, Doerr, like Shriram, is quite bullish on consumer-led growth in the digital space in India. "Unlike China, where growth is a foreign investment- and a state-led phenomenon, growth in India is consumer investment- and consumption-led," notes Shriram. According to Doerr, this is the best time to invest in India because "the market is now better developed, web is more broad-based, broadband market is rapidly expanding and there are many young and smarter entrepreneurs. The business community is positive about growth in India like never before." But he regrets the fact that he missed India's software boom.

Both Doerr and Shriram maintain that Web 2.0 in India is about setting up businesses for the local market, unlike the first wave when players got into the new media business to mainly outsource. "For the first time ever, there is an opportunity in India to build companies that would serve the local consumers and gradually, these can be scaled up to global level," says Shriram, who sold his shopbot firm Junglee to Amazon for $200 million (Rs 840 crore then) before turning a VC. According to Forbes, he still owns 2.8 million shares in Google, worth more than $1 billion (Rs 4,500 crore).

What are the new opportunities that they see in India? "Enterprise solutions for the local community and not just for outsourcing, product innovations, biotechnology, energy solutions, new communications and web services are some of the sectors that are going to grow quite rapidly," says Doerr. But KPCB and Sherpalo will be more keen on web-oriented consumer services, energy innovations, mobile solutions and infrastructure for better communication and connectivity.

Entrepreneurs and venture capital community in the country think both the Naukri deal and the visit of high-profile Valley VCs is a significant development. "When John Doerr and Ram Shriram come to India to explore the market, we can confidently say that venture capital has finally arrived in the country," says Saurabh Srivastava, President, The Indus Entrepreneurs. Expect fresh ideas to come crawling out of every corner in the country.

-Archna Shukla and Sahad P.V.

Who Will Drive The Stock Market This Year?
FIIs and large domestic MFs will dominate in 2006.

Flush with funds: Definitely something to smile about

The BSE sensex finally crossed the magical 10,000-mark on February 6. And it doesn't look like it's going to run out of gas anytime soon. The inflows from foreign institutional investors (FIIs) in January: nearly $1 billion (Rs 4,500 crore). The comparative figure for the whole of 2005: $10.5 billion (Rs 47,250 crore). "India is very much in fashion and is looking more and more like a sustainable trend. The domestic-oriented economy offers a relatively safe haven and a diversification for international investors. And FIIs will continue to be the dominant players in 2006," says Dominic Price, Managing Director and Senior Country Officer, India & Sri Lanka, JP Morgan India, which is setting up an asset management company in India.

Five others-Lotus India AMC, a joint venture between the Fullerton Fund Management Group and Sabre Capital, AIG, Alok Vajpeyi's Dawnay Day and insurance companies Aegon and Axa Bharti are said to have applied for regulatory clearances for starting mutual fund operations in India. And Quantum Mutual Fund has already filed the prospectus for the launch of its first fund, Quantum Long-term Equity Fund.

India-dedicated hedge funds like the Tricolor India Opportunities Fund, JF India Capital Fund, Julius Baer Multiopportunities-India Millennium Fund and Fulcrum DDAV India Opportunity Fund, among others, have lined up billions of dollars of investments. Incidentally, there are about 23 India-dedicated hedge funds, of which 14 were launched in 2005. And unlike in previous years, when players from the us used to dominate, this time, there are several FIIs from European and Asia-Pacific countries like Oman, Japan, Denmark, The Netherlands, Germany, Spain, Hong Kong, Sweden, Scotland, Australia, Ireland, Singapore, Bahrain, South Korea and Austria which now want to buy into the India story.

"Inflows can touch $20 billion (Rs 90,000 crore) this year. And I expect the market to deliver returns of 15-20 per cent, though a short-term correction may take place as it has run up too fast," says Ajay Bagga, CEO, Lotus India AMC.

Existing mutual funds are also expected to contribute a fair bit. Market sources say it was primarily Merrill Lynch, which had collected nearly $750 million (Rs 3,375 crore) from Japan, that fuelled the Sensex's sharp rise in January. Last year, funds like Fidelity, Alliance, Deutsche, HSBC, Prudential and ABN AMRO had mobilised over $5 billion or Rs 22,500 crore for investments in India and emerging markets. This money is not completely exhausted and is expected to flow in this year.

Domestic mutual funds are also lining up big investments. SBI Mutual Fund, HDFC, HSBC, UTI Mutual Fund and Fidelity have raised around Rs 8,000 crore so far this year. And more than 20 other funds are set to hit the market in the near future.

-Mahesh Nayak

Road To Nowhere
The Delhi-Gurgaon Expressway is still a long way off.

In a mesh: Hiccups one too many and the end is nowhere in sight

It was expected to be ready and in use by mid-2005. It's already 2006 and there's still no sign of it. Why? The Rs 555-crore, 27.7- km Delhi-Gurgaon Expressway, also known as National Highway (NH) 8, was awarded to Jaypee DSC in mid-2002. But only two out of the proposed 11 flyovers along its route are close to completion; they will be ready by April. The others will be completed only by February next year. One-third of the expressway passes through Delhi and the remaining two-third over Haryana. The cost of the project, meanwhile, has escalated by Rs 200 crore to Rs 755 crore. The two governments have to cough up this additional sum, but mobilisation is taking time. Says a government official: "Frequent changes in the scope of work and the resultant changes in design have delayed the project. We now expect it to be ready by February 2007."

Part of the land over which the road passes belongs to the Ministry of Defence. It took more than two years to acquire this land. Then, as many as 17 agencies, like the Air Force, Bharat Petroleum Corporation Ltd (BPCL) and GAIL India Ltd, among others, had to be persuaded to shift their communications channels, pipelines and other resources to new locations. The persuasion continues; officials have asked for one more month-as they did six months ago. And work on the 32-lane toll plaza at the Delhi-Haryana border has been held up as the land on which it will come up, belonging to the Haryana government, has not yet been transferred to the National Highways Authority of India, which is the nodal agency for the project. The issue has been pending for three years.

Officials say the road-eight-laned for 22 km and six-laned over the remaining 5.7 km-which was expected to provide relief to the 1.15 lakh vehicles which travel between Delhi and Gurgaon every day, will be traffic-worthy and tollable by December 2006, but some additional work will take another seven months. But by then, the traffic density will almost certainly rise further. Can the expressway handle the additional load? Or will another one be required? Jaypee DSC officials were unavailable for comment. One can only hope for the best.

-Kumarkaushalam

Cement Consolidates

Cementing deals: Very much hot

Is the cement industry going to witness some major consolidation? Or is Holcim's Rs 2,142-crore acquisition of a 14.8 per cent stake in Gujarat Ambuja Cements Limited (GACL) from its promoters, the Sekhsarias and the Neotias, a one-off event? Says Munesh Khanna, Managing Director, Enam Financial Consultants: "Consolidation is here to stay; and this indicates a very high level of maturity." The GACL-ACC combine and the Aditya Birla Group's Grasim are now running neck and neck, with capacities of about 33 and 31 million tonnes, respectively. Grasim had earlier acquired the cement business of L&T.

"The cement industry is growing at 11 per cent per annum," says Ambareesh Baliga, VP, Karvy Stockbroking. "The infrastructure boom is leading to some serious activity in upstream sectors like cement," he adds. Capacity is crucial in such a scenario, and players with large capacities and pan-Indian footprints will have a clear advantage over regional ones.

The price at which the Holcim-GACL deal has been struck ($212 or Rs 9,540 per tonne) has set a new benchmark and is at least 20 per cent higher than what conventional wisdom would have accepted. At this price, several small and regional players may be tempted to cash out. It's a win-win situation-the big boys get additional capacities and the sellers receive a price that is much higher than what they would have expected.

Just the right kind of atmosphere for another round of consolidation.

-Krishna Gopalan

CEO's Guide To The New Cabinet
An introduction to the new economic ministers in the UPA government.

On January 29, prime minister Manmohan Singh carried out the first major expansion-cum-reshuffle of his 20-month-old United Progressive Alliance government, inducting as many as 22 ministers, of them 10 Cabinet ministers. Here's a look at some of the new faces in charge of economic ministries. (With this expansion, there are 79 Cabinet ministers in the UPA government-the largest ever Cabinet.)

Shibu Soren, 62, Minister of Coal: Twice dropped from the Cabinet following arrest warrants for his alleged involvement in the killing of 11 people in Bihar 20 years ago, Soren lands his preferred portfolio.

T. Subbarami Reddy, 62, MoS, Ministry of Mines: A versatile man with diverse interests from films to spirituality, Reddy is also a businessman, besides being the chairman of Tirumala Tirupathi Devasthanam (Tirupati temple).

Pavan Kumar Bansal, 57, MoS, Ministry of Finance: In December 2005, Bansal had resigned as Chairman of the Member of Parliament Local Area Development Scheme, following allegations of diversion of his constituency development fund.

Akhilesh Das, 43, MoS, Ministry of Steel: Businessman and international badminton player, Das also owns a multi-billion rupee education empire that includes engineering colleges, dental colleges and management schools in Uttar Pradesh.

Dinsha J. Patel, 68, MoS, Ministry of Petroleum and Natural Gas: Businessman and agriculturist, Patel is also a social and political activist. He's been on various committees, including those of the Railways and Heavy Industries.

Murli Deora, 69, Minister of Petroleum and Natural Gas: A well-known industrialist and Rajya Sabha member, Deora is known to be friends with the movers and shakers of not just India Inc., but also the American establishment.

Jairam Ramesh, 51, MoS, Ministry of Commerce and Industry: A well-known economist and author, Ramesh played a key role in drafting the UPA manifesto, besides crafting Congress' win in the national elections.

Sushil Kumar Shinde, 64, Minister of Power: A Congress loyalist, Shinde may be unwilling to accept the free power business and thus, continue with the reforms in the power sector.

-Ashish Gupta

SELF WORTH: Kishore Biyani
Retail's Rule-maker
Why Pantaloon's Kishore Biyani has a finger on the pulse of Bargain Nation.

Pantaloon's Biyani: Eyerybody loves a good bargain

Modern retail is supposed to be complicated business. And we are not just talking about managing a supply chain involving hundreds of suppliers or managing store inventory running into thousands of SKUs (stock-keeping units). Retail is supposed to be complicated for one simple reason: You can never really tell what your customers want. That's why giant retailers like Wal-Mart and Target spend millions of dollars running sophisticated computer systems that not just track what gets and doesn't get sold, but the time, place and identity of the buyer. That way, retailers get to push their stocks faster and better.

By that measure, India's biggest retailer Kishore Biyani of Pantaloon Retail doesn't run a very sophisticated shop. In fact, if you've ever shopped at any of his Big Bazaar stores (and especially on a weekend) you'll know that checkouts take forever. Yet, nobody can deny one thing: Biyani knows, better than any other retailer in the country, just what his customers want. His Big Bazaar chain of stores have been a big hit with hoi polloi, helping Biyani grow it from Rs 136.5 crore in revenues in 2000 to (a projected) Rs 2,000 crore for 2005-06.

On January 26, Biyani once again demonstrated his special insight into the average consumer psyche, when he launched a Sabse sasta din (roughly, Day of lowest price), offering up to 80 per cent discount across product categories. What ensued was a virtual stampede across Big Bazaar stores in the country. In Western Mumbai, for instance, it is estimated more than 20,000 people turned up at one of the outlets, compared to a usual crowd size of barely 250 at any given point in time. In Bangalore's Banashankari and Koramangala outlets, police forces had to be deployed because the rush of shoppers had become uncontrollable. Even in Gurgaon, the store was closed mid-way through the day because over 30,000 shoppers turned up (typically, there are about 20,000 people who turn up in total through the day. In this case, there were more than 30,000 at one time).

Biyani admits that the response exceeded his wildest imagination, but he thinks he knows why. "India is split into two kinds of possible consumers: One is those who can afford to spend and the other is made up of those who serve the spenders. This time around, we got in those who serve the spenders." In one sense, the emergence of the classic Indian middle (or lower?) class came to the fore that day, when it seemed just natural to buy goods at throwaway prices. Products like mobile phones and furniture, points out Biyani, sold like "hot cakes". The lessons for Biyani, who has spent time studying consumption habits in slums, are straightforward. For Pantaloon, he says, the world has been divided between "before January 26 and after January 26". He might well be speaking of Retail India.

-Krishna Gopalan

Rediff Catches A Lucky Wind

Balakrishnan: Rising stock

What does it take to get your market cap jump by 35 per cent on the NASDAQ? a matching projection in earnings growth? Nah. If you are Rediff, all it takes is a mention on Jim Cramer's highly influential show on CNBC, Mad Money, where he said the zero-debt pure play could be a good investment. That made the loss-making portal's (2005 revenues: $26 million or Rs 117 crore) market cap soar over a third to $580 million or Rs 2,610 crore. What does Rediff promoter Ajit Balakrishnan have to say? "I am happy, but believe it or not, I don't track my stock movement." Maybe now he will.

-Sahad P.V.

'India Is Key For IBM'

IBM's Rometty: India important both as a market and as a talent base

Virginia 'Ginni' Rometty, 48, is managing partner of IBM Business Consulting, the largest unit of IBM's Global Services (IGs), which brought in more than half of IBM's $91.1 billion (Rs 409,950 crore) revenues in 2005. Rometty played a key role in IBM's acquisition of Daksh in the Indian marketplace. She met BT's Venkatesha Babu in Bangalore recently and outlined IGs' strategy in India and discussed what separates Big Blue from its competitors. Excerpts:

Are you satisfied with IBM's performance in India?

India has been very good for IBM, both as a market and as a resource base. Today, we have over 38,000 people working for IGs. In the domestic market, we have grown 60 per cent over the last year (IBM does not announce country-specific numbers). India is the global Linux hub for IBM. Our oil, gas and energy practice here is one of the largest we have anywhere and our R&D labs are driving key innovation strategies. So, India is very important both as a market and as a talent base.

You acquired Daksh and NetSol (Network Solutions). You personally played a key role in the Daksh acquisition. Any more in the offing?

The two acquisitions are very different from each other. Daksh was a part of our quest for better global resources, while the NetSol deal was primarily aimed at the domestic market. And if we come across some company that can add value to our offerings or help us provide a high-value service or get into a new space, we will definitely look at it.

Indian companies are trying to move up the value chain by emphasising and enhancing their consulting business and hiring rainmakers. Where do you see IBM vis-a vis Tier-I Indian players like TCS, Infosys or an Wipro?

We're completely different. You described it right; they're hiring 'rainmakers', that is salesmen. They have to offshore the bulk of their work here. IBM is present in 180 countries. We will do the same work where we have the competencies. Ours is an asset-based strategy compared to the offshore strategy of Indian players. We have always led the way in creating solutions in the services' space driven by innovation.

Old Lane, New Road

Ramakrishnan: On road less travelled

Lounging on a sofa, guru Ramakrishnan, 41, is reciting fluently from Hindu scriptures, which he swears keeps him sane in a mad world. One suspects he will need all the help he can get as he prepares, with colleagues Vikram Pandit and John Havens, to plunge into the maelstrom that is infrastructure financing in India. These three former Morgan Stanley executives have floated Old Lane, a private equity fund that proposes to invest $500 million (Rs 2,250 crore) in Indian infrastructure projects. And it's not the usual roads-techparks-ports they're gunning for. "We'll position ourselves somewhere between portfolio investment and foreign direct investment," says Ramakrishnan. On his radar are projects ranging from financial market architecture and energy to healthcare R&D and telecom. The money will be locked in for 10 years, giving ample time for projects to blossom. Ramakrishnan has already signed three MoUs with leading players in infrastructure, real estate and engineering. The fund, to be activated from April 2007, will take two to four years to be fully deployed, and Ramakrishnan expects to invest an average $15 million (Rs 67.5 crore) per project. And given the global liquidity boom and the growing interest in India, Old Lane, one learns, might actually end up mobilising $750 million (Rs 3,375 crore). The new road just got bigger.

-Vaishna Roy