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Sequoia's Balaraj: Huge
funds, big plans |
Investors
in 29 companies in India, venture capital firm Sequoia Capital
India (formerly WestBridge Capital Partners, before its merger
with Sequoia Capital) has closed a $400 million (Rs 1,880 crore)
India dedicated fund (the third in India) to invest in later stage
and growth capital opportunities across sectors in India. "As
a part of Sequoia, we realised that the firm in the us had some
great successes in the later stage opportunities. We are hoping
to try the same model here in India by backing well-established
companies," says Sumir Chadha, Managing Director, Sequoia
Capital India, explaining the broadening of the firm's focus on
just early to mid-stage companies.
The new fund has no particular sector focus,
but the bias will be towards services, says K.P. Balaraj, Managing
Director, Sequoia Capital India. The first two investments from
the fund, totaling $50 milion (Rs 235 crore), have been in Café
Coffee Day and in the KKR-led buyout of Flextronics.
Meeting about 30-40 companies every day,
the 10-member Sequoia Capital India team is cautiously upbeat.
"The market is overheated, and we are worried about the over-funding
of certain sectors," adds Balaraj. Ask Sequoia Capital's
partner, Michael Moritz, who was in India last fortnight to meet
a select group of internet and mobile companies, about the opportunity
and he is candid: "Today, 35 of our investee companies in
the us have set up shop in India...it isn't a market we can ignore."
Even if it's overheated.
-Shivani Lath
Drugstore
Cowboys
The fragmented pharma retailing is the next
big thing.
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Organised pharma retail: Consumers
will benefit from lower costs |
It
is a new prescription that Anil Ambani is discussing with the
country's chemists. The talks that the Reliance-Anil Dhirubhai
Ambani Group (R-ADAG) is said to be having with the All India
Organisation of Chemists and Druggists (AIOCD) could well end
up creating a unique nationwide pharmacy distribution set-up.
His plan, going by talks in the market, is to make a foray into
this space by forming a joint venture company with the AIOCD,
which has a widespread network of a little over five lakh pharma
retail outlets in the country (when contacted R-ADAG officials
did not comment).
But then, as it appears, Ambani is not alone
in seeing an opportunity here. "It is not just Reliance,
we are also talking to others (including some banks). Three out
of five (which include another Indian corporate and an MNC) have
expressed interest in forming a joint venture with us," says
J.S. Shinde, general secretary, AIOCD and president, Maharashtra
State Chemists & Druggists Association. "We are actively
considering all these proposals, and should be able to come up
with a final decision by the end of October."
Whatever the outcome, there is little doubt
that retail pharmacy is increasingly attracting serious attention
from some of the big names of the corporate world. Apart from
Reliance, there is Kishore Biyani's Future Group that is entering
this sector, as is Lifeken. Medicine Shoppe flagged off operations
a few years ago, and the Apollo Hospitals group has been in this
area for the past 10 years. Emerging firms, like Care Hospital
of Hyderabad, also have aggressive plans in this space.
In early August, Pantaloon Retail India,
a part of the Future Group, and Manipal Health Systems, a part
of the south India-based Manipal Group, signed a memorandum of
understanding (MoU) to form a 50:50 joint venture. The Bangalore-headquartered
JV will operate pharmacies (selling medical products) and provide
medical services across the country under the 'Manipal Cure &
Care' retail brand. The initial investment is pegged at Rs 10
crore.
Apollo, for its part, already has 350 outlets
(only retail and not including those attached to its hospitals)
and has plans to have in place 1,500 in all in three years. "We
will also be open to making acquisitions provided we get the right
fit and in regions where we are planning to expand," says
Shobhana Kamineni, Director (Procurement), Apollo Hospitals Group."
All of this is happening in market that is
highly complex and fragmented. According to AIOCD's Shinde, there
are about 4.5 lakh pharma retailers in the country and about 1
lakh stockists/ sub-stockists and distributors. The domestic pharma
retail market, he says, is today valued at close to Rs 50,000
crore and could well double in the next five years.
Shinde sees consolidation happening going
forward. "In the next 5 to 6 years, about 30-35 per cent
of smaller players will get eliminated."
Today about a dozen known players operate
in the country and only a handful (two or three major chains)
will remain by 2011. His entity, he argues, will of course continue,
as it has the advantage of a huge network and reach (even into
rural areas).
But why this sudden interest by the biggies?
Explains Kasi Raju, vice president (corporate affairs and business
development), Care Hospital: "After FMCG, food and entertainment,
pharma retailing could well be the next big hope in retail."
He expects the market share of organised (branded) retail to pick
up rapidly as patients benefit from reduced costs-via bulk purchasing
and fewer inefficiencies in the supply chain-and consistent quality.
So, who will survive? Says Raju, "At the moment, different
models are being tried out and perhaps in the next three to five
years there will be clear and visible signs of some sort of consolidation
happening in this space."
-E. Kumar Sharma
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