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.

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