| Niche segments such as clinical research, online gaming, third-party logistics, mobile handset design and online bill paying firms are increasingly attracting the attention of private equity (PE) and venture capital funds (VCFs) as they view these businesses as sure-shot winners of tomorrow. |
| Clearstone Venture Partners, which has a fund size of $200 million dedicated to high-growth companies in India and the US, has made investments in domestic companies. |
| Its niche plays include Games2Win, an online gaming company, Billdesk.com, an electronic bill-paying company and DGB Microsystems, a mobile handset design company. |
| Kotak Private Equity has invested around 60 per cent of its $160 million fund. Its investments include DRS Logistics, a third-party logistics provider, Home Solutions Retail, a subsidiary of Pantaloon Retail, which is establishing dual-format stores in the life-style segment, and Siro, a clinical research company. |
| The larger PEs such as ICICI Ventures (Techprocess, an electronic bill payment company) and Carlyle (Claris Lifesciences, which manufactures and markets sterile parenteral preparations, life-saving medicines and other hospital care products) are also looking at new business segments holding immense potential. |
| Other niche firms that have attracted PE interest are real- time flight bookings company Makemytrip.com (Helion Venture Partners) and interactive mapping portal MapmyIndia.com (Sherpalo Ventures). |
| If they succeed in getting their business right, these niche companies could weave a similar success story to that of Pantaloon (retail), Naukri.com (job portal) or Bharti Tele (telecom). |
| “We are doing a sector-down approach and identifying niche companies in every sector. Our target companies would be those which would emerge as the top three in a specific sector, said Nitin Deshmukh, head, private equity, at Kotak, who spotted companies such as Pantaloon and Naukri.com during his stint with ICICI Ventures. |
| When we (at ICICI Ventures) invested in TV18, people thought the company was closing down. They said we were making a mistake. Now the same company is making others close their business, he added. |
| Adds Rahul Khanna, director of Clearstone Ventures, “We are looking at companies that use technology to provide delivery platforms to vertical industries such as entertainment or financial services. The key to our success depends on how customers embrace the net for entertainment, making payments and so on. The Internet is currently used primarily for communication through email.” |
| Another senior executive in a venture fund stressed that it was investing in companies with clear revenue streams and no potential threats. Though risky, these companies could earn returns ranging between 5 to 10 times. |
| We hardly go wrong on the industries we bet on, claimed Deshmukh of Kotak Private Equity, adding that PEs have gone wrong in odd cases by backing the wrong managements. |
Source : Business Standard