Thought for the day
“Let us raise a standard to which the wise
and honest can repair; the rest is in the hands of God.”
-George Washington (American, 1732-1799)
-George Washington (American, 1732-1799)
Word for the day
Ambivert (n)
One whose personality
type is intermediate between extrovert and introvert.
(Source: Dictionary.com)
Teaser for the day
If not in politics what these people should be doing?
·
Rahul Gandhi
·
Digvijay Singh
·
Lallu Yadav
·
Sharad Pawar
Affordable is profitable
I met with couple of private equity managers last evening. The
idea was to share the learning from my Discover India Trips and gain some
understanding of the investment climate in the country from their experience.
What I learned was quite useful, and I deem it fit to share with the readers.
Not going into too much detail and avoiding jargon, I understand
that in past 5years most of the private equity has ventured into five broader
sectors – education, real estate, healthcare, agro processing and e-commerce.
Besides logistics and technology startups have also attracted good interest
from private equity, venture funds and angel investors.
The investments in education sector have mostly not done well
for a variety of reasons. In my view, the tutorial business model is not
sustainable as it is based on the basic premise that the inefficiencies in the
mainstream education system are perpetual. The classroom business model is not
viably scalable as affordability is still largely missing and political
structure will likely remain socialist. Only content development and management
model appears but that too till the time this sector is opened to global
competition. The best domain appears to be development and management of vernacular
content. Not much activity is so far seen in that sphere. The consequence is
that most investments in these sectors have not performed as per the
expectations.
The real estate sector has caused maximum disappointment to
private investors. Lack of demand, delay in execution, and poor transparency
levels appear primary drivers of the disappointment. Affordability is a major
detriment in this space also. Political involvement had been both a major
driver as well as hindrance in growth of this sector. The general opinion is
heavily skewed in favor of lower political involvement and better affordability
going forward, especially if a strong national leadership emerges from 2014
elections.
Healthcare business is still mostly driven by export demand
rather than domestic demand. Given the rising pressure on global corporations
due regulatory changes; and governments to reduce cost of healthcare – this
space has seen strong growth. Most investors in this space appear happy and
enthusiastic about future growth.
Agro processing industry in the country unfortunately is a great
example of mismanagement. Though extremely critical, this industry is growing
completely on “subsidy” rather than “viability” consideration. In my view, the
fate of this industry may not be much different from wind energy.
E-commerce is the most
active and interesting area of investment. From my own personal experience I
can vouch that many e-market places are very efficient, hugely relevant,
popular and scalable. These ventures adequately address the issue of
accessibility, affordability, aspirational consumption, cost efficiency and
bring the benefits of free market and economies of scale to the consumers
especially in tier II &III cities and towns. I shall eagerly wait for
couple of them going public at a reasonable price!
Readers can send their views, comments, criticism to the
author at vijaygaba.investrekk@gmail.com
Follow @VIJAYGABA
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