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Buy a hot-dog cart and don't bother for IPL teams | Advantage Dealbook

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The PE shot selection shows the miracle | Advantage Indianomics

It is amazing how top tier Private Equity firms start by building a portfolio in retail lifestyle and end up with Telecom investments,. Right now staying with Top 3 TOM recall, Temasek, NSR and KKR have been scouting around for and invested in Coffee Day, Restaurant chains to run as a holding company aka Yum brands and many more looking to emulate the Jubilant Foodworks model and invested in WLAN networks, gold NBFCs ( even KKR has opted to be on board Magnum Fincap, GS Capital Partners on Muthoot) and then ended up as proxy or direct holders in Bharti Airtel , Tower companies and Ascend Telecom, Reliance Infratel etc)

The very being of a retail lifestyle and a telecom infra multi bagger in the same  portfolio is a singing of the paeans of miracles and under currents never to be savored by a really open economy. Even as consumers make up only a third of the GDP and infrastructure remains a $3-4 billion gap mostly on paper and no implementation in hand, while the coffee days’ and Pizza retailers ( ask Yum’s P hut which is now hungry for Tier 2 towns) have grown and stood still after a long unbroken stage of growth. Private Bank investments that grew in the nineties have much plateaued and no Chrys Cap or New Silk Route can today say with certainty that the biggest opportunity is right here. There are a half a dozen opportunity sectors as disparate as multi-brand FDI and retail lifestyle experiences to  Power and Telecom. The new look infrastructure funds seem much better adept at getting to the well funded pure infrastructure plays and many are still on hold with ideas for logistics, defence procurement and luxury retail forom ages ago and for ages to come,. By the time clarity emerges in these sectors too, specialists like 3i and Macquarie would have waited and gone to more tertiary IT exports and non entities in terms of opportunity just to stay liquid. A panorama of policy defects to be sure but at the end of the day, what exactly is your plan?

A Bharti Airtel in giant plays, a Jyothy Labs and a Cafe Coffee Day may well not allow any me too wins over everyone else. The banks have already soured themselves in Private Equity when they did not venture past india China and even Burberry’s and Burger King and Dennys. Now the others want to move to Vietnamese shopping malls, Thai retail, Mexican chilli and some more for the fear of trying something new with all the approvals. The result , a pot-pourrie on the plate that is not fit to eat, and is going to stay that way for a long time to come. A Blackrock PE’s tremendous affinity for Tier 3 IT firms and a Blackstone’s dash for the MSCI mix is well like nouveau PE’s hot dates with multi coloreed shopping carts on the internet for the Indian market. A digital thought in me says Twitter’s $7 bln example is obvious to everyone for the same strain of fallacy running through the whole lot. And just 3i and Macquarie for the Ports, the crude storage, the highways and aviation.

This 6 months has seen a lot in highways being sold through PPP to PE funds but the mainstream cross diversified portfolios still look like midcap shopping carts ( internet plays) , hubcap coffee clubs and a plenitude of Telecom towers, as vended by overleveraged promoters in a bad time.

You might get to do two IPL teams but you haven’t cottoned on to the multibagger unfolding, those weak financials will remove any illusions of weak kneed investors well before the big day. and it is harder for them to create projections after 4 years in the cauldron of people’s whimsies. Blackstone’s catch in FINO is a great one though, much like the earliest investments in NSE. But now of course the taste for mid tier IT is over powering their sense and clouding the digital shopping cart. Investment banking deals have been down too and another Temasek may not get more Coal India’s and Engineers India Ltd opportunities

Kohlberg Kravis Roberts & Co.


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