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https://www.cnbctv18.com/videos/business/investment-guide-what-will-drive-consumption-in-the-post-covid-era-7263461.htm Investment Guide: What will drive consumption in the post-COVID era? As the economy goes through various stages of unlock, and everyone tries to limb back to some semblance of normalcy, the big question is are people going to open up their purse strings. And if they are, what will they spend on. Nikhil Vora, Founder & CEO of Sixth Sense Ventures said that pandemic has cut short the time in which certain changes were to happen. “A lot of times there has to be something drastic that happens and changes the way businesses operate and that event basically cuts short the time period which is required for the change to happen. COVID in India is possibly one such moment,” he said. According to Vora, brand loyalty in India is at an all-time low and brand awareness is at an all-time high. “This is a great case for disruption to happen. So, unlike in the past, now new-age brands, both on the physical side as also on the B2C side, have an ability to take 2-10 percent market share which possibly they would have taken over a 5-7 year period if they survived, to now possibly taking that sort of market share in a 3 year period,” he said.

https://www.forbesindia.com/article/onlinefirst-brands/vahdam-teas-can-the-online-tea-empire-replicate-its-success-at-home/61411/1/ How Vahdam Teas cracked the code by pitching the India story abroad. Will this work back in India? For almost a year after starting an online tea venture in 2015, Bala Sarda lived with a sinking feeling. “I was embarrassed to even talk about it,” he confesses. The 23-year-old nursed an ambition of creating a premium brand and taking it abroad. Tea was a logical foray for the fourth-generation entrepreneur whose family was in the business of retailing and exporting tea since 1931, when a small store, Nathmulls Tea, was opened in Darjeeling. Saddled with a rich legacy, young Sarda started an online-only premium tea brand Vahdam, which was the reverse anagram of his father’s name, Madhav. One year into the business, the fledgling startup posted decent revenue numbers: ₹1.5 crore. In fact, 95 percent of its sales came from abroad, including the biggest market, the US. Yet, the founder was not ecstatic. Sarda was battling mental demons on multiple fronts. First, most of his friends in college had either joined MBA courses in the US or landed consulting jobs at the likes of McKinsey and Bain. “My business was still not glamorous; tea was looked upon as a commodity back home, and I was struggling to sell it on the internet,” he recounts. The feeling of ‘missing out’ was profound. Second, in spite of clocking reasonable sales in the first year, Sarda had to struggle for the next six months to get investors on board. Multiple pitches, innumerable meetings, countless rejections by venture capitalists and shrugs by industry veterans had made him start doubting himself, and his vision. “I could have grown 10 percent year-on-year and built something small. But I needed money to back my plan,” he says, explaining the reason behind hunting for funders. Sadly, there were no takers for a global premium tea brand from India. Sarda was undaunted. Cut to 2020. Sarda’s tenacity and going against the odds seems to be paying off. Vahdam has become a ₹100-crore brand, and turned profitable since April this year; it gets shipped to over 100 countries, has raised $17 million in funding, and now gets half of its revenue from the US and 30 percent from Europe. In five years, Sarda too is a transformed entrepreneur. “In hindsight, we tend to take investor rejection more seriously than we need to be doing,” he says. What matters in the end, he adds, is whether you have the backing of consumers. “Self-doubt can be your biggest enemy. I never gave up.” The online-only model gets a thumbs up from industry experts today. Tea, one of the largest consumed beverages, traditionally reaches consumers through the supply chain of farms and auctions; it is then stored and packaged by the brands and delivered to the consumers through a multi-layered distribution structure, explains KS Narayanan, a food and beverage analyst. “Vahdam has created a fresher delivery model,” he says, pointing to how the upstart stood out in a cluttered market. One of the salient aspects of tea is that it is sold on the premise of freshness. In reality, though, the supply chain was not delivering the promise. Vahdam channelled the tea directly from the estates to the consumers, and in the process, bypassed all the non-value adding middlemen. They were further assisted, underlines Narayanan, by the growth of the premium variety such as green tea, single origin tea, organic etc. “They were able to put together a robust business model to tap into this emerging premium segment,” he adds. By unearthing unexplored varieties and blending with the available rich spices in the country, Vahdam is well-positioned to capitalise on the growing health consciousness sweeping across the world, maintains Narayanan. Sarda explains the biggest edge of an online-only model. “You fail quickly, but it’s not fatal,” he says. For any brand opting to go offline to begin with, he lets on, one has to go with a fixed number of products, and this comes after months of research. “But there’s no guarantee that they will fly off the shelves,” he says. So if a launch doesn’t work or a product fails, it badly hits the brand. Now contrast it with an online venture. Vahdam, he stresses, has over 150 SKUs (stock keeping units). “We discontinued many, we iterated on hundreds of them and made them much better,” he says. What an online-first model, especially for a consumer and FMCG brand, also does is that it helps the fledgling venture miss the ‘tyranny of the unofficial offline mafia’. KV Sridhar, an advertising veteran, entrepreneur and global chief creative officer at Nihilent-Hypercollective, explains how the ‘mafia’ has been working in India in the offline space for decades. In FMCG and consumer products, offline or brick and mortar has always been the name of the game. “It was all about flaunting the distribution reach and using it to muscle out small, new brands,” he says. The big companies dictated terms to stockists, distributors and retailers. “There was no room and chance for a newcomer,” he says. Online has shifted the power into the hands of the digital entrepreneurs. “The rules of the game have changed,” asserts Sridhar. It’s no longer about deep pockets, but deep consumer insights. For Vahdam, the quest to create a perfect cuppa did have its share of misses. A big miss, in fact, happened quite early in the journey. Like any tea entrepreneur or retailer, Sarda too followed the herd mentality of opening a corporate office and factory in Siliguri, West Bengal. The reasons were obvious: Proximity to Kolkata, the tea capital of India; quick access to tea-growing regions of Darjeeling and Assam, and easy availability of technical manpower. It took three months to build the base. But just two weeks into operations, Sarda decided to relocate to Delhi. High moisture in Bengal was turning out to be the villain. Moisture, explains Sarda, is the biggest enemy of tea. The bootstrapped startup wasted enough resources and time during the early part of the journey. The journey ahead, for sure, will have potential roadblocks. One of the challenges will be to live up to the promise of consistency. Having taken the brand globally, Vahdam needs to ensure that the consumer experience remains best in class, says Narayanan. This is crucial given that Vahdam is tapping into the premium segment, where consumers are discerning and demand nothing but the best and would be willing to pay for a great experience. “They need to constantly enhance the experience and build on the brand values,” he adds, pointing out another potential irritant. Addressing the mass market with such a model, he stresses, may not be appropriate. To disrupt such a market, they would need a farm to cup approach. Sarda, for his part, reckons that staying focussed is the biggest challenge. “We have created a premium, scalable and profitable brand,” he says. The big task now is to not lose the bigger picture of keeping consumers happy. “When you raise money, you tend to think that you can do anything, and launch a lot of products,” he says. The point is, capital must not take focus away from the customer. “The vision remains to build a billion-dollar brand loved by customers.”

https://economictimes.indiatimes.com/startups/fullife-raises-rs-50-crore-in-funding-led-by-amansa-capital/articleshow/76584827.cms Fullife raises Rs 50 crore funding from new and existing investors Fullife, which manufactures and retails sports nutrition supplements under the brand name Fast&Up, has raised Rs 50 crore in a fresh financing round, in the process, bringing on board, Amansa Capital, the Singapore-headquartered investment firm founded by ace stock picker Akash Prakash, as a new investor. Mumbai-headquartered Fullife’s existing investors, Dalal Street bull Rakesh Jhunjhunwala and consumer-focused, early-stage investment firm Sixth Sense Ventures, also participated in the fundraising. This takes its total amount of funding to an estimated Rs 100 crore, according to Varun Khanna, cofounder and chief executive of the company. It last raised $2 million from Sixth Sense Ventures in 2018. Jhunjhunwala, an angel investor in Fullife, invested about Rs 25-30 crore about three years back. “This year, we are going to focus on increasing our product portfolio while catering to the required expanded capacity to cater to growing demand as well,” Khanna said. The nine-year-old company will use the proceeds from the round to expand its presence across markets, and ramp up its product portfolio. Founded in 2011, Fullife launched its flagship Fast&Up brand in late 2015, under which it retails a portfolio of about 20 products spread across three segments - immunity, fitness and wellness - and which includes Vitamin C immunity boosters, electrolytes and vegan products. It has two plants in Maharashtra and Himachal Pradesh. Apart from its home market, the company has also launched Fast&Up in the United Arab Emirates, Europe and the UK, and expects to launch in the United States over the next few months. “I am a firm believer in partnering with brands which are future-proof and show vast potential for growth. Fast&Up is undoubtedly getting it right with their focus on accessible high-quality nutrition products. Nutraceuticals is a sector which as-a-whole has immense scope and Fast&Up has an impressive track record of proven success via their unique business model,” Prakash said. Prakash, who is the CEO of Amansa Capital, served as director of investments, India, for Temasek, the investment company backed by the Singapore government. He had also spent six years at GIC, the sovereign wealth fund of the island nation, as a portfolio manager, focused on US, Pan-Asian and Indian investment portfolios.

https://ventureintelligence.blogspot.com/2020/05/inventus-sixth-sense-blume-norwest-win.html Inventus Capital Partners, Sixth Sense Ventures, Blume Ventures and Norwest Venture Partners were voted the top Venture Capital investors in India during 2019. The Venture Intelligence “Awards for Private Equity Excellence” (APEX) is dedicated to celebrating the best that the Indian Private Equity & Venture Capital industry has to offer. Other 2019 winners in the VC segment included Axilor Ventures which was voted the Accelerator of the Year for the second year running, 3one4 Capital (VC Fund Raise of the Year) and Innoven Capital (Venture Debt firm of the Year). The APEX Awardees are selected based on both Self Nomination by the participating PE-VC firms as well as "crowd sourced" nominations and voting from the Limited Partner, PE-VC and advisory communities. (The main criteria are Exit Track Record, New Fund Raises & Follow-on Funding Rounds for Portfolio Companies). "It is an honour to be recognised by entrepreneurs and investors as India's No 1 startup accelerator, two years in a row," said V Ganapathy, Co-founder, Axilor Ventures. "This is clear validation of the program value and the strong market network we have built at Axilor. We are also delighted to have been part of the journeys of so many successful startups," he added. "Its an honour to be considered for this award category." said Sanjay Nath, Managing Partner, Blume Ventures. "Seed funds are tasked with backing entrepreneurs seeking to re-invent the future. These turbulent times have made seed investing even more challenging; on the other hand, its a great time to rebuild and rethink how user and enterprise behaviors are shifting, and back innovative ideas with a brand new canvas," he added. "Over the last decade, we've seen the Indian startup ecosystem evolve into a rich and vibrant ecosystem. The consistent growth in quality of entrepreneurs and companies has enabled us to continue doing our job and we feel truly humbled to be selected as the best Early Stage VC by the startup ecosystem," said Rutvik Doshi, Managing Director, Inventus Capital India. "It's an honour and a matter of pride for Sixth Sense to be accorded (this award). With humility, I accept the award as we remain steadfast in our resolve of 'Investing in the Consumer of Tomorrow...today!'," said Nikhil Vora, Founder & CEO of the stage agnostic Sixth Sense Ventures which was the Co-Winner in the Early Stage VC category. "Our fiduciary responsibility is to optimise returns for our stakeholders. A job made quite easy by the 'smart ass' founders, working in a 'big ass' market with a 'kick ass' product. It's said, 'work hard in silence, let success make its noise'. All I can say is that, We have just started the journey!" he added. "We are delighted to receive the Growth Capital VC of the year award! For Norwest India, in addition to several new investments and follow-ons, our exits continued to remain our focus and we managed to completely exit 6 SaaS companies in addition to significant partial exits as well," said Niren Shah, Managing Director and Head of India at Norwest Venture Partners India. "We have received back to back awards and will hope to maintaining the winning streak in the coming years as well." "We are happy to accept this award and are very grateful for the support and acknowledgment from the investment community, and for everyone's feedback as we scale the firm." said Pranav Pai, Founding Partner of 3one4 Capital, which won the VC Fund Raise of the Year award. "India's nascent startup scene is complemented by the growth of the domestic Fund Management industry. Investments by AIFs in India have grown at a CAGR of 84% since 2015. New Fund Managers are entrepreneurial as they seek to disrupt the VC industry. 3one4 has grown capital under management by 16x over the same time period. Awards such as this help highlight these emerging trends and we're honored to be a part of this year's cohort," he added. "The last five years have been an intense period of growth for India's alternative investment sector, and 2020 promises to support more progress. While the early-stage entrepreneurs focus on cracking the product-market fit, we have focused on mobilizing more of the domestic capital within the country to support the emergence of strong brands that set an example with high-governance. We hope to pay this incredible honor forward and will continue to support the industry so that we may all contribute towards India becoming a standard-bearer for the growth of the next set of generational companies. We are very grateful for the extraordinary support from the ecosystem, and we remain committed to playing our part in growing the asset class as India scales to its $5 Trillion GDP target," added Siddarth Pai, Founding Partner of 3one4 Capital. “We are excited to get this recognition, which is a testament to the accomplishments of our portfolio companies," said Ashish Sharma, CEO of InnoVen Capital India. "We believe that the venture eco-system will play a critical role as the economy moves faster towards low-touch, digital and tech enabled business models. We look forward to continue backing great founders and innovative business models that have the potential to make a meaningful impact,” he added. Venture Intelligence also took the opportunity to request the winning investors to provide their take on the Emerging (Covid-19 impacted) VC-Startup landscape in India. Some reactions: “We are going through unprecedented times with a lot of uncertainty around public health and the state of the economy. However, as VCs we are born optimists and we do believe that the crisis will be behind us soon. Every crisis and downturn redefines the way we do things and smart entrepreneurs will emerge during this crisis too who will build the products and tools to shape our lives going forward. We will be looking for such smart entrepreneurs and are open to backing them.” - Rutvik Doshi, Managing Director, Inventus Capital India. “The venture ecosystem is indeed going through a perfect storm with demand destruction, supply chain disruption and funding market dislocation. While this has created a challenging environment for most start-ups, the new normal is also helping some sectors to scale up faster. We expect that there will be some profound changes to customer behaviour, which will lead to a faster transition to new age business models. There are some valid concerns around growth/late stage funding in the medium term but I am quite encouraged by the strong early stage funding activity. For early stage companies, there is adequate dry powder and investors are keen to back founders who can discover large opportunities, innovate fast and build sustainable business models” - Ashish Sharma, CEO of InnoVen Capital India. “These are trying times indeed, with the pandemic gravitating to a global economic crisis, with a high degree of business uncertainty around. That said, seed (in particular) and early stage (broadly) investing is a 10+ year “long game” and hence all investable startups should be Covid-proof. India continues to be a key talent hub for the world, besides having a massive domestic market. The landmark Facebook-Jio deal has brought digital to the forefront, with venture well positioned to ride on these tailwinds. This digital inflection point plays directly into the exciting consumer and enterprise startups we see every day. This is also an opportune time to self-correct, and valuations will be more accurately priced. We’re seeing more signs of high quality founders starting up, and believe our ecosystem will emerge stronger and more resilient.” - Sanjay Nath, Managing Partner, Blume Ventures. “We believe that the Covid impact on India and globally is going to be significant, but we remain bullish and committed to the India growth story in the long term. We remain active on new deployments in the Growth Equity space and will now invest out of our new $2 Billion global fund which we raised in end 2019. We are very keen to support dynamic & agile management teams, strong business models and companies which will convert this adversity into an opportunity.” - Niren Shah, Managing Director, Norwest Venture Partners India Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

http://www.businessworld.in/article/If-You-Fail-Fail-Fast-Die-Young-Nikhil-Vora-Sixth-Sense-Ventures/23-01-2020-182649/ What does it take to effectively launch a business, and be on the road to success? The founder and CEO of Sixth Sense Ventures, Nikhil Vora, reflects on the dos and don’ts of being a successful entrepreneur. He said, “In every business that one does, the idea is to look forward to what we can do and build further on it. Entrepreneurship is also about the belief that we will tackle things as they come. It happens with arrogance, which is a brilliant thing to have for entrepreneurs.” “For all of us, it is important to know where we want to be and the path to that could be different. Sometimes, we should also know that when we are on the wrong path and the business that you thought will have the longevity, may no longer exist. So you should know when to cut short,” he added. He asserted that entrepreneurs today have numerous lives whereas a decade back they only had one life. He stated, “If you fail, fail fast, die young and live again because you will have a chance to do it again.” Giving an alternative viewpoint to his earlier statement of having belief in what you do, he said, “Your belief should also be tested every now and then. If tomorrow the market doesn’t exist which you are a part of, you can’t be sticking onto it if you have to be relevant.” Vora explained that there is a tendency for people and for businesses, even politics and economy, to overestimate what will happen in the very near term and underestimate the impact of the same in the longer term. In the Indian case, highlighting the past government initiatives such as GST, Bankruptcy Code, Demonetisation and Direct Transfer, he said, “All the event calendars which have happened, at first looked like the biggest event and thereby our expectation that these events should unfold impact lot more sooner. But in retrospective, if I had to look at this, I would want to believe that this could be the most meaningful changes which would happen in the Indian economy over a period of time, keeping aside right or wrong part of it.” Concluding his address while speaking at the BW Businessworld and BW Disrupt TechTors, he asserted, “Disruption is going to happen to you or because of you. Businesses do get disrupted and they will disrupt if you don’t disrupt your business. And in India, we don’t see that happening much.”

https://tech.economictimes.indiatimes.com/news/startups/eupheus-learning-raises-4-3-million-in-series-a-funding/73548163/ New Delhi-based ed-tech company Eupheus Learning has raised $4.3 million in fresh funding led by Sid Yog, founding partner The Xander Group. The Series A investment round also saw participation from existing investor Sixth Sense Ventures, the company said in a statement. Eupheus sells curriculum and homework tracking services on a subscription model to schools and claims it is profitable with a revenue of Rs 60 crore in FY19. The company said it grew its presence to 70 cities in the first half of the current year apart from partnering with 4 international institutes. “With this infusion of capital, we have the opportunity to expand our presence across India and into neighbouring nations, and showcase the benefits of our unique offering to an ever-larger audience,” said Sarvesh Shrivastava, Managing Director of Eupheus Learning. Eupheus said it will use the new capital to grow its presence across the country, develop new products and expand its team. It’s also looking to service schools in West Asia where there’s a strong presence of CBSE curriculum schools. The company caters to the pre-kindergarten to class XII segment and is looking to bridge the gap of learning at school and at home using technology. Eupheus also forges partnerships with learning content providers while it handles delivery and partnerships with educational institutes. “We are impressed by the founders’ experience and the manner in which they have scaled Eupheus in a profitable manner in the last two years,” said Madhav Soi of Yuj Ventures.

https://economictimes.indiatimes.com/tech/funding/bira-91-raises-30-million-from-kirin-holdings/articleshow/80100950.cms Bira 91 raises $30 million from Japan's Kirin Holdings Mumbai: Sequoia-backed craft beer maker Bira 91 has raised $30 million from Japanese integrated beverages company Kirin Holdings, its first investment in India. Kirin will hold less than 10% stake in Bira 91 following the transaction. Sources said Bira 91 is being valued at around $300 million. “Kirin Holding of Japan is investing $30 million with a 50:50 split between equity and debt,” Bira 91 said. Sequoia is believed to be holding about 45% stake in Bira 91 while founder Ankur Jain owns around 30%. The rest is held by clutch of other investors. In May last year, after the business took a severe hit due to the Covid-19 pandemic induced lockdown, the company raised $5 million from existing investors Sequoia Capital and Sofina. The company, founded in 2015, has around 10% market share in the Mumbai, Delhi and Bengaluru markets. “Bira 91 will infuse these funds in business expansion and maintain working capital,” the company said. Prior to that in April, the company raised $30 million from the two investors with participation from Mumbai-based consumer-focused venture capital fund, Sixth Sense Ventures, South Korean private equity fund Neoplux, and certain family offices.

https://www.vccircle.com/flashback-2019-pe-vc-exits-drop-but-these-investors-minted-money/ Private equity and venture capital exit deals in India dropped in both volume and value terms this year, but a few investors managed to make handsome returns thanks to improved liquidity in an otherwise volatile stock market. The year gone by recorded nearly five dozen deals where investors made a complete exit with the bulk of the activity taking place through public markets, according to data compiled by VCCircle. Factoring partial exits, this year saw a total of 150 exit transactions compared with 170 last year and 236 in 2017. Public-market deals had the highest share in the number of exits this year, despite a slow year for initial public offerings. This was followed by mergers and acquisitions, and secondary deals. Interestingly, the IPO pipeline is building up again on the back of renewed confidence that Prime Minister Narendra Modi’s massive victory in the general elections in May will improve sentiment and revive economic growth. All five of this year's top exits by value made money for the investors, with three of those being multi-baggers. Here's a quick look at some of the top exits this year: Sixth Sense Ventures—Hindustan Foods Nikhil Vora-led Sixth Sense Ventures fully cashed out of its near two-and-a-half-year investment in publicly listed Hindustan Foods Ltd. This deal marked one of the highest returns earned by a VC firm in India. The Mumbai-based investment firm clocked a seven-fold return on its investment in the contract manufacturer for fast-moving consumer goods companies. Sixth Sense had invested Rs 8 crore in December 2016 for a 15.4% stake in the Goa-based company, which makes Kurkure brand of snacks for PepsiCo Inc. It fetched Rs 56 crore, clocking 220% IRR. Sixth Sense's stake was bought by homegrown public markets-focussed PE firm WestBridge Capital Partners.

https://www.vccircle.com/fogg-promoter-backed-sanitary-napkin-brand-paree-ropes-in-foreign-investor/ Paree sanitary napkin maker Soothe Healthcare Pvt. Ltd, which was previously backed by Fogg deodorant promoter Darshan Patel, has raised a fresh round of funding from a prominent foreign investor, two people privy to the development told VCCircle. The Delhi-NCR-based firm has raised an undisclosed amount from Symphony International Holdings Ltd, the people said, with one of them adding that the London Stock Exchange-listed investor typically ploughs around $40 million (Rs 284 crore at current exchange rate) into each company. Both said that Symphony has picked up a significant minority stake in the company, which previously counted Vini Cosmetics Pvt. Ltd promoter Darshan Patel as one of its investors. Vini Cosmetics is best known for its Fogg deodorant. In June 2016, Sixth Sense Ventures, a consumer sector-centric venture investment firm, had invested in Soothe. Symphony has picked up a stake of around 25% in Soothe while Sixth Sense holds almost 35%, one of the persons said. The company's founder own the remaining stake. Email queries to Soothe and Symphony didn’t get any response till the time of publishing this report. Symphony is a London Stock Exchange-listed firm that invests across a wide variety of businesses in the healthcare, hospitality, and lifestyle sectors, including branded real estate development, which are principally in Asia. Symphony, led by Anil Thadani, mainly focuses on transactions that involve growth capital for later-stage development and expansion, management buy-outs/buy-ins, restructurings and special situations. It also recently backed a new VC firm Good Capital. In September this year, it joined hands with UAE-based family investment office Foundation Holdings to invest in hospital chain ASG Hospital Pvt. Ltd. It also recently backed technology-focussed investment firm Good Capital Partners, floated by seed stage incubator Investopad co-founders. Soothe was launched in mid-2012 by Sahil Dharia, who had earlier worked as global head of operations, investment research content at Thomson Reuters, where he spent nine years in various roles. Prior to that, he worked on the buy-side at UBS Investment Bank in New York. Paree is positioned in the value segment of the market where the likes of Whisper and Stayfree have a majority share. It is available in pharmacies, retail outlets, modern trade and e-commerce sites across India. Soothe, which claims to be India’s first chemical-free sanitary napkin manufacturer, also has distribution tie-ups with fast-moving consumer goods (FMCG) and retail majors such as ITC and Walmart. Peers Startups working in the health, wellness and hygiene segment have been attracting funding from investors over the past few years. In October this year, wellness brand Pee Safe raised Rs 30 crore ($4.2 million) in its Series A funding round led by Alkemi Growth Capital. In July, Sirona, a startup that sells women-focused hygiene products such as urination device PeeBuddy, raised an undisclosed sum of money from the Indian Angel Network in a follow-on funding round. Prior to this, Azah Personal Care and Nua also attracted investor interest this year. In August last year, Carmesi, a premium natural and biodegradable sanitary pad brand, raised $500,000 in its pre-Series A round of funding from a clutch of individual investors. The following month, VCCircle reported that hygiene products maker Wetex raised funding from a venture capital firm.

https://www.bloombergquint.com/bq-blue-exclusive/india-incs-failure-to-disrupt-is-a-wealth-erosion-risk-says-nikhil-vora Large listed consumer-focused businesses in India have matured and face the risk of wealth erosion as they have been found wanting in their ability to innovate and disrupt, according to investment fund manager Nikhil Vora. Disruption is not happening in the listed space, but only among startups, Vora told BloombergQuint on the sidelines of Alpha Ideas 20-20. “You will have exceptions, but exceptions don’t make the rule.” I think the failure in India is the inability of the leaders to take the risk of disrupting their own existing businesses and losing what they are at today, to the obvious risk of losing the entire business tomorrow - Nikhil Vora, CEO, Sixth Sense Venture And it’s true for India’s entire business landscape, said Vora, founder and chief executive at Sixth Sense Venture, citing the example of banking and financial services. Disruption in the sector is not being led by State Bank of India and HDFC Bank Ltd., but by a Bajaj Finance Ltd. and a Paytm. Similarly, he said, Hindustan Unilever Ltd. and ITC Ltd. are not leading disruption in consumer businesses, but startups have taken the lead. When such new ventures successfully disrupt niche areas, he said, their ability to scale up becomes more apparent. Vora has invested in a host of ventures in early states, including B9 Beverages Pvt. Ltd., the maker of Bira beer; One97 Communications Pvt. Ltd., the parent of Paytm; online retailer Nykaa; and Gowardhan Diary, the producer of Go Cheese. He is amazed hoteliers or automobile companies have not been effective for consumers on a 10-year-forward basis. Hoteliers are not able to create the relevant supply, and haven’t gone where the consumer is going, he said. Even if the disruption was caused by technology-enabled models, there is no reason why market leaders couldn’t do what Ola, Oyo and others have done, according to Vora. He hopes, but doesn’t believe, that the leaders of today will change and disrupt. That’s also a reason why he isn’t worried by the ongoing slowdown in consumption, reflected in declining car sales to easing volumes of the makers of staples to shampoos. Things are not all gloom and doom if looked at from the perspective of disruptors, according to Vora. Numbers will appear lagging for soaps and shampoos, beverages, oral care and cigarettes, but those are not the categories where growth is happening, he said. Those are the categories that have saturated, and incremental growth is always going to be price-driven, not volume-led, he said. People are consuming products in a very different fashion than traditionally, Vora said. “We need to look at consumer companies’ volumes through inclusion of different categories, and not the traditional ones.” Brand loyalty is at an all-time low but brand awareness is at an all-time high, said Vora, reiterating that how large listed companies aren’t disrupting existing brands to create relevant ones for tomorrow. He cited Titan Company Ltd. as an example. The company is evolving, but Titan as a watch brand it will struggle, unless it evolves into categories and sub-brands which the customer of tomorrow will be open to adapt, he said. “Companies need to start mushrooming newer brands, as the days of lesser and bigger brands may be behind us.” “HUL thirteen years ago started to talk about the superbrand strategy, and contracted the brand offerings from 110 brands to 30 brands. Maybe, the time is right to say that 30 brands is not good for India. Consumers have a choice—consumers want a choice,” he said. Companies can’t force-feed the consumer anymore, according to Vora, as they will not be able to push brands through the distribution channel. They will have to give what the consumer wants, leading to evolution of brands, he said. If I were Sanjeev Mehta (chairman and managing director of HUL), I would be worried—that suddenly half a million customers who were buying offline, who were buying in traditional stores, where Lever’s (HUL’s) strength is, have moved online. The customer has moved, companies haven’t. And there lies is advice for investors. Given the changing dynamics, he expects time correction, not price correction, for a bunch of companies in India. ITC Ltd. has gone through a period of price correction over the last 10 years, Vora said, adding that he expects that for a lot of other consumer businesses. “One can see a prolonged period of time correction in them.” Here’s the full transcript of the conversation: You mentioned that the listed space is either dying or will be dead soon, those companies will probably not create value. That’s strange coming from someone who has been in listed market throughout his life. That’s pretty ironic, I keep thinking about this. I have spent almost 90% of my working life in listed market, was 25 years in listed market and yet when I look at the market, I have looked at it for some time now. I feel that India is at the zone where listed businesses are pretty much businesses which are mature and lived their life cycle. The ability to innovate and disrupt existing businesses is found to be wanting. I don’t see them playing the disruptor role, which is so critical in a market like India, where disruption is seen as an apt thing to do. I keep reflecting this, if I look at Fortune 500 and I have talked about this often. I see 90 percent of them die or become irrelevant over a period of time. I see listed market in India pretty much symbolic of Fortune 500 companies. They die or become irrelevant over a decade in cycle. The market behavior that one has seen over the last three to four years, while it pains all of us, our investors also, but it doesn’t really surprise me so much. This is something which was just waiting to happen. It happened faster then what one should have envisaged, but I don’t see that changing drastically. I am not saying as market momentum and stuff, but I think businesses slowly will erode unless and until they change and disrupt. And I don’t see the ability to disrupt existing leadership to be of a very high order or its in a very few spaces and I see that happening at a galloping space in private companies, private entrepreneurs, first generation entrepreneurs who are really taking this opportunity to disrupt market leaders. That’s the reason why Sixth Sense was formed. We thought we will invest in disruptors in consumer space. So, you know what I said in the Alpha 20 Ideas is pretty much what I believe in. Existing players, existing listed companies even if they are leaders, their ability to maintain leadership and sustain value that leadership is going to be extremely challenging. You will have exceptions, but I believe exceptions don’t make the rule. It may well be that the current set of examples that you are seeing in listed space are not doing that because being listed is not a pre-requisite to not be disruptive. At some point of time over next 2-4 years even large listed companies could probably throw out a niche or two could be disruptive and change the model? Yes, I agree. Like I said exceptions will be there. But when I look at broader businesses in our country right now, look at banking. You have a dominant leader in State Bank of India or HDFC Bank, but the disruption in financial services is not being led by an SBI and HDFC. It is being led by players outside that context. It’s being led by a new age consumer finance company let’s say Bajaj, which has evolved in last 7-8 years, or Paytm in some form or lot of other Fintech companies as we look at it. Disruption in financial services, which should ideally have been led by existing leaders is not being done by them. Disruption in consumer businesses, which is close to my heart is not being led by Levers of the world or ITCs of the world and the Colgate of the world, is being led by new age businesses who are doing it in niche, in spaces which they are very comfortable doing, but the more they get comfortable in particular niche, the ability to do scale becomes more apparent. So, a Lever is not disrupting the space or ITC is not doing it. You see newer players, a Veeba is doing it in some form. You start to see it in Bira for instance, I am being biased because we own stakes in these companies. Bira is doing it in alcoholic liquor space and Parag is doing it in milk and so on. These are all relatively new age businesses which have evolved, and you will see lot many develop. My fear and this true in a lot of it. Look at print, which Is very close to you guys, I have looked at that space not a single print player and we are talking about large existing players like the Bennett Group, Times. Look at HT for example, Jagran, so the top 3-4 players and not a single player and I am being critical of them. Not a single player has innovated and disrupted how print should be in India for the next 10 years, how Indian consumers will consume print over next 10 years. They are not going to consume print by reading a newspaper any more or that is becoming slightly irrelevant over a period of time. You have seen players evolve in that category. So, Inshorts has evolved whereas the leaders have not really done the development. Look at Auto, very interesting example. In world where top 3 Auto companies actually lose money, the GMs, the Fords and the Chryslers of the world actually lose money. You have it in India where the largest players the Tatas, Mahindra, Maruti for instance have done practically zero innovation or zero disruption in the category. Auto is a space which is getting disrupted almost completely with the advent of the Olas and the Ubers of the world. Ironically, I remember, Mr. Mahindra at some stage talking about the fact that they will have consumption issues because the sharing capability of Ola and Uber will increase and thereby people will not have cell phone cars. I fail to understand why a forward looking corporate like Mahindras could have not created an Ola in India. But none of the hotel chains thought of creating Airbnb, aren’t these essentially tech companies which are coming out and consumer tech companies which have managed to do this. Your complaint is legitimate that the original product owners could have also thought about being consumer tech but have not thought of doing so. Precisely my point. Hotels, beautiful example of a business like the Taj and Oberoi and all other chains that we look at. They have been static players, they have been brilliant at the product, so nothing taking out from all the guys who have done whatever they have done. But the fact is they have been ineffective for the consumer 10 years forward. What have they done to ensure that the costumer base that they have established in Taj or Oberoi moves along with them. They can move along with them only when Taj sets up another Taj. They have lost the costumers because in India you have a situation where there is so much of balance sheet that has been invested in our country. All of us somewhere have invested balance sheet capital, created asset. An Oyo proved that they could create a model, I am not talking about how Oyo succeeded financially. They have done it in terms of capital raise and so on. I think they have shown the way of what one could do with the balance sheet capital investing in our country. I fail to understand why a Taj or look close to one of our portfolio companies Saffronstays, they have created this premium holiday home play which is about literally all the assets created by us who bought the next holiday home and so on. There is no reason why Taj should not be doing that, there is no reason why Mahindra Holidays should not be doing that. They have members, they have demand, they failed to create supply which is the worst thing that can happen in the business. Businesses struggles when they don’t have demand, here, ironically, we have all leaders who are struggling because they could not cope with the relevant supply that the consumer was wanting. They have demand. A banking channel has demand that’s why you are talking about unbanked bank, micro finance and tertiary banking and so on. Automobile have it, Ola and Uber are proving that. they have not gone to where the consumers are going. Even if it means pure tech or significantly tech enabled, there is no reason why leaders could not do that, and you had startups doing that role. I think the failure in India as of now is about leaders’ inability to take the risk of disrupting their own existing businesses and the fear of disrupting their own business and thereby losing where they are at today, to the obvious risk of actually losing the entire business tomorrow. I think that I very ominous to them and I frankly hope, but I don’t have too much belief while I hope of that, but I don’t have too much of belief that leaders have ability to change. It is very tough; it requires someone to take that ownership. Professionals very rarely will take that ownership, it must be the entrepreneurs, the promoters who must take that call and hope some of them do. Lets draw the conversation to consumption, two things. When I look at the set of portfolio companies that you are invested in they are anything but traditional. When I look at the listed space the only pocket where valuations are still held out despite trends starting to come off is consumers. How do you see this dichotomy, or these things shape up? India has never or very rarely let me say that has been a value market. India has been a growth market. All of us somewhere get trapped in believing that value is what we want to protect, and we are good at capturing the value. Our failure is when we don’t catch growth along with that value and to me Indian market is symbolic of that form. We think that because markets have collapsed the values are becoming very enticing. I think that is not really the case. It’s about saying whether the values are falling, the growth is still sustaining. We don’t have that happening right now. If I look at consumers or frankly any business for that matter is that in the listed market also, while everything around us has possibly collapsed by 50 percent if not more over the last 3 years, we have invested in two listed companies in the same period. We have made 7 times and 10 times the money in two listed companies in the same period. Not saying we did something Earth shattering about it, but the fact is that there are pockets of businesses and sponsors which we think are playing the disruptions which the leaders are not able to do, and they can’t participate in that disruption. So, for instance we invested in contracting, that was a big thing because consumer contracting has become very large. We believe that the leaders will find it a struggle to grow beyond where they are. They will not grow meaningfully. If they don’t grow meaningfully then they have to let go of what is tertiary to them because they have to grow and keep sustaining their brands and so on. They will protect their 60 percent ROI business which is brands and let go of manufacturing which is 16-17 percent of ROI business. That’s the great opportunity we thought will happen. We have invested in company called Hindustan Foods which has now become possibly the largest consumer contracting company in India in 3 years. We have invested in JHS, we sold that at 7 times, but we have invested in it which is largest oral care manufacturing company in India. They control 15 percent of oral care. I think it was about opportunity in businesses. Whereas the largest players in the businesses will get disrupted or are not changing too much for their own good, we thought there is still an opportunity. So, I think what investors, all of us need to really look at which is while there can mayhem in listed space, there is opportunity which is getting created because of mayhem. And in very point in time, someone’s loss is someone’s gain. I think there is opportunity in crises, there is crises in listed market, but there is opportunity in listed may be rare, may be few. But there is significant opportunity in guys who are disrupting the listed guys which are which is in private. So, you are saying that companies should fan out all the alternative brands and invest in new age category because that’s where the Indian consumer space is growing, and we are not capturing that? It brings back to me may be a decade back or 12-13 year back. If you remember when the HULs started talking about the master brand, super brand strategy getting only 30 brands in the portfolio instead of 110 that they had and they literally course corrected in three years to get that done. May be the time is right to actually say that 30 is not good for India. What makes any consumer company think that 30 is great for India? India is a 130 crore pop market, it’s a market where the consumers are experimenting, where consumer have a choice and want a choice. Disruption is happening in distribution, so it’s no longer the funnel which is becoming critical. Its no longer the HUL stranglehold, I am giving it as an example. HUL, ITC or Colgate, I think they control the distribution and thereby they thought that the product that they have put through the distribution funnel was all that the consumer wanted. That’s not true. The distribution was only an enabler, they didn’t push the brand, they didn’t put product categories, they did not innovate. Because it’s tough to innovate when you do well for yourself, you can’t disrupt yourself. I think that is changing as distribution channels change you will see lot more evolution of brands happens and thereby the costumer choice, the consumer choice will get met now. Look at what Nykaa and Purple has done in the beauty space. Unheard of. They were not brands, they were selling HUL brands, P&G brands, they were selling L’Oréal, they were selling everything around the brands created by all these guys. Today they are the platform, they are the brand. So, Nykaa is the brand which sells let’s say Rs 2,000 crore of produce. A Purple is a brand which sells Rs 500 crore of produce. They are the brand and they will get the value because they are the platform and platform has become brand. I can’t believe why a Lakme could not have done the same, or why L’Oréal should not have done it. You are killing your own brand by still targeting traditional ways of consumption and distribution because the consumer is no longer traditional. He has changed, and I think brands have not changed. What do you think is happening to the Indian consumption space? I think it’s very interesting. You know that I have done consumers all my life. I am not debating but I want to challenge the point which is that all the large consumer companies in India, and all of us look at that as data point and think that they their growth has slowed down from let’s say around 8-9 percent volume growth to 4-5 percent and thereby they are degrowing. But what we are looking at growth. We are looking at growth of soaps, we are looking at growth of beverages, in oral care, we are looking at growth in cigarettes and stuff like that. That is not where growth is happening. Those are markets, those are categories which have saturated themselves. So, incremental growth is always going to be slightly price-driven rather than volume-driven in those categories. But the fact is that the consumer is changing. The consumer is now consuming product in a very different fashion to what they have done historically. So, if growth is happening in the category of dips and sauces, is HUL present in dips and sauces? No. Is Knorr a brand in dips and sauces? It’s not. Is Kissan a brand in dips and sauces? It’s not but the category is growing because Indian consumers taste buds have changed because of the Pizza Huts and McDonalds of the world. We all know what mint mayo is, what a Southwest tastes like. Ideally an HUL should be capturing that space, they have not. It has taken Veeba to take leadership in the space. Maybe HUL will wake up they will get into that space sometime at some stage, but they have lost that race somewhere. That happens in every category that one looks at. Look at Bira, closer home. We all think that beer has only two price points, strong beer and mild beer, literally there is nothing else. It’s not like alcoholic space where there are multiple price points and multiple categories. But Bira has disrupted category which is almost owned entirely by United Breweries. I am not saying that they have cracked it completely, but we think they are on the way to crack it. They cracked the brand, they cracked the product proposition of saying that I am new age, I am funky, I am something which is there for the next consumers, not for the consumer of today. If I drink Kingfisher, if I did, my kids are not going to drink Kingfisher. Not because Kingfisher as a brand is poor brand or the product is poor. Its just that they don’t want to be associated with a legacy brand. So, is the case with Titan. Titan thankfully is evolving as a company, but as a brand I would think Titan in watches will over a period of time will struggle. I can’t see how legacy brands will continue to effectively use legacy for the good of growing the brand franchise that they own today. I find that to be a struggle and that to me brings core thought which is about the fact that brand loyalty is at all-time low in India. Brand awareness is at an all-time high. A perfect recipe for disruption to happen in brands. Do you believe that the revenue scalability of these smaller business is because these are still small business. They don’t have still pan India presence, they don’t have turnover might. Do you think in next 4-5 years these businesses will grow in terms of growth and their valuations will grow further and whether the valuation of their existing businesses will come down, do you see that happening? I remember my last call on ITC, almost a decade back. I said ITC is a sell. Not because of anything else but consumer businesses tend to behave in a particular fashion. They only do time correction; they don’t do price correction. ITC is at the same price as it was ten years back, business has grown and stuff like that, but it is at same price. So, the value has not changed but the time correction of ten years has happened. So, fundamentally they have underperformed for 10 years. The same will happen in lot of consumer businesses. You will see underperformance or time correction happening for a long period of time. It doesn’t crack as much as a lot of other businesses do because these businesses don’t require capital. It is almost like a sellers’ market in some form. That is bit of a challenge. Having said that you are in the market to make money, you are in the market to generate returns, and I am generally being overcritical of this because I want to make a point, I may be dramatizing it a bit more. What the opportunity is, it’s about the what we’ve seen in the last ten years in India. So, you look at and I don’t have precise numbers, let’s say listed market unicorns were around 25 or something in India ten years back, private market unicorn was one at that time. Today private market unicorns are 30 and listed market are just the same number. So, values are getting created. Whether these are bubbles or are actual values that investors can tangibly monetize, it’s pretty much a question right now. Having said that, the fact is that the values are precursors for what the business model delivers. I think there is disruption happening, it is slightly silent right now, but it is happening. It will become a bit noisier as we move into it because the more entrepreneurs start to feel that they have cracked the business right, they know that they have got solution for a consumer problem. Vini Cosmetics, the one with Fogg deo, they have done it in 5 years. They have done at the same point when Axe was the leader. Axe sold the product saying that you spray Axe and there will be 10 girls chasing you. Fogg came in and they said girls don’t chase you, but I am not cheating you. I will give you more buck for the product that you buy. No gas. They have changed the industry. It took one level of disruption to change what the market would be. Now Vini possibly has the ability to live through a lot more product categories. They have become innovators in that categories, whether they succeed fail is again up for debate, but the fact is that what these smaller players are showing what has never happened in India for over 50 years. The only disruption in India was Nirma which was 25 years back. There was no disruption in India for 25 years and even leaders do not disrupt their own category. You will see lot many disruptors happening because each category is calling for disruption. Look at foods, HUL has almost zero presence in food, but you will see a lot many players challenging that status. Look at personal care, personal products you have seen Purple, Nykaa really challenge that status and consumers are moving there. If I was HUL, if I was Sanjeev, I would be worried that suddenly half a million customers who were buying offline, who were buying in traditional stores which is where HUL’s strength is, suddenly moved to online Purple and Nykaa. Customer have moved, companies have not. I think, somewhere the challenge of addressing the customer’s needs, wants and attributes is not getting as defined and refined as oppose to existing leaders of listed companies as they should have been. As investor I would be worried about, as a listed market investor I would be surely worried about it. It’s not like that companies don’t disrupt themselves. I think there will be some players who disrupt their own businesses or at least be aware of disruption and capture opportunities. Look at Info Edge for example, I think they have done beautiful job from what they are doing as of now. They had a milking cow in Naukri.com and they moved in to it, they moved into Policy Bazaar and other categories. Makes complete sense of what market was calling for. I think that is what you want leaders to behave as. You want leaders to evolve and change with the time which regretfully the existing players has not really done a great job. How are you doing that in Sixth Sense? How are you choosing businesses? What we are doing is what pretty much what I talked about. Looking at disruptors in some form and we are not really looking at people who are trying to create an innovative product in India and thereby the change the way India consumes. We are not looking at that. We are looking at the fact that India is a great market. India is a 2 percent marke. Two percent of consumer behavior needs to be changed to a different mode of consumption and that will create one of the largest markets in India. If 2 percent of large consumer business companies start to think that contracting is the way to go, that will create a huge opportunity for contacting companies. If 2 percent of market starts thinking that drinking a new age beer is a great product to go with, we’ll create largest beer brand in India with Bira. If 2 percent of India starts to think that dips and sauces to go with, Veeba by default will be the largest category player. We have looked at lot of those players have looked at. Two percent of India says that female hygiene is the category which needs to get lot more penetrated in rural and urban India. We will create a great category pool in Paree which is Soothe Healthcare and what we have invested in. We try to invest in pockets which we believe can become large by its own nature. Obviously given the fact that these are still nascent businesses or early stage of disruption businesses, some of them will really evolve and crack it. Some of them may possibly survive from where they are today to scale up ten times and maybe plateau. But that’s how markets are. We hope that the business we have built at Sixth sense will have longer life. We hope to monetize them. We have objectives for our investor, and we will do that. But I am very happy with the way we have construed ourselves to be. We have not faulted too much till now. Hopefully we don’t or maybe we do, but we just think we have higher probability of cracking it right because we think we are getting sponsors who understood where the consumer minds are going five years forward. And that to me is the only way a consumer company can really evolve or succeed over a period of time.