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Startups Leverage ‘Value-Add’ Mentors for Growth

Startups Leverage ‘Value-Add’ Mentors for Growth

Shared resource model enables PE, VC firms to oversee management
Known for their expertise, ‘value-add professionals’ are becoming increasingly popular among private equity (PE) and venture capital (VC) firms. These firms are adopting a shared resource model, utilizing these experts to support their portfolio companies.
Under this model, experts are shared across various firms where PEs and VCs have invested. They suggest improvements in areas such as tech, legal, training, HR, operations, and brand building, implementing optimal methodologies. Typically, these professionals have extensive experience, having served as chief finance officers, chief marketing officers, or chief technology officers, or leading verticals like training, operations, and legal for at least 15-20 years.
According to TeamLease Services, India hosts around 1,700 VC and PE firms managing portfolios of about 15,000 companies. Approximately 35-40% of these firms, or 595-680 funds, utilize shared resources.
Firms like Motilal Oswal Alternates, Eximius Ventures, Elevation Capital, Prime Venture Partners, and Matrix Partners follow this model. Their shared resources teams collaborate closely with fund partners and portfolio company management teams.
Notable portfolio companies engaging shared resources include BimaKavach, Dairy Classic, Simpolo, Asian Footwears, Symbiotec Pharma, Ganesh Grains, Shuru, Vegapay, and Finarkein.
The shared resources concept has long been prevalent in established startup ecosystems such as the US and China. In India, it gained traction recently, especially following multiple corporate governance and ESG (environmental, social, and governance) issues.
“This model provides portfolio companies with access to expertise they may not have in-house or afford full-time,” said Vikram Ramasubramanian, partner at Inflection Point Ventures. Specialized mentors help establish robust frameworks, prevent mismanagement, foster transparency, integrate sustainable practices, and meet regulatory requirements, which are critical for long-term success.
The shared resources model allows startups to access expertise as needed, reducing overall costs. By leveraging mentors from shared resources, startups can save around 30-40% of their costs, depending on employee costs and numbers. This is because the need for deep expertise in every function on a full-time basis is low for most startups.
For example, a D2C company opening offline stores might only need an operations expert initially. Similarly, a startup might need a marketing expert when taking the digital route and understanding analytics.
Hiring CXOs can cost around ₹60-80 lakh per annum. Ravi Teja Gupta, founder of Guptaji Invests, emphasized that startup success depends more on spending than funding. “Many B2C startups spend around 30% on marketing, and many D2C companies spend around 40-50% on marketing. So, we hired proven experts in viral marketing,” he said. He added that some VC companies have increased their fund size and transitioned into PE companies by adopting this model.
The shared resources model benefits both funds and portfolio companies. For investors, it generates better results from portfolio companies and allows structured control without daily interference. It also protects startups from complications arising from poor corporate governance.
Vishal Tulsyan, MD and CEO of MO Alternates, noted that an organization is built by its support functions. “Every company must embrace tech significantly, but mid-sized companies often cannot afford a strong head of technology. Likewise, HR is a crucial function, but such talent is often unaffordable,” he said.

June 14, 2024
Compliance Burden Hampers MSME Chemical Units

Compliance Burden Hampers MSME Chemical Units

The extensive compliance requirements are stifling growth in India’s $220 billion chemical industry, particularly affecting MSMEs. Each unit in this labor-intensive sector must meet up to 635 compliance requirements monthly, posing a significant challenge, according to industry sources and analysts.
Rishi Agrawal, co-founder and CEO of TeamLease RegTech, noted, “Understanding the compliance needs is difficult for most MSMEs. The lack of training and skilled manpower further complicates compliance efforts.”
Frequent changes in regulatory and compliance norms exacerbate the issue. “For example, in the last week alone, there were 200 compliance changes, 700 in the past month, and approximately 1,963 in the current quarter,” Agrawal said. While large companies have in-house teams to manage these requirements, MSMEs face considerable difficulty.
Jaimin Vasa, chairman of the Gujarat Chemical Association, suggested, “There should be industry-specific general licensing instead of multiple regulations under various acts like the Factories Act, health, explosives, hazardous materials, and food safety.”
Compliance needs also vary by state, complicating matters for companies operating in multiple locations. Vasa added, “The government should simplify the application process and expedite clearances to assist units in meeting compliance requirements.”
Agrawal pointed out that rent-seeking is a major issue in obtaining the necessary registrations and licenses for manufacturing units. He suggested, “To address this, we need a controlled environment and support for private entrepreneurship. The rapid pace of digitalization can be a significant aid.”
India’s chemical industry is the sixth largest globally and third largest in Asia, accounting for about 11% of the country’s exports and projected to reach $1 trillion by 2040. The industry has improved significantly in the World Bank’s Ease of Doing Business rankings, rising from 142nd in 2014 to 63rd in 2019.

June 14, 2024
Manufacturing Sector Seeks Policy Continuity and New PLI Schemes Under Modi’s Third Term

Manufacturing Sector Seeks Policy Continuity and New PLI Schemes Under Modi’s Third Term

With the Narendra Modi-led NDA government commencing its third term, the manufacturing sector anticipates policy continuity, increased capital infusion, and new PLI schemes to strengthen India’s position as a preferred manufacturing hub and to enhance a robust and resilient supply chain ecosystem.
Industry insiders are optimistic about the coalition government. The entry of Chandrababu Naidu-led Telugu Desam Party (TDP) into the ruling alliance is seen positively, as Naidu, now Andhra Pradesh’s chief minister, is expected to drive reform and innovation, acting as a “force multiplier.”
“There is comfort in having just two main alliance partners with the BJP. Chandrababu Naidu is perceived as a progressive and forward-thinking politician, and Nitish Kumar, aiming to keep his prospects bright in Bihar, will likely push for the state’s development,” an industry body spokesperson told ET anonymously.
The coalition regime is expected to lead to a more “uniform distribution” of projects across various states.
“We anticipate more even project distribution among states. With BJP’s win in Odisha and its proximity to Andhra Pradesh, areas like Visakhapatnam might see increased industrial investment,” the spokesperson added. However, some officials expressed concerns that big-ticket projects might favor Andhra Pradesh due to Naidu’s influence, potentially intensifying competition between states for projects.
Overall, the TDP partnership with BJP is viewed positively, with Naidu seen as accessible and receptive. The appointment of a TDP cabinet minister for civil aviation is welcomed, as it could expedite approvals for regional airports in southern states.
“There’s no nervousness or uncertainty,” an electronics manufacturing industry representative told ET. “The coalition is seen as enhancing focus on manufacturing, benefiting the electronics sector.”
The manufacturing industry is eager for the continuation and expansion of successful PLI schemes from Modi’s second term, including new incentives for traditional sectors like textiles, cement, and leather.
In the electronics manufacturing industry, attention is on pending proposals with the India Semiconductor Mission (ISM) awaiting cabinet approval, with hopes for progress post the July budget.
In the automotive sector, expectations of policy continuity and a sustained focus on the Make in India initiative are fostering optimism.
“The general sentiment is very positive, with no expectation of losing momentum,” said Soumen Mandal, senior research analyst at Counterpoint Research. “In the automotive and heavy industries sectors, there’s a belief in continued policy direction, as these are major employment sectors that the government aims to further boost in their third term.”

June 14, 2024
Indian Banks to Request Regulator Not to Increase Provisioning for Infrastructure Loans

Indian Banks to Request Regulator Not to Increase Provisioning for Infrastructure Loans

The Indian Banks’ Association (IBA) plans to ask the Reserve Bank of India (RBI) to maintain the current provisioning requirements for infrastructure project loans. This response is in light of the RBI’s recent proposal to significantly increase the capital banks and non-banking financial companies (NBFCs) must set aside for these loans, according to three banking sources cited by Reuters on Wednesday.
In May, the RBI suggested that banks and NBFCs should allocate a provision of 5% of the total loan amount for infrastructure projects during the construction phase, a substantial rise from the current requirement of 0.4%.
“The blanket 5% provisioning requirement will sharply increase the cost of implementing such projects and will hurt project financing,” one source familiar with the matter stated. They suggested that additional provisioning should only be required if there is a delay in project completion.
Indian banks have previously faced significant defaults on infrastructure loans during 2012-2013 due to aggressive lending, which strained the banking system. Currently, India is experiencing a surge in government-led infrastructure projects aimed at boosting the economy. Given that asset quality issues are not particularly alarming at present, two banking sources believe implementing stringent provisioning rules may not be wise.
The IBA met on Tuesday to discuss feedback from individual banks and intends to submit a formal request before the June 15 deadline. The association did not immediately respond to Reuters’ request for comment.
The Finance Industry Development Council (FIDC), representing NBFCs, has also opposed the RBI’s proposal, suggesting the provisioning requirement remain at the current level. Additionally, the IBA will request that the new norms not apply to loans extended prior to the implementation of these guidelines.

June 13, 2024
Industrial Output Grows 5% in April, Bolstered by Mining and Power Sectors

Industrial Output Grows 5% in April, Bolstered by Mining and Power Sectors

India’s industrial production growth fell to a three-month low of 5% in April 2024, primarily due to a weaker performance in the manufacturing sector, despite strong contributions from the mining and power segments, according to official data released on Wednesday.
Factory output, as measured by the Index of Industrial Production (IIP), had grown by 5.4% in March and 5.6% in February 2024. The previous low for IIP was 4.2% in January 2024. For the fiscal year 2023-24, IIP growth was 5.9%, compared to 5.2% in the preceding fiscal year.
In April 2024, India’s IIP grew by 4.6%, according to the Ministry of Statistics & Programme Implementation. The latest data revealed that mining output growth accelerated to 6.7% in April, up from 5.1% in the same month last year. However, manufacturing sector growth decelerated to 3.9% in April from 5.5% a year ago. Power generation increased significantly by 10.2% in April, compared to a contraction of 1.1% in April of the previous year.
In terms of use-based classification, the capital goods segment’s growth fell to 3.1% in April 2024 from 4.4% in the same period last year. Consumer durables output expanded by 9.8% in April, rebounding from a contraction of 2.3% in April 2023. Conversely, consumer non-durable goods production contracted by 2.4% in April 2024, following an 11.4% growth in April 2023.
Infrastructure and construction goods reported an 8% growth in April 2024, down from a 13.4% expansion in the previous year. Primary goods output grew by 7% in April 2024, a significant increase from the 1.9% growth recorded a year earlier. The intermediate goods segment saw an expansion of 3.2% in April 2024, up from 1.7% in the same period last year.

June 13, 2024
SBI Launches ‘SME Digital Business Loans’, Promising Sanction in 45 Minutes

SBI Launches ‘SME Digital Business Loans’, Promising Sanction in 45 Minutes

The State Bank of India (SBI), the nation’s largest lender, has introduced ‘SME Digital Business Loans’ aimed at approving loans within 45 minutes. This initiative targets micro, small, and medium enterprises (MSMEs), which SBI has identified as key to its growth and profitability over the next five years.
“This innovative product marks a significant leap forward in digitalisation by offering SMEs a digital loan journey with an end-to-end sanction turnaround time of up to 45 minutes,” SBI stated.
The new loan offering eliminates the need for traditional credit underwriting and lengthy appraisal processes, introducing a simpler, faster, and more accessible approach to MSME lending. For loans up to Rs 50 lakh, SBI has waived the requirement for financial statements, relying instead on transaction history and GST returns for appraisal.
SBI has developed a data-driven credit assessment engine that uses authentic data footprints from income tax returns (ITR), GST returns, and bank statements. This engine can provide sanction decisions within 10 seconds after the necessary details are submitted, without any human intervention.
“We are committed to setting a new industry benchmark with SME Digital Business Loans, underscoring our constant efforts to drive innovation in MSME lending,” said Dinesh Khara, chairman of SBI. “By leveraging the rich data footprint of MSME units in the ecosystem, we aim to provide the fastest and most intuitive lending process, further solidifying our position as the leading MSME lender in the country,” Khara added.
SBI’s outstanding SME loan portfolio has grown from Rs 2.67 trillion at the end of March 2020 to Rs 4.33 trillion at the end of March 2024. Additionally, the asset quality of this portfolio has improved, with gross non-performing assets decreasing from 9.43% in March 2020 to 3.75% in March 2024.

June 12, 2024
Ixigo IPO Heats Up: Strong Initial Response Raises Eyebrows

Ixigo IPO Heats Up: Strong Initial Response Raises Eyebrows

The much-anticipated IPO (Initial Public Offering) of Ixigo, the travel technology company behind the popular travel search platform of the same name, has generated significant buzz in the Indian stock market.
Oversubscribed Debut
On its opening day (June 10th, 2024), the Ixigo IPO received a robust response from investors, with reports indicating it was oversubscribed. This strong initial showing suggests investor confidence in Ixigo’s growth potential within the Indian travel tech sector.
IPO Details
The public issue is a combination of fresh issue (₹120 crore) and Offer for Sale (OFS) (₹620.10 crore), raising a total of ₹740.10 crore. The price band has been set at ₹88 to ₹93 per equity share, with a minimum investment amount of ₹14,973 for retail investors. The lot size is 161 shares.
Listing and Allotment
The bidding window for the IPO remains open until June 12th, 2024. Allotment of shares is expected to be finalized on June 13th, with a tentative listing date set for June 18th on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
Reasons for Investor Interest
Several factors might be contributing to the positive investor response. The travel and tourism industry in India is expected to witness significant growth in the coming years, and Ixigo’s established brand presence and online travel platform could position it well to capitalize on this trend. Additionally, the company’s focus on technology and innovation might be seen as a competitive advantage.
Overall, the Ixigo IPO has gotten off to a promising start. However, potential investors should conduct thorough research and due diligence before committing their funds. While Ixigo boasts a strong brand name, a closer look at its financial performance might be necessary before making any investment decisions. With a competitive travel tech landscape in India, it’s crucial to assess whether the IPO price accurately reflects Ixigo’s long-term value proposition.

For more information on Ixigo’s IPO, read more here: https://www.news18.com/business/ixigo-ipo-gets-strong-response-subscribed-1-95-times-on-first-day-8928977.html

June 11, 2024
Policy Changes Expected from New Modi Government to Boost MSME Sector

Policy Changes Expected from New Modi Government to Boost MSME Sector

With the newly elected NDA government led by Prime Minister Narendra Modi preparing to announce ministry allocations, several policy changes are anticipated to enhance job creation, entrepreneurship, and business growth.
According to a report by CNBC-TV18, citing sources, at least nine policy changes are expected, some of which may be introduced in the upcoming July budget. These include higher indemnity for banks issuing loans to MSMEs, integrating MSMEs into production-linked incentive (PLI) schemes, and establishing a new institute to facilitate increased credit access for small businesses and enhance exports.
Additional anticipated changes include a revamp of the government’s Atal Innovation Mission to focus more on entrepreneurship and job generation, increased funding for the aspirational districts program, and more.
Industry experts are also advocating for increased support for MSMEs to drive job creation and export growth. Vijay Kalantri, Chairman of MVIRDC World Trade Center in Mumbai, emphasized the need for Prime Minister Modi to simplify regulations and expand the PLI scheme to boost industry and trade productivity.
“The capacity building is crucial to enable us to export more and employ more people,” said Kalantri.
One of the key changes expected is a revision of the 45-day payment rule for MSMEs to address delayed payment challenges. Last month, Finance Minister Nirmala Sitharaman hinted at potential changes during an interaction with MSMEs and local industries in Ludhiana. She mentioned that the government would consider repealing modifications to Section 43B of the Income Tax Act if MSMEs prefer operating without payment timeline uncertainties.
Additionally, the Federation of All India Vyapar Mandal (FAIVM) has called for extending the payment period for MSMEs from buyers to 180 days from the current 45 days. FAIVM President Jayendra Tanna indicated that the body will urge the new NDA government to implement this extension to better support MSMEs.

June 11, 2024
How India is Poised Amid Global Demand Revival

How India is Poised Amid Global Demand Revival

As global demand shows signs of revival, India must seize the opportunity to capitalize on this trend.
In 2023, global demand was relatively subdued due to lower consumer consumption and rising inflation in key markets such as Europe and the US. This resulted in a decline in India’s merchandise exports. However, experts now anticipate a gradual recovery in global demand, evidenced by a 11.86% year-on-year growth in exports (to $41.4 billion) in February 2024.
Despite the slowdown, industrial products like engineering goods, petroleum products, pharmaceuticals, and electronic goods maintained or increased their export levels. In contrast, consumer-facing segments such as garments, gems and jewelry, and handloom products saw a decline, according to Anubhav Kathuria, Director of Synergy Steels.
“In macro terms, we see inflation cooling down to preferable levels in Europe, which could enhance prospects for consumer-focused merchandise producers in India. The stainless steel industry, impacted by global macroeconomic developments, is looking at the year ahead with cautious optimism,” said Kathuria.
Aruna Sharma, Former Secretary, Ministry of Steel, believes a demand revival would also benefit small businesses and generate employment. “India contributes around 16% of global growth and has maintained a consistent growth rate of 6-8% in recent quarters. Despite challenges and reduced savings, the demand for FMCG goods is reviving. A global economic revival will positively impact MSMEs, driving employment and economic growth,” Sharma stated.

Strategies to Capitalize on the Gradual Demand Revival

Gopalakrishnan Narasimhan, Partner & Director-Africa at Kaizen Institute, noted that the gradual revival in global demand is expected to benefit key industries. Exports of electronic goods have seen remarkable growth, increasing over 25% from $21.07 billion in April 2023 to $26.51 billion in April 2024.
India’s major exports include pearls, precious and semi-precious stones and jewelry (16%); mineral fuels, oils, and waxes (12%); nuclear reactors, boilers, machinery, and mechanical appliances (5%); pharmaceutical products (5%); and organic chemicals (4%).
“Product linked incentives (PLI), which are expected to bring in incremental investment of Rs 7,920 crore and increase exports worth Rs 64,400 crore, alongside flexible FDI policies, have significantly diversified India’s export basket towards more value-added products like electronic goods and chemicals,” Narasimhan added.

Strengthening Supply Chains

Kathuria highlighted that India has learned from the pandemic to create a robust domestic base for raw materials and components in key manufacturing industries. This strategy includes infra-investments, financial incentives, and policy direction. The Critical Minerals Mission, for example, promotes the exploration of 30 critical minerals crucial for manufacturing stainless steel, electronics, and electrification products, which currently rely heavily on imports.
Narasimhan emphasized the volatility in the geopolitical realm and the potential disruptions to supply chains due to geopolitical tensions and economic sanctions. He projected the manufacturing industry’s share of GDP in India to increase from 15.6% to 21% by 2031, doubling India’s export market share. The government aims to boost merchandise exports to $1 trillion by 2027-28.
“With increased budgetary allocations for the manufacturing industry and the integration of emerging technologies like AI, along with dedicated schemes like Gati Shakti and the National Infrastructure Pipeline, India is on track to enhance its manufacturing and distribution networks and emerge as a global manufacturing hub,” Narasimhan noted.

Impact of Demand Revival on India’s Trade Destinations

Sharma pointed out that building trade centers takes years, and maintaining consistent supply and presence is crucial. “India lost the market in iron ore exports from Goa after a court stay on mining in 2018. Such setbacks need to be avoided. India has great potential in sectors like agriculture, textiles, pharmaceuticals, steel, and MSME products. The revival of the global economy is an opportunity for these sectors to thrive. Ensuring access to cheap working capital and complying with emission norms will enhance their export capabilities,” Sharma explained.
Since the 1991 reforms, India’s trade relations have significantly transformed, with increased exports to key markets like the US, Europe, and Asia. Narasimhan highlighted the exploration of newer markets such as Montenegro, Turkmenistan, Mongolia, and Honduras.
“The key reasons for the stellar export performance are the sharp recovery in key markets, increased consumer spending, accumulated savings, disposable income due to fiscal stimulus by major economies, global commodity price rises, and an aggressive export push by the government,” Narasimhan said.
India’s progress as a global export hub, coupled with increasing free trade agreements (FTAs) with major nations and entities, is expected to strengthen trade relationships in line with changing consumer trends and market dynamics.

June 11, 2024
75% of Indian B2B Marketing Leaders Already Using GenAI Applications

75% of Indian B2B Marketing Leaders Already Using GenAI Applications

Three out of four Indian B2B (business-to-business) marketing leaders are already leveraging generative artificial intelligence (GenAI) applications in their marketing strategies, according to a new report released on Wednesday. GenAI has been instrumental in accelerating content creation (43 percent), creating cost efficiencies (39 percent), and improving productivity (38 percent).
The professional networking platform LinkedIn revealed a 142-fold increase in LinkedIn members globally adding AI literacy skills to their profiles, with marketers leading this trend. AI has become the fastest-growing digital skill for Chief Marketing Officers (CMOs) worldwide based on the skills added to their LinkedIn profiles in the past year.
“A competitive B2B landscape and growing buyer influence have made it crucial for marketers to target larger groups. Building collective confidence is essential for brand recognition and sustained engagement,” said Sachin Sharma, Director of LinkedIn Marketing Solutions, India.
The report surveyed over 2,000 B2B marketing leaders globally and found that while 76 percent of Indian B2B CMOs have faced challenges in reaching buyers due to competing demands, the majority (94 percent) agreed that relationship building is crucial for success.
Additionally, 93 percent of Indian B2B CMOs are optimistic about their team’s ability to drive revenue in the coming year, and 85 percent expect their budgets to increase.

June 7, 2024