We have had a lot of discussion on this site on technology ventures and rightly so, given the talent pool in India. However, I think that with our changing social structure there will be interesting opportunities in the recreational services space. For instance, in areas like Health & Fitness, Tourism and so on. Think of the following:
– Will there be an entrepreneur who will set up India’s version of Lifetime Fitness or Ballys?
– Will there emerge new businesses managing sports stadiums, music and sports events and so on?
– What about innovative domestic tourism options such as specialized tours, coast-to-coast cruises?
– Will there be private equity investments in chains that take over and standardize the existing stand-alone hotels in Indian cities?
– Will there be a spate of restaurant chains post investments in the Mainland China business?
In each of these categories, there are reasonably large listed companies on the NYSE and the London Stock Exchange. I expect that over the next 5-10 years there will be several Indian companies that will emerge in these categories.
Their business models will probably be not as disruptively innovative as the next generation Web 2.0 product. But I am sure they will be fun and provide the much needed respite to technology entrepreneurs and workers.
I have written about a few such ideas on www.myopen-window.blogspot.com and would like to learn more from folks who are thinking about these opportunities.
- Building the Green Entrepreneurial Ecosystem city by Indian city - February 3, 2010
- The Largest gathering of Cleantech companies in India - January 8, 2010
- TiE ISB Connect 2009 is on October 22-23 in Hyderabad - September 25, 2009
Deepak,
Restriction of tax incentives to notified sectors does not forbid PE / strategic investments thro FDI / Automatic route ( wherever permitted and subject to 49% or 74%ceilings as may be ) coming into other sectors in accordance with the regulations.
The withdrawal of incentives is mainly to direct the flow of genuine Venture investments to sectors where scope for innovation exists and to provide an avenue for young entrepreneurs to fulfil their dreams without having to leave the Indian shores.
There are big players already in other sectors mentioned in the original post and keeping the incentive tap open will leave the door open for more artful dodgers, by whatever name called.
Krish, I’m surprised the government thought it more appropriate to limit the set of industries that VCs *can* invest in, rather than eliminating those that it can’t. Secondly, that the government decided the list of fields that can be invested in to the seven they think is important (!) – after all innovation means something not yet known.
Blatant misuse by VC funds into PE plays is to blame – you are right – and therefore this rule. We should technically ditch the treaty with Mauritius too, given that the misuse isn’t restricted to Indian funds alone. The market is totally down anyhow, there can’t be a better time than this to get rid of that treaty and level the playing field.
While this budget then slams the door on PE funds masquerading as VC funds, do you think it will mean that no VC fund will invest in the themes mentioned in this post?
Why are you surprised Deepak ? The incentives were meant for mitigating the risks faced by `Venture’ ( Startup) Capitalists while investing in innovative startup plays. They don’t deserve it after they have transformed into pureplay Private Equity investors in established Construction, Stock Broking, Retail and other listed entities. The FM just slammed the door shut on “nothing to declare” corridor for such turncoats.
Can’t have the cake and eat it too !
Darn. Budget 2007 has decided that the definition of “Venture Funds” is restricted to a few sectors only, and has removed the “pass through” status of funding other sectors. Meaning, gains in other sectors by venture funds will now be taxed in the hands of the fund and then again in the hands of the end-investors.
One way to get around this is to go IPO and sell the stake post IPO, so long term capital gains applies (zero tax) But acquisitions are still affected.
Of course, this means foreign funds can come through Mauritius or such and take advantage of the tax treaty, but Indian funds won’t have that advantage.
Check out:
http://economictimes.indiatimes.com/Budget_bite_Indian_VC_funds_cry_out/articleshow/1703155.cms
Hi,
Those were some interesting posts. I have some thoughts and I want to discuss how we can maintain very low costs in the early stages of a startup. Just wondering if I need to start a new thread. ( I cannot start a new thread , thats another matter ).