#4: Mumbai mixer and evaluating Byju in 2015
We also talk about a winter somewhere amidst the building summer
A glimpse of our Mumbai event hosted on Sunday. We were joined by Sridhar, MD at Multiples and Dhvanil, Founder at Skillmatics (Sequoia-backed). We made new friendships over Cheese Chilli Toast and lemonade.
That’s enough talk about us, now let us dive into something interesting cooking up in different sectors:
SBM Bank: Indian Fintech's Invisible Kingmaker
- SBM Bank is a wholly owned subsidiary of SBM Mauritius. It has received a full fledged banking license over 4 years ago
- Since then, it claims to have millions of customers in over 500 Indian cities growing its AUM ~5x with just 11 branches
- Did this by partnering over 30 fintech companies (including likes of Slice, Uni, Lazypay, Rapipay, Lendingkart, Bharatpe, Razorpay, Vested) across sectors such as credit cards, prepaid instruments, micro ATMs, Digital Deposits, Remittances etc
- Earns a part of transaction processing fee / MDR
- Basically, SBM is positioned to rapidly acquire customers riding on the back of fintechs (who burn money) and earn fee income which is ROE accretive (doesnt block capital)
Agri Food Processing - Sunrise Sector
- Food processing; $400B market, likely to touch $470B by FY25.
- Only 10% of the food is processed in India; global average is 60-80%. 300MT of fruits and veggies produced; only 3% processed.
- Growth in this space due to trend in eating more processed food in India.
- Key sub segments: Dairy, Poultry & Meat, Fruits & Vegs, Fisheries.
- In the value chain of food processing, highest margins at “Processor”level(15-30%)though capacities in India are under utilised(60%).
- FDI received April 20-Dec 22; $12B.
- Food processing industry employs ~7M
- Major markets for processed food export - EU and UAE.
- Major govt initiative; PLI scheme, Micro Food Processing Enterp Scheme.
- Agri&Food Processing exports crossed $25B in FY22.
(Funding)Winter has come. Do you have enough wood to burn?❄️
- On avg, 100-150 startups got funding every month over the last 8 yrs, however, in Feb just 66 got funded. Lowest since 2014. Downward trending 📉since Q2 FY22
-These 66 ventures raised a combined $471m wheras avg. for the last three years is $1.5-3Bn
- This year, investors tightened their purse strings after public market re-rating of tech companies, war, high Inflation, increased interest rates and global slowdown in spending
- Seed stage activity remains buoyant
- Profitable consumer and Fintech companies are the only ones taking centre stage in this funding winter, leading to a paradox of funding drying up for the needy and being aplenty for the cash rich.
Scents of Spec chem - Flavours and fragrances
- Flavors are used as an additive to enhance the taste of food & beverages. Fragrances are important to conceal the bad odour, and thus are mainly used in consumer products, including body care, oral care, and home care.
- Global size $26.5 Bn, India market $3.7 Bn. Key main players are blenders like Givaduan, IFF, Firmenich, Symrise and Mane globally.
- The value chain is as follows: Feedstock comes mainly from petrochem players, intermediaries supply products with specific features to blenders. Blenders sell the fragrances/flavours to FMCG cos which are the biggest consumers
- The segment for suppliers to blenders is highly fragmented due to small size of molecules (volumes) which are used by blenders
Hospitality Industry - The Ground Reality
- Average occupancy for hotels in 2022 recovered to over ~90% of pre-covid levels
- Leisure destinations witnessed full recovery given revenge travel and limited access to international destinations
- Business hotels in prime cities also recovered well with demand driven from local business travel
- ARR levels have surpassed pre covid on an overall basis
- Improving demand and cost rationalization have led to stable margins
- EBITDA margins for lemon tree has surpassed pre covid levels while Chalet is close enough
Derma: The Appearance of Future
Recent Deals – Eris Lifescience has a portfolio of 9 derma brands from DRL for INR 275Cr (~4-4.6x Revenues). This will help Eris augment and expand the cosmetic dermatology business
Driving Factors: Growing burden of dermatology diseases, increase in awareness levels of disease progression, and rise in the elderly population, rising adoption of cosmetic dermatology amongst youth.
1) Minimally invasive / non-invasive procedures to treat various types of skin related diseases that are more economical.
2) Based on device type, Imaging devices / technology for derma accounted for the highest CAGR of the derma diagnostic devices market. Based on application, skin cancer diagnosis holds the highest CAGR.
Saga of SAAS valuations
Highest fall in Public SAAS valuations in 2022:
-Public revenue multiples were around 4x-5x in 2008, and then fell to 2x revenue during the global meltdown
-Multiples were growing steadily and reached around 8x in 2011 and reached at all time high of 17x in late 2021
-However, with the current market scenarios, multiples have fell to 6x in Nov-22, lowest since 2013; As of Feb-23, multiples are trading at 7x
Private SAAS that were funded 12 months ago are not fundable anymore:
-As SaaS picked up, 10x ARR remained a rough standard
-However, for Series A, B, and later rounds grew to about 15x for top-performing SaaS companies
-In 2018-2019, even 20x ARR wasn’t uncommon for Series A and later rounds for top performing SAAS companies;
-In 2021, Top-tier growth rounds had an ask of 114x ARR at the very peak in 2021
Late-Stage funding slipped in 2022
-Total funding dropped by 39% in 2022 to $93 Bn. from $152 Bn. in 2021
-Led by a steep decline of 49% in late-stage funding rounds from $104 Bn. in 2021 to $54 Bn. in 2022
-Early stage rounds also registered a decline of 22% at $34 Bn. in 2022 while seed stage were still able to maintain their pace with a moderate 10% growth at $5 Bn. in 2022
Compiled by Hanu Bansal & Tushar Khandelwal
Contributions by Arnim Dhakad, Ashish Purohit, Anand Vadia, Mukund Maheshwari, Parin Detroja, Prachi Malpani, Tanay Lohia, Shlok Sanghi, Harshil Shah.
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