Should I invest in stocks now?

Well, this is the thought I’m trying to answer myself now-a-days, looking at the mirror every morning

First question: Why is the economy slowing down? Well, my one line answer to it – it’s the fear among people that’s slowing down the economy, rather than the virus itself. I’m not going to write about these things and “hows” and “whys” related to it (there are ample amount of media articles floating in the internet), but I’ll come straight to the point

Should I invest in stocks now? How should I invest?

In my opinion, this is the right time to review my investment portfolio and evaluate the stocks I always wanted to invest in

  1. I’ll choose stocks across sectors. Warren Buffet says, “One should never put all one’s eggs in one basket”. This is a golden rule now. I’ll read about the sector(s) before I invest in it. I should be able to gauge “Why would this sector do well?” I always choose that sector which is going to grow for the next 5 years. (i) Research reports, (ii) Analyst reports, (iii) investors say about the sector, (iv) what Mutual Fund Managers are investing in, etc. can be a good start to understand the chosen sector
  2. Large-cap stocks / blue chip companies across sectors are the ones for me now. I’ve been eyeing such stocks for a long time, but didn’t invest in them because they were expensive. Now is the time these stocks gives me the opportunity to earn profits
  3. If I’m fearful of losing money, I’d invest in staggered fashion. For example, if I want to invest INR 1,00,000 in a banking stock, for example, I’d invest in it in a equated installment, say INR 25,000, over a four-month period, or INR 12,500 every 15 days till I reach INR 1,00,000. In this way, I invest through the ups and downs of the stock market
  4. I keep a “sell” target before I buy a stock. I hold the stock for a period and book profits once it reaches its target price. I keep a variation of 15% in the absolute price
  5. I’d start small, if I’m new to an industry. To make a safe bet, I’ll capitalize on the expertise of a Mutual Fund Manager, who invest in my chosen sector, and see how the return came up for him/her in the last 5 years. I’ll, then, try my hands on the direct equity route
  6. I invest in a stock for at least 3 years. Equity is not for short-term investment (one year or less), nor is it for parking the money
  7. I do not borrow money from individuals or financial institution(s) to invest in stocks. While sophisticated investors do so, I recommend retail investors to stay away from such a strategy, even if there is substantial upside in stocks. I’d liquidate my term deposits and invests in stocks

In a nutshell, I’m holding cash to explore how the market volatility turns up. I know many Fund Managers who are waiting to see how low the stock markets go, so that they can buy good stocks at cheaper price. If you are a first time investor in direct equity, taking the expertise of a good fund manager, by investing through 100% equity mutual funds, is a great way to learn the fundamentals of equity investing and achieve long-term capital appreciation.

Warren Buffet says, “Fearful when others are greedy and greedy when others are fearful.” This is the time to realize this statement. Fingers crossed!


Private Equity Investment and Investment Banker

Private EquityThere are tons of Investment Bankers right from bulge brackets (read Goldman Sachs, JP Morgan, Morgan Stanley) to small ones (ones with 2 – 3 people) who provide their services in Private Equity. While the bulge bracket will not do deals below USD 100 million, the others also have some sort of minimum deal size they target at to report a minimum revenue per deal to cover their cost and expenses per month.

In our experience, most of the start-up Clients, we have worked with, need some sort of consulting (especially for a 5-year strategic plan) before pitching the idea to investors. This consulting, in our opinion, is essential to ensure your business idea and business model is in sync with the business strategy, the financial projections (also known as financial model), the market trends and the competitive forces/analysis. These 6 parts form the major ones from the business idea perspective.

Market segment (and market trends) plays a major role because you will operate and grow within it (remember, B2B and B2C segments have different business dynamics with its own cost and revenue drivers. Because of this, investors evaluate them deeply from at least 5 years down the line. Off late, Robotics in India, for example, is doing well. So, Investors would explore the market for it, your idea to address and tap the market, the team and the initial traction).

However, we should keep in mind that an Investor always invest in the Entrepreneur – it is s/he who converts the business idea into a tangible sustainable business and give the investor a successful exit. Hence, a credible team goes by far to attract investors and get funded.

For example, an e-commerce business, at the core, should have a CEO (sales), COO (operations) and CTO (technology). The core team may be surrounded by Advisors of respective fields to help them formulate business plan and make strategic decision. We have seen most successful businesses with this structure. As and when you grow, a CFO needs to be present in the core team.

Whether investors would like to see traction at the initial stage depends on the idea, its stage and the investor’s investment philosophy. For example, there are technology companies that gets funded even at idea stage (the company is not on the ground yet). Such cases require a strong large untapped market, commendable business plan, sustainable and scale-able business model and a strong team. B2B businesses are not highly scale-able (at least to the best of my knowledge), but usually have steady cash flow after 3 years, especially once they win large / long-term contractual agreements.

Ideally, an angel investment takes 75–90 days, and a VC round 4 – 6 months (first discussion to receiving the money into your bank account). This is assuming that your information memorandum is ready. Once invested, an angel investor would stay invested ideally for 3 years on an average and exit with 2x – 4x returns, and a VC stays invested up to 7 years (depends on the fund) and exit with up to 10x returns. For example, Tiger Global, one of the top VC investors, is estimated to make a partial exit from Flipkart with 3x return; EVC Ventures, an early-stage VC fund, exited from Milkbasket with 200% IRR of their initial investment.

Our story: Let me introduce you to Garg Partners

logoGarg Partners is a management consulting and investment banking firm dedicated to helping start-ups, small and mid-size enterprises improve organizational performance and with private equity and M&A advisory.

In the last 3 years, Garg Partners helped (pre-revenue) start-ups, high-growth and distressed businesses across 13 industry verticals (retail & e-commerce, manufacturing, logistics, travel & transport, food & beverages, fashion & apparel, automotive, specialty chemicals, engineering, technology, media, bio-technology and healthcare) develop 5-year strategic plan, improve organizational performance (operational efficiency, sales, inventory, gross margin, EBITDA/EBIT margin, cash flow and profitability), develop marketing and branding strategy (including celebrity brand endorsement), initiate strategic partnerships, restructure organization, restructure debt and originate strategic M&A transactions. We had built investor-facing pitch-deck and 5-year financial model for 43 products and 19 countries with manufacturing plant and R&D facility for raising equity capital, constructed accretion/dilution analysis for buy-side M&A (51% stake acquisition with 25% cash and 75% stock), calculated the market size for 75 products, designed CEO compensation, prepared numerous pitch-decks and financial models for sell-side M&A and performed valuations, besides various corporate advisory projects.

Over the past 5 years, Garg Partners has built relationship and understood the investment philosophy of 450+ Private Equity and Venture Capitalists (incubator, accelerator, seed, early-stage, growth and buyout) across India, Hong Kong, Singapore and USA, 340 accredited Angel Investors and 10 large business houses in India for strategic minority investments.

In FY19, Garg Partners clocked a growth of 313% by revenue and 100% by new Client acquisition over FY18. Reference Client base grew 60% over the last year and contributed 39% to FY19 revenue. This year’s performance is followed by a revenue growth of 46% in FY20 and 23% in FY21.

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Why should you consider Singapore for your company registration?

singaporeLast week, one of my e-Commerce Clients in the B2C segment asked me this question: “Where can I register my company, other than in India? Is Singapore a good option?”

This is a common question every Indian startup Entrepreneur explores, keeping in the mind the FDI and taxation policies that Indian government has. So, let’s take a close look at why you should consider Singapore as your destination while exploring foreign company registration

FDI Policy

The Government of India recently introduced Foreign Direct Investment (FDI) policy did not permit FDI in the multi-branded retail (B2C segment). As such, foreign venture capitalists have restrictions while funding an Indian online retail operation.

Take the example of Flipkart, India’s largest e-commerce private company. When the Indian Government turned down the proposal for allowing FDI in the retail sector, investors of Flipkart were left with 2 options: (i) sell the company at the best price or (ii) sell the risky part of the business (logistics and delivery) and move the profitable part to a country with more relaxed regulations. It’s very obvious for the Bansals (Sachin Bansal and Binny Bansal, the Co-founders of Flipkart) to agree to the second option; they registered their company in Singapore. Flipkart’s investors now can infuse the capital in the parent company, and can direct the funds to its India arm

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Demonetization in India: The Bigger Picture

demonetizeDemonetization is a buzzword in India today; tune in to an India news and I will probably hear the word “demonetization” about a 100 times in 15 minutes, followed by rumors, comments and suggestions. So, today, in this article, I’m presenting my views on this topic and trying to portray a bigger picture in front of you by dwelling a little bit into the history of India. I welcome your views and thoughts on it.

4 decades ago, in 1969, Mrs. Indira Gandhi, the then Prime Minister of India, indiragandhidecided to nationalize the Indian private banks. Following this move, critics attacked her, calling her approach pro-poor and anti-rich. When the after-effects, similar to today’s cash crunch, erupted after the bank nationalization move, critics criticized her, saying bank nationalization should have been planned better; bank nationalization should have been restructured to have one/two central banks and several regional banks.

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Twitter sale and potential acquirers: Salesforce, Microsoft, Google, Disney, Verizon

twitter“Why Twitter?”, “Who will buy?”, “Why will they buy?” These are the questions that engulfs my thinking mind when I dwell into this deal. So, today, I’m going to present my thoughts on this possible transaction and how the potential acquirers are positioned in relation to this sale transaction. I’ll try to simplify my views under the respective headings and present my opinion to my Readers in an easy-to-comprehend manner. I welcome Reader’s thoughts and views on my article.

What makes Twitter so attractive?

  1. Twitter has an active user base of over 300 million users and an annual revenue of about $2 billion. Even though it’s losing about US$ 125 million every quarter (although some attribute it to stock-based compensation), the potential acquisition candidate holds about US$ 3 billion in cash and short-term securities in hand, and an accumulated deficit of US$ 2 billion in its Balance Sheet.
  2. Twitter, which originally started out as a micro-blogging site, evolved into a social platform for discussing opinions, news and live events. Its video ads through data streaming are widely expected to be the primary source of revenue in the future. Recently, the company also inked deals with several companies for live-stream events on its platform, including 120 Sports, Bloomberg TV and the four major sports leagues in the U.S. In other words, it’s an attractive investment because of its data, user base and influence in politics, culture and the media.
  3. Verto Analytics conducted a survey in the US on 20,000 internet users and found that Twitter is the sixth largest digital publisher in the US from montly active users perspective, that reaches 89% of its audience in the nation.

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2015 Recap: Angel, Venture Capital and Private Equity

Angel and Venture Capital investment set a new stage in Year 2015, both in value and volume, which in effect drove the overall private investments to a new high

According to VCCEdge, Angel and VC investors closed a total of 1,096 deals in 2015, an increase of 68% from last year, a record jump and also the highest early-stage investment in India. Of these, angel and seed investors funded 632 deals, whereas VCs closed the remaining.



In value terms, angel and VC firms together contributed 24.5% of the total private investments in 2015, a growth of 17.2% as compared to last year. On a standalone basis, angel funding crossed US$ 300 million for the first time, an increase of nearly 60%, from US$ 196 million in 2014,. VC funding showed a similar trend, clocking deals worth US$ 5.183 billion, a growth of nearly 127%, as against US$ 2.287 billion last year.

Year 2015 also witnessed highest funding in eCommerce and Technology industries. According to Padmaja Ruparel, President, Indian Angel Network “The technology and e-commerce sectors have been in the limelight in 2015, and our country is the fastest-growing start-up ecosystem in the world, right now. 11 of the 68 ‘unicorns’ globally, (companies that are valued at over US$ 1 billion) are of Indian origin.”

Currently, India is home to over 18,000 start-ups valued at US$ 75 billion and employing 300,000 people. This makes India the world’s second largest start-up ecosystem while the growth rate is estimated to be highest here.

Top 5 Issues in M&A Transactions

Image result for merger acquisitionDuring an M&A transaction, many issues populate that need immediate attention. In this article, I’m going to highlight the top 5 burning issues and the challenges thereof, that both the parties face while negotiating a transaction.

1. Structure of the deal

There are 3 ways to structure a transaction: (i) stock sale, (ii) asset sale and (iii) merger. The acquirer and the target have competing interests with each of 3 alternatives. Hence, it’s important to recognize and address material issues while negotiating a deal structure. Highlighted below are 4 areas that needs to be considered when structuring the deal

i.    Liability: Unless contractually negotiated otherwise, in a stock sale, upon the consummation of transaction, the target’s liabilities are transferred to the acquirer by operation of law. Similarly, in a merger, the surviving entity assumes all liabilities of the merged entity. But, in an asset sale, the acquirer picks and chooses and assumes only the designated liabilities; the non-designated ones remain with the target

ii.    Contracts: Target’s existing contracts might sometimes prohibit assignment. In that case, a pre-closing consent to assignment must be obtained. However, for a stock purchase or merger, no such requirement exists unless the contracts state otherwise; the prohibitions get activated upon a change of control or by operation of law

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