Times News Network, December 29, 2006

Stock prices of emerging sector companies are creating new peaks in the Indian stock market. But the real action in the emerging sector is in privately-held companies or companies which are now gearing towards the next round of growth.

ET brings you a list of 10 ET hot companies in the emerging sector. These companies are being watched closely by venture capital and private equity funds as they are ‘industry disrupters’.

Investors, private equity funds and merchant bankers will be chasing these companies in 2007. Most of these companies have reached a critical size for take-off. The common thread among all these companies is their unique business model and the enormous drive of the entrepreneur team that feels it can change the way the world works.

Avnish Bajaj, a former entrepreneur and now with VC fund Matrix Partners, says: “While the ecosystem is not perfect for start-ups, the really smart and hardy entrepreneurs have already created scale and size. They will be the cheerleaders for the next generation of entrepreneurs.”

Therefore, our list has reached a critical size. It spans emerging industries across medical equipment, manufacturing, retail, mobile & Internet, IT and BPO companies. The companies are not ranked in any particular order as we feel that all of them are too different to be compared or ranked against each other.

Kanwaljit Singh of Helion Venture Partners, says: “Domain specific and high value outsourcing businesses will be a major hot sector for investment.”

Chennai-based BPO company SlashSupport, started by Shiva Ramani and Shiv Kumar is one such company. The company started with providing tech support to open source software companies, a rich and virgin territory untouched by global BPO companies, even Indian IT companies.

SlashSupport has raised two rounds of funding, and its first investor Baring Private Equity divested profitably in favour Softbank Asia Infrastructure fund (SAIF). SlashSupport is the only BPO company from India, which is offering tech support directly to end-consumers.

It’s created a brand in the US called SupportMinds, which provides tech support for a fixed fee to consumers. While most BPO companies offering tech-support are working at the backend of hardware companies, SlashSupport has a new business model. Competitors and investors are closely watching the company as it has reached a critical size.

Our next company, OnMobile, is a value-added mobile product company. The company was given seed funding by Infosys. OnMobile has raised three rounds of funding in the past six years. In October 2006, it secured strategic financing of $27.8 million from Deutsche Bank, Goldman Sachs & Polygon Investment Partners.

The company has reached a critical size, touching around 120 million telecom subscribers across the world and around 1.4 billion mobile calls that are routed through its system. In 2007, there are chances that the company might hit the public markets. Mobile value-added services is becoming a hot sector for VC investment and OnMobile is one of the leaders to watch out for in this space.

In the much-talked about BPO sector, Mumbai-based Hurix Systems is an e-learning company with 450 people that is expecting to double its headcount in two years. The company is poised for growth, it raised its first round from Kotak Private Equity fund in 2000, and will be raising its next round of funding in 2007.

Retail is hot and will remain so, though the focus will shift to regional and specialised retailers players. This is where Provogue and Vishal Mega Mart, two of our hot companies in this sector, come to play. Provogue has all the edginess of a first generation entrepreneur.

VMM started as a humble one-store enterprise in 1986 in Kolkata and has today grown to be a 46-outlet chain across 34 cities. VMM is the first hypermarket chain in India and also claims to retail the largest collection of goods and commodities sold under one roof in the country.

The company is now poised for capital expansion and growth in 2007. We have two companies, riding the wave of domestic IT growth, the domestic market is the fastest growing IT market in the world.

CMS Computers and Allied Digital are two such companies, which are well placed to capture this growth. Started by Ramesh D Grover, an ex-IBM professional, CMS Computers is the second largest domestic IT services company in India, with revenues in excess of Rs 500 crore.

When the economy grows at such a rapid pace, there is bound to be consumption across sectors. The flip side of this growth is the rising demand for better healthcare. We have two companies in this sector - Thyrocare and Relisys.

Relisys is likely to hit the public markets in 2007. The company is the only domestic manufacturer of medical stents. Thyrocare is the world’s largest thyroid testing laboratory, with a network of franchisee labs across the country.

Mr Singh says: “Companies focusing on the Indian consumer is a hot sector for VCs. Apart from the generic mobile and Internet businesses, models targeting specific consumer needs, for example, local information (yellow pages), education, transaction-based mobile services like movie ticketing; m-commerce, etc., will be the focus.” Now this is why we selected JiGrahak. We found it having an interesting business model.