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What Narayana Murthy thinks of India’s startup scene

Batting for India’s fledgling ecommerce companies, Infosys co-founder NR Narayana Murthy said that the opportunity for such companies was huge as “the ability to buy something at a click is irresistible”.

But he stayed away from commenting on premium valuations most ecommerce firms have commanded of late, and which have generated much debate among observers given their high cash burn and lack of profits.

“Valuations are something venture capitalists [who invest] have to decide but the business is here to stay,” he told CNBC-TV18’s Shereen Bhan in an interview.

Murthy’s own venture capital firm, Catamaran, is looking at and has made investments in a number of young startup s, in the healthcare and education fields.

The former Infosys CEO was also recently appointed as head of a panel that will looking into easing fund raising norms for startup s.

“We have some work to do in that area. We are meeting on June 9 and will look into how policies can be eased for startup s,” he said.

Below is the transcript of the interview on CNBC-TV18.

Q: The world has changed for you, for India and for Infosys since 2003. Do you believe it is easier being an entrepreneur in India today?

A: Absolutely, there is no doubt about it because there are that many more opportunities but then there are more competition too because today you compete at a global level because the opportunity is on the global level. So, while on the one hand there are more opportunities at the same time it has become more difficult because you have got global competitors, competitors from every country in the world.

Q: Speaking of competition and speaking of where we could possibly see the next Infosys and the next TCSs in India, eCommerce is the big buzzword today, do you believe that Indian IT products, services companies could be the next innovators in that sense could be the next global play?

A: I think so, already these companies are at a fairly large level in the sense and most of them are between USD 8-12 billion. So they have lots of money to invest in innovation, they have great ideas, so they could certainly do that but at the same time the current entrepreneur s in eCommerce have done pretty well. They have attracted global capital, they have made their enterprises attractive to a wide number of well respected Indian industrialists too. So overall it is good for them and good for India.

Q: Are you a believer in the Indian e-commerce story? I know Catamaran has invested in select e-commerce ventures but do you really believe in the Indian e-commerce story? There is a lot of question marks on the valuation, on the road ahead as far as profitability is concerned.

A: I am a believer in e-commerce simply because India is large country and therefore ability to buy whatever you want sitting at your laptop or tablet is an irresistible option. Therefore e-commerce is here to stay, e-commerce will succeed in India but valuations or something that the venture capitalists has to decide so therefore I don’t want to comment on that but certainly e-commerce is here to stay, e-commerce has great opportunity in India.

Q: Speaking of the start-up story, SEBI appointed you as the chairperson of the committee to look at what it would actually take to get start-up s to list in India, to make it easier. Do you believe that enough work has actually been done and also from a government point of view, the previous Budget spoke about a fund being set up but no follow through action in that sense. Do you believe that in terms of getting the ecosystem right, enough has gone into it?

A: No, we have some work to do and that is precisely the reason why Securities and Exchange Board of India (SEBI) has appointed our committee and we are meeting sometime on 9 June and certainly we will discuss, debate and see how alternate investment policies will have to be updated.

Q: What are the big impediments right now that need to be addressed and need to be corrected?

A: It is just to reduce friction to venture capitalists, friction to private equity people, so there are many of those, many dimensions and certainly once we have had a discussion, once there is unanimity, once the committee has decided, the SEBI spokesperson will be the right person to talk about it.

Q: Do you really see start-up s listing in India any time soon, do you believe that as and when your committee does put its recommendations together and of course Sebi has already put out some guidelines, do you believe that we are in the process of actually seeing start-up s listing in India?

A: It is too premature for me to comment on that because we haven’t had any discussions. I am not an expert in that area, I have to listen to experts, we have to discuss and debate and then probably there would be an unanimity of opinion. However at this stage I would be jumping the gun if I were to give out any of my uneducated opinion.

Q: From a government point of view what is it that you would like to actually see the government do because government fund isn’t really the answer. Providing a more facilitative environment is the answer. What is it that you would like to see the government specifically address?

A: I would like to make India the best in terms of private equity investors as well as venture capitalists as well as crowd funding paradigms are concerned. If we can move in that direction and if we can work hard to adopt some of the best practises that have already succeeded in more developed markets and put them in place I would be very happy.

Q: Do you think a government fund is the right approach or do you think the government ought to focus on some of the other stuff?

A: I am a great believer in open markets, I am a great believer in competition, I am a great believer in great ideas being competed for by several people. So, if government fund is one of those as long as it is free and everybody can compete with it, why not?

Q: What are the sort of start-up stories that are looking exciting to you, what are the sort of companies that you would like to mentor, invest in? You talked about e-commerce but beyond that what is exciting you when you look at start-up universe today?

A: We are already looking at healthcare in a model where the old concept of the GPA, coming to your house, helping people who are not well, that is being adopted in a different context.

Q: So, it is not telemedicine exactly?

A: It is not telemedicine, it is brick and mortar really but addressing the needs of a small community. We have looked at and invested in people who are providing a common platform for students who are taking their CBSE and ISC examinations as well as competing for competitive examinations.

Q: So it is like a preparatory course?

A: Preparatory plus passing and doing well in their ISC as well as their CBSE exams, both.

Q: So, healthcare and education, those are the two areas that you are focusing on. What else?

A: There are many others. We have also financed a soft drinks company…

Q: [Interrupts] Paper Boat.

A: Absolutely. You have probably sipped it.

Q: They have been on my show on Young Turks and we have been tracking that story.

A: Yes, I remember that. So, there are many of those. We are also working with a very highly qualified chemical engineer who is working out a new model for reducing the costs of various tests for patients. So, there are many areas where we are working, in healthcare, education, etc.

Q: But, only Indian start-up s? Or are you also looking at exciting opportunities from around the world.

A: At this point of time, only Indian start ups, but we are quite hoping to looking at a global.

Q: But do you really see the Paper Boat kind of stories. People who are not in the technology business. Do you see more of those sort of stories given the kind of regulatory concerns, given the ease of doing business constraints in India or do you believe that the Paper Boats of the world are an exception.

A: No, my view is that India needs modernisation in every area. India needs improvement in production in every area, food, healthcare, agriculture, transportation, urban management, you name it, in every area. Therefore, as long as an entrepreneur comes out with an idea, who has differentiated value proposition in that field, is compelling to us, certainly we will look at it.

We are not limited to just one area or another. But certainly having come from a background of technology, anything that leverages the power of technology to provide better productivity, to provide better quality products and cheaper products to the market is welcome.

Q: Speaking of technology, we are seeing the various disruptions that are currently underway. What excites you the most as far as the changes that we are seeing in technology is concerned? Vishal Sikka says automation has not been understood fully, especially as far as the Indian market is concerned. What are the things that look exciting to you from a technology and a disruption perspective?

A: Clearly, Internet of Things because it is what will make driverless cars, automatic machines, improvement of quality, robos in the surgery, all these. Internet of Things is the one real exciting area where you combine the power of mechanical engineering, aeronautics, civil engineering, you name whatever branch of engineering with the power of internet and thereby improve productivity, thereby bring automation, thereby improve cost of production.

Q: Do you see India playing a big role in that? Do you believe we have the capability and the skills?

A: We have the capability to learn new things pretty fast. That is our strength and therefore as long as we focus on those ideas, as long as we put our heart into it, I believe we will succeed.


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