7Avenues News: Notes From Recent Investor Meets

From: Shankar AVSB

Sent: Monday, 17 November 2008 19:40

To: 7Avenues Team

Subject: Notes From Recent Investor Meets

Hello Folks,

As you are aware, over the last 2 months, we had 7Avenues Investor Meets in different cities: Mumbai, Pune, Delhi, Hyderabad, Bangalore, and London. Through the events, we connected with 30+ 7Avenues Investors, and 30+ interested new Investors. While the 'formal meetings' happened at the cafes, 'informal meetings' happened at various airports, Marine Drive in Mumbai, and London Tube Stations -- we met interested people wherever we could, sharing information and thoughts.

In the coming weeks and months, more such meetings are planned at Chennai, Singapore, Perth, New York, Atlanta, Chicago, Minneapolis, Seattle and SF Bay Area.

Following are the key questions we anwered in the recent investor meets:

1. How many Investors are there today?

We have a global network of current/interested investors -- professionals and entrepreneurs -- from various industries. Today we are150+ member-investors worldwide, with common investment goals - each member investing Rs 1 to 20 Lakh as equity. We will continue to add new members selectively and cross 1000+ members by 2010, and grow further. From 2009, we will be open to investors from worldwide.

2. What are the growth plans for 7Avenues?

As a group, we have the industry insights and business experience to build successful ventures by investing capital and management expertise. We are in our ventures for the long-term, looking at 20 year time frame, and we will go for big achievements. Our current ventures are offering good potential for growth and returns. We want 7Avenues to own a portfolio of both mature profitable businesses and new ventures.

3. What are your best assets and how do you plan to leverage them?

Answer: Following are our major assets, and we are constantly building up on them for our growth.

Worldwide network of top quality stakeholders (for new businesses/ promotion)
Intellectual Property (on how to run and scale up large businesses, handle specific business issues, new ventures)
Talented & Dedicated Team (that's putting 100% effort in the ventures and making an impact on business KPIs)
Proven Business Model (which includes our set-up and infrastruture and we now need to replicate for more revenues, lines of business, Internet channel, New Stores, etc)
Brand (we are slowly but surely developing the brand/positioning we want for ourselves, which is: dependable investment team with top quality performance; we're still in the early days of our PE model, and our market visibility has probably increased 10x in the last one year alone; we plan to spend more effort in reaching out to more people in 2009)

4. Would you consider new ventures? What's the process for it?

Answer: Yes. Though we are not forced to seek new options for deploying our capital and teams, we are open to new opportunities in new sectors, wherever we have a critical mass of talent that commits to executing the business opportunities. Regarding the process, we have a dedicated team of 20+ investors -- from across the world -- to evaluate new ventures, and any new venture where we have to invest capital above a minimum threshold, should successfully pass through our New Ventures team. In that sense, a services business with no capital costs, that can leverage the extended business network of 7Avenues to get customers, has an advantage.

5. What are the growth plans for the portfolio companies?

Answer: Each venture has its plan and team, and will continue to grow as per its plan, and be a successful and profitable business. We may sell some of equity from the portfolio company to Financial Institutions, or sell it to the public through an IPO, etc. We will see what option gives best value to us. It should noted here that we don't plan to exit our ventures and 'sell-out'.

Our first and major portfolio company, 7to9 Retail has grown 300% over last two years with current montly sales increasing month-on-month, and we are aiming to touch annualized sales of Rs 180 million at the end of FY 2008.
Our food supply chain venture, Big India Farms established its ground level team and presence in difficult areas. We are now executing projects for Vegetable supplies (direct from farm), Food processing units, and Horticulture, and we are aiming to touch annualized sales of Rs 60 million at the end of FY 2008. More updates are in the answers below.
We have made investments in our ventures because they are fundamental businesses whose value will appreciate along with India's economic growth. We aim to operate them with world-class efficiency and build them as our long-term business assets. In the coming 4-5 years (which is still near-term when we think of our 20+ year horizon), we should be in a comfortable position to sell partial equity in our ventures, if we choose to do so. It is possible we may not sell any equity at all from our ventures, if we are able to raise all the necessary funds through 7Avenues because it won't make sense for us to dilute/sell equity from our profitbale businesses. If funds additional funds are required for capex, we will find ways to get them.

6. How do we plan to offer Returns to our investors?

Answer: Each of our investors is dear to us and we are committed to making 7Avenues their best investment experience. We plan to use a combination of Dividends and Share buybacks to offer returns to our investors. As per our Investment charter, we expect our investors to give us at least 5 years to produce returns for them because almost all our investment is organized retail and supply chain, which need time to mature. With the current business growth trends, this will be possible from around year 2012 onwards by when our businesses should start generating cash for us be able to offer returns to our investors.

7. What is the impact on financial crunch and the bad news from other retailers on retail plans?

Answer: Like a typical Warren Buffet plan, we had not expanded madly to chase unrealistic valuations. Our plans were made keeping ground realities in mind and to get best from our invested money. Irrespective of 2- 3 year slowdown, Retail in India is a very attractive business for those who plan long term and so we are still expanding and planning better ROIs as we mature. Regarding those retailers who are not doing well, market reports have suggested their systems and processes have not kept pace with the pace of new store openings, which can lead to very high opex costs. Howerver, those who have grown cautiously over the last couple of years, and focused on building systems and processes to manage the supply chain and inventory - they are doing fine, and we are in this group.

8. What are the updates on the new venture 7iDigital?

Answer: The venture is still in the warm-up mode, making a few sales without any money spent on promotion. We have tested the end to end supply capability with one supplier, and want to do that with at least 2 more suppliers that we have identified. One of them is in India and the other in the US for North American markets (if we can line-up a deal there because that market is quite crowded). Our primary focus remains Indian market where there is a solid demand for laptops under Rs20,000. We have identified one strategy to make this possible, and will be working on it. We are also looking to start offering in-demand digital products through the website (7iDigital.com), as we need to expand our portfolio. For this, we are currently looking for: Laptops/ Notebooks/Netbooks, Digital Cameras, USB drives. We would also like to share that so far, 7iDigital has taken only under $250 as investment, which is mainly for sample costs. So our drop-ship model will continue to operate with a super-lean inventory.

9. What are the updates on MyOrbit?

Answer: The new company website went live in October: MyOrbitOnline.com – it showcases our sites and services and testimonials in one place. From October, we started our Business Leads Generation service, which is a high margin area, and all the preparation we did in the recent months will become applicable now. Overall, there are 40+ websites in MyOrbit site-network with 5 more work-in-progress, with appreciating valuation every quarter because they generate business leads and some revenue in different levels. MyOrbit.biz (advanced business directory) now has 15 Beta clients worldwide. And of course MyOrbit.tv remains our anchor site with its blog and business channels.

10. What are your focus areas for 2009?

Answer: There are many areas, and each of our team members is leading a front, so we will have a lot of news in 2009.

We are excited about the launch of our financial services line of business, which will offer retail financial products to our retail customers. And will also launch our managed accounts, wherein our customers can exit anytime they want, because our managed fund would have invested only in listed securities.
We will also go-live with our pharmacy service for our retail customers. We have already conducted a successful pilot for it, and have got the necessary set-up in place.
Each of our ventures will run profitably. For example, MyOrbit is profitable on monthly basis, and that's because it's an online business with much lower capex and opex compared to 7to9 Retail and or Big India Farms, but we are close to achieving opex profitability in these ventures, and we hope to share good news with you on this front in Q1 2009.
We want to reach out to more like-minded investors worldwide, and will put much more effort in that direction, with the support of our Investors team, which has some of the best people that we know. Currently we are connecting with about 200 interested people worldwide and it feels great to see their interest in 7Avenues.

So overall, lots of projects are happening at 7Avenues, and we are confident of building profitbale business assets for our member-investors.

If you are not a member, and are interested to join, please feel free to connect with us so that we can share more details with you and then me or one my colleagues will speak with you.

And if you have any questions that aren't answered above, please do ask them, and we will be happy to answer them for you. Thanks.

Best Wishes,

Shankar AVSB