BackThe online space in India seems to be overheated: Raju Narisetti
News Corp's senior vice-president talks about the company's India strategy and pitfalls of the online explosion
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News Corp., the media and publishing firm owned by Rupert Murdoch, is betting big on India’s digital landscape. In May, the company acquired media and publishing firm VCCircle Network and financial advisory firm BigDecisions, and invested over $30 million in real estate firm PropTiger. In an interview, News Corp. senior vice-president Raju Narisetti, the founding editor of Mint, talks about the company’s India strategy and its expectations from its investments. Edited excerpts:
What is News Corp’s strategy in India and what is it that you are trying to build here with the kind of acquisitions you have made?
It is not a strategy that is unique to India. Most of our businesses are concentrated in North America, Australia and Europe, and as we look to expand here and elsewhere, some of the macro indicators in India fit in with our own aspirations, essentially around digital and mobile, and how a large number of Indians are likely to live their lives on mobile phones. India’s geographical ecosystem has always made sense.
The old News Corp., as you know, has always had a strong presence in India through Star and when the company split, the new News Corp. did have a couple of businesses here—Dow Jones and The Wall Street Journal. We have a pretty robust HarperCollins India publishing business. But there seem to be opportunities in other areas that News Corp. has been focusing on over the years, and real estate is a good example.
We realized that a lot of trends that have played out in the West are starting to happen here. That was the reason behind investing in PropTiger.
There are primarily two models in real estate. One is around brokers and realtors, essentially offering them a listing business like Housing.com, Magicbricks or 99acres do. But the challenge there is that Indian brokers are not regulated, there is no licensing. So you are not necessarily solving a consumer problem. We decided to look at other models and given that the demand for new homes in India is going to be fairly persistent over the next couple of decades, we got interested in the companies that are doing transactions rather than just listing. That led us to PropTiger.
VCCircle, our other investment, has been a bit of a pioneer in India. It’s just 10 years old, but it’s one of the first and one of the only subscription-led news models or data models in India. That was a natural fit for us simply because The Wall Street Journal has been a paid product for close to 17-18 years now and a lot of offerings in the News Corp. news space are subscription-based products.
For BigDecisions, the thinking was that if a lot Indians are going to make decisions for their lives using technology, mobile and digital, there isn’t really anybody giving them impartial information.
It’s natural of people to think of News Corp. and think only of news brands. We do have a lot of them, but in India we have not looked at any news businesses simply because of the investment and regulatory environment. And that has remained unchanged. Hence most of our investments have been around data and digital real estate.
If the regulatory environment changes, and there has been talk of increasing foreign direct investment in news, would the company consider looking at this space?
I think there have been talks of changing that for nearly two decades now and the government has either formed committees or cabinet committees or various groups. We haven’t seen any change in that stance at all. But if the law changes…we as a company in the news business would not hesitate to look at it.
Would you like a 49% cap or would you want the sector to open up more?
I think it is less about the ownership cap; it’s really about what can we bring to the Indian market, to the audience and how we can run an effective news businesses in a place like India.
Is there a pattern to the investments you have made in India?
I think you will spot a pattern if you see what News Corp. has been doing globally. There isn’t something different we are doing here. Our investments in the last two years in Realtor.com, Storyful, etc. have been of digital data information, publishing of products, which are not really news brands.
The thread here could be that we are looking at businesses which are primarily digital and would hopefully have multiple revenue streams as opposed to just advertising-based or having a single revenue stream.
News Corp. is not a financial investor, we are not looking to put money into something just for profit, but we tend to be strategic. So we are looking at adjacent opportunities rather than go alternate and invest in e-commerce businesses or in a mobile wallet.
What are your expectations from each of these deals?
Nothing, simply because this is as much a bet on India as it is on these entrepreneurs. It’s a fairly long-term view for us.
Clearly, anyone looking at the Indian real estate market will think it to be crazy to be in it right now because there is a significant oversupply and the demand has been very weak. But what we tend to look at is that every year Indians need about 4-5 million homes. In the short term it looks like there isn’t much happening, but the demand isn’t going away and if you execute well, don’t spend all your money on billboards and ad campaigns, and are focused on revenue, execution and solving customer issues, then this business will pay off in the long term.
VCCircle has been around for a decade, profitable and does fairly well. I think they have the opportunities to grow that business and give it the resources to expand.
Are there any other sectors that might be of interest to News Corp. in India?
Yes and No. By that I mean I don’t have a pressure of spending a specific amount or a specified number of deals to do, like the private equity firms or hedge funds have. I don’t have that kind of pressure, so I can be pretty opportunistic. Every investment we have done, and we have done three over the last six months, have been things where we have had familiarity with the founders or the business models and it has felt like it was the right thing to do. Honestly, because we are talking about laying down adjacent bets, you can be pretty sure we won’t be doing something which does not gel with News Corp.’s strategy globally.
Is there a corpus specifically for India? Also, what is the process of screening the deals?
There is no fund set aside for India. The way the process works is that I am responsible for identifying things and we are a two-three member team that does the initial vetting, and if it makes sense we continue our conversation. We tend to be not very bureaucratic about it so that we can make relatively quick decisions. The biggest question I have to answer in my head is why News Corp.? And it can’t be just because we have the money.
There is no amount certified. It’s up to me to identify opportunities and if it makes sense we have the ability to do big ones, and we don’t even mind doing little ones.
Spending News Corp. money wisely is not as easy as it seems and what you don’t want to do is throw money at everything that comes your way. It was since last June that we started looking at India and focusing on it. I have visited India probably eight times in the past 12 months.
You meet people in a couple of ways…one is people reach out to us quite a bit. In a week I get up to three-five different incoming pitches. But the ecosystem is fairly well defined in terms of the cities in which there are companies to look at and because the spaces are somewhat defined in my head, it’s easy to track some of them. We have strong relations with funds globally and through PropTiger I have made strong relations with Accel Partners and SAIF Partners, and they are often willing to send some of these pitches my way. In that sense it is not that very hard to tap into the ecosystem.
What do you think about the valuations in the online space in India? Are these justified?
The answer depends on who you ask, again, simply, because we are not a financial investor. The fundamental value matters than the paper value and it seems to be a bit overheated. There are a lot of entrepreneurs in India who think that everything they do will be the next Alibaba and there are not many Alibaba(s) floating around.
We also see a lot of me-too business models. So there’s hot money chasing few good ideas in that sense. So that feels overheated, but that’s a global phenomenon. I don’t think India particularly stands out. It is just that when the fourth or fifth company gets funded in the same space, you tend to wonder how that is possible. But I guess investors are betting thinking that at least one of them will turn out to be a unicorn.
We don’t have the narrative simply because we are not looking to maximize short-term return on one or two of the investments. We just think of them as businesses that we would continue to build over the next one-two decades.
It also means that the kind of entrepreneurs that I look for are different. We want entrepreneurs who want to build the business in long term, rather than cash out.
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