October 2007
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Tourism Finance Plans $100 Million Fund

Tourism Finance Corp. of India, which has funded the world's top-rated spa, plans to sell shares and set up a $100 million private equity fund to buy stakes in hotels catering to domestic travelers, the chairman said. The money for the seven-year fund will be raised from banks and high-net-worth individuals, Archana Capoor, chairman and managing director, said in an interview in New Delhi, where the company is based. Tourism Finance plans to sell new shares to select investors to more than double its equity capital. A doubling in India's middle class, estimated at 50 million by McKinsey & Co., has in the past decade spurred demand for hotels and resorts, driving an almost threefold rise in Tourism Finance's shares this year. ITC Ltd., the Indian partner of Starwood Hotels & Resorts Worldwide Inc., is expanding its brand of cheaper lodgings to 100 to tap demand in smaller towns. “The future growth is not in the eight big cities, the growth is in the smaller towns,'' Capoor said yesterday. “If someone wants to set up a chain of hotels, it's one of the best models. You can't have all your eggs in one basket.'' [...]

Sabre Capital in talks to acquire DBS Chola

Sabre Capital Worldwide, backed by Singapore's Temasek Holdings, is in talks with Cholamandalam DBS Finance Ltd to buy the latter's fund firm, the Economic Times said quoting unamed sources on Thursday. The deal to acquire DBS Cholamandalam Asset Management was likely to be worth around 4 billion rupees, the paper said, adding a few other investors were also in the fray. Sabre Capital, founded by former Standard Chartered chief executive Rana Talwar, and Fullerton Fund Management, a unit of Temasek, jointly own Lotus India Asset Management which managed 64 billion rupees at September-end. If the deal goes through, the 38-billion-rupee DBS Cholamandalam Asset Management could be marged with Lotus mutual, the report said quoting sources. Spokesmen at both fund houses could not be reached for comment immediately. (Reuters) [...]

Lupin acquires Japanese drug-maker

India's pharmaceutical major Lupin Ltd on Wednesday said it had acquired a majority stake in Japan-based generic drug company Kyowa Pharmaceutical Industry for an undisclosed amount, news reports said. “This is a very significant part of our strategy to tap leading global markets. It establishes a beachhead in the second largest pharmaceutical market in the world,” Lupin Chairman Desh Bandhu Gupta was quoted as saying by the PTI news agency. Lupin did not give any financial details, but CNBC-TV 18 network said the company paid 60 million dollars for the buy-out. Kyowa has strengths in product development, manufacturing and marketing of its products in Japan. The product range of the company varies from psychiatry to cardiovascular and digestive portfolio, and comes under the brand name Amel. [...]

IDFC arm to raise $700 million

The infrastructure funding story is getting better and better. After raising $192 million and $440 million for its first and second funds respectively, IDFC Private Equity, the PE arm and wholly owned subsidiary of Infrastructure and Development Finance Corporation (IDFC), is expected to raise $700 million for its third fund. According to industry information, the company is expected to take a call on the size of its third fund by the end of December 2007, when 75 per cent of its second fund will be committed. A spokesperson could not be contacted for official comments. IDFC PE was set up in 2002 and in a span of five years has entrenched itself in the PE sector by funding notable deals such as Manipal Group’s education and healthcare expansion, Gujarat Pipavav Port, GMR Infrastructure besides Hotel Leelaventure. Industry information further indicate that global Fund of Funds as Thomas Weisel is expected to have shown further interest in the third fund being planned by IDFC PE. In addition to this, NEA Ventures, an existing investor is also expected to come back. [...]

Advent buys stake in MF registrar for $90 million

Making its debut in India, the US-based private equity firm Advent International has invested $90 million in Chennai-based mutual fund registrar Computer Age Management Services (Cams). Advent picked up a minority stake in the company from Housing Development Finance Corporation (HDFC). Sources said the buyout and growth equity fund, which made the investment out of its $12 billion global capital pool, acquired the shares in the unlisted Indian registrar through a combination of primary (new share issuance) and secondary (stake held by HDFC) shares. Cams, a leading registrar and transfer agent for mutual funds industry, presently enjoys a 60 per cent market share in the mutual fund market. [...]

Standard Chartered PE puts 16% of Asia corpus in India

Singapore-based Standard Chartered Private Equity Advisory (India) Pvt. Ltd (SCPE) has deployed in India $115 million (Rs452 crore), or 16%, of the $700 million that it has spent from its current $1 billion pan-Asia fund. The amount invested in India excludes one undisclosed deal. The bank’s total investment in India, including from a $100 million local fund (the erstwhile Merlion India Fund in collaboration with Temasek Holdings Advisors Pvt. Ltd), stands at $222 million in five years. So far, the firm has invested $700 million of the pan-Asia fund, raised in 2002, across the region. Standard Chartered’s Mumbai-based private equity arm has been investing in the country since 2002, looking for companies that exploit India’s low-cost arbitrage, the growing domestic consumption and infrastructure. The India team was based in Singapore until 2005, when Nainesh Jaisingh, managing director, SCPE India, brought the team to Mumbai because the increasing competition required a local presence. Since then, SCPE has created a five-person team in India and done five deals from the pan-Asia fund. The most recent and largest disclosed deal closed last week: $50 million into genset manufacturer and power solutions provider Powerica Ltd. The firm has done three deals, totalling $107 million—ABG Shipyard Ltd, Sutherland Global Services and Punj Lloyd Ltd—from the erstwhile Merlion India Fund. The fund came up mid-2003 and was absorbed into SCPE’s operations in 2005. [...]

PFC in talks with PE players for fund recast

Public sector Power Finance Corp. (PFC) is in talks with several US-based private equity players as it looks to recast the India Power Fund it floated in 2004 to invest in power projects. A senior PFC official, who did not wish to be named, as he is not authorized to speak on the subject, said the company was talking to funds such as Blackstone and Goldman Sachs among 8-10 others. The corporation spearheads the government’s investments in power projects. Launched in 2004, the original India Power Fund had an initial corpus of Rs200 crore and was expected to eventually expand to Rs7,000 crore. However, as not too many projects took off between 2004 and 2006, the fund has languished somewhat. The official said, “initially, we will be setting up a company to advise hydro and thermal power projects. And once all the stakeholders have decided what kind of investments are required, then we will decide on the fund size. At that time we will also bring in the domestic players.” PFC chairman V.K. Garg confirmed the company was talking to private equity players to raise an equity fund but declined to name any. He clarified the fund would be pure play equity investor in power projects that are set up during the 11th and 12th Plan periods. Under the 11th Plan, around 76,000MW of power generation projects are planned, which would require a mammoth investment of Rs10 trillion. ( Livemint) [...]

RBI calls for curbs on PN, PE inflows

The surge in capital inflows over the past few weeks, especially through the portfolio route, has prompted the central bank to move to discourage such flows. RBI has called for a ban on incremental or fresh issuance of participatory notes (PNs) to overseas investors by foreign institutional investors (FIIs), tightening of due diligence norms for issuance of PNs, and some controls on other forms of capital such as private equity, government sources said. However, they said the government may not favour such drastic measures. Instead, the government and capital markets regulator Sebi are working on a framework that will make investing in Indian stocks through PNs more expensive. The broad objective is to ensure that all investors come in a transparent way. In the next few weeks, Sebi is expected to unveil the names of some big-ticket foreign investors who until now had bought into Indian stocks through PNs, but are now set to register directly as FIIs and set up compliance offices here. Sebi sources said these are investors whose portfolios run into billions of dollars. [...]

Policy unease over rising PE inflows

Last year, at the height of the buyout binge by private equity funds, German regulators waded into those managing such funds, dubbing them as a bunch of locusts. Some reckon that they are barbarians. RBI governor YV Reddy is not given to such outbursts. Yet on Monday, three weeks in the run-up to the monetary policy review — a silent period — he made a pointed reference to the role of PE in India. According to Mr Reddy, a significant component of foreign direct investment (FDI) is in the nature of PE or acquisitions of existing firms. What he meant was that foreign money was being poured not into greenfield or new ventures, which is what policymakers would expect out of FDI which ranks right on top of the hierarchy of preferred investment flows. Although there is no outrage like in the West here, given the incipient nature of PE investment in the country, the figures reflect the concern of India’s financial regulators. In FY07, close to 30% of the total FDI inflows were reckoned to be PE flows through just transfer of shares by locals to foreign funds. In the first three months of this fiscal, estimates are that more than $1 billion has again come into the country through this route. By the end of this fiscal, estimates are that PE flows could top the $13-billion mark. [...]