More PE funds flocked to India compared to China in 2007. For the first time, China PE investments were in the range of $12.8bn; nearly 34% less than the investments in India at $19.5bn. This was a huge change from 2006, when China received $12.9bn worth of PE investments, nearly 70% more than the $7.6bn received by India. However, there was a qualitative difference in the way funds were deployed in China compared to India. China's traditional Manufacturing & Infrastructure sectors attracted $8.3bn, constituting 65% of total funds invested; compared to $6.2bn constituting 32% of the total for India in 2007, according to a Four-S Services report . Interestingly, the core sectors were the main areas of PE interest. Infrastructure (Engineering & Construction) sector accounted for a lion's share of the deals in 2007 with nearly $4.0bn worth of investments (20.5% of total PE/VC investments announced during the Year). As core development continues to be a high priority, Infrastructure is expected to be one of the fastest growing sectors in India, requiring huge investments worth $492bn over the next 5 years. The major growth driver within the Infrastructure sector was the Construction industry, accounting for 60.3% of the investments.   more »

Global and Indian venture capital firms are continuing to have faith in the India market unperturbed by the global economic uncertainties. While the US-based Mayfield Ventures is said to be in the process of raising $150 million, India's Gaja Capital Partners have initiated the process for a $200 million fund. The appetite to absorb these funds in India is growing given the fact that $3.3 billion was invested here across close to 100 deals during the first three months of 2008, showing a growth of 22 per cent over the corresponding period of 2007. "Despite the turmoil in the global financial markets, PE investments during this period registered a growth over the corresponding period in 2007 thanks to a spurt in deals in the ‘late stage' segment which accounted for 60 per cent of the amount invested," noted Arun Natarajan, Founder & CEO of Venture Intelligence, a venture research firm. "While the steep decline in public markets is leading Indian companies to adopt a wait-and-watch stance vis-à-vis their fund-raising plans, in the medium term, the correction is likely to favour private equity emerging as an attractive alternative," he added.   more »

The IPO route of exit by a private equity (PE) player is seen as the most efficient way of exit, but in India, irrespective of a vibrant primary market, the number of exits through the IPO route is less compared to other exit options available. Data from Venture Intelligence shows in 2007, PE firms exited in 65 Companies, of which only 16 were through IPOs, while 2006 saw 19 exits through the IPO route from a total of 37 PE exits. The year 2005 saw 42 exits, but IPOs’ share was just 17. Experts attribute this to flexibility available to PE firms to exit through more lucrative routes than an IPO. Dhanraj Bhagat, partner, specialist advisory services, Grant Thornton, said, “While IPO exits may be less, many exited through strategic sales via the exchange after listing. They would have expected better returns post-listing. Also in the past few years, many Companies preferred strategic sales i.e. sale to financial investors, competition & joint venture partners, which is not possible in an IPO. Also, a presence of quality investors like PEs makes an issue more saleable. Many Companies in the past years opted to divest some stake during the IPO and some, post-listing.” Though PE firms exited 170 Companies since 2004, only 58 cases, or 34%, were through IPOs; the others took the M&A route or sold back shares to the promoters. The year 2007 saw 95 maiden share offers, while 2006 and 2005 saw 73 and 50 such offers, respectively.   more »

With the Indian real estate market slated to grow 35-40 per cent in value terms over the next two years, private equity (PE) players are lining up significant investments in the segment. Led by Blackstone and the PE arm of Deutsche Bank, a host of players -including Red Fort Capital Advisors, Starwood Capital and Walton Street - are expected to invest close to US$ 12 billion combined in homes, offices, townships, hotels and other projects. Red Fort Capital is preparing to invest Rs 3,500 crore, mainly on budget hotels, while Starwood is committing Rs 800 crore to Chennai-based Shriram Properties. Deutsche Bank will help Suncity Projects raise Rs 1,500 crore, and the Blackstone Group has said it would invest around US$ 18 million (around Rs 73 crore) in Synergy Property Development Services. Kuldeep Chawla, director, Red Fort Capital, said, "We will focus on developing a chain of budget hotels by associating with local developers. About 400 budget hotels with 60,000 hotel rooms are expected to come up in India. We will look at investing in a diversified portfolio of properties." In 2006, markets regulator SEBI opened up the real estate market to PE investments. The first year was a learning period. "The following year saw a real correction in the market, with large incremental growth rather than dramatic growth, where stock market money went into special purpose vehicle-level investments," says Arun Natarajan, founder & CEO, Venture Intelligence India, which tracks the PE segment.   more »

Venture investment in India had a relatively quiet first quarter — VCs invested $99 million in 16 deals, according to a new report from Dow Jones VentureSource. That’s an 80 percent drop from the same period last year, but that plummet tells us more about the investment spike in early 2007 than whether the recent quarter was particularly terrible. It’s also a 27 percent drop from the fourth quarter of 2007. (Yeah, last year was a record-breaking time for venture investment in India.) Interestingly, the amount of deals held relatively steady — it’s the deal size that shrank. That’s pretty much the exact opposite of what happened in China (the other country seen as the standard-bearer in overseas venture growth), where the number of deals fell, but the amount of money per deal grew, causing a 46 percent year-over-year boost. How big is the difference? In India, the median deal size was $4.1 million; in China, it was $10 million. The United States fell in between, with a median size of $7.1 million.   more »

In an attempt to bridge the gap between investors and technology companies, Yen Expo Pvt Ltd for the first time, is organizing an unique event for technology companies, Bangalore Technology Equity Fair (BTEF) 2008. The event will be held on 27th June 2008 in Sigma Room, Chancery Pavilion, Bangalore. BTEF 2008 will provide a unique forum for technology companies to access the Private Equity market. This unique event will allow technology companies seeking equity funding to make presentations to and meet directly with Private Equity & Venture Capital investors. Yen Expo will screen and shortlist 10 high quality technology companies seeking capital for growth. Yen Expo will then work closely with the short-listed companies to make them investor ready prior to the event.   more »

Non-resident Indians are increasingly looking at private equity (PE) funds as an alternative investment avenue. While the PE space has traditionally been the domain of institutional investors, now there is an increasing trend of high networth NRIs investing in such funds, said Mr Sonjoy Chaterjee, Executive Director, ICICI Bank. Mr Chaterjee, who is in charge of the bank’s International Banking, said that for NRI investors, this gives an opportunity of indirectly participating in growing sectors such as real estate and infrastructure. Mr Chaterjee told Business Line that the bank has successfully raised money from NRI investors in West Asia and the UK for two of ICICI Venture’s funds, India Real Estate Fund and the India Advantage Fund. Some other funds that attracted interest from NRI investors were the ones launched by JM Financial and the healthcare fund launched by Ajay Piramal’s group.   more »

Despite a meltdown in India’s equity markets, fresh capital continues to pour into venture and private equity funds with active plans for the country. Such firms have raised more than $1 billion (Rs4,260 crore today) in new funds in the first four months of this year alone, which is about half the total amount raised in 2007. Fund-raising, which had slowed down in the first half of 2007, is gathering momentum again. At its current rate, it may well match the record level of 2006, when private equity (PE) returned in a big way for the first time since the dotcom bust, raising $2.8 billion. After spending the last two years deploying funds, several venture capital (VC) and PE players are now raising fresh capital, to start off the next cycle of investments. “About 60-70% of the money raised is put to work in the first two-three years, so all those (who raised funds around 2006) will come back to fund-raising this year,” says Srini Vudayagiri, managing director, Lightspeed Venture Partners, which closed an $800 million global fund last fortnight.   more »

According to a report by PricewaterhouseCoopers and Federation of Indian Chambers of Commerce and Industry (FICCI) the E&M industry recorded a growth of 17% over the previous year, against the projection of 15%. Equity majors like Blackstone, Temasek, Warburg Pincus, Goldman Sachs, T Rowe Price, Lehman, DE Shaw are key investors in the sector. "Given this growth, it may be the right time for such funds. Many of these funds cover a wide range of areas within the entertainment arena such as retail, shopping malls, mobile content providers lifestyle beyond the conventional media like television, film, print advertising and multiplex,'' said Jaideep Ghosh, director, KPMG Advisory Services. Asset management companies (AMCs) do have thematic funds focusing on select sectors. Mutual funds on entertainment industry are relatively new to India. Sundaram BNP Paribas Mutual and Reliance Mutual Fund have launched funds that are focused on entertainment and media industry. Religare with Vistaar Entertainment Ventures recently has launched, a film fund aimed at financing films in the country and overseas. In the first round it will have a corpus of Rs 200 crore. Pyramid Saimira is also said to be launching a similar fund in the country.   more »

The skyrocketing global crude oil prices may have fuelled inflation across the world, with India being no exception. But it has also brought good news for the country by way of private equity participation. “Investors from the Middle East are taking keen interest in India’s private equity domain with a timeframe of 7-8 years to garner big returns, about which they are quite confident. According to Sharia Law, they will be investing in sectors like real estate, health care, retailing and education,” said Yen Management Consultant Managing Director and Chief Executive Officer Sunil Shirole, who met many such investors there recently. Many sovereign fund houses in Oman, Abu Dhabi, Qatar, Dubai, each with a corpus of Rs 4,000-10,000 crore, are scouting for Indian private companies to invest in. “They are trying to connect with the right kind of people to make inroads in India,” according to an industry insider, who declined to give names to safeguard his business interest. Investment Dar, an Islamic investment bank in Bahrain with a target investment of Rs 6,000 crore, has appointed Mumbai-based Yen Consultant to scout suitable investment opportunities here.   more »