With a bearish phase prevailing over stock markets, valuations of private equity (PE) investments have taken a beating. Certain PEs which had overestimated companies to enter at high values have seen a decline in valuations due to volatile capital market conditions. A compilation of how PE investments of 2007 compare with current mark-to-market (MTM) values shows that about 58% of the PIPE (private investments in public enterprises) deals of 2007 are in the negative territory. According to the research undertaken by SMC Investment Solutions & Services (May 2008), the only ray of hope is that overall till-date-returns on PIPE deals of 2007 (on volume basis) are still in the positive, although at a margal 8.3%, despite rough market conditions of 2008.   more »

In the wake of the recent Ranbaxy-Daiichi deal that took many by surprise, private equity (PE) firms are treading a more cautious path in their approach towards investments in the fast-growing Indian drug companies. The way the leading Indian drug firm, Ranbaxy Laboratories, was acquired by Japan's Daiichi Sankyo, has made them realise the vulnerable nature of the domestic pharmaceutical industry and the need for more preconditions to prevent the promoter from selling off his company soon after the investments are made. Though PE interest in the pharmaceutical sector is rather small compared to other sectors, about 20 PE firms had made small investments in the healthcare sector in 2007. The significant ones included Chryscapital's $24-million investment in Mankind Pharma, Avenue Capital putting in $17.91 million in Morepen Laboratories, and Rideback Capital investing about $5 million in Granules India. The Ranbaxy-Daiichi deal is expected to make PE firms review their positions on investments in acquisition-prone industries like pharmaceuticals. "PE companies invest in a company if they feel that its promoter can deliver goods. If the promoter changes, then its a different ball game.   more »

Private Equity investment in the real estate sector may go up as much as 15-20 per cent in the current fiscal to over $13 billion in the wake of acute crisis of funds plaguing the growth of the industry. "Private Equity players started investing in India's real estate space since 2005. The sector had received $2 billion private equity investment in 2005 which went up to $4.5 billion the next year and to a whopping $11 billion in 2007. This year, it should go up by 15-20 per cent," financial services firm Jones Lang LaSalle Meghraj's Chairman and Country Head Anuj Puri told PTI. There are mainly three preferred routes for developers to ensure funds for their projects - raising funds from capital markets, pre-sales funds from prospective buyers and loans and advances from banks and other financial institutions.   more »

Private equity as an asset class has been badly hit in the ongoing global financial crisis. But, there is no taking away from India, which has over the last few years emerged as a region of choice for a large number of overseas investors who want an exposure to this asset class. That said, the general risk aversion brought on by the credit crunch the world over may pave the way for a private equity investment structure that is not yet very popular in the country: fund of funds (FoF). Asieh Mansour, managing director and chief economist and strategist for RREEF Alternative Investments, the global alternative investment management business of Deutsche Bank said, "Across surveys that we've conducted, the message is clear that overseas investors have the Asian region, including India, on top of their radars, but would rather opt to invest via a fund of funds than maintain direct relationships with a 100 private equity funds that may be operating in the region."   more »

Private equity and venture capital investors are readying funds in excess of $2 billion (about Rs8,500 crore) to invest in India’s maritime infrastructure and logistics, as the country strengthens cargo handling facilities to meet rising demand for exports and imports. About 95% of India’s external trade by volume and 70% by value move by sea, but cargo handling and logistic costs are high because of deficient infrastructure and delays in shipments. “The sector is underdeveloped in terms of setting up of port capacities and related support infrastructure,” said Vipin Agarwal, assistant vice-president at Kotak Private Equity, part of the Kotak Mahindra Group. “As a result, the sector will witness lot of expansion activities.” The national maritime development programme, drafted by the shipping ministry, envisages an investment of Rs1 trillion to spruce up India’s maritime sector including ports, shipyards, marine logistics parks, inland container depots and related support services. Of this investment, 64% is expected to come from private firms.   more »

An increasing number of private equity (PE) firms are making a beeline for investing in the booming energy sector. These firms have made a total investment of $990 million (Rs 4,158 crore) during the first five months of 2008 in this sector compared to just two deals worth $45 (Rs 189 crore) million during the same period of 2007. The energy sector, especially power, has been witnessing a lot of interest from PE investors, said Arun Natarajan, chief executive officer (CEO), Venture Intelligence, a Chennai-based research service company focused on PE and venture capital activities. Some of the big deals between January and May 2008 include Farallon Capital, L N Mittal India and Internet Ventures' investment of $395 million in Indiabulls Power Services in February 2008. In the Konaseema Gas deal in May this year, IDFC Private Equity and Lehman Brothers invested $125 million and in the KLG Power deal, TPG Growth put in about $50 million in April.   more »

Contrary to popular perception, the past five months — for all the turbulence in the stock market and subsequent valuation crisis — have been the best times for private equity in India. The private equity sphere between January and May witnessed as many as 151 deals aggregating to $5.5 billion (or Rs 23,100 crore) as compared to 140 deals totalling $4 billion (or Rs 16,400) during the same period last year, according to PE research firm Venture Intelligence. Among sectors, infrastructure topped the ‘in-demand’ chart with 26 deals aggregating to $2,504 million (or Rs 10,517 crore) being reported during the period under consideration. The rise in number of deals is attributed to availability of assets at lesser prices, lowering valuation expectations of promoters and rising costs of borrowing.   more »

At the India’s Investors Forum, delegates will be treated to presentations by well-known and established high-profile speakers from the industry. Delegates will come away with an in depth knowledge of India’s investment industry which would allow them to anticipate challenges, capitalize on regulatory reform, adopt best business practices, and identify new and emerging opportunities in the industry. Additionally, delegates will have the opportunity to network, learn, and share with their peers in the industry. This exclusive 2 day conference must not be missed by delegates who wish to upgrade their knowledge of the industry and to gain an edge over their competitors. Special rebates for INDIA PE subscribers & Hedge Funds India’s readers/patrons to attend the mentioned event when registering with Ms. Kelly Lee. For more information on how to register & exhibit, and special rebates please contact Ms. Kelly Lee Tel No: + 6032723 6798 Email: KellyL@marcusevanskl.com Event link:    more »

Private equity firms could drive brokerage consolidation — it’s probably a connection that is hard to decipher for most people. By all indications, it does seem as if the consolidation among brokerages has been driven by private equity firms. Here’s how the story has been unfolding. Over the last two years, there have been a slew of private equity players making significant investments in broking firms. Among the prominent deals are those of Citi Venture Capital acquiring a 85% stake in Sharekhan in a Rs 650-crore deal, it also picked up 19.9% in Anand Rathi for Rs 100 crore and Barings PE arm Duckworth picked up a 45% stake in JRG Securities for Rs 150 crore. Apart from this, ICICI Ventures and Barings Private equity bought into Karvy Stock Broking with a 20% stake for Rs 440 crore and IFC picked up a 12.5% holding in Angel Broking for Rs 150 crore.   more »

Foreign investors may shun the Indian real estate market as lower asset prices in the US and the potential to earn better returns skew the risk-reward equation against emerging markets such as India, say private equity experts. "Real estate developers face a double whammy of slowdown in the overall growth and hardening of interest rates, while the perceived risk-reward equation for India is going down," said S Sriniwasan, CEO, Kotak Real Estate Fund. Take a pension fund in the US, which has the option to invest in the real estate in India or other markets. As the level of information is better in other markets, investors find it easier to take a call there. "These are existing assets, so there's no development risk unlike in India. Also, if they are investing at home, there's no currency or political risk compared to here. As they can make a return 18-20 per cent in the US, they are wondering if it is worth going to India for an additional 5 per cent," said a real estate expert. Investors feel that the marginal higher return is not commensurate with the higher risk investors have to take here. These are early days yet, but this is reflected in the slowdown in decision-making for investment in India, pointed out experts.   more »