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 »