The movie industry dubbed them as flops. But films like Fiza, Yaadein and Ram Gopal Verma ki Aag delivered profits. Films like Om Shanti Om (OSO) and Namaste London delivered over 100 per cent returns while still under production. It is success stories like these are driving the new script being written for Bollywood. Private equity funds are now preparing to make use of this opportunity too. ICICI is backing a Cinema Capital Venture Fund (CCVF), the first of its kind, which is looking to raise Rs 500 crore from high net worth investors. As rapidly changing consumption patterns for entertainment and digital technology change the contours of the entertainment business, big funds are now getting ready to make their presence felt in the business.   more »

The hanging uncertainty in the capital markets and the ensuing fall in company valuations have triggered an influx of private equity (PE) funds. But a likely overcrowding could stretch valuations, experts say. The 30% fall in stock markets, from January, has led to a greater appetite for PE funds, but many deals were stuck over high valuations. Now, with promoters seeing a prolonged stability in the market at the current levels, and with no immediate upswings in sight, the time is again ripe for PE. The BSE Sensex, which had touched 21,000 in early January, is now languishing over the 14,000-mark. “Valuations have cooled off in the deal space, leading to the entry of new PE players into the segment,” says Deepesh Garg, a director with O3 Capital, an investment banking and financial services firm.   more »

Lack of clarity over foreign venture capital investments (FVCIs) in India has led to 83 applications from foreign venture capital firms piling up with the Reserve Bank of India for approval. Of these, about 28 venture funds (non-real estate funds) which have sought approval have committed close to $10 billion to India, according to lawyers involved with the registration process. Most of these foreign private equity firms have given an undertaking that they would not invest in the real estate sector or in related activities. According to sources close to the development, policymakers and financial sector regulators are working towards harmonising the regulations related to foreign venture capital investment, foreign direct investment and domestic venture capital investment. “RBI is looking into a broad-based policy issue with regard to the foreign venture capital investments in the country,”   more »

The government is likely to bar foreign venture capital funds (VCF) from investing in compulsory convertible debentures (CCD) and other quasi-equity instruments. Officials rewriting the norms governing foreign venture capital investor (FVCI) plan to restrict investments to pure equity. Sources said the new definition of venture funding would ensure they are directed towards equity that has risk associated with it. Fundamentally, venture funding is associated with risk as its aim is to finance startups and upcoming entrepreneurs. However, there is a view among the policymakers that venture capital funds have been avoiding the risks associated with funding startups and going in for more secure forms and avenues of investments such as debt and listed securities.   more »

The Insurance Regulatory and Development Authority’s (Irda) move to allow insurance companies to invest in venture capital (VC) funds could help them raise money more easily, but it could take up to 12 months for insurers to start investing. On Friday, Irda allowed life insurers to invest 3 per cent of their total investible corpus in VC funds or 10 per cent of the fund’s size, whichever is lower. For general insurers, the limit is 5 per cent of their investment assets or 10 per cent of the fund size, whichever is lower. Based on life insurers’ assets under management of Rs 700,000 crore, potentially over Rs 21,000 crore can flow from this segment alone. Canaan Partners CEO Alok Mittal said the move is a good beginning, but does not translate into immediate gains.   more »

Two venture capital firms have invested $25 million (Rs109 crore) in Hyderabad-based pharmaceutical retailer MedPlus Health Services Pvt. Ltd in the first publicly known foreign investment in a medical store chain. NEA-IndoUS Ventures, a Santa Clara, California-based venture fund, and an unnamed fund from West Asia have jointly invested the amount in MedPlus for an undisclosed stake, a person close to the transaction said, asking not to be identified ahead of a formal announcement. A top MedPlus executive, too, declined details. “It’s confidential,” said Madhukar Gangadi, chief executive of MedPlus. “At this point of time I am unable to tell you anything.” Since India bars overseas investments in a retail venture selling multi-branded products to consumers, the two foreign funds have invested in MedPlus’ wholesale arm.   more »

Venture capitalists (VCs) raising new funds dedicated to the Indian market are not finding the going tough despite a global slowdown impacting availability of capital. For instance, Clearstone Venture Advisors, a global venture capital fund with over $650 million of committed capital for investment globally, plans to close its fourth fund soon. The fund, which could be over $200 million, will also have a larger share of investments in India. The company had raised $210 million for its third fund, of which 20 to 25 per cent was dedicated for investments in India.Similarly, Seed Fund, which invests in early start-ups, is in the process of raising its second fund. The fund, which will be in the range of $50-60 million, will be closed by the end of this year.   more »

Competitors are increasingly becoming collaborators when it comes to mergers and acquisitions (M&A) as the credit crunch has made it difficult for corporates to find bridge loans. These strategic buyers are now collaborating with private equity (PE) investors to access funds for big ticket overseas deals. Traditionally, strategic buyers compete with PEs. For example, Tata Motors last year had to compete with One Equity Partners, TPG and Ripplewood Holdings LLC in its bid to buy European luxury brands Jaguar and Land Rover (JLR). The company took a $3-billion bridge loan to finance the deal.   more »

Private equity(PE) firms who have been largely focused on providing growth capital in India are now eyeing distressed firms, which has been a domain of the Asset Reconstruction Companies (ARCs). While some of the PE players such as Vision Global, Eight Capital and ClearWater have specialised funds, which are targeting distressed assets, other PE firms are also looking to invest in such companies during these troubled times. According to Vision Global MD Parth Gandhi, “We’re in talks with around 10 such companies. In the next two-months we’ll be able to close in a few deals. With the current slowdown in the economy, a lot of companies have not been able to meet their growth projections and are facing an acute credit crunch. The idea of the fund is to tap such opportunities.”   more »

Private equity (PE) firms favour clubbing when it comes to striking deals. Unlike in the past, when PE firms were single investors in a company, they now prefer to join hands in putting money in firms. Early this year, Temasek Holdings, an investment arm of the Singapore government which is the only foreign institutional investor in Tata Teleservices, seemed to be content being one of the investors in an eight-way deal to invest close to Rs 4,800 crore in Bharti Infratel. If eight is fine, then consider Idea Cellular’s transaction. The telecom company struck a nine-way deal with private equity funds, which is probably the largest ‘club deal’ in India by private equity firms. Similarly, Reliance Telecom roped in seven foreign institutional investors including New Silk Route, Galleon, Fortress, GLG, Quantum, DA Capital and HSBC Principal Investments. Although there is nothing unusual about PE firms adopting the group approach, what is striking this time is the coming together of a varied number of investors.   more »