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Small companies tapping PE funds

Several small companies are raising private equity (PE) to meet their capital expenditure needs instead of tapping the primary market.
In recent months, companies such as Jas Toll Road Company, Time Technoplast and Vigneshwara Exports have taken the private equity route after their initial public offerings (IPOs) were delayed or deferred for various reasons.
“There are two types of companies which tap the IPO market: those which want to cash in on the buoyant markets and those which want to meet genuine capex requirements. The latter is now opting for private equity instead of IPOs,” said Amrish Baliga, vice-president of ICICI Securities.
Jass Toll Bridge raised funds worth Rs 65.6 crore from IDFC last month, nearly a year after it filed the draft document for an IPO with the Securities and Exchange Board of India. Jass owns, operates and maintains a 32 km 4-lane road on the National Highway 4 between Neelamangla and Tumkur near Bangalore.
Similar is the case with Time Technoplast, a leading producer of plastic drums used for bulk packaging of industrial goods. Time Technoplast announced last week that it received Rs 19.5 crore from Motilal Oswal Venture Capital Advisors, the private equity funding arm of Motilal Oswal Financial Services. Its IPO document has been pending with Sebi since December 2006. The case of Vigneshwara Exports is more interesting. This Mumbai-based company, which pulled out its IPO following the May stock market meltdown, opted for private equity funds .
Nearly 190 companies filed for IPO with the Securities and Exchange Board of India (Sebi) in 2006 and 2007. But only a small fraction was able to tap the market owing to various reasons including poor market sentiment and delays in getting final observation (clearance) from Sebi.
“An erudite management prefers private equity for capex requirements. These companies will go to the IPO market only after attaining a critical mass, perhaps 2-3 years after getting the private equity funding,” Baliga said.

Source : Business Standard

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