Indian promoters, from the Tatas to the Birlas are upping their stake in group companies. But are they really under threat? The Mahindras may soon follow the Birlas and Tatas in raising promoter stake in group companies. Keshub Mahindra, Chairman, Mahindra & Mahindra said, “We are thinking and will do it at an appropriate time. ” After the hostile takeover of Arcelor in June last year, the question everyone asked was, would Mittal do the same with Tata Steel, since the promoter holding is barely 26%. To which, Mittal, President & CEO, Arcelor Mittal said, “Why should Tata Steel be worried?” But Ratan Tata is not taking any chances. Tata Steel announced a 10% preferential allotment to its promoters Tata Sons last year to hike its stake from just above 20%. Ratan Tata, Chairman, Tata Steel said, “The vulnerability when the industry is trying to consolidate is considerable.” […]

Private equity funds with a special focus on micro finance institutions have lined up billions of dollars for the sector in India. For instance, Aavishkaar Goodwell, a micro finance private equity company, is building a $25 million portfolio across India, $2 million of which has already been invested into Share Microfin, a micro finance company with over a million clients. Funds such as Bellwether and Lok Capital have also lined similar plans. Private equity funds raise capital from financial institutions and banks and lend it to micro finance companies, mostly for equity. For example Deutsche Bank, Netherlands Development Finance Company (FMO) and International Finance Corporation (IFC) of the World Bank group have provided funds for Aavishkaar Goodwell. IFC and FMO have also invested in the $12 million Lok Capital fund. Some other private equity funds have lined up much bigger sums. “For India we are not talking millions but billions,” says Vikram Akula, founder of the new age micro finance company SKS. […]

The Sebi-appointed committee on dedicated infrastructure funds (DIFs) to be launched by asset management companies, has proposed that DIFs should have the flexibility to invest its entire corpus in unlisted companies, including equity and debt instruments. The committee has also proposed that these funds should be allowed to own the 100% paid-up capital of a company, if they so desire. However DIFs’ exposure to listed companies should not exceed 10% of the net asset value (NAV) at the time of investments. The product, once approved, will allow retail investors an exposure to unlisted companies in the infrastructure space. So far, it is the deep-pocketed venture capital funds who have been buying stakes in unlisted companies in the infrastructure sector. Retail investors on most occasions are unable to meet the minimum investment requirements of these funds, thus missing out on a portion of the company’s growth phase prior to the listing. With this product, retail investors can buy units of this product from mutual funds, which will invest the proceeds in shares or debt of unlisted companies. […]

It’s the season of stealth for venture capital (VC) and private equity (PE) firms. A host of PEs and VCs have gone into a ‘private’ mode and are keeping new investments under wraps. Firms such as Nexus India Capital, Bessemer Venture Partners (BVP), Kotak Private Equity, Matrix Partners and Sequoia have chosen to be discreet about some of their investments. Nexus India Capital, which recently announced a $100-million fund, has officially announced only three of its six completed deals. Similarly, Bessemer Venture Partners, which recently earmarked $350 million out of its newly-raised $1 billion fund, has announced just 50% of its deals in India. Industry watchers estimate the value of such deals could be more than $500 million and will only grow with time. Interestingly, even Anil Ambani refused to share the list of his PE investors in the recent Reliance Telecom Infrastructure (RTIL) deal. Some investee companies deliberately choose to hide their investments because costs, such as real estate, go up, as people jack up prices expecting the companies to be loaded with cash. Also, some VCs and PE funds insist on keeping deals under wraps because new entrants flush with dollars approach companies and lure them with much higher valuations for the next round of funding, thus creating an awkward situation for the original fund managers. The firms want to lie low in some cases for strategic reasons too, especially when they feel it is in the best interest of the company. “We are not looking for publicity, we will announce the deals when it is best for the business of the company,” explains Nexus managing director Naren Gupta. Firms say they often leave the decision to decide when they want to go public with the news with the investee companies. […]