October 2007
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Hot Sectors for PE Investment in India

(Contributed by Dr. Alok Aggarwal, Chairman and Co-founder, Evalueserve) Evalueserve, the global research and analytics firm, has identified three major groups of industries in India that are likely to be lucrative for private equity investors. One such group is that of hi-tech services and products, most of which are currently being exported. The second group consists of services that are mainly geared towards the Indian domestic market. And the third group comprises products and services related to high-end manufacturing and infrastructure. The hi-tech services and products category includes Information Technology (IT) and application development, business process outsourcing (BPO), knowledge process outsourcing (KPO), drug research and clinical research outsourcing (CRO), engineering services outsourcing (ESO), software and solutions related to the consumer Internet, software as a service (SAAS), open source, software-cum-services, and telecommunications (both wireless and wire-line) products and services. This combined group of products and services is expected to grow at approximately 22% per year during the next five years and is likely to contribute about 1.3% out of a total nominal growth of 13% per year (including 5% annual inflation), i.e., approximately 10% of the total growth of the Indian economy. […]

‘Venture capital, PE deals to touch Rs 70,000 cr by 2009’

Eyeing a chunk of the India pie, venture capitalists and private equity players will strike deals worth $17.5 billion (Rs 70,000 crore) by 2009. This is a three-fold jump from $5.5 billion at the end of the first half in 2007, predicts a new study from market research firm Evalueserve. Consequently, the total number of deals would soar to 560 as private equity players put in funds into the new engines of growth that drive the Indian economy. The paper mentions that 173 deals have been struck by the end of the first half of 2007. Evalueserve forecasts that beyond the technology-sector focused activity that has driven PE investments in the past, private equity and venture capital firms are now aggressively looking to invest in new areas such as manufacturing, financial services, healthcare, real estate, and construction. […]

RBI for ban on automatic FDI in realty

Worried over the substantial inflows of foreign funds into the real estate sector, the central bank has asked the government to allow FDI into the sector only after the clearance from Foreign Investment Promotion Board (FIPB). At present, up to 100% FDI is allowed in realty projects on automatic route with certain conditions like a three-year lock-in on investments and minimum capitalisation of $5 million. RBI wants real estate removed from the list of sectors where FDI can come in through the automatic route. RBI wants inflows routes like participatory notes (P-notes) and private equity contained. The market regulator Sebi is currently in the process of initiating moves to restrict investments coming in through P-notes. Sources said the government, which has completely backed Sebi’s action to restrict P-note flows, may now not relent on other suggestions, especially restricting FDI. Also removing one sector from the automatic list, will be seen as a retrograde measure by foreign investors. […]

Shapoorji Pallonji eyes PE investments

Construction firm Shapoorji Pallonji & Co. Ltd, which is developing four special economic zones (SEZs) focused on the information technology and back-office businesses, plans to sell up to 10% equity in these projects to private equity (PE) firms. “We are talking to a lot of private equity firms, including (the private equity arms of) Goldman Sachs and Deutsche Bank, but we have not frozen on anybody as yet,” said Ashutosh Pathare, vice-president (commercial sales and business development) at Shapoorji Pallonji. People familiar with the development, who did not wish to be identified, said Singapore government-owned investment management firm GIC and local firm HDFC Realty were also interested in buying a stake in these projects. Several reports in the media had earlier said that Shapoorji Pallonji was considering selling a stake in its real estate projects that are FDI (foreign direct investment) compliant. Currently 100% FDI is allowed in projects covering a minimum area of 10ha for residential developments and more than 50,000 sq. m for commercial properties; such investments come with a lock-in period of three years. […]

Dhanus close to 3 overseas acquisitions

Chennai-based communication services provider Dhanus Technologies is set to acquire two US-based communications companies and a Chinese telecom services provider as part of its global expansion, a source close to the deal said. The company plans to raise up to Rs 800 crore to finance these acquisitions. Dhanus has zeroed in on VPN and VoIP services firm Seawolf Technologies in China, a vehicle tracking services provider Hetrogenous and an NYSE-listed company serving the US market for satellite telephony and mobile virtual networking, the source said. The name of the third company could not be ascertained. Dhanus plans to acquire 60-70% stake in each of these companies. The company has valued the Seawolf deal at $52 million and that of Hetrogenous at $40 million. Dhanus would use $100 million to acquire a majority stake in the NYSE-listed company. […]