May 2010
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PEs pump in $140 million in education since Jan 2010

Education has emerged one of the most lucrative sectors in India, making private equity investors line up in big numbers to the $80-billion plus industry. Numbers crunched by education-focused private equity fund Kaizen Management Advisors show that venture capitalists and private equity players have pumped in excess of $140 million so far this year, 50% more than what they invested in the whole of 2009. “We feel the education sector offers tremendous growth potential and is poised for rapid growth in the next few years,” says Ramesh Venkat, chief executive of Reliance Equity Advisors, a private equity arm of Reliance Capital, which entered the segment a few months ago by investing about Rs 100 crore in Pathways World School, a primary and higher secondary school. The total VC/PE investment into the sector is expected to be close to $300 million this year, says Sandeep Aneja, managing director of Kaizen Management Advisors. Dhanraj Bhagat, partner at research firm Grant Thornton, says investments into education will grow 40-50 % every year. […]

Valeo Acquires 100% of its Electrical Systems Entity in India

Valeo today announced that it now owns 100% of the capital in its electrical systems manufacturing entity based in Pune, India. Valeo previously held a 66.7% stake and the N.K. Minda Group 33.3%. The company, which produces alternators and starters for passenger cars, will be named Valeo Engine and Electrical Systems India Private Ltd. This transaction is in line with Valeo's strategy to reinforce its presence in high-growth emerging countries. Valeo plans to devote over 60% of its investments to these countries in order to reinforce its positions, notably in China, India, Brazil, ASEAN, Russia and Turkey. The Group has been present in India since 1997. It employs around 1,000 people at four production plants, in Chennai (transmissions and friction materials) and Pune (security systems and electrical systems), and at the Valeo Engineering Center India in Chennai. The production of lighting systems and wiper systems will be launched in India later this year. […]

ICICI acquiring poor asset at exorbitant price

ICICI Bank Ltd is acquiring Bank of Rajasthan Ltd for around Rs3,000 crore in a share swap transaction. Interestingly, its market capitalization has fallen by around Rs7,200 crore, around 2.3 times the acquisition amount. That’s a big thumbs-down from the market. Of course, it must be noted here that the broad markets fell by around 3% on Wednesday, and ICICI shares would have lost around Rs3,000 crore in value even if they only mimicked the drop in the markets. Even so, investors have demonstrated that they are highly disappointed with the deal, and especially the valuation. Bank of Rajasthan had an adjusted book value worth Rs559 crore at the end of December, so the acquisition price works out to 5.5 times book value. Other old private sector banks such as Karur Vysya Bank Ltd, Federal Bank Ltd and South Indian Bank Ltd trade between one and two times their book value. What’s more, Bank of Rajasthan is running losses and banks such as Axis Bank Ltd and Yes Bank Ltd which have high profit margins trade at much lower price-book multiples. […]

PE funds see decline in deals as valuations soar

The rise in the stock market in the past year may have brought cheer to most investors, but not to private equity (PE) funds. The equity rebound has had promoters demanding valuations 20-30% higher than the estimates of PE investors. The mismatch is resulting in at least one-third of the deals under negotiations falling through, say PE firms. This is on top of the usual 30-40% drop in deals in the initial stages because of hurdles over business plans, management teams or performance. “That (stock market rise) tends to impact deal closings as certain promoters, who may have been happy at the valuations discussed pre-surge, try to renegotiate valuations upward when markets surge,” said Jacob Kurian, partner at PE fund New Silk Route Advisors Pvt. Ltd. K. Srinivasan, managing partner at BTS Investment Advisors Pvt. Ltd, said the stock market surge “is definitely not helping us in deal closing. Valuations are shooting through the roof”. […]