May 2010
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M&M buys 55.2% stake in Reva; to up capacity 5-fold

Tractors & utility vehicles giant Mahindra & Mahindra (M&M), on Wednesday, said it acquired 55.2 per cent controlling stake in electric car-maker Reva through a combination of equity purchase and fresh capital infusion. M&M will spend Rs 45 crore — Rs 15 crore for buying existing equity and another Rs 30 crore in the form of fresh capital which will be invested in the new plant of Reva in Bangalore. The company will now be named Mahindra Reva Electric Vehicle Company Limited with M&M Automotive Sector President Pawan Goenka as the Chairman and Reva’s Chetan Maini as Technology & Strategy Chief. The new board will include five nominees from M&M, two from Maini family, and one from AEV LLC, California, co-founders of Reva and an independent director will be inducted in due course. […]

PE funds elude banking industry

The domestic banking industry does not appear to be a major investment hotspot for private equity (PE) players. The absence of clarity on mergers and acquisition (M&A) norms seems to have prompted PE players to adopt a wait-and-watch policy. PE firms, which infused Rs 2,250 crore into the banking system in 2007, have developed cold feet in providing funds to the sector, even as the economy showed signs of recovery and PE funding have once again taken off. The figure had doubled in a span of one year. However, in 2010, no banks have received any PE funding. According to Venture Intelligence data, Centurion Bank of Punjab, Yes Bank, UTI Bank, South Indian Bank and ICICI Bank had received PE funding […]

ICICI Venture plans to float public issue

The private equity arm of ICICI Bank Ltd is considering a public issue though it will move ahead only after it launches a greater variety of funds to create an “alternative asset platform”, its new managing director and chief executive said in an interview. Such a listing would be unusual even by global standards. Private equity has come to the public markets only fitfully, with the most famous instance being the public issue of the Blackstone Group in June 2007 on Wall Street. In India, only IL&FS Investment Managers Ltd is listed on the local exchanges. The future listing goal and more immediate plans to float new funds is part of a renewed expansion drive that comes in the wake of a difficult year when ICICI Venture Funds Management Co. Ltd had to manage investor worries and build a new team. […]

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”. […]

KKR near Rs 225-cr Emcure investment

In what would be the second-biggest private equity investment in the Indian life sciences sector in the last 12 months, global PE firm Kohlberg Kravis Roberts & Co (KKR) is close to investing nearly $50 million (around Rs 225 crore) in Pune-based Emcure Pharmaceuticals, said industry sources. The biggest PE deal in the segment recently was New Silk Route’s $55 million (Rs 248 crore) investment in Chandigarh-based Nectar Life Sciences this February. The Emcure and Nectar deals signal the recovery of PE investments in the Indian life sciences sector, which had hit a low in FY2009 following the global financial crisis. According to sources, KKR and PE giant Blackstone had been talking to Emcure for some time now, but KKR is the front-runner now. As on December 31, 2009, KKR has $52.2 billion (Rs 2,34,900 crore) in assets under management worldwide. […]

Mauritius PE firm to buy 80% in INX Media

Within three years of its launch, home-grown INX Media—launched by Indrani Mukerjea and ex-Star India CEO Peter Mukerjea—will become a foreign-owned entity. Mauritius-based private equity firm New Silk Route (NSR) is set to scale up its stake in the loss making INX Media from the current 20% to 80% by buying out stakes of some of the existing foreign and domestic investors. Going forward, NSE Mauritius will also fund the expansion of INX Media that is going to launch nine new television channels under the 9X brand. INX has been amidst a financial restructuring since last 10-12 months as a result it divested 9X to Zee Tele Films last month. In order to resurrect INX Media, NSR has not only agreed to infuse Rs 55 crore but will also pump in more money as per the business needs of the company. NSE Mauritius has taken upon itself to weave the turnaround of INX Media, sources said. Upto 100% foreign investment is permitted in the non-news channels. […]

US Darby among bidders for Axis Bank private equity arm

US-based Darby Private Equity and India's IL&FS Investment Managers are among six bidders for the private equity arm of Axis Bank, the Economic Times reported on Tuesday. The bidders include Aditya Birla Private Equity and Shapoorji Pallonji Group, both based in India, the newspaper said, citing two unidentified executives involved in the process. The last date for receiving the bids was May 15, it said. […]