Private Equity (PE) and Venture Capital (VC) firms which have been using the trust route as vehicle for funds to pass through the tax at entity level are divided if they should opt for Limited Liability Partnerships (LLPs). The government had introduced the LLP mechanism on April 1 this year, giving PEs and VCs hope of an alternative to the trust route. However, yesterday’s Budget announcement with regard to taxing LLPs at the entity level has created some disappointment. “It is out of sync with international practices,” said Nishith Desai, founder of Mumbai-based corporate law firm Nishith Desai Associates. “In a cross-border scenario, issues relating to application of tax treaties and availability of tax credit to foreign partners will arise. There are also problems on the treatment of losses in the hands of the partners,” he said. […]

Several private equity (PE) players, global and domestic, whose lock-in period in real estate investments are to end soon, are pressurising developers for an exit route. While some PE players are asking developers to go for an IPO at an SPV or a portfolio level, developers who are wary about going public are approaching other investors or even buying back stakes themselves. Biren Parekh, Partner, (Real Estate), Ernst & Young, said, “Some developers delayed projects to get higher valuations in the booming market. Many PE players, especially at an SPV level, now want to exit and are asking developers for an exit route.” A fund manager with a US-based PE fund agreed, “While some developers delayed projects, time has been running out for us. Some clauses that formed the agreement allow us to persuade developers and ask them to give the returns agreed upon.” […]

As declining portfolio value clips the market valuations of many firms, the secondary private equity market has swung into action. Exit options such as initial public offering (IPO) have dried up in the last three months, leading to secondary market sales emerging as a viable option for private equity players, feel market analysts. Secondary deals in the private equity (PE) parlance refer to instances where a PE or LP (limited partnership) firm buys out the stake of other PE/LP firms. According to Rupali Vasudev of market research firm Evalueserve, “Although the secondary market has been present in the PE/LP and venture capital space, it is only recently that a lot of attention is being focused on it. There is a paucity of exit avenues and, hence, many firms are looking to liquidate their investments through secondary sales.” […]

Fund raising activity through private equity route witnessed an upsurge in May and touched $12,929 million, but is still 75% lower in value terms on year-on-year basis, a study says. “May brought an encouraging 81% upsurge in the total value of private equity deals, which rose from $7,162 million to $12,929 million in just four weeks,” global deal tracking firm Zyphyr said. This is despite the fact that the deal volume in May was significantly less than that in April, suggesting that there were more high value deals being signed off. In May this year, only 172 deals were announced while in April the number was as high as 257. Notwithstanding the surge in deal value is “still 75% lower year-on-year, against a less significant 52% drop in volume,” Zyphyr added. […]

A couple of years ago, private equity, or PE, players were spoilt for choice in terms of investing opportunities. Funds were flowing in and there was room for everyone, as evidenced by the frenetic pace of deals and the ever expanding competitive landscape, even in the face of increasing valuations. Today, in comparison, opportunities still exist, but discussions are subdued, tinged with a sense of caution. Transaction levels are low since the bid-ask spread continues to remain high. Education, with its opportunity for scalability, huge mismatch in supply and demand, and high returns is a current favourite. PE and venture capital, or VC, funds have already made at least 30 investments worth $300 million in education-related companies in the past 24 months. Some funds have been forward-looking and already have portfolios in these sectors. For example, PE players invested $250 million in microfinance in the last two years, most of which was focused on rural areas, which have been rather insulated from the downturn. […]