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Venture capitalists invested over $ 13 billion in companies in emerging countries, including India and China, in 2008, much higher than their previous bets, even as global economic situation continued to deteriorate at a faster pace. Venture capitalists (VCs)continued to seek out investment opportunities outside the US in 2008, as they put more than 13.4 billion dollar to work in 1,416 deals for emerging countries including India, China and Israel last year, as per global data provider Dow Jones VentureSource. VCs, who invest in startups and small businesses, raised investments by nearly five per cent from over 12.8 billion dollar in 1,711 deals outside the US in 2007. […]
Private equity (PE) firms are learnt to be pulling out of real estate deals, citing condition precedents (CPs), which are part of a deal document. CPs are conditions that are required to be satisfied post signing of a deal, without which the deal cannot close. Conditions include getting permission in a specified time period, timeline guarantees. An overseas PE firm based in Mumbai is trying to get out of a deal it had signed with a Delhi-based real estate developer in the third quarter of 2008. It is invoking the ‘no material adverse change’ clause, which is part of the CPs in the contract. “PE firms are looking at various exit options to get out of partly completed deals. In transactions where the promoters have agreed that they will cause the company to effect a buyback, funds are assessing the exercise of such a provision,” said Akil Hirani, managing partner at law firm Majmudar & Co. […]
Private equity investment in India in 2009 is expected to tumble by more than a third to $5 billion to $7 billion, similar to the fall in 2008, as investor aversion rises and asset owners stick to high price expectations, industry players said. PE firms will also be busy tending to Indian portfolios battered in the stock market meltdown, speakers at a private equity conference in Mumbai said on Thursday. “The sustainable private equity deal volumes in this market would be just about 50 percent of the last couple of years,” Puneet Bhatia, managing director at PE firm TPG, said at the conference. “The price of being prudent and diversified has just not delivered,” he said, referring to the sharper fall in developing market indices than in major industrial markets. […]
Set back by the economic downturn, foreign and domestic private-equity firms in India are spreading the risk of investing in assets by banding together. Firms are resorting to clubbing together to form a syndicate when acquiring stakes to limit both funding requirements and risk. “Over the next 12 months, there will be much more syndication of deals and the insistence (by the lead investor) of having other co-investors to bring additional risk bearing capacity,” said Jasmin Patel, Managing Director, FIL Capital Advisors (India), Fidelity's India-focused private equity and growth capital fund. “The capital required to get a funded firm to a certain maturity point has gone up, so the presence of another investor from a growth perspective and the amount of capital required is becoming a prerequisite,” Mr. Patel said. Syndication is where two or more private equity firms participate in investing in a company, each putting in part of the total equity package for proportionate amounts of equity — usually with one private equity firm acting as lead investor. […]
As stock markets around the world continue to tumble, private equity (PE) players are sensing an opportunity in the foreign currency convertible bonds (FCCBs) issued by Indian companies. Most of the FCCBs are trading at a discount of 30 to 70 per cent now. And given the tight financial situation internationally, many investors could be desperate to raise cash by selling them. Some PE firms are looking at companies whose FCCBs are maturing in the near future. Vedika Bhandarkar, managing director and head of investment banking, JP Morgan India said, “If it is a fundamentally good company and the bond is available at a huge discount, it makes sense to go for it.” […]
Mergers and acquisition (M&A) activity in the Asia Pacific region did not escape unscathed from the effects of global financial crisis that originated in the US. According to a study by ICICI Bank Global Investment Banking Group, overall M&A value dipped by 5% while deal volumes fell by almost 17% during 2008. During the year, Greater China dominated the M&A scene, closely followed by Australia, Japan and Hong Kong. Of the overall deals done in Asia-Pacific, China accounted for over 22% deals in the Asia-Pac region. Deal value for the region jumped from $101 billion in 2007 to $155 billion in 2008, making up more than 39% of the total deal value in Asia-Pacific. Indonesia also posted a strong gain, nearly quadrupling ts deal value to $19 billion. However, Japan (accounting for over 15% of overall deals), Australia (17%), India (6%) and Malaysia (1.5%) saw marked declines in deal values. […]
The private equity (PE) space is likely to see an increased activity in the coming days, as several PE firms are planning new investments. However, several PE firms feel that there will be some slowdown in deal making. Speaking on the sidelines of a seminar on PE funding in Kolkata on Monday, Gopal Srinivasan, chairman, TVS Capital Funds, said TVS Capital had raised close to Rs 600 crore, invested Rs 20 crore and lined up another rs 100 crore investment. The company invested in retail, social infrastructure, media and entertainment. […]
There are rumblings in the world of private equity (PE). The investors in the funds, known as limited partners (LPs) in trade parlance, have defaulted on their commitments to several PEs. At least four PE funds in India have been told by some of their major LPs that they would not chip in with the promised money. These PEs — which include big Indian VCs and offshore funds — are exploring legal recourse under terms laid down in the subscription agreement between them and LPs. It’s easier for an LP to back out if it has not yet invested in the fund pool. However, if it holds back investments after contributing a few tranches, the fund manager may freeze the money already invested. Indeed, a few funds ET spoke to did not rule out this possibility. One of the funds floated by an Indian financial services firm, which recently announced the completion of fund raising and even indicated a 25% return, has been told by two big US pension funds not to go ahead with the ‘draw down’. […]
At a time when private equity investments in India are slowing down, a study has found that PE-backed companies are more profitable than their non-PE backed peers. The study, conducted by Venture Intelligence, says PE- and venture capital-backed companies are growing significantly faster than non-PE backed companies as well as market indices such as Sensex, Nifty and CNX midcap. While PE and VC funds have invested $32 billion in Indian companies in the last three years, the value addition has been much better. On an average, PE-backed companies grew at 24.9 per cent compared to 15.5 per cent by non-PE backed companies. […]
Companies seeking to take the buyback route for FCCBs (foreign currency convertible bonds) amid sharp fall in the bond prices are approaching private equity investors to fund buy, an investment banker said. The Reserve Bank had recently relaxed norms for companies opting for buyback of FCCBs. Over a dozen listed Indian entities have already approached the RBI for approving the buyback and many more are finalising their plans. Jefferies India, a subsidiary of the US-based Jefferies Group, Managing Director and Country Head Sidharth Punshi said that over 200 companies have raised $20 billion in FCCBs over the last few years. After the recent meltdown, majority of the FCCBs have been trading at a discount of 30-70 per cent to the issue price, he said. […]
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