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The financial meltdown has dampened the merger and acquisition spirit in India with companies and private equity (PE) players adopting “extreme caution” in dealmaking. The sudden market crash in the face of a liquidity crunch has impacted M&A plans with some deals even falling apart. Experts at top consultancy firms told TOI that the current sentiment in the M&A space was of “wait and watch” with no company in a hurry to rush through deals. “There are a lot of people who are sitting on cash. But most are in a wait-and-watch mode and are taking time to decide,” Pankaj Karna, Head M&As at Grant Thornton, said. Karna said while good companies are generating interest among suitors, the meltdown had seen the collapse of many deals-in-the-making. “There has been a good excuse for investors to re-negotiate… We have come across situations where due to the changed market conditions, people got cautious and held off (from previously negotiated deals),” Karna added. […]
The world's leading private equity firms are reassessing how they invest in India after racking up huge paper losses buying stakes in listed companies. Firms have struggled to deploy capital in India in recent years because of the unwillingness of familyrun companies to sell control, and limits on leverage. The situation led to a huge increase in private investments in public equity, or so-called “Pipe” deals, as private equity firms sought exposure to companies that were among the world's fastest growing. However, the amount invested in Pipe deals has fallen sharply amid the collapse in company stock prices in the wake of the global financial crisis. […]
India and Oman are expected to soon launch a $100 mn joint investment company on equal partnership basis to facilitate cooperative projects in various sectors through investments. “The potential is very high for expanding business cooperation,” Omanese Ambassador Humaid Al-Maani told here ahead of the long-overdue visit of Singh to his country on Saturday. The two countries have set the two-way non-oil and non-gas trade target of $2 billion by the end of this year, which the Ambassador said could be raised in view of the existing potential. […]
The Reserve Bank of India, which has been holding back applications of several foreign venture capital funds (VCFs) for a few years, is slowly opening the doors to these investors — a decision which could be partly driven by the dollar shortage following the FII outflow. During the last fortnight, the central bank has cleared proposals of as many as 10 foreign VCFs which are adequately capitalised. Many VCFs were setting up entities in Mauritius with only a few thousand dollars as the overseas investors in the funds were reluctant to park the money in Mauritius before the regulatory clearance. This was unacceptable to RBI. Indeed, RBI had returned more than 16 foreign VCF applications to Sebi citing ‘under-capitalisation’ as the reason. After this, several foreign VC funds began capitalising the investment company before approaching the financial sector regulators. Sources said Sebi has already issued the in-principle approval to 10 applicants. However, while clearing the cases, RBI has inserted a new clause, which restricts investments by these foreign funds to certain sectors, similar to those prescribed under the Income Tax Act for availing of a tax pass-through for Sebi-registered VCFs. […]
The merger and acquisition (M&A) spree of corporate India seems to have hit a low, as India's share in the global M&A tally, which touched a whopping $3 trillion, is less than even one per cent. Till September this year, corporate India has announced merger and acquisition deals worth $26.43 billion, which is around 0.8 per cent of the total global M&A kitty. Commenting on the current market situation, KPMG Executive Director (Corporate Finance Group) Gaurav Khungar said: “The environment is plagued with conservatism and a wait-and-watch approach with absence of decision making or aggression… And questions on prospective bankruptcy risks are abound.” […]
Private equity (PE) deals in the real estate and infrastructure space grossed about $3 billion in value during the first nine months of 2008, over 9 per cent lower than the year-ago period. Moreover, PE investors, who had been cherry-picking realty deals earlier this year, appear to have tightened their purse strings now, with September seeing only two transactions worth $12 million compared with August, when $427 million of PE funds was infused into various projects. According to data compiled by Grant Thornton, while the number of deals during January-September was higher at 45 against last year’s 39 deals, the average ticket size of the transactions has come down substantially in the first three quarters of 2008, reflecting softening valuations across the crisis-ridden real estate sector. Realty companies have been facing a severe cash crunch with bank loans drying up. Their problems have been compounded by plunging sales and weak demand. […]
One of the largest global private equity (PE) fund was close to finalising a deal with a north-based company. However, following the changes in the global economic environment, the fund’s US-headquarters instructed the Indian arm to go slow over the deal citing concerns over the falling valuations. There are many such instances where deals are taking a longer time to close or at times PE firms are going back on their commitments. Compared to the first nine months of last year, this year has seen a dip in the number of transactions as well as the ticket size. Private equity firms have begun to cherry pick on deals and are becoming cautious in their investment strategy, unlike in the past where there was too much money chasing such deals. […]
Private equity firms that are going through troubled times across the world, have resorted to various alternatives including diversification of their portfolio to adjust to the present economic constraints. PE firms are mainly diversifying into infrastructure assets, debt funds and energy technology investments, as institutional investors believe there would be stable cash flows into these sectors. “I think what you are going to see is a natural evolution of firms taking their networks and their brand into other fields where they can get a return,” global PE and investment advisory firm CVC Capital Partners Partner Marc St John said. PricewaterhouseCoopers in its Global Private Equity Report 2008 has said “private equity firms are taking advantage of financial turmoil to diversify either by buying new investment businesses from within troubled banks or by hiring experienced investment banking executives who can spearhead expansion into new asset classes and geographies.” […]
As the global credit crisis casts its spell on the private equity (PE) firms in India, fund-raising has witnessed a significant dip. India-dedicated firms raised $1.8 billion through five funds in the second quarter of this financial year, down 60% compared to the same period a year ago when 11 funds worth $4.5 billion were raised by PE firms. The total size of the funds raised during 2007 calendar year stood at $8.4 billion, according to a study by Venture Intelligence, a firm that tracks private equity and venture capital in India. […]
The uncertain future of the equity market seems to be paving the way for newer invesment opportunities. Private equity (PE) players have been quick to recognise these. Of late, their appetite seems to have shifted from the most-talked about sectors like real estate and financial services, which were the flavour of the season till some time ago, to sectors like education, healthcare, defence, logistics, warehousing and infrastructure. These not-so-talked-about sectors are now attracting big private equity players. Though some of these are the very basic sectors of the economy, it is only recently that investment interest has found a place in them. […]
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