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The Securities and Exchange Board of India (Sebi) is likely to discuss clearing applications through the foreign venture capital investor (FVCI) route when its board meets on October 6. As many as 80 such applications are pending with Sebi due to the Reserve Bank of India’s reservations on the issue. Sources familiar with the developments said RBI was not clearing them earlier as there was a need to control the flow of foreign capital. But the situation has changed now, raising hopes that Sebi will resolve the issues with RBI and review the status of the FVCI applications. […]
India does not seem to be losing its sheen among private equity, or PE, investors even as the global liquidity crunch is now assuming significantly larger proportions and investors are increasingly turning bearish. According to the investment banking arm of Mumbai-based financial services house JM Financial Consultants Pvt. Ltd, 13 of the world’s 20 largest PE funds — in terms of fund mobilization in the past five years — have already invested in India. Besides, two more — Apollo Global Management Llc. and Bain Capital Llc. — have recently set up offices here and started seeking deals. This means only five of the world’s top 20 firms — Permira Advisers Llp., Terra Firma Capital Partners Ltd, American Capital Ltd, Silver Lake and Cerberus Capital Management Lp — haven’t come to India yet. […]
The credit crunch in the wake of the global financial crisis has thrown up fresh opportunities for private equity (PE) players and sovereign wealth funds (SWF) to invest in India in a big way. With traditional sources of cheaper credit drying up, corporates are increasingly looking at raising funds from PEs and SWFs. Sources said that companies, like infrastructure, which are yet to tie up funds for their expansion plans, are in talks with PEs and SWFs to meet their requirements — be it long-term debt, working capital or equity infusions. One such company is JSW Energy, which is pursuing a major investment programme of Rs 11,000 crore for its power business. JSW Energy was earlier planning to raise up to $1 billion through an IPO, it did not materialize due to sluggish market conditions. […]
The collapse of the big guns of global financial services sector could well turn out to be a gain for the private equity (PE) industry in India. Thousands of professionals who were employed by these firms will now be chased by the PE firms, which are already facing an acute shortage of skilled professionals. At present there are over 366 PE firms in India while three years ago the number stood at around 100. The industry witnessed a robust growth in the last few years with investments going up from $2 billion in 2005 to close to $17 billion in 2008. […]
The secular decline in stock prices for a good part of this year has prompted private equity funds to shun listed companies and opt for investment in unlisted firms. Of the 206 deals struck by private equity funds in the past eight months, 182 deals were in unlisted companies. Interestingly, India has been largely a PIPE (private investment in public equity) market but the pummelling of stocks over the last few months has influenced private equity funds to change track. After seeing a high of 21,000 early this year, the BSE Sensex, the benchmark index for the Indian stock markets has slid to below the 13,000 mark. The public markets have corrected by 30-40% across sectors this year. According to industry experts, there is always a difference in correction between stock market and private equity valuations. […]
After a quiet July, dealstreet was again buzzing with action in August. The total value of mergers and acquisitions(M&A) and private equity(PE) deals during the month is pegged at more than $5.57 billion against a mere $1.23 billion in July’08. Though this has largely to do with large M&A transactions, even PE deal value jumped almost 50%. While the number of M&A transactions actually dropped compared to July, the total value of deals rose sharply month-on-month. The total number of M&A deals announced during August stood at 31 with an announced value of $4.63 billion against 43 deals amounting to $580 million during July 2008, according to the latest dealtracker of advisory firm Grant Thornton. […]
Lehman Brothers’ bankruptcy is likely to cost Indian real estate dear. It may impact the financial major’s existing investments worth $500 million in realty firms, including DLF and Unitech, besides drying up another $500-million worth of potential investment which was expected to flow into Unitech’s Mumbai projects. The news of Lehman’s collapse brought the BSE realty index down by 7.65% on Monday, while the benchmark Sensex declined 3.35%. Both DLF and Unitech fell 7.5%. Lehman’s fall signals a deepening of credit crisis for Indian developers, who have lately been battling falling sales, rising cost of construction and tightening credit. It is expected that the US-based firm is likely to go for a fire sale of its assets. Lehman invested $200 million in DLF promoter group company DLF Assets last year and bought 50% stake in Unitech’s Mumbai project for $175 million a few months ago. It had also invested $80 million in Bangalore-based SEZ Gandhi City and was likely to hike its share to $300 million. […]
Smart private equity money is showing a clear bias for healthcare providers rather than drug manufacturers. Despite the slowdown in the equity markets, over half a dozen private equity investments have come into the hospitals and healthcare segment in the recent months. Over the same period, the biggest news in the pharmaceutical industry has been the sell out by the promoters of Ranbaxy to Japanese major Daiichi Sankyo. Tellingly, one of the businesses they have retained is Fortis, the hospital chain. There are also rumours of another Hyderabad-based pharmaceutical company scouting for a buyer to come to its rescue. This is in stark contrast to the trend between 2004 and 2006, when Indian drug majors were sewing up big-ticket acquisitions abroad. […]
Worried that real estate developers will not be able to complete projects in time in a market where demand is slowing and credit is becoming tighter, private equity firms that invest in such projects have increasingly started doing so in phases or instalments. “The problem in investing at one time is that you don’t really have any link to progress in the project you have invested in,” says Aashish Kalra, managing director of the New York-based, India-focused real estate fund, Trikona Capital Ltd. “Funding should always be performance linked.” Private equity firms are a preferred source of funds for developers who are finding it increasingly difficult to raise money from banks or retail investors. And the cost of debt has increased to around 16-18% a year. […]
The rising cost of capital may stall crucial infrastructure projects and hold back private equity (PE) funds worried about their valuations, exposing other industries to the risk of an investment slowdown as well, PE managers say. Infrastructure companies such as power project developers accounted for more than 32% of all PE-funded deals in the country last year and 37% through the first half of this year. India needs investment worth tens of billions of dollars to reinforce its deficient public works, such as power plants, roads, ports and airports, to sustain economic growth. Debt capital costs have increased for infrastructure companies in a regime of rising interest rates. Developers who fear they wouldn’t be able to service higher-cost debt may put borrowing plans on hold, delaying the execution of their projects, and in turn, lowering their equity valuations. […]
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