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Foreign private equity (PE) firms may be in for a jolt. If the government has its way, PE funds will not be allowed to invest in Indian retail companies which are franchisees of foreign brands. They will not even get to invest in retail companies where foreign investment is allowed. Currently, the Indian government allows global brands to invest up to 51% in Indian retail companies provided they sell all products in their outlets under a single brand. However, PEs will not get to invest even in this category because only the owner of the global brand is permitted to invest in the Indian company. The one exception to this may be food and beverage retail where 100% FDI is allowed. Whether foreign private equity funds can invest in retail companies, franchisee-led or foreign-owned, has been a grey area. […]
Foreign direct investment in the country's real estate sector is likely to rise to a whopping $25 billion in the next 10 years from the present $4 billion, even as the industry faces a slowdown in the short term due to rising interest rates, an Assocham study said. “Despite real estate market confronting a temporary depression with real interest rates hovering between 12-16 per cent, FDI in real estate market would increase by about $21 billion to touch USD 25 billion in the next 10 years,” industry chamber Assocham said in its latest study. At present, the domestic real estate market is estimated at $15 billion, of which FDI contributions are about $4 billion, it pointed out. […]
JPMorgan plans to invest more than $1 billion in Asian real estate over the next three years, hoping to fill a gap as Indian and Chinese developers crave funds and rival investors recoil from property markets. The investment bank, which has fared better than some Wall Street rivals because of smaller exposure to US sub-prime mortgage investments, is using its special opportunities group to finance Asian property firms and their projects. “It’s a fantastic opportunity for us at a time when a lot of our competitors are scaling down because of difficulties accessing their balance sheet,” the group’s Asia real estate head, Bryan Southergill, said. […]
With the real estate market in a state of flux, private equity investors are increasingly moving their investments to companies engaged in real estate ancillary businesses, where returns are perceived as fairly safe. According to a report by international realty firm Jones Lang LaSalle, global commercial property transaction volumes in the first six months of 2008 have fallen 41 per cent to $236 billion, from the record levels seen in first half of 2007. At least six private equity investors are learnt to be in talks with Pune-based Universal Construction Machinery and Equipment. Mumbai-based Sankalpan Group revealed that three private equity investors are interested in investing in its four subsidiaries. […]
Bio-technology, film production and education are among the five emerging sectors expected to attract an investment of $8.5 billion from private equity and venture capital funds in the next five years, a study has said. The other key sectors identified by the private equity (PE) and venture capital (VC) funds are clean technologies and logistics, according to the Assocham-Deloitte study. PEs and VCs are shifting to non-IT areas, where regulatory mechanism is disappearing, it said. “VCs and PEs which for long has been choosing IT for investment purposes, have found huge investment opportunities in above listed areas as regulatory regime in them is gradually disappearing,” Assocham President Sajjan Jindal said. […]
Reserve Bank of India (RBI) has asked the Union finance ministry to prevent foreign investors from side-stepping foreign investment norms by taking recourse to the venture capital (VC) route. With increasing concerns of foreign capital driving up real estate prices, RBI has recommended that foreign venture capital investments (FVCIs) be restricted to nine sectors (investment in other sectors being treated as foreign direct investment). It has suggested that capital market regulator SEBI set up a screening mechanism for all pending and future FVCI proposals. The new set of restrictions will help prevent low capital base, circumvention of takeover guidelines and round-tripping of investments. Out of 58 FVCI applications pending with RBI, 22 are considered to have low capital base. […]
The mergers and acquisitions (M&A) activity by India Inc seems to be running out of steam. According to a study, M&A deals have declined by nearly 60% in the first half of 2008 compared to the same period last year. Experts say if global financial conditions continue to remain under pressure, M&A activity will take a back seat. According to a study by Grant Thorton, there were 335 M&A deals worth 43.97 billion dollars in first half of 2007. This year the value of M&A deals have declined to 17.4 billion dollars. Experts say it's lack of easy financing, that's creating a hindrance. Harish HV, Partner, Grant Thornton said, “We had seen some mega deals last year, which were missing this year. We are buffeted by a global financial crisis this year. If it continues the way it is going now, we will see some more slowdown. Making deals at the end of the day requires the market to be vibrant and capital to be raised in an efficient way. […]
More than 100 funds dedicated to private equity investment in emerging markets have raised $35 billion in capital in the first half of 2008, a 68 percent increase over the amount raised during the same period in 2007, according to the latest numbers. Data from the Emerging Markets Private Equity Association (EMPEA) showed the total value of private equity funds raised in the first two quarters of 2008 was greater than the $33 billion raised during all of 2006. Sarah Alexander, president of EMPEA, said: “What began as incipient interest in emerging markets private equity has developed into an acceptance of the asset class as part of mainstream allocation strategy. Economic conditions in the US and Europe appear to be having less impact on fundraising for private equity in emerging markets compared to mature private equity markets.” According to EMPEA’s analysis 104 funds raised a total of $35 billion in capital commitments. Average fund sizes increased 72 percent, from $197 million in the first half of 2007 to $339 million during the first half of 2008. […]
If dismal quarterly results and hammered stocks are painting a bleak picture of the tech sector, here is the proverbial silver lining. Venture capitalists (VCs) are surprisingly upbeat. Last week alone, five companies in India have raised funds from VCs like Intel Capital, SAP Ventures, Canaan Partners, Helion Venture Partners and SVB India Capital Partners (venture fund affiliate of Silicon Valley Bank). “There is a lot of money chasing good technology stories,” according to the promoters of companies like iYogi and United Lex who have just raised money. While iYogi raised $9.5 million in Series B financing from SAP Ventures, Canaan Partners and SVB India Capital Partners; United Lex raised $6 million. And so far data bears that out. In an otherwise tough economic environment, VC investments in the first half of 2008 are broadly at par with the numbers last year. In the six months to June, VC firms invested $340 million in 51 deals compared with $363 million in 55 deals in the same period last year, according to VC tracking firm, Venture Intelligence. Other investors, however, have not been able to weather the slowdown. Private equity (PE) deals, for one, have shrunk to almost half in the first half of 2008. The total value of deals announced in the first half of 2008 was $760.17 million against $1.47 billion during the first half of 2007 respectively. […]
Sectors with cheap valuations are on the radar of most private equity funds, most of whom are flush with funds. Owing to the market slowdown in the first half of the year, most PE funds did not deploy cash. Deals clinched in the last few weeks indicate that PE funds are targeting real estate, education and infrastructure companies. Recently, Bahrain’s TAIB Bank acquired a 26 per cent stake in Anant Raj Industries. Lightspeed Ventures and Sequoia Capital invested $18 million (Rs 76.3 crore) in Tutorvista.com, followed by JP Morgan, which has picked up a 33 per cent stake in Alok Infrastructure’s Special Purpose Vehicle. “Real estate, as a sector, has corrected a lot and probably we could see some more correction but there is no dearth of demand. Price has now become attractive for some of the good companies in the sector. One will see lots of deals going forward,” said the country head of an international PE fund. The Bombay Stock Exchange’s Realty Index has crashed more than 60 per cent this year from its peak of 13,848 as on January 8, 2008. Promoters too, as the PE funds say, are coming to terms with the reality. The lag effect is showing and the PE funds have realised that they cannot make aggressive projections way ahead of fundamentals. […]
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