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Indian outsourcing firms are winning deals from overseas entities controlled by private equity (PE) firms that are growing more comfortable with farming out work both as a way to reduce costs and leverage on the technology talent in Asia’s third largest economy. PE-controlled firms are typically privately held and lack the size and scale to outsource technology and back-office services. But as global economic growth slows and cost-cutting becomes imperative, PE and venture capital firms are cutting deals with outsourcing firms that can apply across their portfolio companies. “These are organizations which traditionally haven’t looked at globalizing their businesses, but are trying to do it now,” says Rohit Kochar, who advises PE firms on outsourcing possibilities. “These organizations have been languishing, and they are beginning to look at how to leverage India.” […]
The bear market has led to resurgence in private equity deals. “More than 150 deals are expected in the third quarter of 2008. Investors from Mauritius, Europe and Middle East are poised to strike deals with Indian companies with good valuations,” said YEN Management Consultant Managing Director and Chief Executive Officer, Sunil Shirole, who recently visited 10 countries meeting 50 private equity investors. Investors still believe in the strong fundamentals of Indian economy and they are coming to India with a 5-7 year time horizon, Shirole said. Axis is currently evaluating investments in healthcare, renewable energy, hospitality, and logistics.Bangalore-based Lightspeed is also looking at investments in infrastructure-derived industries, media & entertainment, and financial services. YEN Consultant is also mediating 2-3 deals between Middle East and Indian companies in the education and health care sectors. […]
Five post-graduate programme (PGP) students of the Indian Institute of Management, Ahmedabad (IIM-A) have set up a Private Equity (PE) and Venture Capital (VC) club to help students get hands-on experience by involving PE/VC players from India and abroad. Unlike finance clubs run by most B-schools in the country, this club exclusively focuses on PE and VC funding. The lack of opportunities and experience in the PE and VC space led five students to set up the club called 'Leverage'. With around 50 students interested in being members, the club will be a forum for students interested in all aspects of private equity and venture capital. […]
Venture capitalists have found new ways to side step stringent Sebi laws. If market sources are to be believed, VC funds are registering themselves as PMS (portfolio management service) providers — a step that will enable these fund-pools to invest across asset classes. A PMS fund manager said: “It is relatively easier to get approvals for PMS services than VC funds. With a PMS registration, these funds will be able to invest in listed and unlisted companies without really having to disclose much about their investments.” Violating relevant Sebi PMS rules, most of these funds are targeting live real estate projects, which are facing tough times as a result of lower sales and higher borrowing costs. […]
The current downturn in the equity markets has made exits difficult for private equity (PE) players. While earlier, exits through IPO route were common due to a buoyant market, the current slowdown will make such exits a thing of the past. “The environment for exits is terrible,” says ChrysCapital senior managing director Ashish Dhawan. Most private equity firms invest in mid-cap companies, where liquidity has dried up, he explains. Numbers, too, point to a slowdown on exits through IPOs. Data from Venture Intelligence for the first half of 2008 suggest that PE players made six exits through IPOs. Last year, 16 exits took place via IPOs while the number for 2006 was 19. […]
Private equity firms are warming up to Indian restaurants. The Dodsal group, one of the two largest franchisees of Yum! Brands-owned Pizza Hut and KFC, is in advanced talks with private equity firm New Silk Route (NSR) to sell 30-40% stake in the company. The deal could be anywhere between Rs 300 crore and Rs 500 crore, an industry source said. This deal comes on the back of a similar PE fund infusion in the other large franchisee of Yum! Brands, Ravi Jaipuria-owned Devyani International, which has the franchisee rights for Pizza Hut and KFC for the North and East with 65 Pizza Hut and 7 KFC outlets in the country. Last month, Jacob Ballas picked a 21.5% stake in Devyani International for Rs 300 crore, valuing the firm at Rs 1,400-1,500 crore. Sources told ET that the diversified Dodsal group, owned by the Dubai-based Kilachand family, wants to exit the quick-service restaurant business and the PE deal is the first step in that direction. If the group sells all its stake, then the deal could be between Rs 1,000 crore and Rs 1,500 crore. […]
Private equity (PE) firms operating in India are plugging energy as the next sunshine industry for investors. And the number of investments made in the sector so far this year seems to bear them out. In the last six months, private equity and venture capital firms have invested $890 million, or Rs3,818 crore, in 14 big and small energy deals, compared with four transactions worth $123 million a year earlier, according to local private equity tracker Venture Intelligence. Reason? In a power-starved nation that is getting more prosperous, energy presents a business opportunity that can be readily scaled up. “PE players look out for scalable businesses and enormous growth prospects. The energy sector in India provides potential for both, as the supply and demand gap is huge,” says Raja Kumar, founder, chief executive and managing director of UTI Ventures. UTI Ventures has invested in half-a-dozen energy or related companies, including Ind- Barath Power Infra Pvt. Ltd and Pesco Beam Environmental Solutions Pvt. Ltd. Apart from project-specific risks, experts say energy-business revenue, particularly in the power sector, can easily be predicted for as long as 10 years. Power requirements aren’t prone to fundamental shifts, they reason. […]
Venture Capital firms invested $158 million in over 26 deals in the country during the three months ending June 2008, according to a study by Venture Intelligence. The study done in partnership with the US-India Venture Capital Association reveals that during the first six months of 2008 investments of $340 million across 51 investments were completed. “VC investment activity as well as amounts invested during the first half of 2008 has not been affected much by the turmoil in the global financial markets,” said Arun Natarajan, CEO of Venture Intelligence. “While IT companies continue to account for a majority of investments, it is quite significant that the proportion of non-IT investments – both by activity and value – has now climbed up to 40%. VC investments are increasingly focusing on alternative energy, media, retail and other consumer demand-led sectors,” Natarajan added. […]
Amid apprehensions of economic slowdown, India Inc. seems to have resorted to mergers & acquisitions to keep their business going. The number of M&A deals announced in June stands at 51 with value at $5.35 billion, as against 49 deals and $2.92 billion in May, reveals Dealtracker, a monthly report by Grant Thornton. According to the report, the most significant deal was Japan’s Daiichi Sankyo Co. acquiring 34.8 per cent stake in Ranbaxy Laboratories Ltd. for $2.40 billion. This is followed by GMR Infrastructure Ltd ’s acquisition of 50 per cent stake in Netherlands based InterGen NV for $1.10 billion. There were 20 domestic deals (both acquirer and target company being Indian) with an announced value of $1.01 billion and 31 cross-border deals with an announced value of $4.33 billion. Nineteen of the cross border deals were outbound, where Indian companies acquired business outside the country and valued at $1.90 billion. Twelve were inbound deals where international companies or their subsidiaries bought Indian business with an announced value of $2.44 billion. […]
Private equity (PE) funds in the real estate space are starting to don the developers’ hat. Funds such as Trikona Capital, South Asian Real Estate (SARE) and Yatra Capital have started to create in-house teams that can execute real estate projects on their own. For some, the opportunity has already arrived. For the funds, the idea is to have better control over their development partners while others are clear that they also want to make the kind of margins that construction offers (25-35%). Apart from the cost advantage, this would also mean a lower dependence on construction companies in a scenario where execution capability bottlenecks are threatening to derail projects. Trikona Capital, which has over $1-billion investments committed in India, is setting up a development group, which will be headed by the ex-chairman of HUDCO, Dr PS Rana. “There is very little scalability in India. My best development partner has at best developed 5 million sq ft of space,” says Trikona MD Aashish Kalra. Execution is the most important thing, he says. […]
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