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Private equity (PE) investments clocked $2.8 billion in the first quarter of the current financial year, an increase of 50% compared to the corresponding period in 2007-08. This is even as the PE deal activity in terms of number of deals have gone up only marginally. The biggest investment this year has been made by Aditya Birla Telecom, a subsidiary of mobile telephone services provider Idea Cellular, which raised $640 million from Providence Equity Partners. The first three months of FY’09 has registered 77 deals as against last year when 74 deals worth $1.9 billion were signed during the first quarter, according to Venture Intelligence which tracks private equity and venture capital sector in India. Telecom, infrastructure, power and healthcare sectors have seen the most number of deals last quarter besides attracting the big-ticket investments. These sectors attracted large number of deals at a time when funds have been wary of investing as the global economy is expected to slow down and there is a sharp correction in corporate valuations across sectors. […]
A whopping 75 per cent of private investments in public equity (PIPE) deals of 2007 have gone sour for their investors, according to a study by Delhi-based NEXGEN Capitals. However, there is a silver lining to the PIPE deals story in India. Banking, financial services and insurance, telecom, and retail are the sectors which seemed to have survived the market meltdown. Retail was the top performer with returns of 41 per cent. An analysis of 63 PIPE deals stuck last year shows that infrastructure sector has been the worst performer. In 2007, the infrastructure sector saw PIPE deals worth Rs 5,912 crore but the marked-to-market value of these transactions has eroded nearly 50 per cent to Rs 2,967 crore as on July 7. NEXGEN Capitals, which is the merchant-banking arm of Delhi-based brokerage SMC Global Securities, said total investment of Rs 21,857 crore in PIPE deals last year stood at Rs 19,223 crore, down 16.7 per cent. […]
With a bearish phase prevailing over stock markets, valuations of private equity (PE) investments have taken a beating. Certain PEs which had overestimated companies to enter at high values have seen a decline in valuations due to volatile capital market conditions. A compilation of how PE investments of 2007 compare with current mark-to-market (MTM) values shows that about 58 percent of the PIPE (private investments in public enterprises) deals of 2007 are in the negative territory. According to the research undertaken by SMC Investment Solutions & Services (May 2008), the only ray of hope is that overall till-date-returns on PIPE deals of 2007 (on volume basis) are still in the positive, although at a margal 8.3 percent, despite rough market conditions of 2008. However, wealth creation is highly imbalanced in different sectors, with Banking, Financial Services & Insurance (BFSI), telecom and retail sectors ducking the volatile capital market conditions. On the other hand, sectors like IT & ITeS, infrastructure, healthcare and life sciences, media, manufacturing and real estate are in the negative zone. […]
In a sector that’s largely unorganised and dominated by family-run set ups, private equity and outdoor media owners are becoming strange bedfellows. But there’s also a catch — currently, most of the funding is going into newer players with interests beyond conventional media. Recently, Warburg Pincus invested about Rs 276 crore in the out-of-home (OOH) advertising company Laqshya Media. UTI Venture Funds, which is largely credited with identifying the sector, also invested an additional Rs 25 crore in the company taking the total investment to Rs 301 crore. The company had picked up a 15% stake in Laqshya for Rs 45 crore in October 2006. Earlier this year, another OOH media firm received funding to the tune of $50 million from Goldman Sachs and Lehman Brothers. Media reports now suggest that ICICI Ventures, Lehman and Goldman Sachs have lined up plans to pick up around 15-20% stake in the Bangalore-based OOH advertising firm Serve & Volley for Rs 250 crore. […]
With a bearish phase prevailing over stock markets, valuations of private equity (PE) investments have taken a beating. Certain PEs which had overestimated companies to enter at high values have seen a decline in valuations due to volatile capital market conditions. A compilation of how PE investments of 2007 compare with current mark-to-market (MTM) values shows that about 58% of the PIPE (private investments in public enterprises) deals of 2007 are in the negative territory. According to the research undertaken by SMC Investment Solutions & Services (May 2008), the only ray of hope is that overall till-date-returns on PIPE deals of 2007 (on volume basis) are still in the positive, although at a margal 8.3%, despite rough market conditions of 2008. […]
In the wake of the recent Ranbaxy-Daiichi deal that took many by surprise, private equity (PE) firms are treading a more cautious path in their approach towards investments in the fast-growing Indian drug companies. The way the leading Indian drug firm, Ranbaxy Laboratories, was acquired by Japan's Daiichi Sankyo, has made them realise the vulnerable nature of the domestic pharmaceutical industry and the need for more preconditions to prevent the promoter from selling off his company soon after the investments are made. Though PE interest in the pharmaceutical sector is rather small compared to other sectors, about 20 PE firms had made small investments in the healthcare sector in 2007. The significant ones included Chryscapital's $24-million investment in Mankind Pharma, Avenue Capital putting in $17.91 million in Morepen Laboratories, and Rideback Capital investing about $5 million in Granules India. The Ranbaxy-Daiichi deal is expected to make PE firms review their positions on investments in acquisition-prone industries like pharmaceuticals. “PE companies invest in a company if they feel that its promoter can deliver goods. If the promoter changes, then its a different ball game. […]
Private Equity investment in the real estate sector may go up as much as 15-20 per cent in the current fiscal to over $13 billion in the wake of acute crisis of funds plaguing the growth of the industry. “Private Equity players started investing in India's real estate space since 2005. The sector had received $2 billion private equity investment in 2005 which went up to $4.5 billion the next year and to a whopping $11 billion in 2007. This year, it should go up by 15-20 per cent,” financial services firm Jones Lang LaSalle Meghraj's Chairman and Country Head Anuj Puri told PTI. There are mainly three preferred routes for developers to ensure funds for their projects – raising funds from capital markets, pre-sales funds from prospective buyers and loans and advances from banks and other financial institutions. […]
Private equity as an asset class has been badly hit in the ongoing global financial crisis. But, there is no taking away from India, which has over the last few years emerged as a region of choice for a large number of overseas investors who want an exposure to this asset class. That said, the general risk aversion brought on by the credit crunch the world over may pave the way for a private equity investment structure that is not yet very popular in the country: fund of funds (FoF). Asieh Mansour, managing director and chief economist and strategist for RREEF Alternative Investments, the global alternative investment management business of Deutsche Bank said, “Across surveys that we've conducted, the message is clear that overseas investors have the Asian region, including India, on top of their radars, but would rather opt to invest via a fund of funds than maintain direct relationships with a 100 private equity funds that may be operating in the region.” […]
Private equity and venture capital investors are readying funds in excess of $2 billion (about Rs8,500 crore) to invest in India’s maritime infrastructure and logistics, as the country strengthens cargo handling facilities to meet rising demand for exports and imports. About 95% of India’s external trade by volume and 70% by value move by sea, but cargo handling and logistic costs are high because of deficient infrastructure and delays in shipments. “The sector is underdeveloped in terms of setting up of port capacities and related support infrastructure,” said Vipin Agarwal, assistant vice-president at Kotak Private Equity, part of the Kotak Mahindra Group. “As a result, the sector will witness lot of expansion activities.” The national maritime development programme, drafted by the shipping ministry, envisages an investment of Rs1 trillion to spruce up India’s maritime sector including ports, shipyards, marine logistics parks, inland container depots and related support services. Of this investment, 64% is expected to come from private firms. […]
An increasing number of private equity (PE) firms are making a beeline for investing in the booming energy sector. These firms have made a total investment of $990 million (Rs 4,158 crore) during the first five months of 2008 in this sector compared to just two deals worth $45 (Rs 189 crore) million during the same period of 2007. The energy sector, especially power, has been witnessing a lot of interest from PE investors, said Arun Natarajan, chief executive officer (CEO), Venture Intelligence, a Chennai-based research service company focused on PE and venture capital activities. Some of the big deals between January and May 2008 include Farallon Capital, L N Mittal India and Internet Ventures' investment of $395 million in Indiabulls Power Services in February 2008. In the Konaseema Gas deal in May this year, IDFC Private Equity and Lehman Brothers invested $125 million and in the KLG Power deal, TPG Growth put in about $50 million in April. […]
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