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Private equity deals appear to be back on track even as strategic acquirers seem to be holding back after the market meltdown in January dented corporate valuations. According to data for March, the number of PE deals jumped 20% compared to February, while strategic mergers and acquisitions (M&As) continued to shrink. As many as 34 PE deals were announced in March, compared to 28 in the previous month. While PE deals have picked up, large deals have dried out. Just one $100 million-plus deal was inked during the month against 7-8 such deals each during January and February, according to the latest deal tracker of advisory firm Grant Thorton. This is also reflected in the cumulative value of PE deals, which is down by almost half at $960 million, from $1.73 billion in February. The data collates the value of announced deals and would be higher than the actual PE fund flows as some transactions take time to close. The largest PE deal in March saw Singapore’s Orient Global Tamarind Fund picking 2.6% stake in Cairn India for $278.7 million. […]
The recent crash in the stock market, among a host of other things, has made the life of people managing venture capital (VC) and private equity (PE) funds a lot easier. Companies, which till recently had the option to either get VC funding or tap the primary market directly, are now finding the second route nearly closed. And a resultant effect is that top VCs are again being pursued by companies looking for funds, top officials at VC-PE funds said. This is a welcome change from the days when some of the VCs even went to companies to convince them to take funds from them. Till about January this year, VC and PE funds almost had to make companies understand that there was greater value in taking money from them than tapping the capital market directly. But the irrational valuations that the market gave to all and sundry made a number of entrepreneurs greedy. […]
Private equity firms, which were once hot on Indian real estate, have of late turned wary of investing in realty companies whose shares have been hit by a worldwide slide in stock prices. Placement deals worth between Rs 15,000 crore and Rs 20,000 crore by Indian realty firms have been put on the hold, according to investment bankers tracking the matter. “Although investors are willing to renegotiate prices, the companies cannot make any placement because regulations do not permit them,” said Yogesh Kapur, vice-president at Enam Financial. The Securities and Exchange Board of India prohibits listed companies from making private placements at prices below the average for six weeks or six months, whichever is higher. […]
Most PE or VC firms, which arrived in India in past 12 months, are perhaps finding the going a little tough. There seem to be quite a few firms which have done no deals yet, or at best one or two deals in say 12 months of being active in India. In other words, many of these firms are as yet finding their way around in the Indian markets. A look at the data would also give some indication. In the first quarter of 2008 (Jan-Mar), private equity firms invested about $3.3 billion in 97 deals according to Venture Intelligence. In Jan-Mar 2007, there were 101 deals. So while the number of PE firms is perhaps up 15-20% in the same period, the number of deals going around is roughly the same. The learning here is simple — traditional PE models which apply in say, US or Europe, may not always work in India. For example, it is hard to do large deals in India, for more than one reasons — supply remains low, consequently valuations are often an issue. Deals like buyouts are still harder. […]
After the big private equity (PE) deals of Mahesh Tutorials ($12 million by Helix Investments Advisors) and Career Launchers ($10 million by Intel Capital) in the education sector, more deals are likely in the days ahead. “Through Mahesh Tutorials itself, we have two other deals, which would be made shortly,” said Cyrus Driver, director of Helix Investments Advisors, which has about $70 million in its corpus waiting to be deployed. “We are bullish on the education sector. Over the next 12 months, it looks very attractive.” It goes without saying that the Budget announcements for the current fiscal would provide a fillip to the education sector. However, private institutions are not on Driver's radar. “They are non-profit organisations,” he said. He said he is open to investing in firms targeting students preparing for competitive exams such as IMS, Time etc. Neel Broker, principal and India head of Sterling Partners, said, “We are very excited about the sector. We are looking across the education spectrum. We would focus on distance learning, too.” […]
It is a segment that is still considered to be in its infancy, but that has not deterred investors who poured close to $100 million (around Rs400 crore) into health care firms through 2007, up from $41 million in 2006. Venture capitalists (VCs) invested a total of $928 million in entrepreneurial companies in India during 2007, according to the India Venture Capital Report, published by Dow Jones VentureSource. Companies in the health care sector accounted for more than one-tenth of this investment. This year, the country’s oldest and largest private equity firm, ICICI Venture Fund Management Co. Ltd, is upping the ante. It has launched a new firm, Iven Medicare, that will lead all investments in this sector. To begin with, the firm has finalized four deals totalling close to $70 million, with three more deals in the pipeline. It is not just health infrastructure, such as hospitals and diagnostic laboratories, that is attracting investor attention. Start-ups focused on rural health care, online medical services, design and manufacture of medical devices and specialized services such as telemedicine and teleradiology are also raising equity capital. […]
The turmoil in the stock markets is showing. The private equity (PE) investors who were considered the step-through in the investment chain are cooling their investments. Worse still, the feeling is that this may continue in the following quarters. Venture Intelligence, a research firm focused on PE and VC investments, said in a statement, that during January-March 2008 quarter investments worth $3.30 billion across 97 deals were completed. However, on a sequential basis, during the October-December quarter, 131 deals saw as much as $5 billion invested. For the corresponding quarter January-March 2007 though $2.70 billion got invested in 101 entities. […]
PE firms invested about $3.3 billion in the first three months of this year, $0.6 billion more than in the same period last year, according to a study by Venture Intelligence, a research service focused on PE and venture capital. “Last year, PEs competed with the public markets for investments. If the competition for public markets slows down, then more deals will get done among companies that see PE as an alternative to raising money from the markets,” said Venture Intelligence founder & CEO Arun Natarajan. Mr Natarajan added that the choppy market conditions would not be conducive for Pre-IPO and PIPE (private investment in public equity) deals in the medium term. Also, the spurt in deals in the late stage segment account for 60% of the amount invested during Q1 2008. The amount invested during the quarter was higher than that during the same period last year (which witnessed 101 deals totaling $2.7 billion) but lower compared to the immediate previous quarter (which witnessed 131 deals totaling $5 billion). […]
India is an attractive venture capital (VC) destination today and the future will only get better. Many more VC funds will come in and entrepreneurs, at least the good ones, will be badgered by VCs for ‘lets-get-to-know-each-other-better’ meetings. This capital availability and increased VC activity is good for the entire entrepreneurial ecosystem. But, in all this hype and hysteria about VC and entrepreneurship, something has been missed. Namely, that in as much as due diligence is performed by VCs on entrepreneurs prior to making an investment, a reciprocal arrangement needs to be in place for VCs. Wheat needs to be separated from the chaff, the genuine from the pretenders. Classic VCs are partners in business, not purely opportunistic money makers. They see themselves as company builders, not just as investors. They don’t take short term stock market oriented investment decisions. They help build successful businesses, not spend time on financial engineering. In the early days of the Indian VC industry (that’s less than 20 years old!), most of the VCs had a lender’s mindset where risk minimisation (zero risk?) took precedence over risk management. They found it hard to understand the startup situation used as they were used to more stable and less risky Companies. The situation today has undergone a sea-change with the entry of Silicon Valley style VC funds. […]
The diminishing appetite of investors is hurting the fund raising plans of the PE players. Corporates are also in a tight spot as the markets have turned unfavourable in terms of raising money. Said a source at the financial institution, “We are hoping to close the fund by June-end and there is a possibility of falling short by 15 per cent.” Since there is a turbulence in the global markets, some of the PE players are postponing their fund raising plans, while others are revising their original targets and extending closing dates for their funds. According to banking sources, ICICI group — which is planning to raise over $7 billion for its PE activities — said the entire process is being prolonged because of the market conditions. “The fund raising plans of PE firms will be dampened considering the current market conditions. There will be a temporary flip,” said P Harshavardhan, partner & director, Boston Consulting Group(India). According to industry estimates, the amount being raised by PE players is more than $12 billion this year. This figure, however, does not include real estate funds. […]
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