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Venture capitalists invested some $928 million in 80 deals for entrepreneurial companies in India during 2007, according to the Quarterly India Venture Capital Report published today by Dow Jones VentureSource. This was a whopping 166% increase over the $349 million invested in 36 deals in 2006 and easily the highest total on record for the region. The report found nearly 48% of all venture financing deals in India were for Information Technology (IT) companies, as 38 rounds were completed, accounting for $384 million, more than India's entire 2006 venture investment total. The most popular recipients of venture capital in the IT industry were companies in the Web-heavy “information services” sector, which accounted for 22 deals and nearly $141 million in investment. Among the deals in this area was the $10 million second round for Bangalore-based Four Interactive, an online provider of local information on food, events, lifestyle, shopping and more. […]
The government is considering a sovereign investment fund with an initial corpus of $5 billion to acquire companies abroad. The investment fund may also be used to bolster the country’s energy security by acquiring coal mines and oil and gas blocks abroad. Prime minister Manmohan Singh has issued a directive to the finance ministry in this regard, and an announcement is likely in the Budget, an official said. According to officials, one of the options available to the government is to create a special purpose vehicle (SPV), which will borrow funds from RBI in the form of long-term securities in foreign currency and lend the same to Indian companies at lower rates. Thus, RBI and the government will be able to earn more on forex reserves, which currently fetch average returns of 3.5-4%. The new fund will be on the lines of the infrastructure SPV being set up in London. It is learnt that the decision to form a fund was taken at a recent meeting of the PM’s council on trade & industry. Along with industry leaders, Planning Commission deputy chairman Montek Singh Ahluwalia, finance minister P Chidambaram and commerce & industry minister Kamal Nath were present at the meeting. The sovereign fund is part of the government’s plan to maintain high economic growth. Kuwait Investment Authority, the Government of Singapore Investment Corporation and Temasek Holdings are examples of such sovereign funds. Last September, China floated a $200-billion sovereign wealth fund, China Investment Corp. […]
Indian government's Department of Industrial Policy and Promotion (DIPP) is likely to start tracking the duration of investment, entry and exit patterns of private equity in India, the Economic Times reported, quoting unnamed sources. It however quoted a DIPP source as saying it will not resort to regulatory measures as this could send a wrong signal to investors. Many foreign private equity funds take over company managements rather than staying as only financial investors, with 10-15 pct stake, and the government will monitor the outcome of such management takeovers on the health of the company, the daily added. SEBI had earlier said overseas funds picking up controlling stake in listed Indian firms through the secondary market can lead to asset stripping as identities of many of the foreign investors involved with such funds are not disclosed and the ultimate source of funds is not verifiable, the paper noted. Private equity deals announced in 2007 amounted to 19.03 bln usd, of which Temasek accounted for 2.5 bln usd, the paper said. As many as 386 private equity deals were struck last year with major funds including Temasek, GIC, Blackstone Group , Warburg Pincus, Carlyle Group and Actis Capital the paper said.(Forbes) […]
Markets may have crashed, justifying some recent high-profile exits by leading private equity players from Indian companies, but their pullouts may have cost them a few billions, at least notionally. Some number crunching by ET shows that although global PE majors like Warburg Pincus, Baring, ChrysCap and Citigroup Venture Capital have made big profits from their Indian investments, they would have pocketed a few billions more had they held on to their shares for a little bit more. And this is exclusive of the dividend money which would have accrued to them while they were holding the stock. Given the spectacular bull run over the last couple of years in the Indian stock markets, the value of the listed firms rocketed sky high. While some PE funds timed the market right by exiting at a price with a fair degree of profits in Actis-Punjab Tractors, IDFC Private Equity-Hotel Leela Venture, many others made huge losses from their early exits, notionally speaking. Take Warburg Pincus’ investments in Bharti Airtel. This has been the most valuable exit by any PE firm in the country till date. The PE firm had invested Rs 1,300 crore in 1999 in the telecommunication company. Subsequently, through various partial exits, it made a phenomenal Rs 8,496 crore, or $1.9 billion, at the time of the final exit, taking home more than six times its original investment. […]
Signs of weakness in the primary market issuance can bring private equity (PE) deals to the fore, experts believe, as higher cost of debt may not prompt issuers to borrow significantly. Expansion and future projects of these companies cannot be delayed, however, and weak response from the equity market is likely to push them towards PE. “Certainly, the environment is positive and has improved on the backdrop of this (primary market weakness), we can see better traction and momentum in PE deals,” said Pankaj Karna, partner and head mergers and acquisitions, lead advisory, Grant Thornton Corporate Finance. In the last two days, two major public issues – Emaar MGF Land and Wockhardt Hospitals – have been withdrawn on account of weak response from investors. In 2007, India witnessed over 150 per cent rise in deals worth $70 billion, according to Grant Thornton’s Deal Tracker. Out of the total, $51.11 billion was the value of strategic mergers and acquisitions involving Indian companies, and the remaining $19.03 billion was the result of PE deals having average size of $47 million. […]
Private equity investors are showing a greater interest in special economic zones in the country, according to ICICI Venture, one of the major PE players. In a write-up, which forms part of a report titled ‘Private Equity Impact 2008´ released by Venture Intelligence, which tracks private equity and venture capital investments in India, ICICI Venture said: “PE investors are finding SEZ story interesting and are increasingly making larger and more investments in SEZs in the country.” The report has listed recent PE investments in SEZs such as the one by ICICI Venture, which has invested $40 million in an IT/ITES zone in Hyderabad and DLF’s receiving $400 million from US hedge fund DE Shaw. Besides, it noted, that Trinity capital has invested about $75 million in Luxor Cyber City and Mundra Port and SEZ receiving an unspecified private equity investment before its IPO. According to ICICI Venture, while private equity would be willing to come into large SEZs, they are also talking to some of the developers of smaller SEZs for pharma, gems and jewellery, and textiles. […]
Deals indicate growing interest of private equity firms in India's pharma, healthcare segments. Private equity firms are discovering value in picking up small stakes in Indian pharma and healthcare companies. At least two dozen such deals, worth about $400 million (or Rs 1,600 crore), have happened in the last year. The cumulative investment, although not significant in size when compared to that in sectors like real estate or infrastructure, is indicative of the active interest by some 20 PE firms in India’s pharma and healthcare sectors. Only last week ICICI Venture announced the acquisition of substantial stake in Sahyadri Hospitals Ltd for $35 million (Rs 140 crore). Experts think it is a trend that’s here to stay. “We are certainly looking at buyout opportunities in the domestic pharmaceutical space this year,” said Sanjiv Kaul, managing director, Chryscapital. “We can bring in smart capital, world class teams and facilitate international collaborations through partnerships.” […]
This week’s government decision to cancel the empowered group of ministers meeting, which was to take a final call on crucial decisions on special economic zones (SEZ), dented the ambitious plans of private equity (PE) firms to invest in these tax-free enclaves. Many PE firms plan to withdraw from their proposed SEZ investment plans as the frequent changes in the SEZ policy makes their investment look unviable. Following nation-wide protests on alleged forced land acquisition for such tax-free enclaves and industrial projects, the government had in April 2007, capped the maximum area for a single multi-product SEZ at 5,000 hectares. Besides, the finance ministry suggested withdrawing such tax exemptions, though the commerce ministry pitched for commercial viability of SEZs. […]
Private equity deals are set to shrink in number and size during 2008 on the back of fears over US economic slowdown while moderating valuations will throw up good investment opportunities too, industry players said on Thursday. The year would present a more difficult environment for PEs than 2007, when booming economy and entrepreneur activity attracted record investments in India, PR Srinivasan, managing director of CVC International said at the Venture Intelligence conference. “The rush would not be as big as 2007. So, expect a sedate year ahead in terms of large PE deals.” According to a report by IndusView, an India-focused cross-border investment advisory and financial services firm, private equity investment to India touched more than $13 billion in the period between January and October last year. “Although there is a buoyant entrepreneurial climate in the country, PEs would have problems in the coming year if the slowdown in the US continues at the same pace, as nearly 95% of the PE money coming to India is either from the US or Europe,” said Varun Sood, managing partner, Capvent. […]
The momentary uncertain economic scenario, slowdown in export-driven industries, high interest rates and lacklustre credit growth in the real estate markets have raised the question of a slowdown in real estate market in India. Historically, real estate development in India has been highly fragmented. The nascent growth in our realty market, aided by copious flows of private equity, is helping the real estate development process get organised with increasing corporate and institutional participation. These developments, coupled with healthy economic growth indicators and a new-found comfort in this sector triggered a lot of activity and capital appreciation in the sector over the past few years. While the overall activity in the market remains healthy, the past 12-18 months have seen some degree of rationalisation in residential prices. Even though this might be a result of increased interest rates, decreased holding power of speculative investors and sudden flush of supply in some suburban areas, there is probably a case to admit that if not a slowdown, the marginal rate of growth certainly seems to have come down significantly as compared to the past few years. Contrary to the above, the commercial and retail sectors continue to demonstrate record absorption and bullish price movement. One may however argue that significant supply on account of SEZs and other new projects may bring about some due rationalisation in prices in these sectors over the next few years. If at all there is a slowdown, it will be a mild one given the demand indicators across sectors and the attractiveness of India as an investment destination. Also, a slowdown will be the best thing to happen for the long-term potential and growth of this market. […]
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