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Escalating interest rates, perception of a real estate asset bubble and aftershocks of US subprime credit defaults have not dampened the spirits of overseas funds looking to invest in the Indian realty sector. In the past nine months, overseas funds have raised around $2.4 billion towards investment in real estate projects; and if estimates are to be believed another $1.1 billion will flow in before the end of this year — taking the grand total to a whopping $3.5 billion. Real estate fund-raising continues to boom in 2007 following strong returns from real estate firms. According to the London-based Private Equity Intelligence (Preqin), 88 new funds have raised an aggregate $59 billion this year as compared with $72 billion by 116 new funds in the whole of 2006. Although firms are raising record amounts of capital, there are now more funds on the road than ever. Over 200 funds are looking to deploy an aggregate $105 billion in the sector across the world in 2008. This is thrice the amount raised as recently as January 2007, and a massive six times increase from January 2006, says a Preqin study. […]
When it comes to project financing, realty-focused private equity funds are churning out the dollars. JP Morgan's USD 360 million India-focused fund has made its largest investment so far in an IT park in Navi Mumbai. This 40-acre plot, near Patni Knowledge Park in Airoli, in Navi Mumbai, will soon host a sprawling IT park. JP Morgan's realty fund will cash in on demand from it and ITES companies to shift to such cheaper locations. The fund will invest Rs 100 crore or over USD 25 million in the development. We hear JP Morgan's property fund will buy 40% in the 4.5 million-square-foot IT park, to be developed on this plot by the B Raheja Group. Although the Rahejas and JP Morgan have refused to comment on the deal, according to sources, B Raheja will consider applying for an IT SEZ notification for this development. The B Raheja Group recently received an investment of USD 45 million from US-based investment banker Wachovia, for two projects in Bangalore. And JP Morgan's realty fund has invested USD 10 million each in Hyderabad-based Modi Developers and Chennai Based Arihant Foundations for middle-income group housing. The fund is also about to finalise an investment in an IT-cum-residential complex in Kolkata's new town Rajarhat with Unicon Builders.(Money Control) […]
Private equity has come a long way since the days of Technology Development and Information Company of India (TDICI), the first Indian company with a mandate to do venture capital, that was floated jointly by ICICI and UTI in the late 1980s. The quarter to September 2007 saw $3.52 billion worth of private equity deals in India – something TDICI's first president and chief executive officer Kiran Nadkarni could not have imagined in those in his wildest dreams. Nadkarni moved on and TDICI became ICICI Venture in the mid-1990s. But that's another story. Cutting to the chase, private equity is gaining juggernaut proportions in India. Private equity is a broad term which means shares of a company that are not listed on an exchange. So traditionally, those who buy such shares are called private equity investors, and, according to a recent study by Evalueserve, there are 366 of such entities operating in India. […]
A clutch of investors are understood to have evinced interest in the country’s largest urban housing project. Five Private Equity (PE) firms, including Warburg Pincus, Goldman Sachs and AIG, are mulling exposure in the Rs 62,000-crore Satyagriha project involving around 20 realty developers across 15 Indian cities, sources said. India’s biggest private sector housing venture is expected to develop 342,000 homes priced between Rs 7-75 to Rs 22. 25 lakh over the next six years. The project is being marketed and managed by Bangalore-based Asipac Projects, and is expected to kick off in Jaipur later this month. The total land under development for the project is 634 acres. Besides Warburg, Goldman and AIG, two other funds, Barings Asia and Lightspeed Ventures, have also shown preliminary interest in picking up stake in the master asset holding company of the project, sources added. Sources said some of the bigger PEs could take an exposure of around $300 million initially. It is believed that a relatively smaller fund like Lightspeed could look at sewing up a consortium play targeted at one segment of the project development. It is possible that the project with a unified procurement, marketing and sales strategy might have multiple asset management companies. For instance, procurement alone could look at big-ticket investors given its Rs 24,500 crore size over a six year period, sources added. When contacted, Asipac Chairman Amit Bagaria declined to comment. The first phase of the Satyagriha project will include 64,000 homes spread over 18 projects in 10 cities. […]
Private equity interest in microfinance institutions (MFIs) is reaching a crescendo with heavyweights such as Blackstone and Carlyle willing to invest in the sector. Both these groups have shown interest in putting money into MFIs, said a source close to the development. The quantum of investments may be upwards of $20 million. The target firms are not yet clear. “They are keen on making huge investments, but they are yet to decide on the MFIs. Since most of the big MFIs are saturated with funds, they may need to look at multiple investments in smaller MFIs,” the source said. There nearly 15-20 serious funds in the sector, but very few look at tier 2 and 3 categories of MFIs. While the Blackstone group refused to comment, a spokesperson at Carlyle was unavailable for comment. “PE investors look at hard growth numbers and these organisations throw up incredible growth figures, year after year. With a CAGR of 100%, this sector is very attractive,” he added. Of the 200 odd MFIs in the country, only the top 10 corner most of the funds. PE investors find it a daunting task to zero in on credible investments. […]
The surge in capital inflows over the past few weeks, especially through the portfolio route, has prompted the central bank to move to discourage such flows. RBI has called for a ban on incremental or fresh issuance of participatory notes (PNs) to overseas investors by foreign institutional investors (FIIs), tightening of due diligence norms for issuance of PNs, and some controls on other forms of capital such as private equity, government sources said. However, they said the government may not favour such drastic measures. Instead, the government and capital markets regulator Sebi are working on a framework that will make investing in Indian stocks through PNs more expensive. The broad objective is to ensure that all investors come in a transparent way. In the next few weeks, Sebi is expected to unveil the names of some big-ticket foreign investors who until now had bought into Indian stocks through PNs, but are now set to register directly as FIIs and set up compliance offices here. Sebi sources said these are investors whose portfolios run into billions of dollars. […]
Last year, at the height of the buyout binge by private equity funds, German regulators waded into those managing such funds, dubbing them as a bunch of locusts. Some reckon that they are barbarians. RBI governor YV Reddy is not given to such outbursts. Yet on Monday, three weeks in the run-up to the monetary policy review — a silent period — he made a pointed reference to the role of PE in India. According to Mr Reddy, a significant component of foreign direct investment (FDI) is in the nature of PE or acquisitions of existing firms. What he meant was that foreign money was being poured not into greenfield or new ventures, which is what policymakers would expect out of FDI which ranks right on top of the hierarchy of preferred investment flows. Although there is no outrage like in the West here, given the incipient nature of PE investment in the country, the figures reflect the concern of India’s financial regulators. In FY07, close to 30% of the total FDI inflows were reckoned to be PE flows through just transfer of shares by locals to foreign funds. In the first three months of this fiscal, estimates are that more than $1 billion has again come into the country through this route. By the end of this fiscal, estimates are that PE flows could top the $13-billion mark. […]
Private equity funds are beginning to emerge as a major source of FDI for India. PE funds may invest as much as $13.5 billion this year, making India the seventh highest recipient of PE funds in the world. PE funds have faced opposition in many places. In Germany a politician once referred to them as locusts. They also faced political opposition in South Korea, Thailand and Japan. In the US, the home of private equity, they have always been controversial, often being accused of destroying jobs as companies acquired by them go through wrenching restructurings. In India, by contrast, there has been no problem whatsoever. There are many reasons for this. Some of the investment classified as private equity appears to be little more than portfolio investments, though somewhat more long term. In India the managements have usually tended to keep control. For example Temasek, the Singapore sovereign wealth management fund and a significant PE investor, has taken stakes in a number companies, but these have been minority stakes. […]
Reddy expressed concerns regarding private equity flows while dwelling on the issue of setting up a currency stabilisation fund and sovereign wealth fund. “We have been seeking comfort in the nature of investment associated with capital inflows through hedge fund channels and participatory notes. Similar issues could also be relevant to private equity flows,” said governor, Y V Reddy, in his address at the golden jubilee function of Foreign Exchange Dealers Association of India (FEDAI) today. The objective of establishing a stabilisation fund is to smoothen revenue flows arising out of volatility in commodity export proceeds. A wealth fund is generally created amid current account surpluses by using a part of the foreign currency assets. Reddy said that a large part of the capital flows into India were portfolio investments, while a significant part of foreign direct investment (FDI) was in the form of private equity and geared towards brownfield projects rather than greenfield investments. […]
Private equity (PE) investment in the country are set to touch $13.5 billion this year, making India one of the top seven recipients of such funding in the world, a new study said. It is projected to reach around $20 billion by 2010. According to a study by research firm Evalueserve, there are more than 366 PE firms operating in the country while another 69 are planning to start operations soon. “They have amassed $48 billion, which are earmarked for investments in India in the next three and a half years,” says the report. Investments made by private equity firms in India have seen a drastic rise, touching $7.46 billion from 299 deals in 2006. The figures stood at $2.18 billion from 146 deals in 2005. The investments were just $20 million from five deals in 1996. […]
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