Private equity investors have pushed through exit transactions in India worth $534.7 million (Rs2,133.5 crore) in the first nine months of 2007, just a few notches short of the $589 million worth of transactions concluded in all of last year. It is estimated, based on potential deals in the pipeline, that before the year closes, the total value of exits would have scaled $1 billion. This would, however, still be well below the peak in 2005 when the total value of exits concluded by private equity investors stood at $3.3 billion. These numbers do not include exits by early-stage venture capital investors. The internal rate of return (IRR) on these exits—IRR is the profit earned after returning money to the limited partners and settling fund manager fees—cannot be ascertained yet. However, the growing size of deals and multiple exit routes used indicate that India is fast gaining credibility for returning value to investors and augurs well for future fund-raising for this market. Three of the eight disclosed exit deals this year are over $100 million against just one in 2006. ICICI Venture Funds Management Co. alone has pulled off three significant exits—from ACE Refractories Ltd, Subhiksha Trading Services Ltd and Deccan Aviation Ltd, and currently leads the pack in terms of total value of exits this year, at $161 million. […]

107 private equity funds focused on investing in the emerging markets of Asia, Europe, Latin America, the Middle East and Africa raised US$21.5 billion in capital commitments in the first half of 2007, compared to US$33.2 billion raised by 162 funds in all of 2006, reports the Emerging Markets Private Equity Association (EMPEA). “The pace of fundraising in the first six months of this year is evidence that investor interest in these markets is still growing,” said Sarah Alexander, EMPEA’s president. “These half-year figures are impressive, and we expect 2007 to be another record-breaking year for EM PE fundraising. A number of funds held significant closes later in the summer, and several large funds are expected to close by year’s end.” EMPEA estimates at least an additional US$7.7 billion was raised for EM PE funds in July and August, bringing the total raised year-to-date to over US$28 billion. Funds raised for emerging markets private equity investments increased over nine-fold between 2003 and 2006, according to EMPEA estimates. […]

Thanks to the two big-ticket deals, Tata-Corus and Hindalco-Novelis, domestic and overseas deals are now almost equal in value, in the first half of this year. “The first half of this year has seen mergers, acquisitions and takeovers on the domestic front to the tune of $25.5 billion as against overseas deals worth $25.6 billion,” said associate director of Ernst & Young Navroz Mahudawala. He was speaking at a seminar organised by FICCI on Dynamics of Growth Through Mergers, Acquisitions & Takeover. The average size of mergers and acquisitions has grown to around Rs 300 crore recently, he added. While the telecom sector has contributed nearly 41% of M&As in India, broking and asset management have also contributed significantly in 2007. “The pharma sector contributes around 6% as the deal size in this sector is considerably small. However, the sector might have the highest number of deals among all sectors,” Mr Mahudawala said. Most of the deals are by debt method he said. […]

Firms are opting for acquisitions over new projects as operational hospitals mean immediate revenue at lower costs. For an industry that is moving faster than fire in a vineyard, having to wait for more than five years just to get a green field project going can be rather frustrating. But increasingly now, in the healthcare industry, numerous hospital chains — in attempts to clamp down on their waiting periods, boost cash flow and expand into other parts of the country — are on the prowl for strategic acquisitions of other hospitals. Fortis Healthcare’s 46 per cent acquisition of Chennai’s famous Malar Hospitals last week was the second such acquisition for the north Indian hospital chain and also marked its first step into the south. Previously, in 2005, Fortis had acquired 90 per cent in the Escorts Heart Institute in Delhi along with three other Escort hospitals in Amritsar, Faridabad, and Chhattisgarh and a vacant plot marked for an Escorts hospital at Jaipur for more than Rs 600 crore. Towards the end of 2005, Apollo Hospitals acquired 51 per cent stake in Bangalore’s Imperial Cancer Centre and Multi-Specialty Hospital for Rs 35 crore, having already acquired Gleneagles Hospital in Kolkata, Sagar Hospital in Mysore and hospitals in Kakinada, Chennai and Madurai. Today, roughly 5-6 per cent of Fortis Healthcare’s entire revenue comes from Escorts alone. The acquisition that put the company on a financial backfoot that will only break next year, in retrospect, worked brilliantly for Fortis. […]

The promoters of Indian companies are hiking their stake through the issue of warrants and preference shares. A host of small and mid-cap companies such as Webel SL Energy, Madhucon Projects, Alphageo India and Almondz Global (formerly Allianz Securities) have issued warrants or preferential shares to their promoters in recent months. Companies generally opt for warrants as they are not required to pay money upfront and can redeem them within 18 months, according to experts. With the threat of takeovers looming large, promoters are using the preference and warrant route to increase their stake. A preferential issue is an issuance of equity shares to the promoter group or selected investors. It covers fully convertible debentures, partly convertible debentures or any other financial instruments that could be converted into equity shares at a later date. One of the main reasons why companies go for preferential issues is that they can raise money quickly and cheaply compared with other means such as IPOs or rights issues. However, since preferential issues are meant for a certain class of investors, the retail investors are deprived of investment opportunity. […]