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India ranks second in capital market inflows and fourth in merger and acquisition deals in Asia Pacific (including Japan), as deals worth $65.033 billion were reported in the first eight months of calendar 2007. The data compiled by Thomson Financial revealed that 121 Indian firms mobilised $23.96 billion, while there were 697 M&A deals worth $41.069 billion. The strong inflows saw India’s share in capital markets in Asia Pacific region increase to 17.3 per cent from 9.7 per cent in calendar 2006. With Indian firms making overseas acquisitions and placing shares to private equities, its shares in merger and acquisition deals have increased to 10.3 per cent from 7.9 per cent in calendar 2006. The Indian firms have heightened activities in equity market and mergers and acquisitions mart in the last four years. The equity markets snapshot shows that 56 firms mobilised 9.27 billion in 2004, 14.39 billion in 2005, $16.1 billion in 2006 and 23.96 billion in the first eight months of the current calendar year. On the M&A platform, the total cross boarder deals registered $4.3 billion in 2004, $12.58 billion in 2005, $34.72 billion in 2006 and $54.48 billion in the eight months of 2007. […]
Private equity's (PE) big fish are finding it hard to crack deals in India that are respectable by their standards. Last month saw Blackstone striking it big with investments in Gokaldas Exports ($170 million) and Nagarjuna Constructions ($150 million). But that was an exception. Such big-ticket transactions have not been easy to come by, especially for those with a mandate to invest only giant sums. Data compiled by Venture Intelligence, a research service focused on PE and venture capital activity in India, shows that 77 per cent, or 232 of the 302 PE deals in India in 2006, were in the sub-$25 million range. Of these, 104 were in the $10-25 million range, 55 in the $5-10 million band, and 73 were of the sub-$5 million variety. The biggest PE deal in India so far has been one by Carlyle – a $650 million investment for a 5.6 per cent stake in Housing Development Finance Corporation. General Atlantic's $18 million investment in Daksh eServices in 2002 was among the lowest. As a result, some PE firms are viewing India as a different market and are willing to scale down their minimum threshold levels here. […]
Although 2007 is likely to be another landmark year for private equity (PE) in India, the level of PE activity, currently estimated at around $10 billion, could increase and needs to increase multifold given India’s current GDP growth. To achieve this, regulations and taxes need to improve and the PE community needs to project itself in the market that it is a source of finance that contributes to the growth plans of entrepreneurs, helps generate employment and improves corporate governance. Having said this, PE financing is steadily gaining more acceptability amongst Indian promoters. This indicates a ‘leap of faith’ for closely-held traditional Indian family-owned and managed businesses, which until a few years ago, had viewed private equity financing as a possible interference in their business. The recent investment by Blackstone in Bangalore-based garments company Gokaldas Exports demonstrates this leap of faith. Blackstone has acquired a controlling stake from the owners. This transaction symbolises a traditional promoter-family run business partnering with a large private equity fund to accelerate its growth plans. This transaction demonstrates that Indian promoters are recognising the value that a PE brings to the partnership and PE investors are being viewed as ‘partners’ to the business. […]
Reflecting the buoyancy in India Inc's quest for global mergers and acquisitions, the country's largest private lender ICICI Bank today said it will have a role to play in 70 per cent of the deals that are expected to be about 35 billion dollars in aggregate during 2007. “Indian companies made overseas acquisitions worth 20 billion dollars in 2006, a level crossed during the first six months of 2007 itself… this year even on a conservative note overseas mergers and acquisitions are expected to reach 30-35 billion dollars,” ICICI Deputy Managing Director Chanda Kochhar told a news agency in an interview. “ICICI Bank's involvement — be it advisory, lending or syndication of loans — accounted for 70 per cent of the deals in the first half of the year and we hope to maintain this market share,” she added. Kochhar, ranked 30th in Fortune list of world's most powerful businesswomen, said the Bank also helped companies raise 24 billion dollars in overseas borrowings last year. It was quite possible for ICICI to be counted among the top 25 global banks, she said. […]
The financial crisis triggered off the by the US subprime mortgage meltdown, is already impacting Private Equity (PE) investing in North America and Europe. And depending on how our public equity markets react, it will impact the PE scene in India too. But, the nature of the impact is likely to be very different from that in the US and Europe. Because, PE in India is quite different from Private Equity in the Western world. While (unfortunately) there are many definitions of Private Equity, PE in the US and Europe is commonly used to refer to buyout investments and especially, leveraged buyouts (LBO) which involve taking on significant portions of debt to acquire (often) publicly listed companies – with a view to improving profitability and taking them public again (or selling them off) a few years later. With the sub-prime crisis raging, PE firms will find it very difficult to access cheap debt from banks – and reports have emerged on how the financing for several mega deals in the US and Europe have been placed on hold. In India, on the other hand, buyouts (let alone large LBOs) form a very small part of the PE market. Out of the 302 PE investments in India that Venture Intelligence had tracked in 2006, only 14 investments (i.e., less than 5%) were of the buyout variety. And only one of these deals – the KKR-led buyout of Flextronics Software – was valued at over $100 million. Even without including the 22% of PE investments which went to listed companies, an overwhelming 75% off all PE investments in India went into unlisted companies in various stages of their growth. […]
If more and more private equity (PE) firms are refraining from investing in tobacco, liquor and gambling companies, it shows the growing Arab interest in India. As the oil sheikhs find alternative investment avenues like rupee-backed assets an attractive proposition, PE firms are undergoing a 'purge'. Alok Sama, founder and president of Baer Capital Partners, which recently raised a $250 million PE fund for India, says one-third of the money was from the Gulf region. Sama said the $250 million fund will not invest in alcohol and gambling companies – sin businesses for Gulf investors. “If you examine the books of funds like Carlyle and New Vernon, they raise a chunk of their capital from the Gulf region,” said a PE investor who did not wish to be named. The trend started after 9/11, when a lot of Middle East investors started withdrawing money from the West and looking for safer avenues. Its traditional ties with the Gulf countries and success story among emerging markets made India an obvious destination. […]
Private equity fund investment in India has risen to $2.48 billion till July driven by the country's robust economic growth and investors are now likely to target opportunities in the core sector in the days ahead, a latest report says. The India fund pool, referring to the investments made by PE funds in the country, has already crossed USD 2.48-billion mark in the first seven months this year, compared to a total of $3.28 billion in 2006, data complied by Asia Private Equity Review (APER) shows. “In recent weeks, the closing of a number of funds brought in an additional $1.62 billion of fresh capital. With the additional $1.16 billion also currently being raised, the PE funds pool in India is set to swell to a new level during the year,” a report by UK-based global PE advisor Almeida Capital based on the APER data said. […]
Forget about Henry Kravis and Stephen Schwarzman. Mergers and acquisitions may set a worldwide record of more than $3.57 trillion before this year ends without a megadeal from the kings of leveraged buyouts. Bankers specializing in mergers and acquisitions need to drum up only $486 billion in transactions during the next four months to boost fee revenue to more than $11 billion for the first time, data compiled by Bloomberg News show. Only once in the last seven years, during the takeover drought of 2002, have they failed to crack the $500-billion mark from September through December. As contagion from the U.S. sub-prime mortgage crisis sidelines Kohlberg Kravis Roberts & Co. and Schwarzman's Blackstone Group, overseas buyers are stepping in. Indian billionaire Ratan Tata and Dubai's Sultan Ahmed bin Sulayem are just two of the investors seeking to benefit while competition is scarce and the dollar is cheap. “Cross-border activity will keep the volume up for the balance of the year,” said Frank Aquila, a partner at Sullivan & Cromwell in New York, the top legal advisor on mergers this year. “Transactions are still being announced.” International buyers will spend more on takeover advice in 2007 than ever before, as higher borrowing costs constrain leveraged buyout firms. Investors from Saudi Arabia to Sweden already have announced $282 billion of mergers and acquisitions in the world's biggest economy, according to Bloomberg data. […]
Barring a minor “ripple effect”, private equity (PE) players do not expect the US subprime crisis to truncate inflows into India in the near term. Absence of leveraged buyouts (as in the US and Europe), abundance of India-dedicated funds and renewed interest among “long only” pension and endowment funds would provide the necessary cushion for PE funds operating in India, according to experts. The Reserve Bank of India, in its 2006-07 annual report, recently warned that PE funds, which are major investors in emerging market economies like India, could pull out in the face of continuing crisis in the US house mortgage market. “There should only be some ripple effect in the near term. Unlike in the US and Europe, Indian PE funds do not indulge in leveraged buyouts (LBOs),” said Venture Intelligence CEO & founder Arun Natarajan. “Secondly, unlike during the 2000 stock market scam, when PE players retreated in large numbers, there is an abundance of India-focused PE funds now. This negates chances of fund disbandment and pull out. Thirdly, (post the subprime scare) we are still seeing deals happening in the PE segment,” Mr Natarajan added. A peep into the available data for the past two months, since the beginning of the subprime scare, show that there has been no serious dip in the number of PE deals. About 47 deals worth $2,360 million were effected in July and August as against 68 deals worth $1,080 million during the same period in 2006. […]
Private equity (PE) investors, including early-stage venture capitalists, have poured more than $433 million (Rs1,775 crore) into environment-related businesses, primarily wind energy and clean fuel, in the country since 2001. The number, though minuscule in the context of the estimated $7 billion that was invested overall by PE investors last year, is a significant achievement for the cash-strapped sector. Investors and advocates said that closing investments in such businesses is still difficult but expect the pace to pick up in the next five years. So far, investors have put down an average of $33 million into companies that, for example, turn sugar into clean fuel or make cars that run on an electric battery. Overall, investments favoured wind energy, which saw four companies receive funding worth $224 million, and clean fuels, where five companies got $141 million (see accompanying table). A large portion of the investment dollars were focused on a handful of companies including Suzlon Energy Ltd, Aryan Coal Benefications Pvt. Ltd and Natural Bio-energy Ltd—two of which received more than one round of funding. A majority of the deals— 56%—were closed last year. This mirrors trends in the US market, where investments grew from $820 million in 2005 to $2.36 billion in 2006, according to Venture Power Newsletter on venture capital investment in clean energy. Most investors are driven by the domestic need for power and water in India, and making that energy supply sustainable as the country develops. “People are looking at India as a market for things, not as a source for things,” said Vineet Buch, principal at Menlo Park, California-based venture capital (VC) firm BlueRun Ventures. “Where there is a market, domestic supply will emerge.” But, there is also the potential for a broader market as the world continues to draws its attention to climate change and conserving the environment. […]
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