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The ministry of corporate affairs has arrived at an understanding with the finance ministry on not using the criteria used in other sectors for regulating mergers in the banking sector. The size threshold for merging companies to seek the competition regulator’s approval would be appropriately raised for banks after the Competition Commission of India (CCI) gains experience, sources said. The corporate affairs ministry, which turned down a finance ministry proposal to the effect, introduced the competition amendment Bill, 2007, in Parliament last week, with a uniform threshold for all sectors. The understanding with the finance ministry is that it would be suitably modified to keep mergers that do not adversely affect consumer interest out of the purview of competition regulation based on the regulator’s experience. As per the existing norm, a combined entity with more than Rs 1,000-crore assets or Rs 3,000-crore turnover in the country should notify the regulator. In the case of entities having overseas presence as well, the bar is $500-million assets or $1,500-million turnover in the country and abroad taken together (in addition to separately meeting the local requirement). However, for foreign companies merging abroad and for group companies, there are separate thresholds. The government expects the competition regulator to be fully functional by April. The norm is set to come under sharp focus in the light of State Bank of India (SBI) merging its subsidiaries with itself and the global consolidation of banks that have a presence in the country. Banking sources say SBI’s move to acquire the smallest of its seven subsidiaries, State Bank of Saurashtra, is likely to trigger more M&As in the sector. […]
Private equity's appetite for India's fast-growing economy has not been spoiled by the global credit crunch and investment is expected to stay on track to rise by a third to $10 billion this year, with fewer but larger deals. Blackstone Group has struck two deals in India totalling $315 million in just over a week, while 3i Group is setting up a $1 billion India infrastructure fund and ChrysCapital has a new $1.25 billion cross-sector India fund. Blackstone has said it has a “huge pipeline” of deals in India and was targeting deals in the $50-$500 million range, even as the U.S. and European credit markets remained frozen. Private equity firms and takeover advisers in India say Blackstone and others are right in going ahead with plans. “A lot of money has been raised by India-specific funds recently, and that money has to find a home here,” said Rishi Sahai, director, IndusView Advisors Pvt Ltd. […]
Niche retail start-ups are the flavour of the season for venture capital funds that invest in early stage companies. From Printo Document Services Pvt. Ltd, a retail chain that offers on-demand print services, to Mango Digital Vending Machines Network Pvt. Ltd (Mango DVM, for short), which aims to sell digital music from 400,000 kiosks across the country by 2010, retail companies focusing on specific needs of customers are being wooed by venture funds that see a huge opportunity in building niche businesses. For good reason. “Retail is not just a big boys’ game; small start-ups with a clearly defined product offering will do very well in the Indian retail market,” says Raman Mangalorkar, who heads the consumer and retail practice for Asia at consulting firm A.T. Kearney Ltd. For the third successive year, India has been ranked the top destination for retail investments by an index the firm uses to track retail activity in 30 emerging global markets. Investors picking up equity in these start-ups have their eyes on a sector on the cusp of explosive growth. By 2010, the Indian retail industry is expected to reach revenues of $427 billion (Rs17.5 trillion) up from today’s $350 billion and, according to AT Kearney estimates, could nearly double to $635 billion by 2015. With organized retail accounting for just 3% today, reckon investors, the expansion can only be rapid. […]
IF global private equity (PE) and venture capital(VC) funds are queuing up to invest in India, it’s not only because the country offers a compelling investment opportunity. It is also because most of the funds have Indians at the top. According to independent estimates, as much as 15-20% of the team members of some of the global funds are Indians. We are not talkign about the usual top names like Ram Shriram, Vinod Dham, Promod Haque and Vinod Khosla, but of a new crop of PE and venture capital investors who occupy senior roles in firms like Blackstone, Permira, Carlyle, General Atlantic, Warburg Pincus, Apax, Battery Ventures, Bessemer Ventures and Sequoia. Take the US-based buyout fund Blackstone, for instance. The world’s largest PE house has about 11 Indians in its team of 148-odd members. Some of the top names who serve as senior managing directors of Blackstone include AJ Agarwal, Akhil Gupta, Punita Sinha, Prakash Melwani and Manish Mittal. Similarly Carlyle, which has a large global team of more than 400 people, has close to 30 executives of Indian origin. In General Atlantic Partners, there are 15 Indians out of the 87 team members. Warburg Pincus, which hit a jackpot with its early investment in Bharti Airtel, has 25 Indians among the 150-plus member global team. Besides these top PE firms, there are ex-bankers like Arshad Zakaria, who has set up New Vernon Capital, and Vikram Pandit, who recently sold his hedge-cum-private equity fund Old Lane to Citicorp. […]
Mergers and acquisitions seem to be the flavour of the season in India this year with reports of more than two potential deals hitting headlines every day, but over 80 per cent of these do not actually fructify. According to a study by international M&A deals tracking firm 'mergermarket', India has emerged as Asia-Pacific's second-biggest target after China in terms of official or unofficial intentions expressed for takeover deals from across the world this year. However, the conversion rate – measuring the proportion of news headlines actually converting into deal announcements – is the second-lowest for the country in the region. India was the target for as many as 561 potential merger and acquisition deals in the first seven months of 2007, trailing China with 824 potential deals. This translates into a daily average of about four deals in China and 2.6 deals targeting India during the 212 days between January and July this year. […]
The supremacy of Western economies in venture capital (VC) investment is facing a challenge from emerging economies, with India expected to overtake the UK by 2009, a latest report sponsored by UBS, a global wealth management company, said. As per data analyzed by ‘UBS UK Venture Backed Report—2007,’ Western leadership in innovation is being increasingly threatened by emerging economies. According to the report, “India’s VC market with a growth rate of approximately 90% is likely to overtake the UK by 2009.” The Chinese VC market has already surpassed the UK in terms of absolute size in 2006 and is growing at a much faster clip. […]
Private equity major Blackstone’s acquisition of 50% stake in Gokaldas Exports is significant in that it is the first major buyout of a listed company. With a takeover of Patni Computers likely soon, PE players operating in India have started doing what they do abroad, acquiring controlling stakes in listed companies. So far the great majority of PE investments in Indian companies have been more akin to portfolio investments. The change agent, however, is the willingness of at least some Indian promoters to sell out and not a sudden increase in risk appetite of PE players. For PEs this makes sense. The value proposition, to use some jargon, that PEs bring to the table are primarily superior management skills. This includes perceived skills at cost cutting, improved supply-chain logistics and the ability to find clients using their global networks. […]
After scouting for deals over two years now, buyout funds are finally making a headway in the Indian market. Blackstone’s acquisition of Gokaldas Exports comes a few months after it bought Intelnet and PE watchers. With a PE fund likely to take over Patni Computers, experts believe that buyouts are set to gather momentum in the country. “Over the next 2-3 years, buyouts will be the next big thing in private equity in India. We expect the opportunities to increase,” said Chrys Capital Senior MD, Ashish Dhawan recently. Chryscapital, which has just concluded fund-raising for its $1.25 billion fund, will actively look for buyout opportunities. Buyout specialists such as Blackstone, Carlyle, KKR and Apax Partners, which are known for buying companies rather than picking minority stakes, have been on the prowl for some time in the country. But so far, PE players have only participated in a handful of buyouts. US-based PE KKR set the trend when it bought a 85% stake in Delhi-based Flextronics Software Services for over $900 million. The other buyouts in India included WL Ross’s acquisition of textile company OCM India for $37 million, Navis Capital’s buyout of restaurant chain Nirula’s and packaging company Oriental Containers and Actis, snapping south India-based food group Nilgiri’s for $65 million. […]
Private equity and venture capital funds have exited from 160 companies through either IPOs or merger and acquisition routes between 2004 till the first half of 2007, according to a research firm. “From January 2004 to June 2007, PE and VC investors have made investments in 706 companies in India for an estimated $17 billion while they have made exit from 160 companies in the same period through IPO or merger and acquisition route so far,” Arun Natarajan, Founder and CEO of Venture Intelligence, the research firm that tracks venture capital and private equity investment in the country said. Incidentally, a very large majority of the exits were successful, meaning they resulted in Private Equity investors and VCs making money on their original investment. Exiting from the investee company is an important feature of private equity and VC investment, as it not only determines the returns for the investors in that fund but also determines the ability of the fund managers to raise funds in future. […]
According to an estimate by RREEF, the value of globally invested commercial real estate market is around $10 trillion in 2006. Invested market is the real estate market where space is owned by professional real estate investors, such as money managers, funds, private investment vehicles, listed companies, institutions etc. and this market is only two-thirds of investible market, which also includes investment-grade space that is owner-occupied. US accounts for more than a third of investible stock (around $5.6 trillion) and around 85 per cent is already invested. Other major markets that have large proportion of invested real estate are Japan, UK, and Germany. About 90 per cent of around $1 trillion investible stock in the UK has already been invested. Emerging markets like India, China, Brazil and Mexico have very small proportion of market that are institutionally invested. Despite phenomenal economic and property market growth in India, the size of investible commercial real estate stock is $100 billion because a large chunk of real estate stock is not investment grade. However, India is adding real estate stock at a fastest rate in the world. During current and next year, around 300 per cent of total stock is projected to be added despite an expected slowing down of the real estate cycle. According to RREEF, India would add 700 million sq ft of office space valued at $35 billion. […]
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