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The Sebi-appointed committee on dedicated infrastructure funds (DIFs) to be launched by asset management companies, has proposed that DIFs should have the flexibility to invest its entire corpus in unlisted companies, including equity and debt instruments. The committee has also proposed that these funds should be allowed to own the 100% paid-up capital of a company, if they so desire. However DIFs’ exposure to listed companies should not exceed 10% of the net asset value (NAV) at the time of investments. The product, once approved, will allow retail investors an exposure to unlisted companies in the infrastructure space. So far, it is the deep-pocketed venture capital funds who have been buying stakes in unlisted companies in the infrastructure sector. Retail investors on most occasions are unable to meet the minimum investment requirements of these funds, thus missing out on a portion of the company’s growth phase prior to the listing. With this product, retail investors can buy units of this product from mutual funds, which will invest the proceeds in shares or debt of unlisted companies. […]
It’s the season of stealth for venture capital (VC) and private equity (PE) firms. A host of PEs and VCs have gone into a ‘private’ mode and are keeping new investments under wraps. Firms such as Nexus India Capital, Bessemer Venture Partners (BVP), Kotak Private Equity, Matrix Partners and Sequoia have chosen to be discreet about some of their investments. Nexus India Capital, which recently announced a $100-million fund, has officially announced only three of its six completed deals. Similarly, Bessemer Venture Partners, which recently earmarked $350 million out of its newly-raised $1 billion fund, has announced just 50% of its deals in India. Industry watchers estimate the value of such deals could be more than $500 million and will only grow with time. Interestingly, even Anil Ambani refused to share the list of his PE investors in the recent Reliance Telecom Infrastructure (RTIL) deal. Some investee companies deliberately choose to hide their investments because costs, such as real estate, go up, as people jack up prices expecting the companies to be loaded with cash. Also, some VCs and PE funds insist on keeping deals under wraps because new entrants flush with dollars approach companies and lure them with much higher valuations for the next round of funding, thus creating an awkward situation for the original fund managers. The firms want to lie low in some cases for strategic reasons too, especially when they feel it is in the best interest of the company. “We are not looking for publicity, we will announce the deals when it is best for the business of the company,” explains Nexus managing director Naren Gupta. Firms say they often leave the decision to decide when they want to go public with the news with the investee companies. […]
The word out on the street is that leverage — that great tool of boosting return on equity — is going to get really scarce for private equity (PE) guys. According to market data, the spread of European top-rated corporate debt over government bonds has moved from 38 to 53 basis points. But for private equity firms investing into India, the leverage party has just begun. One of the biggest PE funds operating in the country has recently made an investment using this method and another much smaller firm made such an investment a few months ago. Some PE firms are using ‘asset swap’ foreign currency convertible bonds (FCCB) to multiply returns on their investments, largely in listed companies. In such arrangements, the PE firm partners with a bank to capitalise an investment company that has debt from the bank and equity from the PE firm. For example, the bank will put a debt of $200 million while the PE firm puts in $100 million. This total sum of $300 million is now put into an Indian company either through preferred stock or an FCCB. […]
India has emerged the third largest destination for private equity in the Asia-Pacific region in 2007, next only to Australia and Taiwan, both in terms of value and volume of transactions. According to data compiled by research outfit Thomson Financial, PE investments in India during the year have touched $2.49 billion, as against $1.05 billion in Hong Kong , $1.47 billion in Singapore and $752.2 million for the Chinese market. The total PE funding in India is nearly equal to the PE funding that has come into Hong Kong and Singapore together. “The trend of India witnessing higher levels of PE funding than its Asian peers is just a reflection of its growing importance in the global economy. Going forward, we can expect continued buoyancy in both these markets as investors start seeing returns in the backdrop of abundance of high growth opportunities. However, with investors having figured out ways to secure exits from Chinese investments, China may just gain an edge over India,” said Srinivas Baratam, Director, UTI Ventures According to Thomson Financial , 29 PE deals have been struck in India this year, next only to Australia (67) in the entire Asia Pacific region. Though there were 28 PE deals in China, the size of the deals were much smaller. While the average size of the deals in India is $85 million, the deal size in China was only $26 million and $188 million for Australia. India is also a hot-bed for strategic buys, which include M&A activities, with $29.74 billion worth of strategic deals being struck, again the third highest in the Asia Pacific region. While Australia leads the pack with $76.07 billion of strategic deals, China reported $36.88 billion of such deals. There were a total of 331 M&A deals worth $44.34 billion in India in the first seven months of 2007, as compared to 328 M&A deals worth $10.36 billion in 2006. […]
The Bombay Stock Exchange may have well begun to realise the importance of real estate sector and introduced the realty index, but venture capital investors have been moving away from the realty by trimming allocations to the sector by 31% since the beginning of the year. Venture Capital Funds (VCF) and Foreign Venture Capital (FVC) investors have been realigning their investments by reducing inflows into real estate, information technology, telecom and industrial products sectors. In contrast, investments have been piling up in the services, media and entertainment, biotechnology and pharma sectors. However, the total investments in the country have shot up by 67% to Rs 20,310 crore as on June 30, 2007, from Rs 12,127 crore as on September 30, 2006, according to data from Securities and Exchange Board of India (Sebi) on 88 VCFs and 66 FVC investors registered with the regulator. […]
The monetary policy has bad news for private equity (PE) funds. The Reserve Bank of India (RBI) today expressed concern over higher leveraging by PEs in international mergers and acquisition (M&A) deals and raised questions over the longer term sustainability of such investments worldwide. The RBI’s caution comes in the wake of rising PE investments in the country even though the role of such investments in domestic M&As is minuscule, prompting analysts to say that the RBI has taken a futuristic view in view of the increased pace of foreign money inflows through PEs, venture capital funds and foreign institutional investors. RBI said, “In view of the opaque nature of PE activity, high levels of leveraging has raised concerns about longer-term sustainability. Given the size of business accruing to private equity, they carry risks to overall macroeconomic stability and, in particular, to EMEs.” PE investments in global M&As stand up to 25 per cent while its share in the Indian M&A scene is negligible to the extent of two per cent. In 2007, the overall PE deals in India amounted for $2.3 billion. […]
India Inc may have to wait a while before concluding a cross-border acquisition as big as the Tata-Corus deal. Leveraged buyouts, which helped Indian companies to raise finances for global takeovers, are heading for a slowdown, triggering sale of equities in global markets. In a leveraged buyout the acquisition of a company is financed significantly by money borrowed against its assets. Leveraged buyouts thus allow companies to make large acquisitions without having to commit a lot of capital. The Tatas managed to raise debt worth $6 billion–six times the earnings before tax, interest and depreciation (EBIDTA) of Corus–to finance the acquisition. But they may have to take another fund-raising route if they chose to acquire Land Rover and Jaguar from Ford. A liquidity crunch has forced global lenders to significantly scale down loans to 3-4 times the EBIDTA of the acquired company. […]
With return on investments (ROI) ranging between 25-30 per cent, Indian telecom has become one of the most attractive destinations for the private equity players worldwide. And this action is now shifting to the telecom infrastructure and VAS players too. From initial funding to minority stakes and now even acquiring control, from the start-ups to mid-size companies and even mature listed companies, it is all happening in Indian telecom. The soaring Indian telecom industry has in the last one year witnessed frenetic activity as PE investors hope to repeat Warburg Pincus' success with Bharti Airtel. In 2006, the telecom sector accounted for about 44 per cent of the total value of all private equity deals in India, spread over 19 deals, according to a study by Delhi-based KPO firm SmartCube. The zooming equity markets and robust GDP growth have added to create an increased appetite among private equity firms. Even though it is ranked sixth in the telco sweepstakes, Idea Cellular, for instance, saw multiple investments from various private equity groups prior to its IPO. UK based GLG Partners picked up an 8 per cent stake in the company for $213 million. ChrysCapital invested $116 million for a 5 per cent stake. Providence Equity Partners invested $400 million for a 16 per cent stake, while TA Associates acquired a minority stake. In fact, acquisition of the stake in Idea marked the entry into India for funds like Providence and TA Associates. The other Indian telco that has seen high PE interest was Tata Teleservices. Singapore's Temasek Holdings and Sterling Infotech invested approximately $397 million in the company. […]
After growing rapidly from around $1 billion in 2004, private equity flows into India grew to $7 billion in 2006 and will probably exceed $10 billion this year. In addition to its traditional functions of providing smart capital to fuel the entrepreneurship of non-traditional businessmen and boosting managerial efficiency, PE is slated to enter into new areas such as leveraged buy-outs, distressed assets and infrastructure. We could also witness some public offers from PE firms. At present, there are over 100 PE firms seeking to deploy $20 billion in India. The PE industry has been able to attract talented professionals from major consulting firms, investment banks and industry in India and overseas. Some of the large deals have been KKR’s investment of $900 million in Flextronics, and the recent Carlyle investment of $600 million in HDFC. […]
Private equity investors Lehman Brothers , Warburg Pincus and Carlyle Group are in talks with Mumbai brokerage Angel Broking to buy a 20 percent stake, the Economic Times said on Tuesday. Angel aims to raise about 2 billion rupees ($50 million) from the stake sale, which would value the stocks brokerage at about 10 billion rupees, the newspaper said, quoting unnamed sources. Other investors are also in the fray, the paper said, and it quoted Angel Chairman and Managing Director Dinesh Thakkar as saying it had short-listed a dozen suitors and would shortly invite bids from them. […]
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