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With the secondary market witnessing a 25 per cent correction in January, private equity players are expecting valuations to become more realistic in the late-stage investments in India Inc, at least during this calendar year. The performance of secondary markets always acts as a benchmark for PE players to pump capital investment into a private company, or even a publicly listed company. Despite the unprecedented rally in the markets in the past few years, the share of PE investments in listed companies has shown a decrease since 2004. The PE investments in public enterprises (PIPEs) amounted to $4.2 billion across 80 deals, against a total PE investment of $17 billion, last year. […]
On Saturday, Goa State Industries Association (GSIA) and private equity (PE) firm Lauris Capital Partners (HK) Ltd held the first of a two-part event to educate small and medium enterprises (SMEs) on PE and help them access investors. The event, Introduction to Private Equity and Private Equity Investment Process, preceded India Private Equity Fair, where 25 companies looking for investments ranging from $10 million to $200 million (Rs40 crore to Rs800 crore) will be on showcase to PE firms at Mumbai on Wednesday. These events are significant, because typically it is venture capital investors who hold showcases and workshops for start-ups. It seems that PE investors are working harder to access SME deals. And they are realizing that SMEs need a similar level of hand-holding through the investment process as start-ups, because they don’t have exposure to PE investors, nor the budget to educate themselves via investment bankers or consultants. This may be the start of a trend to help bridge the gap between SMEs (particularly in smaller Indian cities) and investors. On Saturday, 55 people listened as Hong Kong-based Harshawardhan Sabale, founder and head of Lauris Capital Partners, which does SME buyouts in India, demystified how funds are set up, how fund managers get paid and how they make investments. […]
What could have been one of the largest private equity deals in India has come unstuck. ICICI Venture and Jaypee Infratech have terminated negotiations for the PE player buying close to 10-15% stake for $800 million in the infrastructure company, which is developing project worth Rs 1 lakh crore. The deal could have given Jaypee Infratech a valuation in excess of Rs 30,000 crore. “ICICI Venture is not investing in Jaypee Infratech. We were looking at getting a strategic investor in the firm, but have put our plan on hold for now,” Jaiprakash Associates (JAL) executive chairman Manoj Gaur told ET. Jaypee Infratech is a wholly-owned subsidiary of JAL and the original plan was for investors to acquire 44% stake in the company through allotment of new shares. But now JAL plans to invest up to Rs 440 crore to acquire 44 crore equity shares of Rs 10 each at par, in one or more tranches in Jaypee Infratech. The additional shares JAL is subscribing were originally meant for strategic investors, Mr Gaur said, adding that “since the strategic investment has been put on hold, JAL has initiated action to subscribe to these shares.” […]
With IT projects taking a backseat on the investment front, private equity (PE) funds are cosying up to residential, commercial and hospitality spaces in south India. Pragnya, a Mauritius-based private equity fund focussed on the real estate market in India, has so far invested about $40 million in realty projects, including an integrated township project by L&T in south India, and expects its investments to reach $100-110 million this year. It is also planning to come out with a $150-million Pragnya Fund 2, which will invest in realty and hospitality projects, particularly in the South. In December 2007, Red Fort Capital, a global real estate private equity fund, announced a Rs 400-crore investment plan for Chennai's realty market over the next six months. It has acquired 10 acres of land for a large residential project in Chennai. The company has already invested Rs 1,200 crore on projects in Bangalore and Hyderabad. […]
Is the public primary market turmoil affecting the PE sector yet? From the trend in February, it does appear to be so. With a week still left to go, fund raising from private markets has been fairly good. About $1.6 billion has been raised so far. If you annualise this, this is a run rate of over $20 billion, which is better than 2007. There’s not much impact in the number of deals either. Around 24 deals have been announced, which is nearly a deal a day. There were nearly 400 deals in 2007, a little over a deal a day. So, the current run rate is not too bad. What is discernible, maybe, is some impact on investments in listed equity by private investment in private equity (PIPE) deals. It appears only one PIPE deal has been announced so far. According to PE investors, while stock prices have come down, promoters are not yet willing to reconcile to them. PE investors will naturally not pay the price which was prevailing two months ago at this time. Take the case of a building material company, which was quoting around Rs 230 till two months ago. It wanted to do a PIPE deal at Rs 270 while the PE investors were not willing to go beyond Rs 250. The deal didn’t happen. Now, the company quotes well below Rs 200. Clearly, promoters may prefer to wait at this point. If the stock does not cross Rs 200 for, say, the next 3-4 months, then they may be forced to go for a lower price. […]
Delhi-based tier II realty player Eldeco Group is in discussions with AIG and Merrill Lynch for raising $200-250 million from a clutch of private equity (PE) investors. As part of the plan, Eldeco has already raised some funds from Xander PE. Sources said group company Eldeco Infrastructure & Properties (EIPL) was in the market for raising funds at the entity and special purpose vehicle (SPV) level for upcoming projects in Ludhiana and Jalandhar, in Punjab, and in two cities in Maharashtra. The company is also looking at raising funds through four SPVs and may be at the holding entity level as well. “We look at raising funds from time to time, but there is no need for us to comment on it,” said Eldeco CFO NK Ahuja. The company denied it was holding talks with the PE firms, and that it has raised funds from Xander. The move comes after the group’s earlier plans to merge the listed entity Eldeco Housing & Industries (EHIL) with EIPL and raise funds from the capital market was abandoned, sources said. Lucknow-based EHIL is a smaller group company compared to the privately-held EIPL, which has notched up 80% annualised growth since being incorporated in 2000. […]
A RS 1,200-crore venture capital fund being set up for investments in small & medium enterprises (SMEs) in the defence sector has run into red tape. The fund has been put on hold by the Foreign Investment Promotion Board (FIPB). Former RBI deputy governor Vepa Kamesam, Lt Gen VJ Sundaram, who is leader of the flight vehicle design team for Prithvi, and Tata Strategic Electronics CEO Rahul Chowdhry are on the advisory board of the fund. A lack of clearance from the defence ministry and “a potential conflict of interest” with the advisors of the company are cited to be the reasons behind the hold-up. This is the first time that a venture fund of such size is being set up for investments in defence SMEs. The move comes at a time when multinationals are vying for multi-billion dollar defence deals from the Indian government, which also include mega orders for fighter aircraft. The fund is promoted by Rajesh Narayan, who was earlier a director and India head (specialist finance) at ANZ Investment Bank. The segments of investment identified by the fund include military aircraft, helicopters, radars, submarines, missiles, rocket launchers, simulators, tanks and torpedoes. Investment would be made in SMEs that are vendors for these products. Many SMEs supply components, technology and designs for such products. […]
The recent market slump has claimed yet another casualty. Kishore Biyani promoted private equity fund Indivision India Partners, which had picked up a 4.9% stake in Zee's DTH arm Dish TV for Rs 250 crore, has now cancelled the deal. The reason: the Dish TV shares have crashed from a high of about Rs 175 in mid-December 2007 to end at Rs 62.95 on Friday. Dish TV is India’s largest DTH operator and commands about 67% market share in this space. ET has learnt that Zee had sent a legal notice to Indivision India Partners for backing out of a binding deal, following which both groups have now smoked the peace pipe. The deal was announced in December last year under which Indivision India Partners was supposed to be allotted 1.25 crore equity shares of Dish TV of Re 1 each at a price of Rs 100 each, aggregating Rs 125 crore. Further, the private equity fund was to subscribe 9,615,385 warrants — each convertible into an equity share — at Rs 130 per equity share, aggregating to Rs 125 crore. The deal, when signed also raised Dish TV’s valuation to over Rs 5,000 crore. This was about Rs 1,000 crore more than its valuation if the same was calculated based on the closing price of the company’s shares on December 6, 2007. […]
Taking a big stride towards its foray into commodities trading, the Bombay Stock Exchange (BSE) has decided to play an active role in the management of National Multi-Commodity Exchange (NMCE), India’s first demutualised online commodity exchange. BSE has agreed to buy a 26% stake in the Ahmedabad-based commodity exchange, which is lagging behind its rivals MCX and NCDEX. BSE is in the process of finalising the transaction and will soon make a formal announcement to this effect, said BSE MD and CEO Rajnikant Patel. He, however, declined to comment on value of the deal because of the confidentiality clause. Market sources estimate the enterprise value of NMCE well below its peers, given its low trading volumes.BSE will be issued fresh shares, which will bring down the promoters’ stake substantially in NMCE. At present, Central Warehousing corporation holds a 26% stake while the National Agricultural Co-Operative Marketing Federation of India (Nafed) and the Punjab National Bank hold around 10% each. Gujarat Agro Industries has a 5% stake. […]
It’s official: HDFC Bank will merge Centurion Bank of Punjab, a bank one-fifth its size in terms of assets, with itself in the biggest consolidation seen in private-sector banking in India in recent times. What such a merger does is help HDFC instantly augment its branch network by 50% or 400 branches. Centurion also has Reserve Bank of India’s permission to open another 30 branches. Suresh Ganapathy, analyst with Deutsche Bank, said Centurion’s branch-network was the main draw for HDFC Bank. “That’s because in India, getting a branch licence is becoming more and more difficult. HDFC Bank will certainly benefit from the move,” he said. Fee-based income has become crucial for banks as margins in their core business of lending are on a decline due to competition and interest rate pressures. Having a larger branch network helps distribute more products that bring in fee-based income, such as mutual fund schemes and insurance plans. The latter afford as much as 30% commission on premiums. […]
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