Quite contrary to investment guru Warren Buffet’s term ‘deal flippers’ for private equity companies, ET Intelligence Group concludes that private equity money is good money. In 1999, Warburg Pincus picked up a stake in an emerging company called Bharti Tele-Ventures. By ’01, it had invested close to $300 million in a company yet to make a profit. Sceptics sniggered and there was a time when the company’s stock price plunged lower than the issue price, However, Warburg remained confident and finally, the bet paid off. When Warburg sold its stake, it walked away with a profit of $1.3 billion. It was a landmark deal, in that private equity (PE) became a force to reckon with. From $1.1 billion invested in 60 deals in ’04, to $7.9 billion in 302 deals in ’06, PE has grown by a whopping 600%. In the first half of ’07, 200 deals worth $6.82 billion had been announced. It’s likely that the total investment will touch $10 billion by the year-end. Blackstone, Carlyle, Farallon, Chrys Capital, Morgan Stanley and Temasek are some companies that have committed millions to the India Growth story. Some have entered as venture capitalists, which generally focus on early stage investments, while others are pure PE buyouts. PE has come a long way from providing fuel (funds) to the fiery growth of India Inc. It helps investee companies with a whole host of activities — from forging strategic alliances to assisting in corporate governance, from providing management advice to budgeting. To understand the PE impact on India Inc, ET Intelligence Group decided to scrutinise the performance of companies receiving PE funding. We did this by tracking deals concluded before January ’07, since it’s too early to comment on companies that received money in ’07. We analysed data for approximately 100 listed companies, spread across sectors like gems and jewellery, tea, shipping, aviation, edible oil and garments, to name a few. We compared the performance of companies receiving PE funds with those of their peers in the corresponding ET sectoral indices that did not get any such funds. […]

India's realty industry will grow at a fast clip of 30 percent over the next 10 years, offer 20-25 percent returns and secure foreign investment worth $30 billion, says a study by a leading industry lobby. 'The total size of investments in the domestic real estate sector is likely to be $102 billion,' says the study released Sunday by the Associated Chambers of Commerce and Industry of India (Assocham). 'At present, the domestic real estate market is expected to be $14 billion, in which the foreign direct investment contribution is estimated to be at $5-5.5 billion,' the study adds. 'The only problem that the real estate sector is currently confronting is with approvals for setting up townships, as a number of central and state agencies are involved,' said chamber president Venugopal N. Dhoot. […]

The government is likely to allow private equity (PE) funds and venture capitalists (VCs) to be part of the consortia that bid for infrastructure projects. At present, these entities can only participate indirectly in these projects by committing funds to one of the bidders. “Given that financing of the infrastructure sector is essential to sustain the growth story, the move to enable PE/VC funds to invest in these projects is in the right direction,” said a finance ministry source. Sebi-registered VC funds and PE firms are barred from bidding for infrastructure projects, as they do not meet conventional qualifications like gross revenue, net worth or net cash accruals. The move is in line with the recommendations of the infrastructure finance committee headed by Deepak Parekh. The Centre is understood to have agreed in principle to the proposal and is examining the impact. The move would encourage these investors to participate at the inception stage, the source added. […]

Small and mid-size pharma companies focused on outsourcing seem to have caught the attention of investors, if the recent investments by private equity (PE) players in the sector are any indication. PE firms such as ICICI Venture, Citi Venture Group and Sequoia Capital have put their money in upcoming pharma units that are focussed on outsourcing. Sequoia Capital on Wednesday invested Rs 100 crore in Hyderabad-based pharma and biotech research firm GVK Biosciences. Earlier, the PE firm had also picked up around 18% stake in clinical research firm Sai Advantium for around Rs 50 crore. Two other clinical research firms Radiant Research and SIRO Clinpharm have also received PE fund infusement from ICICI, 3i and Kotak, respectively, earlier this year. Says Sequoia Capital MD Sandeep Singhal: “The growth in small companies and companies which are focussed on a specialisation, is much faster than the leading established players. We are looking at investing in companies which are looking to become leading players in the future rather than the stable companies with lesser risks and lesser rewards.” Adds PwC associate director Pharmaceutical and Life Sciences Practice Sujay Shetty: “This is a new breed of companies which has entered the new space of high potential contract manufacturing and outsourcing. Outsourcing is the biggest growth area in the pharma sector and the PE investments in such firms will continue.” […]