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. […]