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The rise in the stock market in the past year may have brought cheer to most investors, but not to private equity (PE) funds. The equity rebound has had promoters demanding valuations 20-30% higher than the estimates of PE investors. The mismatch is resulting in at least one-third of the deals under negotiations falling through, say PE firms. This is on top of the usual 30-40% drop in deals in the initial stages because of hurdles over business plans, management teams or performance. “That (stock market rise) tends to impact deal closings as certain promoters, who may have been happy at the valuations discussed pre-surge, try to renegotiate valuations upward when markets surge,” said Jacob Kurian, partner at PE fund New Silk Route Advisors Pvt. Ltd

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PE funds see decline in deals as valuations soar

ICICI Bank Ltd is acquiring Bank of Rajasthan Ltd for around Rs3,000 crore in a share swap transaction. Interestingly, its market capitalization has fallen by around Rs7,200 crore, around 2.3 times the acquisition amount. That’s a big thumbs-down from the market. Of course, it must be noted here that the broad markets fell by around 3% on Wednesday, and ICICI shares would have lost around Rs3,000 crore in value even if they only mimicked the drop in the markets. Even so, investors have demonstrated that they are highly disappointed with the deal, and especially the valuation

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ICICI acquiring poor asset at exorbitant price

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How To Convert Triers Into Buyers – with Jason Cohen

In what would be the second-biggest private equity investment in the Indian life sciences sector in the last 12 months, global PE firm Kohlberg Kravis Roberts & Co (KKR) is close to investing nearly $50 million (around Rs 225 crore) in Pune-based Emcure Pharmaceuticals, said industry sources. The biggest PE deal in the segment recently was New Silk Route’s $55 million (Rs 248 crore) investment in Chandigarh-based Nectar Life Sciences this February. The Emcure and Nectar deals signal the recovery of PE investments in the Indian life sciences sector, which had hit a low in FY2009 following the global financial crisis. According to sources, KKR and PE giant Blackstone had been talking to Emcure for some time now, but KKR is the front-runner now. As on December 31, 2009, KKR has $52.2 billion (Rs 2,34,900 crore) in assets under management worldwide.

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KKR near Rs 225-cr Emcure investment

Within three years of its launch, home-grown INX Media—launched by Indrani Mukerjea and ex-Star India CEO Peter Mukerjea—will become a foreign-owned entity. Mauritius-based private equity firm New Silk Route (NSR) is set to scale up its stake in the loss making INX Media from the current 20% to 80% by buying out stakes of some of the existing foreign and domestic investors. Going forward, NSE Mauritius will also fund the expansion of INX Media that is going to launch nine new television channels under the 9X brand. INX has been amidst a financial restructuring since last 10-12 months as a result it divested 9X to Zee Tele Films last month. In order to resurrect INX Media, NSR has not only agreed to infuse Rs 55 crore but will also pump in more money as per the business needs of the company. NSE Mauritius has taken upon itself to weave the turnaround of INX Media, sources said. Upto 100% foreign investment is permitted in the non-news channels.

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Mauritius PE firm to buy 80% in INX Media

US-based Darby Private Equity and India’s IL&FS Investment Managers are among six bidders for the private equity arm of Axis Bank, the Economic Times reported on Tuesday. The bidders include Aditya Birla Private Equity and Shapoorji Pallonji Group, both based in India, the newspaper said, citing two unidentified executives involved in the process. The last date for receiving the bids was May 15, it said.

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US Darby among bidders for Axis Bank private equity arm

Private sector Bank of Rajasthan (BoR) Tuesday said its board has approved merger with India’s largest private sector lender, ICICI Bank, through a share swap. BoR’s managing director and chief executive G. Padmanabhan said the board has given its in-principle approval for the merger. The share-swap ratio is likely to be decided by May 23

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Bank of Rajasthan to merge with ICICI

The Carlyle Group spent half of its invested capital last year on “corporate and real estate transactions”, as the private equity giant concentrated on fundraising during a difficult time for dealmaking and exits in the buyout industry. According to its annual report, released yesterday, Carlyle invested and committed $5.2bn (€4.1bn) last year. Of that amount, $2.7bn was spent on 47 “new corporate and real estate transactions with a cumulative enterprise value of more than $4.4bn”

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Carlyle adjusts to new reality

Emerging markets fund firm Ashmore said on Thursday it has launched a fund jointly with power trading firm PTC India that aims to raise $750 million to finance power projects across all energy-related sectors in India. India’s power sector, beset by a peak power deficit of 12 percent, has struggled to attract foreign investment in recent years, but the tide seems to be changing. In March, a group of investors including Morgan Stanley’s infrastructure arm, Goldman Sachs, and General Atlantic said it invested $425 million in Asian Genco Pte Ltd, which has stakes in power generation assets in India.

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Ashmore, PTC India in $750 mln energy infra fund

About 77% of private equity players in the country expect an increase in investment momentum in the coming 12 months, according to a survey by Deloitte Touche Tohmatsu India. And the deals will be simpler. The report said 87% of respondents rated ‘structured development capital’ (in essence, a return to the traditional way of structuring development capital deals, using less leverage and a simplification of the structure) to be the key focus area for investment this fiscal. Following this are transactions in the venture capital, pre-IPO and buyout space, in that order of priority. “Some funds have committed a lot of private investments in public enterprise (PIPE) deals since 2007 and have suffered mark-to-market losses. We’ll increasingly see a return to basics — back to structured development capital deals. However, PIPEs will continue to see activity given the lack of sizable development capital deals,” Avinash Gupta, head-financial advisory services for Deloitte Touche Tohmatsu India, said in the report.

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PE firms see bigger, simpler deals

Fortis Healthcare, Asia’s biggest hospital chain, raised Rs 380 crore by selling shares to Singapore state-run investment company GIC Special Investments as part of its plans to raise Rs 3,000 crore for expansion. The company has agreed to sell 6.58% of the company, or 22.35 million equity shares, at Rs 170 apiece, 1.5% higher than its closing price on Monday. Its shares rose 1.27% to Rs 167.25. The funds will be used to part finance recent acquisitions like the purchase of TPG Capital’s 25% stake in Singapore’s Parkway Holdings for around $715 million and also for more in the future, said a statement. The deal may close by June. The New Delhi-based Fortis plans to sell foreign currency convertible bonds (FCCBs) and other securities in the months ahead as it funds the Singapore acquisition and last year’s purchase of 10 hospitals from Wockhardt. The company has been growing its revenues through acquisitions, but the profits are yet to come by.

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Fortis Health sells 6.58% to Singapore’s GIC for Rs 380 crore

Council of Scientific and Industrial Research (CSIR), the industrial research and development organisation under the central government, plans to take equity stakes in some companies to whom it is lending technological innovations. Samir K Brahmachari, director general, CSIR and secretary, department of scientific and industrial research, Government of India, told DNA, “We will take stakes in smaller companies. We have received the government’s approval for it and are already negotiating with the companies. Many are in the pipeline in the life sciences and energy sectors, which have great potential.” CSIR has been charging fees and royalties for its technology transfers for commercial use to private companies but hasn’t taken stake in any company.

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CSIR to take equity stakes in companies

ICICI Venture, the private equity arm of lender ICICI Bank , plans to launch a $500 million fund by July to invest in infrastructure projects, its chief executive said. “In the private equity context I would put education (and) hospital as part of infrastructure, but there is also a big opportunity on serious infrastructure like roads, ports, power,” Vishakha Mulye told Reuters in an interview. India has made building of roads, bridges, airports and power plants a priority and expects private firms to fund half of a projected $1 trillion in infrastructure between 2012 and 2017. India’s diversified conglomerate Tata Group and private equity firm Actis aim to bid for $2 billion of road projects in India over the next five years as the country makes a major push to build highways.

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ICICI Venture plans $500 mn infra fund

Godrej Consumer Products is in talks with a clutch of private equity investors to raise USD 125 million, two sources with direct knowledge of the matter said on Tuesday. The company is in talks with US giants Carlyle Group and Blackstone, as well as India’s ChrysCapital and Standard Chartered Private Equity, the sources said. Godrej has hired JM Financial Ltd to arrange the deal, sources said.

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Godrej Consumer looks to raise USD 125 m via PE

Private equity (PE) funds will remain a preferred choice for capital growth and Indian industries will receive about $ 10 billion investments from the PE deals by the end of this year, says a latest report jointly released by global auditing firm KPMG and the Confederation of India Industries (CII). “India has a very vibrant private equity industry with over $ 32.5 billion invested across more than 1,500 PE deals from January, 2006, till date. As per the industry estimates, PE investments would be in the range of $ 9-10 billion in the year ending December 31, 2010,” says the report. It adds PE funding is expected to provide capital to fund much-needed infrastructure projects to support gross domestic product (GDP) growth of seven to eight per cent in India. According to the report, the country needs about $ 1.3 trillion investment over the next three years to sustain a GDP growth of seven to nine per cent out of which $ 60-100 billion will be PE investments.

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Pvt equities to invest $10 bn in India this year

Crisis-ridden private-sector lender Bank of Rajasthan’s promoter P K Tayal today ruled out any possibility of selling his stake in the bank amidst speculations that ICICI Bank and Axis Bank have evinced interest for a buy out. “There are people who are coming (to buy the stake). They are not welcome … the answer is no,” Tayal told PTI when asked if he was open to sell his shareholding in the bank. At present, Tayals have a stated holding of around 28 per cent in Bank of Rajasthan while according to market regulator Securities and Exchange Board of India, promoters’ actual holding in the entity is around 55 per cent.

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Tayal not open to sell stake in Bank of Rajasthan

Dalmia Cement (Bharat) Ltd. (DCBL), and Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, “KKR”) today announced the signing of a definitive agreement under which KKR has agreed to invest up to Rs 750crores in DCBL’s wholly owned unlisted subsidiary (“Company”) which will house post restructuring DCBL’s 9MTPA cement manufacturing capacity, DCBL’s stake in OCL India Limited (5.3MTPA capacity) along with the upcoming green field projects of 10MTPA across the country. The use of proceeds will be for both organic / inorganic growth and de-leveraging. “When we realigned our businesses in March, 2010, one of our goals was to create separate pure play entities that could thrive on their own and have flexibility to raise capital. This transaction with KKR is not just about capital but the foundation of a long term relationship. It will enable us to enhance our capacity and market share through organic as well as inorganic routes, while benefiting from KKR’s global network and proven value creation capabilities,” said Mr. Puneet Dalmia, MD of Dalmia Cement (Bharat) Limited.

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KKR Invests in Indian Cement Venture

Chennai-based VGN Developers Pvt Ltd is planning to raise Rs 600-700 crore private equity (PE) fund to support its proposed investment of around Rs 3,000 crore in various residential projects. The company has developed two million sft of residential projects in the last four years. Over the next 3-4 years, it is planning to develop another 7-8 million sft, said Pratish Devadoss, managing director, VGN Developers. “The total investment, including land, would be around Rs 3,000 crore,” said Devadoss. The company is planning to fund the project through internal accruals, debt and equity. “We just signed an agreement with a PE player, who will invest around Rs 80 crore. Going forward, we are planning to raise another Rs 600-700 crore,” he said without disclosing the name of the PE player.

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VGN Developers to raise Rs 700 cr from PE funds

Dabur India in talks to acquire Paras Pharma; PE Fund Actis looking to exit Paras Pharma: Sources Dabur India is in talks to acquire Paras Pharma, reports CNBC-TV18 quoting sources. PE Fund Actis is looking to exit Paras Pharma. Actis currently holds almost 60% stake in Paras. Pharma player Paras sells Dermicool, Moov, Krack brands. Actis had first bought 23% stake in Paras for $ 43 million in 2006. Sources said that the talks are at advanced stage level. Dabur first looked at Paras 6 months ago. Dabur India said that the company cannot comment on market speculations. The company continues to look at acquisition opportunities.

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Dabur India in talks to acquire Paras Pharma

Private Equity (PE) and Venture Capital (VC) funding in India needs to increase three-fold to 430 billion annually from the current level to shore up funding for small but promising companies, said a KPMG-CII report. Besides, it said, as the Indian economy expands, the country’s investment needs are estimated to be over $1.25 trillion over the next three years. Higher PE/VC funding can contribute to the requirement by funding the growth of small but promising companies that are not able to tap equity and debt markets at the outset. It said that even in the case of listed companies, 40 per cent have market capitalisation of less than Rs 1.25 billion (Rs 125 crore), with Sensex at 17,000, and 80 per cent of the Bombay Stock Exchange (BSE) listed companies have revenues of less than Rs 100 crore. Thus, making a pitch for greater PE/VC paricipation in the country, the report said, “It is estimated that investments from PE and VC needs to be increased three fold, from a trailing level of $10 billion annually, to $30 billion.”

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PE/VC funding needs to grow three times to $30 bn: KPMG-CII