2i Capital Sells Part Stake in Titagarh Wagons To Hedge Fund

Bangalore-based private equity fund 2i Capital has sold nearly half of its stake in railway freight wagon manufacturer Titagarh Wagons. The fund sold a 2.71% stake in Titagarh for a total sum of Rs 9.55 crore on Wednesday when Sensex reached a six month high. The shares weresold at a price of Rs 191 per share to hedge fund Indus Capital Advisors. At the time of listing, 2i Capital held a little more than a million shares. The PE fund's average stock acquisition price stands at Rs 191 per share, Vivek Sekhar, CEO of 2i Capital (India) Pvt. Ltd, told VCCircle in an email response. This means that 2i Capital has sold its stake exactly at par to its acquisition price. The private equity firm, which is currently raising its second fund of $200 million, still has a little more than 3% stake in the firm. Sekhar also said that 2i Capital's average sale price is higher as it sold some stake in a trade sale. Titagarh Wagons listed on April 2008 with a price band of Rs 540-610. The Kolkata-based firm also sold stake to GE Capital International and JPM Morgan Mauritius in a pre-IPO deal. It had reached a 52-week high of Rs 907 last year before slipping as markets melted. Titagarh Wagons had raised Rs 24.7 crore from 2i Capital in March 2006, by selling stake at a price of Rs 1711 per share. ChrysCapital also picked up a stake in the firm for around Rs 55 crore in 2006, buying stake both from the promoters and through fresh equity. The number of shares held by 2i Capital later increased due to a bonus issue in January 2007.
The stake has been sold by 2i Capital soon after one year lock-in period post listing has completed.

PE Funds Continue To Exit

Private equity funds continue to selectively pare their shareholding in various listed portfolio companies, making best of what is tipped to be a bull rally. The funds may also see this as good time to exit as markets are expected to see volatility post-elections, especially between 16 to 30 May, when the government is to be formed. Besides 2i Capital, IL&FS India Leverage Fund also sold a little more than 2% stake in IBN18 Broadcast, which operates general news channels CNN-IBN and IBN7. The stake has been sold for Rs 35.8 crore between September 2008 and April 2009, IBN18 said in a filing earlier this month. Last month Citigroup Venture Capital International sold nearly a 5% stake in Techno Electric & Engg Company and UK-based 3i Group also sold 1.42% stake in Mundra Port and Special Economic Zone Ltd. Earlier this month also IDFC Private Equity sold a small part of its stake inGujarat State Petronet Ltd via open market deals.

Source: VCCIRCLE

Pangea Capital To Invest $30M In Deepak Puri's Cobol Technologies

Solar power firm Cobol Technologies (owned by Deepak and Ratul Puri of Moser Baer), has raised $30 million(Rs 151 crore) from Pangea Capital. Bermuda-based Pangea is a mid-sized fund house with total assets under management in excess of $100 million.
The investment in Cobol has been made through Pangea Emerging Infrastructure Fund, which targets both listed and unlisted Indian infrastructure companies. It invests in companies engaged in sectors such as energy, oil & gas, roads, ports and telecom. Besides this Pangea also has an emerging markets focused fund called Pangea Emerging Markets Fund and Pangea Alternative Fund. According to an application submitted to foreign investment promotion board(FIPB), the top government body which clears foreign investment into the country, Cobol has raised the funds through the issue of fully convertible debentures (FCDs) to Pangea in three tranches. The FCDs are compulsorily convertible into equity shares by March 31, 2012.
The agreement between the two firms say that the number of equity shares to be issued after conversion of the FCDs to Pangea shall not exceed 49% stake in Cobol. Moser Baer chairman and managing director Deepak Puri and executive director Ratul Puri own 50% each of the solar power firm. The firm, started in August 2007, operates in the area of electricity generation and distribution and is currently setting up a 5 mega-watt (MW) solar power project in Uttar Pradesh. This marks an expansion of business in the non-conventional power sector for Deepak Puri and Ratul Puri whose flagship company Moser Baer has also branched out in solar photovoltaic business. Moser Baer has outlined plans to invest $3.2 billion in the solar business and is also setting up a solar power project in Rajasthan, which is expected to become the largest grid-connected solar farm in India.

Source: VCCIRCLE

Axious Investment to Pick 3.8% stake in QTIL

Singapore-based Axious Investment is picking up 3.8% stake in standalone tower company Quippo Telecom Infrastructure (QTIL). The deal size is estimated at around Rs 200 crore. According to sources, Axious will buy out Delhi-based Premier Chemco’s 3.8% stake in QTIL, and this will involve a transaction between two private parties.

Source: Economic Times

Navis Capital Picks Up Majority Stake in Edutech

In one of the biggest deals in India's education sector, private equity firm Navis Capital Partners has invested $30 million in Edutech. The PE firm has acquired a majority stake of between 55-80% in Edutech, which provides post-graduate and part-time executive programmes, reports Pei-Asia. The investment in Edutech has been done from Navis V, which raised more than $1 billion in 2007. Edutech has revenues of Rs 55 crore ($11 mn) and seven branches spread across the country. It offers courses in areas like finance, healthcare, hotel management and hospitality.
With this investment, Edutech is planning to open five more campuses and also offer courses in areas like law and engineering. Education, till now has seen growth capital deployment from the PE investors, this would be one of the first controlled transactions in the space.

PE Interest In Education Continues To Increase

Education sector has been increasingly attracting interest from private equity and venture capital investors, especially in the recent times. The investors are attracted by the non-cyclical nature and the huge opportunity presented by this under-served sector in India. The private spending on education is increasing by 14% CAGR and is expected to reach $80 billion by 2012, says a IDFC-SSKI report. Also this sector has managed to give some of the best returns to investors in India's short history of PE & VC industry. Gaja Capital Partners made 24X from their investment in educational technology company Educomp Solutions Ltd. UTI Venture also made 50x on its investment in e-learning firm Excelsoft. Malaysia-based Navis Capital has a strategy of buying majority stake into companies. Late last year, the PE fund acquired a 62% stake BSE-listed lubricants manufacturer SahPetroleums. It has also invested in Delhi-based fast food chain Nirula's and Mumbai-based call center Andromeda.

Source: VCCIRCLE

IFC to invest 20 per cent in Indian venture capital fund

The International Finance Corporation, the private sector arm of the World Bank, will invest up to 20 per cent of capital committed to the India-dedicated VenturEast Life Fund III.The fund, managed by VenturEast Mauritius Investment Advisors, will invest in expansion capital in small and medium businesses across India. The focus will be on life sciences sectors including healthcare, food and agriculture. The IFC investment is aimed at stimulating economic activity and employment growth outside the larger Indian cities. In 2007, IFC also invested $15m in the $150m VenturEast Proactive Fund, a technology-focused venture capital fund which so far has invested in a variety of sectors including technology for microfinance, infrastructure technology and semiconductors.

Source: Alt Assets

India Infrastructure Fund invests $50 mn in two toll road projects

India Infrastructure Fund, or IIF, has invested $50 million (around Rs250 crore) in two companies floated by Nashik’s Ashoka Buildcon Ltd to build two stretches of road connecting two cities of Maharashtra and Chhattisgarh, according to M.K. Sinha, president and chief executive officer of IDFC Project Equity Co. Ltd, which manages the fund. The fund has taken a 49% stake in these two entities, both structured as so-called special purpose vehicles, or SPV, which will build two stretches of toll roads totalling 162km between Nagpur in Maharashtra and Raipur in Chhattisgarh. SPVs are limited to the financing of specific assets. This is the third investment from IIF, sponsored by IDFC, Citigroup Inc. and India Infrastructure Finance Co. Ltd (IIFCL). The first investment was for $70 million across four road projects, which acted as seed assets for the fund, and the second was a $70 million investment in Essar Power Ltd in March. IIF was conceived in 2007 by IDFC, Blackstone Group LP, Citigroup and IIFCL to invest in India’s fledgling infrastructure projects. Going by government estimates, India needs $500 billion of investments in the infrastructure sector through 2012. The fund was to raise up to $5 billion—$2 billion equity and $3 billion long-term debt—but the corpus was subsequently reduced, with IIF garnering $875 million in commitments from investors in June 2008, and on the road to close another $50 million. Blackstone pulled out of the fund as the economics did not work in the US buyout fund’s favour. “Almost 60% of our fund will be deployed between power generation and road projects,” said Sinha of IDFC Project Equity, adding that ports, airports, telecom infrastructure and power and gas distribution and transmission projects will make up the remaining. The fund, according to him, will make investments at the project level, compared with private equity, which typically comes in at the holding company level, potentially exposed to several undeveloped projects. “Our investments will be in projects that are either under construction or up and running, and are likely to generate dividends quickly. Our focus is more on regular cash flow by way of dividends, not just capital appreciation. Private equity can live without dividends and generate returns upon exit over three-five years. We would like to generate dividend income over the lifetime of the asset,” said Sinha. That will mean that returns may not be as high as private equity, but a return mix that’s a blend between dividend income and capital appreciation on exit. “When I say low returns, it’s still in the 18-20% range, but we’re not looking to generate those returns in two or three years. We’re looking to generate those returns over 8-10 years,” said Sinha. The fund term for IIF is 12 years, extendable by another three years. Even as many listed infrastructure funds globally are hurting, there are not too many options for funds such as IIF to exit project-level investments, other than listing. “We do not borrow as a fund. Most of the other listed infrastructure funds that are hurting are those that have borrowed and do not have matching cash flows to service that borrowing. We do not intend doing that,” said Sinha. IIF is negotiating exit options at the investment level as well. This could involve transferring its equity from the SPV level into a holding company at the time of the initial share sale or a put option or even a tag-along, which enables the fund to sell when the promoters are selling out. A put option will give the fund the right to sell its holding back to the promoter at a pre-determined price. “There are various ways of exiting SPV investments as well. The most optimal one would be to list the fund, but we don’t know whether that will happen,” Sinha said.

Source: Livemint

PE firms allowing warrants to expire

Following the steep decline in the equity market in 2008, some private equity (PE) firms that had invested in companies through warrants are now left with no option but to let them expire because shares on the open market are cheaper than the exercise price of the warrants.
Warrants are securities that stakeholders use to purchase or increase equity in a company at a future date. An investor pays 10% of the value of the investment up front, and acquires the option of converting the warrants into shares any time within 18 months at a pre-decided price. This price is known as the exercise price.
A Mint analysis of data provided by Delhi-based investment banking outfit SMC Capital Ltd shows that there are at least 13 companies in the National Stock Exchange’s S&P CNX 500 index in which PE investors had warrants exercisable after 1 January 2007. The S&P CNX 500 represents about 95% of the total market capitalization of the stocks listed on the exchange. This index declined by 57.13% in 2008.
In at least six firms, warrants have been allowed to expire by their PE investors. The six are Abhishek Industries Ltd, Anantraj Industries Ltd, KPIT Cummins Infosystem Ltd, Nagarjuna Construction Co. Ltd, RSWM Ltd and S Kumars Nationwide Ltd. These warrants, if converted into shares before they expired, would have been worth Rs550.04 crore.
For RSWM Ltd, the expiry date of the warrants issued to New Vernon Bharat Ltd, an investment vehicle of New Jersey-based private equity and hedge fund New Vernon Capital Llc, was 29 May 2007. This could mean that the conversion did not happen because of some reason other than the market fall, which began only around January 2008. For the other five, the expiry date was either late last year or early this year.
Investors have fully converted their warrants into shares in only two companies—KS Oils Ltd and Oracle Financial Services Software Ltd.
Warrants issued to PE investors in at least five other companies are yet to expire and haven’t been fully converted. These firms are Everonn Systems India Ltd, Havells India Ltd, Shriram City Union Finance Ltd, SpiceJet Ltd and Uflex Ltd. The collective value of these warrants, if converted, works out to Rs377.93 crore.
The expiry date for Shriram City Union Finance’s warrants, originally set for mid-May, has been extended by six months. The investors are Bessemer Venture Partners, Asiabridge Fund I Llc, ICICI Venture Funds Management Co. Ltd and ChrysCapital. On whether it would convert in that time, senior managing director of ChrysCapital Ashish Dhawan said in an email: “We don’t need to decide for six months.”
“There is little likelihood of these getting converted for the reason that all these warrants are out-of-money or the current share price in all these cases is at a discount of between 17% and 77% to the exercise price,” said Jagannadham Thunuguntla, head of equity at SMC Capital.
In February 2009, the capital markets regulator Securities and Exchange Board of India changed the rules for warrant-conversion, saying that in forthcoming warrant issues, the holder would need to pay 25% up front. All the companies reviewed by SMC Capital had issued their warrants before February 2009.
However, at Rs1,251 crore, the conversion value of warrants issued to PE investors and exercisable after 1 January 2007 is minuscule compared with those for promoters.
Mint had reported on 15 April that out of warrants worth Rs25,153.04 crore issued to promoters of 34 companies, only Rs3,886.41 crore worth had been converted to equity. This was because the warrants were out of money, meaning that the share price of these companies was at a steep discount of anywhere between 15% and 86% to the exercise price of the warrants issued to promoters.
Source: Livemint

Origo Sino-India invests $5m in risk management solutions business

Origo Sino-India (OSI), a London Stock Exchange-listed, Beijing-based private equity and consultancy firm, has made a follow-on investment of $5m in IGH, an international provider of risk management solutions. The deal was made in conjunction with a subsidiary of the firm, Origo Resource Partners (ORP).

IGH, which completed its first full year of operation in 2008, produces risk management products and services for the public sector and mining, power, construction and manufacturing industries. The company comprises a network of 15 subsidiaries across five continents, including operations in China. The investment will initially be in the form of new convertible loan stock to be issued by IGH, which will be split between OSI and ORP on a 30:70 basis, in accordance with their shareholding in IGH. Assuming the loan stock is converted, the $1.5m investment by OSI will result in its equity interest increasing to a maximum of 19.2 per cent. The capital will be used to fund a proposed acquisition by IGH and to complete another, both within the next month. The acquisitions will provide scope for expanding IGH's operations in Asia Pacific, South America and the Middle East. Chris Rynning, CEO of OSI, said, "I am delighted that Origo has been able to play such an important role in the development of IGH. This transaction provides IGH with significant growth opportunities and underlines how our strategy of investing and working with promising companies, in our chosen sectors, can deliver value to shareholders." OSI is a private equity investor and strategic consultancy business focusing on core economic growth opportunities in China and India. Last year the firm made a £3m deal with global investment manager GLG Partners to provide research on investment opportunities in the Chinese and Indian markets.

Source: AltAssets

Adani Power files for IPO; 3i's Investment in positive zone

Adani Power, a part of Gautam Adani-led business conglomerate with interests spanning from FMCG to infrastructure, has approached the market regulator SEBI with a revised IPO plan, estimated to raise more than Rs 2,000 crore. This is the second time Adani Power is planning to come out with an initial public offer (IPO), as its previous attempt was scuttled due to adverse market conditions. In its revised draft prospectus filed with SEBI, Adani Power has proposed to sell over 330 million equity shares of Rs 10 face value each, which would account for about 15% of the company's post-issue equity capital. While the price of the shares to be offered in IPO would be decided later, the company has said in the draft prospectus that it expects to utilise Rs 2,193 crore of net proceeds from the public issue to fund its power projects - Mundra IV in Gujarat and Tiroda in Maharashtra.

What about 3i's investment?

With this development, it is now confirmed that UK-based 3i’s investment in Adani Power remains in the positive zone. The average cost of acquisition for 3i is pegged at Rs 59.5/share. Adani Power seeks to raise Rs 2,193 crore through the issue which would translate into per share price of around Rs 65-70 given that the issue comprises 33.05 crore shares including 80 lakh shares reserved for the employees. Though 3i would be sitting on profit at this valuation, looking at the opportunity cost of the fund(had it been invested in some debt instrument) it could have earned a higher return.

Earlier, the private equity fund had invested Rs 900 crore in Adani Power in two tranches-- October 2007 and April 2008. The PE firm subscribed to 8.4 crore shares as a result of these two transactions which now stands at 15.14 crore shares due to a 4:5 bonus issue at Adani Power last year. 3i holds 8.22% stake in Adani Power before the IPO which would become 6.92% post issue.

Source: Business Standard, VCCIRCLE

StanChart eyes Mideast and Africa Private Equity deals

Standard Chartered bank is bidding for private equity deals in Asia, the Middle East and Africa after an 18-month hiatus as it looks to benefit from higher yields in the aftermath of the financial crisis. The bank's Middle East & North Africa Managing Director and regional head of private equity Hossam Shobokshi told Reuters it was focusing on areas including real estate and infrastructure mainly in Asia and the Middle East. "We are active, but we are disciplined, and we are putting in bids," Shobokshi said on the sidelines of a conference in Abu Dhabi on Tuesday. "Deals done in the next two years will yield high returns." Stock markets in the Middle East and North Africa have been hard hit by global turmoil and valuations have dropped. Private equity funds in the region have $11 billion (7.54 billion pounds) to invest after raising a record $6.4 billion in 2008, the Gulf Venture Capital Association said. The bank, which is managing a fund with India's Infrastructure Leasing and Financial Services, is looking at companies with at least three years of operation and minimum profits of $5 million, Shobokshi said. "Over the last one and a half years, we have not invested in a single deal," he said. "We looked at 180 deals, (but) did not invest to avoid the speculative valuations in the market. We are here to produce returns." Standard Chartered has 60 percent of its business in Asia, 20 percent in the Middle East and the rest in Africa, Shobokshi said. "Emerging markets are important for us," he said.
Source: Reuters

Morgan Stanley raises $1.14 Bn FOF; To Invest in emerging mkts

Morgan Stanley Investment Management (MSIM) has said that its alternative asset arm has raised $1.14 billion in commitments for Morgan Stanley Private Markets Fund IV, a private equity fund of funds. Its strategy is to emphasize less efficient market segments and target managers with differentiated skill sets in the US, Western Europe and emerging private-equity markets. The firm has also recently opened up an office in Hong Kong.

"In today’s environment, distressed – including secondary purchases – and asset-backed strategies are especially attractive," said Tom Dorr, Chief Investment Officer, Private Equity Fund of Funds Team. The new fund, which is an increase of over 15% from the last fund, will make investments in primary funds, co-investments and direct secondaries.

Emerging markets are increasingly becoming attractive for limited partners (LPs). India ranks third in terms of attractiveness among emerging markets, after China and Brazil, said a recent survey by Emerging Markets Private Equity Association and Coller Capital. The survey added that 78% of the LPs with an exposure to emerging markets are now looking to increase their commitments. This is because most LPs believe that emerging market funds will give better returns developed market funds.

Fundraising has been increasingly getting tough as LPs are cutting commitments to the private equity asset class. Many fund managers have delayed their fund closing dates and are even trimming their fund size in order to reach a close.

Currently there are 78 India-focused funds on road in 2009 looking to raise $24 billion, according to data by Prequin. There are about 117 pan-Asia private equity funds - who have India as one of its geographies - on road currently targeting to raise an aggregate capital of $59.2 billion.

Shriram City To Sell Windmill Biz; PE Warrant Conversion Put Off

Shriram City Union Finance (SCUF) plans to extend the validity of warrants issued by the company to four private equity investors from 12 months to 18 months. The warrants were granted alongside allotment of equity shares on May 3, 2008, SCUF said in a statement to the Bombay Stock Exchange today. The private equity investors are ICICI Ventures (through IDBI Trusteeship Services Ltd), ChrysCapital (through Van Gogh Ltd), Asiabridge Fund I (TPG Newbridge) and Bessemer Venture Partners. The company will seek approval of this and other proposals at its Extraordinary General Meeting on May 11, 2009. The other conditions regarding the warrants, which includes price and conversion ratio, will remain the same. The equity shares were subscribed at Rs 400 per share and the current shareholding as of March 30, 2008 stands at ICICI Venture (6.64%), ChrysCapital (13%), Bessemer (2.73%) and TPG Newbridge (1.28%). Another major shareholder is Merrill Lynch Private Equity, which holds an 8.72% stake in SCUF.
The warrants were issued at a subscription price of Rs 40 per warrant, with an option to subscribe to one equity share per warrant at an exercise price of Rs 400. This is higher than the current trading price of Rs 322. The total warrants held by the four private equity players are 3.25 million, and upon conversion will amount to 6.6% stake collectively. With the warrant conversion price at a premium to current trading price, the investors and the company would be hoping that the share price may come to Rs 400 level in the next six months. Otherwise, the investors can pick up the stake through secondary purchases from the open markets.
SCUF, part of the Chennai-based Shriram Group, is one of the largest retail financiers in the consumer durable segment. In September last year, Shriram Group sold a 49% stake in Shriram Retail Holdings Ltd, the holding company of of SCUF, to Texas Pacific Group (TPG). Through this deal, TPG indirectly acquired upto 26.7% in SCUF, and has made an open offer for another 20% stake in the firm. Warrants have become tricky issues for private equity players with crash of markets from levels reached in January 2008. In February this year, private equity major Warburg Pincus converted warrants held by it in Havell's at a high premium of Rs 690 per share as compared to the then prevailing market price Rs 110-120 per share. But the warrants held by private equity funds in Shriram City Union Finance are optional.
Selling Non-Core Assets
SCUF has also decided to sell its shareholding in non-core assets. These include selling its holding in its windmill business in Tamil Nadu and Karnataka, including assets like plant, machinery, etc. SCUF also plans to sell and transfer stake in Shriram Life Insurance Company Ltd and its wholly owned subsidiary Shriram Non Conventional Energy Ltd.
Interestingly, Shriram Group firm Shriram EPC has promoted along with Bessemer Venture Partners a renewable energy company, Orient Green Power Ltd.

KKR Joins Race To Pick Up Stake In Vijay Mallya's USL

Kohlberg Kravis Roberts & Co, or KKR, has joined the race to pick up a minority stake in Vijay Mallya's United Spirits (USL), which is the world’s third-largest liquor marketer. The private equity biggie is looking to pick up USL’s treasury stocks, which amount to a 14.8%stake in USL, reports Economic Times. Mallya has been in discussions with strategic players like Diageo and Bacardi for some time now, and is now also looking at financial investors.
The shares of USL reacted positively to this news, rising up by more than 6% reaching days high of Rs 751, against its yesterday's closing price of Rs 705. The 14.8% stake as per yesterday's closing price would be valued at Rs 1,045 crore (~$210 million), but Mallya would certainly seek a premium to current trading levels. The stocks 52 week high is Rs 1,873 per share.
A MNC player would be willing pay a premium factoring in the advantage of distributing its the distribution of its products in the Indian market, the world's largest beer market by volume.
The report adds that MNCs are willing to pay as much as Rs 1,400 per share. USL is also looking at issuing fresh shares, apart from selling treasury stocks.
Mallya is raising funds to pay off the Rs 6,900 crore debt on its books. UB Group's recent acquisitions have been funded by debt, including the $827 million acquisition of Whyte & Mackay. The deal will help UB deleverage its balance sheet, which is its first priority.
KKR set up its India office earlier this year, hiring former Citigroup India honcho Sanjay Nayar. A significant minority in one of the worlds largest spirits maker with a 55% share in the fast growing Indian market may just be the grand start its looking for.
It has done couple of deals before setting up office in the country - the leveraged buyout of Aricent, and $250 million for a stake in Bharti Infratel, the telecom tower arm of Bharti Airtel.
PE Investments In The Space
Alcoholic beverages market are considered somewhat recession proof, with sales being affected only mildly. Private equity funds, who are now focusing on India's domestic consumption story, seem to be actively looking at deals in this space now. Private equity firm Wilbur Ross & Co is looking to acquire Cobra Beer brand or take a controlling interest in the beermaker’s Indian unit, as per reports. Standard Chartered Private Equity is also believed to be in the race.
There have been some investments in this space before in India. Lighthouse Funds has picked up a stake in Imperial Spirits and Sula Wineyards has raised funds from a bunch of PE investors including Indivision India Partners, the PE fund of Kishore Biyani's Future Capital Holdings.

Top european fund likely to invest Rs300 crores in Sobha developers

Redevco, one of Europe’s largest real estate investment and development firms, with a $10 billion portfolio, is understood to be looking at investing around Rs 300 crore in various projects of Bangalore-based Sobha Developers. Redevco, part of the diversified Cafro Holdings, which is into private equity, retail, financial services and renewable energy, in addition to real estate development, set up office in India in late 2008. If the discussions with Sobha fructify, it will be its first investment in India. Investment banking sources indicated that Redevco has had initial discussions with the management of Sobha Developers, which is mired in debt like many of its peers. The investment, if it materialises, is expected to be tied up by September 2009, they say. Private equity investments into Indian real estate have been slowing over the past three quarters and this deal is expected to be a major one. While Redevco said it had nothing to comment, Sobha has been maintaining that it is in talks with various funds and nothing has been finalised. Over the past two quarters, Sobha has been aggressively looking at three options to reduce its debt burden of close to Rs 1,900 crore, a leverage of 1.6 times. The company, which has Infosys as one of its major clients, is looking to raise around Rs 850 crore by selling around 200 acres of its 3,000 acre land bank, offloading up to 49 percent stake through special purpose vehicles and to offload up to 25 percent stake at the enterprise level. Sobha is understood to have identified around 150 acres of land on which projects can be implemented through special purpose vehicles by divesting stakes. The company is also engaged with around 12 banks and financial institutions to restructure around Rs 850 crore of debt that will be due for payment during the next 18 months. Banking sources indicate Sobha has been able to get a nod for a part of that sum and talks are also on with mutual funds to roll over Rs 350 crore of debt.

Tata Capital to roll out first PE fund by 2009-end

Tata Capital plans to roll-out the first of its series of private equity funds by the end of this year and will approach the market regulator Sebi to obtain regulatory approval very soon, a top company official said. "We plan to launch our first private equity fund, a 'classic' PE fund, before this year-end, specifically targeting the mid-market segment. We will be seeking regulatory approval from market regulator, Sebi, in the near future," Tata Capital Head Private Equity Shailendra Bhandari told PTI here. This will be followed by the Innovation Fund, most likely by end-2010, and later by a sector-specific fund, Bhandari said. Tata Capital, which proposes to be the anchor investor in all its domestic funds, has tied-up with Japan's Mizuho Securities to partner it in the mid-market fund which will be the first to be launched. This fund will target mid-market companies which are typically unlisted and the deal size would be in the range of $25-30-million. "It will be sector-agnostic and will invest in all sectors except real estate. We plan to do 4-5 deals a year, stay invested in companies for five years and exit in the sixth," he said.

Tatas eye new PE structure

The House of Tatas is on course to pilot a new venture funding structure in the Indian market. The private equity arm within Tata Capital, which is set to launch two to three funds this year, plans to leverage the expertise of a diverse pool of people working in nearly 100 companies that are part of the Tata group. Under the new model, apart from infusing money into companies selected by Tata Cap PE for funding, the PE arm will also try to bring in experts from within the group to help these portfolio companies grow faster. The PE fund could also try and test some of the technologies emerging from its portfolio companies with the group companies to check commercial viability before taking it to the market. In contrast, under the prevailing model, PE funds put money into companies in their portfolio and help partly with the management. In some other successful cases in India like in Bharti Airtel and Gujarat Ambuja Cements the venture funds just put money while the management was solely with the promoters. "The prevailing models might not work any more," said Shailendra Bhandari, head-private equity, Tata Cap. "We are trying out a new model, combining financing and operating leverage. In the changing environment we have to sweat the equity," Bhandari added. Other than bringing in expertise from group companies, the PE fund also plans to introduce these companies to Tata group companies and the thousands of suppliers and vendors to these group companies. Are there opportunities around Nano? About 70-80 companies were involved in launching the most watched small car in the world and Bhandari said that his team was already in touch with all of them to identify emerging opportunities. Tata's PE arm, established last year, is on course to launch one or two funds in 2009 which will invest in established companies at some stages of growth. It would also launch another fund, the `Innovation Fund,' which will target seed stage companies. Although Bhandari declined to comment on the corpus of the two funds citing regulatory issues, market estimates the first fund, the mid-market fund, could have a corpus of $300 million to $400 million. The innovation fund would be much smaller in size, about $100-150 million. "The mid-market fund will invest about $25-30 million in each of the companies which need something to take them to the next level," Bhandari said. "In the innovation fund we plan to target companies with disruptive technologies and the ticket size will be $5-10 million," he added. Tata Cap PE's strategy will be to take either significant minority stake or a friendly majority stake where the management remains with the team running a company. In the first few funds, Tata Cap PE would target only domestic and foreign institutions to come in as investors. It could also consider high networth individuals, but only the sophisticated ones, Bhandari said.

PE investors bullish on emerging markets; to hike investments

Private equity investors are turning towards emerging economies, which have become attractive as they continue to chart growth, while their developed peers are in negative terrain."Emerging economies have positive growth rates, while the developed peers are lagging in negative zone. In such times PE players look forward to investing in those economies which can absorb the shock and reap returns on their investment," SMC Capital Equity Head Jagannadham Thunuguntla said. According to Emerging Market Private Equity Association, institutional investors believe emerging markets will continue to present attractive investment opportunities in the coming year and plan to maintain or expand their exposure. "Investors recognise that emerging economies are the only ones still growing, and they also know that, since private equity deals in emerging markets do not rely on debt, the collapse of the global leveraged finance markets will not impede deal flow," EMPEA President Sarah Alexander said. Of the BRIC (Brazil, Russia, India, China) economies, the fund partners ranked Brazil as the second most attractive destination for investment in the next 12 months behind China and just ahead of India, according to a survey by EMPEA. "In India transactions are in the form of equity with no debt component. In contrast, the US and the Europe focussed funds are more into leverage buyouts for which they raise bank loans," Venture Intelligence CEO Arun Natarajan said.
Analysts said India focussed funds mostly target growing companies, while the US and the Europe focussed funds are more into 'buyout investments'. "A majority of investors committed to recent emerging markets (EM)PE funds expect them to outperform developed market funds of equivalent vintages. Moreover, they expect this out-performance to continue for new commitments they will make over the next few years," UK-based Coller Capital Partner Erwin Roex said. Analysts feel that despite PE investors shifting towards the developing economies, actual investment in those countries are going to take time, as fund managers are waiting for the global economic condition to improve. "Fund managers have evinced their interest in emerging economies, but converting that into investment will mostly be after a recovery in the global markets," Thunuguntla added. New investors will continue to enter emerging markets in 2009, but at a slower rate. The majority of fund partners believe the risks of EM PE have increased over the last year, especially in Russia, Central and Eastern Europe, and Africa, EMPEA said in a statement. "However, four out of five existing investors who think risk has increased nonetheless expect to expand their exposure to EM PE within the next five years," the EMPEA survey stated. Emerging markets might see slightly higher allocation of funds and more PE transactions when market improves, but developed economies will continue getting a big chunk of the pie, Natarajan added.

UTI AMC Attracts Bids From 4 Investors; Valued At Rs 3,500 Cr

Schroders, Vanguard Mutual Fund and T Rowe Price have reportedly submitted bids to acquire 26% strategic stake in UTI Asset Management Company (UTI AMC), India’s oldest and fourth-largest fund house. The highest bid has valued UTI AMC at around Rs 3,500 crore ($690 million) which is around 7.3% of the assets under management (AUM), The Economic Times reported today.
UTI AMC has four shareholders State Bank of India (SBI), Life Insurance Corporation of India (LIC), Bank of Baroda (BoB) and Punjab National Bank (PNB), holding 25% stake each. It was formed six years ago when the government was forced to restructure the erstwhile Unit Trust of India, following a payments crisis. Its assured return schemes were transferred to a separate company called Special Undertaking of UTI (SUUTI), and the rest was moved to UTI AMC.
The latter’s four state-owned shareholders had acquired the firm from the government for Rs 1,250 crore. The ET report adds that each of these four shareholders will sell part of their stake to the strategic investor instead of a fresh issue of shares.
The plan to induct a strategic partner in UTI AMC was announced last year by the former finance minister P Chidambaram. UTI AMC had even toyed with the idea of a public float but this didn’t materialise as the markets turned turtle. It had originally considered a private placement followed by an IPO that would have brought down the stake owned by its four shareholders to 51%.
The shareholders had planned to raise around Rs 2,500 crore last year that would have valued the asset management firm at Rs 6,500 crore. The bids which are reportedly submitted for the strategic stake now values UTI AMC 46% lower than this.
Among those who had courted the firm earlier include Japan’s Shinsei Bank and the National Australia Bank. Shinsei has since then joined hands with private investor Rakesh Jhunjhunwala to launch a mutual fund venture in India.
There were a couple of deals involving mutual fund houses last year where Religare Enterprises bought out Lotus AMC and IDFC acquired Standard Chartered’s asset management business in India.

Private Equity and hedge funds participate in the rally

Private equity and hedge funds seem to be playing their parts in the brief rally that the Indian stock markets are witnessing. Multi-strategy fund New Vernon has picked up minor stakes in twocompanies. New Vernon bought little more than 3% stake in Indage Vintners for Rs 2.76 crore. Indage Vintners, formerly known as Champagne Indage, is one of the oldest wine producer in the country.
New Vernon also picked up shares in real estate firm Orbit Corporation for Rs 1.42 crore for a less than 1% stake. It was only yesterday that Orbit Corporation got approval from Bombay High Court for amalgamation of Orbit Shelter Pvt Ltd with itself. The company share price rose by 18% yesterday.
New Vernon is an active investor in Indian markets, both public and private. Some of its investments include INX Media, Prime Securities and Sarover Hotels.
Some hedge funds also saw this rally as a good exit opportunity and a chance to cut their losses. Hedge funds around the world have come under redemption pressures as their portfolio values have shrunk since last year.
Genesis Indian Investment Company sold shares worth around Rs 6.5 crore in Balaji Telefilms, accounting for around 2.67% stake. Another hedge fund active was ICG Q, a fully owned subsidiary of India Capital Growth Fund, which dumped more than half a million shares in AsianElectronics for around Rs 23 per share.
Also there were multiple block deals involving United Breweries, UB Group's beer company, where Deutsche Securities bought 11% stake from DB International Asia for around Rs 273 crore. The deal was an inter-scheme transfer by Deutsche Bank.

IFC Invests In Lifetree Convergence; To Fund Inorganic Growth

Lifetree Convergence Ltd., a Delhi based telecom software and billing solutions company, has raised growth funding from International Finance Corporation (IFC), the private equity arm of World Bank. Even though the amount is undisclosed, a 2007 project report of IFC showed that the PE entity was invited to invest upto $20 million of a total funding requirement of $60 million.
Avendus Capital was the exclusive financial advisor to Lifetree for the transaction. According to a statement from Avendus, the capital would be used by Lifetree for inorganic initiatives. The transaction was consummated in August 2008.
Interestingly, Lifetree was acquired by Finnish telecom company Tecnomen for a cash and stock consideration of €33.2 million. Lifetree Convergence was founded in 2000 by Atul Chopra and others. It provides convergent billing and customer care, rating, and messaging platforms for the telecom industry.
The operational support systems (OSS) and business support systems (BSS) software space, in which Lifetree is present, is a $29 billion opportunity, and is expected to grow at 8% year on year. Among them, the convergent solutions are expected to grow by 30% a year. Emerging markets are expected to contribute over 50% of the projected growth in this domain, a statement said.