Posts Tagged ‘PE funds’

Indian Private Equity Industry to Hit By US Banks Curbs : Experts

Indian Private Equity Industry to Hit By US Banks Curbs

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In case, US President Barack Obama‘s proposal to curb the role of commercial banks in hedge and PE funds is implemented, then fund-raising could indeed become a very tough task for Indian private equity players.

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But at the same time, the move could help Indian funds take part in more deals, market players insist.

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Obama has proposed to bar commercial banks from owning, advising and investing their own capital in PE and hedge funds.

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Though most investors in Indian PE funds are university funds, endowment funds, pension funds, insurance funds and institutional investors,Β  the industry expects the move to impact fund-raising in the long term and in big way, as banks will be barred from taking part in these funds.

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A large number of venture capital and PE funds of US-based commercial banks had reduced their exposure to India during the economic slowdown.

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Though few big ones like Goldman Sachs, Merrill Lynch etc; stayed back in the market.

Indian PE players hope to get more deals if these players vacate the market.

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Market experts do not see any significant impact in the coming few months, but cannot deny that a slowdown in USA market will surely impact the Indian private equity industry.

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They feel that any curbs on banks would make fund-raising a very difficult task since banks were the biggest contributors of funds.

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Industry players say the focus will shift from funds of banks to fund of funds, pension funds, and university and endowment funds.

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“It will be difficult to put a number as these transactions are structured in a complex manner.

But I believe a significant proportion of investments in India-based PE funds come from balance sheets of these banks.

These firms will be affected and will have to look for new sources of money,” said Jagannadham Thunuguntla, equity head at SMC Capitals.

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In India, PE & VC Funds Turn Selective :)

PE and VC funds in India have tightened their purse strings.

PE and VC funds in India have tightened their purse strings.

Private equity (PE) and venture capital (VC) funds in India have tightened their purse strings.

That’s because limited partners (LPs) β€”the main source of funding for venture capitalists β€”are reducing their exposure in this space.

According to industry estimates, there has been a drop in new investments to the tune of 71% during the first nine months of 2009 as compared to the same period last year.

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Industry experts say limited partners are miffed with the returns shown by the general partners, who manage the fund and its operations on a daily basis.

Many LPs are looking at better returns and shorter investment term cycles, instead.

LPs have instructed some of their funds to conserve cash and value in the existing portfolio. Some limited partners are not investing in private equity funds on an incremental basis.

This assumes significance in the current context because it’s tough to raise fresh funds, and the competition to attract limited partners to VCs is quite intense.

A venture capital firm is usually structured in the form of a limited liability partnership and people who invest in it are limited partners.

In India, the bulk of venture capital inflow is from Foreign markets like the US and Europe, with limited partners mostly being institutional investors such as pension funds and insurance companies and family offices who are mostly based out of the US.

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Indian venture funds are also in place, many of which tap money from overseas by means of an offshore fund.

With new funds not in sight, private equity and venture capital firms are also becoming selective.

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PE Funds Raising Plummets to Lowest Levels Since 2003

Private equity fund raising plummets to lowest levels since 2003

Private equity fund raising plummets to lowest levels since 2003

Fund raising by global private equity funds has dipped to an over five-year low of $38 billion in the third quarter of 2009, as fund managers are refraining from making any new commitments before next year.

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Fund raising in Q3 of 2009 represents a 55% slump from Q2 of 2009, when the PE funds had raised an aggregate $84 billion globally, according to latest report by a reputed global research firm Preqin.

Private equity fund raising plummets to lowest levels since 2003, with the third quarter figures equivalent to just 45% of the $84 billion raised in Q2 2009.

Many of the funds that are closing are doing so short of target, and a number of fund managers putting their fund raising efforts on hold until 2010, or abandoning them altogether for the foreseeable future.

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However, the report noted that the investment shift from the private equity asset class is only short term and the institutional investors would pull back again in the final quarter of this year and in 2010.

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Over the year the number and aggregate fund raising target has dropped considerably.

Reasons can be the slowdown in launches of fund raising programmes, plus an increase in the number of funds being abandoned.

Institutional investors are not making new commitments at anything close to the rate they were in previous years.

The rate of fund raising to drop by nearly 70% over the course of a year is a dramatic fall and demonstrates just how challenging it has become to raise new funds in the current scenario.

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QIPs Outstripped PE Funding & IPOs in Fund Raising Process ;)

QIP-investments-outpace-PEfunds

Qualified institutional placements (QIPs) have outstripped private equity (PE) funding since January by at least eight times, making it by far the most popular fund-raising route for firms this year.

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QIPs raised at least Rs. 21,209 crore since January this year, while PE funds invested only Rs. 2,574 crore in listed firms.

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QIPs have almost raised more than twice of initial public offerings.

A QIP is a private placement by a listed company of shares or securities convertible to equity with qualified institutional buyers approved by market regulator Securities and Exchange Board of India(SEBI).

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Data from Delhi-based investment bank SMC Capitals Ltd shows another 48 QIPs worth Rs.43,891 crore are in the pipeline.

But analysts do not expect a significant rise in the number of, or funds through, PE deals this year.

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Typically, PE investments take up to six months to complete, whereas a QIP can be done in up to four weeks, making the fund-raising process faster and more reliable since the institutional buyers are selected carefully.

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Also, in a QIP, the institutional buyers rarely seek a seat on the company board, or management control, a common practice in large PE deals.

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Since PE is perceptionally intrusive for promoters, QIP serves as a good alternative.

However this QIP structure is liked by investors and firms as in a QIP the window is shorter and money can be raised quickly.

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While real estate firms typically prefer QIPs for their need of capital at short notice, the companies currently waiting to do QIPs are across sectors, including telecom, entertainment, retail and information technology.

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In line for QIPs are Reliance Communications Ltd, Pyramid Saimira Theatre Ltd, Pantaloon Retail (India) LtdΒ  and few more.

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Some firms, though, have taken both routes for their funding needs.

Historically, PE investments in India have been in the form of private investments in public enterprises, or PIPEs, which also happen to the only firms eligible for QIPs.

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β€œPrivate equity investors have missed the boat,” Jagannadham Thunuguntla, head of SMC Capitals, said in a statement.

Companies that are in the pipeline for QIPs may also look for American depository receipts or global depository receipts for funds, heΒ  added.

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Movers and Shakers of Today’s Market : 22nd AuG,2009 :)

gainers and Losers

MOvers and Shakers

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Here we present you with the data of Top Gainers and Losers in BSE Index and NSE Nifty for today.

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Top Gainers shows the list of stocks that have gained the most (% terms) compared to their last closing prices. πŸ™‚

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Top Losers shows the list of stocks that have lost the most (% terms) compared to their last closing prices.

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1. Top Gainers in Sensex

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Top Gainers Sensex

2. Top Losers in Sensex

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Top Losers Sensex

3. Top Gainers in Nifty

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Top Gainers

4. Top Losers in Nifty

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Top Losers Nifty


Click HERE to view company’s detailed stock quote and company profile.

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Top Gainers shows the list of stocks that have gained the most (% terms) compared to their last closing prices. πŸ™‚

Top Losers shows the list of stocks that have lost the most (% terms) compared to their last closing prices. 😦

Institutional Investors have become more sceptical in committing funds!

Equity Head

Private equity firms are becoming cautious about making fresh investments in India with less funds flowing into this segment as institutional investors have become more skeptical in committing funds without thorough research, experts says.

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The rush for PE investments into India has slowdown a bit at present.

Managers are studying the companies more carefully before making any new investment commitment as of now.

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PE funds investing in India has turned cautious and limited partner or the part owners of funds are raising questions over the intent of the investment owing to the fact that global PE fund dipped to record lows during the second quarter of 2009.

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“Limited partners or institutional investors are increasingly becoming sceptical about their investment decisions and are questioning the intent of the General Partners,” SMC Capitals Equity Head Jagnnadham Thunuguntla said.

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PE funds are now preferring to liquidate their stake asΒ Β  capital market sentiment is improved.

The degree of scepticisim in the Indian Market has reduced to what it was few months back.

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However, with the capital market boom, PE funds are now preferring to exit via open market transactions,” Thunuguntla added.

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However, India is among the few markets wherein the PE firms are still looking at investments in times of downturn, though cautiously.

During second quarter 2009, globally 89 private equity funds reached a final close securing $79.7 billion among them. as per the latest survey.

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“The capital market bounce starting April 2009 has seen several PE (Private Equity) funds selling their investments in the open market.

The recent market bounce has given a fresh breather of life for several PE investments with impressive recovery of losses,” Thunuguntla said.

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Private equity firms are becoming cautious about making fresh investments in India with less funds flowing into this segment as institutional investors have become more sceptical in committing funds without thorough research, experts says.

PE Exits through Bulk & Block Deals: SMC Capitals

SMC Capital Equity Head

According to the SMC Capitals report, the capital market bounce starting April 2009 has seen several PE (Private Equity) funds selling their investments in the open market.

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The PE funds have sold from April 2009 till date, an amount to the tune of about Rs 1531 crore through bulk deals and block deals.

SMC Capitals report on PE funds selling investments :


1. The capital market bounce starting April 2009 has seen several PE (Private Equity) funds selling their investments in the open market.

2. The severe capital market correction of 2008 has resulted into several PIPE (Private Investment into Public Enterprises) investments into listed companies by PE funds, facing huge losses with severe wealth destruction.

3. However, the recent market bounce has given a fresh breather of life for several PE investments with impressive recovery of losses.

The PE funds have sold from April 2009 till date, an amount to the tune of about Rs 1531 crore through bulk deals and block deals.


4. The several prominent exits, either partial or full, by PE funds during this period are such as:

– ChrysCapital sale of their stake in Shriram Transport Company for an amount of about Rs 300 crore.

– Orient Global sale of their stake in India Infoline for an amount of about Rs 250 crore

– Warburg Pincus sale of their stake in Max India for an amount of Rs 246 crore

– TPG sale of their stake in Mahindra & Mahindra Finance for an amount of about Rs 123 crore.

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Also read full report on the attachment:

http://www.moneycontrol.com/news_html_files
/news_attachment/2009/SMS%20report%20on
%20PE%20Exits.pdf

According to the SMC Capitals report, the capital market bounce starting April 2009 has seen several PE (Private Equity) funds selling their investments in the open market. The PE funds have sold from April 2009 till date, an amount to the tune of about Rs 1531 crore through bulk deals and block deals.