Global Finance Rules

Private Equity Bonanza—–Destination India

The above statement not only speaks volumes about the kind of confidence that industry expert have on the corporate India but also throws the spotlight in the sizzling private equity space in India. Given the buoyant economy, it shouldn’t come as a surprise to know the fact that India I has of late emerged as an attractive private equity destination in the world. The figures demonstrate the facts. Of late private equity investments in India have been increasing at record levels. They have almost tripled from $2.2bn 2005 to $7.4bn in 2006. This clearly vindicates the fact that global PE firms are investing aggressively in India vying for a share in its private equity pie.
The year 2007 has also marked a jubilant beginning with one of the biggest private equity investment in an Indian media company –Nimbus Communication. PE firms namely 3i, Cisco and Oman investment Fund have closed a deal $125 mn with NIMBUS. It would be all the more interesting to know that this is the third time that Nimbus has raised fund via the PE route. Nimbus was keen to participate in this deal also after having benefited from the exemplary execution of growth plans by its previous PE partners. All in all, the PE route demonstrates a win-win situation for both the target companies to participate in PE deals.
TRANSFORMATION PHASE
Private equity primarily involves collection of large amounts of capital from very high net worth individuals and also institutional investors like insurance companies, pension funds, university endowments, etc. These large pools of capitals raised would be invested primarily in private companies which are not listed in the stock exchange with an objective to restructure the companies to unlock their value and thus obtain huge investment returns.
PE firms typically invest in such kind of companies whose valuation look attractive. They usually invested in different forms like venture capital, leveraged buyouts, angel investing financing, distressed debt financing etc.
The origin of Pe investing can be traced back to 1960s in the US. The concept quite old and popular in Europe and Australia. However, the investment tool is relatively new in Asia and has started gaining momentum only during the recent years. Although India had paved the path for private equity investment in 1980-90,it was only during the end of 1990s that India evinced interest , from major global players. However, as the investment guidelines were more suitable towards the technology sectors , growths was confined to only that particular sector. It was only since 2003 that private equity space in India underwent a, major global players started betting on emerging economies like India after witnessing dwindling returns from the developed economies.
Global private equity players started wetting their toes in India after War-burg Pincus, one of the largest Us private equity firms, tasted success by making an investment worth $300mn, in an Indian mobile telephony service provider, Bharti Telecoms. That investment which was made between 1999and 2001, was party sold in 2004 and completely sol in 2005, resulted in total return of a whopping $1.92 bn-around seven times than its original value. This has lured many US and European PE firms to set up shops in India. Many of the worlds a big player namely Carlyle, Blackstone, Matrix Partners, Barings, General Atlantic, Citigroup, 3i, and ChrysCapital has establish their presence in India. Some of the Indian private equity players include big names like IDFC PEBolstering Volumes
According to the India Venture Capital Association, PE investments in India have risen
Substantially since 2003. The investments, which were worth $700 mn in 2003, touch the US$1 nb mark in 2004. Further the investment double in 2005 and touch $2.2 bn. In a further record braking performance, they almost tripled in the year 2006 by zooming up to $7.5 bn over its previous year.
Two mega deals-Idea Cellular’s pre-IPO placement and the KKR-Electronics Software buy-out-bolstered the PE investment volume in 2006. Out of these biggest deal of the year 2006 was rge sale of 33% stake worth $950 mn by Idea Cellular to a based Providence Equity Partners, India’s Chrys Capital, the UK-based TA association and GLLG Partners and City groups.

About : Raja CRN

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