PEs continue to flow into India. Slowdown? What slowdown?!Enough water has flown under the bridge since the collapse of the Wall Street giants, namely, Lehman Brothers, Merrill Lynch, Freddie Mac and Fannie Mae and many more... Ever since, strong words and statements like ‘unprecedented recession, cascading stock prices, evaporation of billions of dollars in thin air, financial institutions falling like nine pins’ et al, have flown in from every corner of the media brass, to describe the prevailing economical conditions. But there’s bright hopes too! Well, at least when it comes to judging by how global Private Equity (PE) players are still enthusiastically investing billions of dollars in Indian companies. So what makes the investors bullish about the land of the Maharajhas? What’s the white elephant?
There are currently 1,601 PE funds in the global market and these are eyeing an aggregate fund raising target of a whopping $934.2 billion during 2008. Kalpana Jain, Senior Director, Deloitte, while explaining the behaviour of the PE giants rightly asserts, “PE finds places where there is opportunity. When developed economies are slowing down, they look for another wind of opportunity. And India with enormous untapped opportunities suits the bill of the biggies.” In India, PE firms have invested over $9.7 billion with 330 deals being completed in the first nine months of 2008. Sequoia Capital has been the largest investor this year, with $750 million in second growth capital fund. Then there are names like Providence Equity (invested $640 million in Aditya Birla Group), Symphony ($450 million in DLF), Farallon ($395 million in IndiaBulls Power), Morgan Stanley ($300 million in Tower Vision), Orient Global ($278 million in Cairn Energy), JPMorgan ($250 million in Café Coffee Day) alongwith Franklin Templeton, Nexus India Capital and Gaja Capital were the major fund investors till the third quarter ending 2008. JPMorgan has further announced an additional investment of $5 billion in non-profit and health care companies, higher-education institutions and government units over the next year. “We have expanded and will continue to expand our lending to existing clients while beginning new relationships with others.
Lending to these organisations helps both them and our communities,” declares Todd Maclin, CEO, Commercial Banking, JPMorgan Chase & Co. Then there are other names like Actis Capital LPP – which has unveiled plans of investing $1 billion in India over a period of 3-4 years and Blackstone Group – which has bought a stake in Mumbai based CMS Computers with an estimated valuation of Rs.5.0-5.5 billion. Numbers, satisfying enough to the fearful, and proving enough to doubting Thomases that India is still a favourite destination for PEs!
What’s better? PE companies still see a huge growth for themselves in the sub-continent as Harish HV, Specialist Advisory Services, Grant Thorton, justifies, “I think there is still potential and we see significant growth going forward.” India, which is now focussing on the PPP (Public Private Partnership) model of development certainly stands to gain from the bandwagon of investors. The prime reason why these PE giants are investing in the country is simple – these PE investments are a long term bet, and a growing economy is definitely a good bait. “These PE players take a long term view towards their investments thus minimising the impact of the current downturn. Moreover, the returns from PE funds have been very strong, and this would entice the investors to make new investments in the future, irrespective of market situations,” explains N. Wadhwa, Director, SKI Capital.
And it’s not just the big names we’re talking about here that are getting global PE sharks hooked onto the ‘high-return’ bait. As per the 2008 report by The Federation of Indian Micro and Small & Medium Enterprises (FISME), PE players led by Avigo Capital Partners and Blue River Capital invested $1 billion in SMEs in 2007-08, an increase of 75% from the previous fiscal. FISME further estimates the market for PE funding in Indian SMEs to be around $5 billion in the near future. “Investment in key sectors like Real Estate, Telecom, Energy et al, by the PEs is likely to give them high returns,” suggests Ashok Jainani, VP, Research & Marketing, Khandwala Securities.
But after all the good news for India, one issue stays – the lock-in period, which will definitely test the patience of a few of these aggressive PEs. But patience we have, and patience they will have to keep... Will they?!
There are currently 1,601 PE funds in the global market and these are eyeing an aggregate fund raising target of a whopping $934.2 billion during 2008. Kalpana Jain, Senior Director, Deloitte, while explaining the behaviour of the PE giants rightly asserts, “PE finds places where there is opportunity. When developed economies are slowing down, they look for another wind of opportunity. And India with enormous untapped opportunities suits the bill of the biggies.” In India, PE firms have invested over $9.7 billion with 330 deals being completed in the first nine months of 2008. Sequoia Capital has been the largest investor this year, with $750 million in second growth capital fund. Then there are names like Providence Equity (invested $640 million in Aditya Birla Group), Symphony ($450 million in DLF), Farallon ($395 million in IndiaBulls Power), Morgan Stanley ($300 million in Tower Vision), Orient Global ($278 million in Cairn Energy), JPMorgan ($250 million in Café Coffee Day) alongwith Franklin Templeton, Nexus India Capital and Gaja Capital were the major fund investors till the third quarter ending 2008. JPMorgan has further announced an additional investment of $5 billion in non-profit and health care companies, higher-education institutions and government units over the next year. “We have expanded and will continue to expand our lending to existing clients while beginning new relationships with others.
Lending to these organisations helps both them and our communities,” declares Todd Maclin, CEO, Commercial Banking, JPMorgan Chase & Co. Then there are other names like Actis Capital LPP – which has unveiled plans of investing $1 billion in India over a period of 3-4 years and Blackstone Group – which has bought a stake in Mumbai based CMS Computers with an estimated valuation of Rs.5.0-5.5 billion. Numbers, satisfying enough to the fearful, and proving enough to doubting Thomases that India is still a favourite destination for PEs!
What’s better? PE companies still see a huge growth for themselves in the sub-continent as Harish HV, Specialist Advisory Services, Grant Thorton, justifies, “I think there is still potential and we see significant growth going forward.” India, which is now focussing on the PPP (Public Private Partnership) model of development certainly stands to gain from the bandwagon of investors. The prime reason why these PE giants are investing in the country is simple – these PE investments are a long term bet, and a growing economy is definitely a good bait. “These PE players take a long term view towards their investments thus minimising the impact of the current downturn. Moreover, the returns from PE funds have been very strong, and this would entice the investors to make new investments in the future, irrespective of market situations,” explains N. Wadhwa, Director, SKI Capital.
And it’s not just the big names we’re talking about here that are getting global PE sharks hooked onto the ‘high-return’ bait. As per the 2008 report by The Federation of Indian Micro and Small & Medium Enterprises (FISME), PE players led by Avigo Capital Partners and Blue River Capital invested $1 billion in SMEs in 2007-08, an increase of 75% from the previous fiscal. FISME further estimates the market for PE funding in Indian SMEs to be around $5 billion in the near future. “Investment in key sectors like Real Estate, Telecom, Energy et al, by the PEs is likely to give them high returns,” suggests Ashok Jainani, VP, Research & Marketing, Khandwala Securities.
But after all the good news for India, one issue stays – the lock-in period, which will definitely test the patience of a few of these aggressive PEs. But patience we have, and patience they will have to keep... Will they?!
Ratan Lal Bhagat
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