If it's any consolation, it's not just you who have lost money in the market. Even the so-called market-savvy have.
One subset in the latter group is private equity (PE) funds, many of which are banging their heads for indulging in a bull market phenomenon called private investment in public enterprises (PIPEs).
Most such PIPE deals, in which PE players took stakes in listed companies, lured by the phenomenal market run in the last five years, have come a cropper.
The embarrassment gets magnified when you consider that a PE fund's traditional mandate is to buy into unlisted companies, and create value in them.
An analysis by DNA Money of data provided by Venture Intelligence shows that, of the 51 PIPE deals in India in 2007, 33 have lost money. That's more than 60 per cent of the transactions.
“If you ask a PE investor, the standard answer would be that these short-term blips do not really bother them,” said one investor who did not wish to be named.
“Our analysis shows that a bulk of the 2007 deals of this nature is out of money,” said P Harshavardhan, partner and director, Boston Consulting Group (BCG), on the sidelines of releasing a BCG-IESE Business School (of Spain) report on private equity, 'The Advantage of Persistence'.
Venture Intelligence data also shows that it was the who's who of PE that made investments in listed companies, and are now left holding crying babies.
Based on the value of the deal and the market value of the fund's stake in the company now, Baring India's stake in JRG Securities is the worst hit, its worth having eroded 71 per cent.
Others that have lost more than 50 per cent due to the recent market meltdown are Nalanda Capital in Vaibhav Gems, Al Anwar Holdings in Almondz Global Securities, Fidelity in BAG Films and Media, Orient Global in India Infoline, ADM Capital in Rama Pulp & Papers and Macquarie and Credit Suisse in Sical Logistics.
Deals consummated in 2006 also tell a similar story. Almost 40 per cent of them, or 17 of the 41 PIPEs, have lost money.
Capital International's stake in McLeod Russel India, Carlyle's in Allsec Technologies, Future Capital's and Reliance Capital's in Maxwell Industries, Goldman Sachs Investments' and Voyager Fund's in Spentex Industries, New Vernon's in JB Chemicals and Unichem Laboratories, Clearwater's in Kopran, ICICI Venture's in Geometric Software and Gateway Distriparks and General Atlantic's in Hexaware Technologies, are some of the investments whose values have eroded over 50 per cent from the time the funds invested in them.
“From now on, PE players will have to behave differently, as they cannot rely on the markets alone for providing returns in excess of 40 per cent,” said Saurabh Tripathi, another partner and director at BCG, referring to the slowdown in the equity markets after a phenomenal five-year run.
“Most of them have been riding growth till now. This will have to change, with networked access, domain expertise and operational improvement being the three capabilities that a fund will need to bring to its investments, if it is to show superior performance,” added Tripathi.
That's not to say that PIPEs will completely go out of fashion. “The tempering of the overall market will mean that PIPEs are unlikely to dominate the way they did in the last couple of years,” says Harshavardhan.
“When such deals happen, the funds will play a more activist role in running their investee companies,” he adds.
That's because the markets are turbulent as many funds would have realised in the last two months.
Source: Sify