Defying the gloomy economic scenario, over half a dozen overseas private equity funds are set to pump in R3,500 crore ($700 million) in diverse sectors in India including entertainment and leisure, energy conservation, microfinance, antenna manufacturing and surgical instruments, among others.
The deals will materialise within the next fortnight or two, sources in the investment banking sector said. This comes despite the slowdown in PE investments in the last three months of 2011.
While Mauritius-based PE fund APF-II is looking to pump in close to R1,000 crore, California-based Sequoia Capital (through its subsidiaries) along with a host of private equity funds will pick up 80% stake in Chennai-based Equitas Micro Finance for R230 crore. Another US-based fund Twin Star through its Mauritius offshoot is planning to invest around R1,600 crore in the Maharshtra-based subsidiaries of Sterlite Technologies.
Private equity funds including NYLIM Jacob Ballas and HSBC PI Holdings Mauritius are close to buying an 81% stake in meters and antenna manufacturing company Microqual Techno for R523 crore, while Oman Investment Fund through an overseas subsidiary will acquire a small stake in Mumbai-based Universal Commodity Exchange for around R14 crore. Spanish Company Chemco Ispana is also looking to buy a Chennai-based surgical equipment company Ordian for close to R50 crore while Renuka Ramnath’s Multiples Private Equity fund will pick up 10% stake in Mumbai-based Indian Energy Exchange for R50 crore valuing the company at R500 crore, sources said.
Taking note of the flood of private equity capital, especially from tax havens like Mauritius, the revenue department of the finance ministry is said to have sought detailed information from a host of overseas PE investors before giving its clearance, official sources said. Mauritius-based APF-II fund has been asked to furnish details of which sectors it plans to use its funds and how much exposure will the various companies receiving the funds will have from APF. Similarly, the home ministry has sought information from Mauritius-based Twin Star PE funds which wants to pump in R500 crore in Sterlite Networks, a subsidiary of Sterlite Technologies, which in turn, will use the funds to expand in telecom service related areas.
PE funds have played a very significant role in the country’s economy in recent years. According to a recent report by a research firm Venture Intelligence, PE firms made investments of around $10 billion (R50,000 crore) in India during 2011, taking their total investment over the past five years to about $47 billion. However, on a quarter-on-quarter basis, PE investments in the country saw a decline during the October-December period last year.
The role of private equity funds in bringing foreign investments has increased tremendously in the past decade. According to a recent UNCTAD’s World Investment Report, PE funds accounted for an average of around 22% in all the cross-border merger and acquisition deals between 2000 and 2010.
Source: Financial Express