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Showing posts from February, 2008

Emerging markets PE Funds raise $59-B in 2007

204 Private Equity funds investing in the emerging markets of Asia, Central & Eastern Europe/Russia, Latin America, the Middle East and Africa raised over $59 billion in capital in 2007. Full details on fundraising by region and overall trends are available as part of the press release from the Emerging Markets Private Equity Association (EMPEA).

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Why SWFs are targeting US financials?

This New York Times article on the burning questions surrounding Sovereign Wealth Funds provides an educated guess why these funds are going after financial services companies.
Sovereign wealth fund investment may benefit these financial companies by opening up doors in the fund’s countries for business. However, it also establishes a friendly shareholder position in the company. These sovereign wealth funds are taking mostly non-voting positions and even those that have a vote will lack a right to a designated board seat.

...As these funds grow and begin to invest further with their newfound financial partners, expect them to further branch out and take larger, voting positions in different industries. Sensitive industries, such as defense, technology, and transportation infrastructure will still remain problematic, so expect investment there to be limited and when done to be by sovereign wealth funds of our ostensible allies working with the pre-approval of the U.S. government.

Arun …

VC Market

The following companies are seeking capital for starting-up / expanding their operations:

08-02-20-1: Bangalore-based Healthcare firm seeks >$5-M to acquire and manage a stand alone doctor owned mid sized hospital and make them part of a retain hospital chain.

08-02-20-2: Hyderabad-based entrepreneur seeks <$100 K to develop a prototype for a framework that will provide next generation Application Development and bring down ADM costs by 70%. “This method of Application development has the potential to kill ERP products market” the entrepreneur claims.

08-01-09-1: Chennai-based start-up seeks <$1 M for producing algae-based bio-fuels

08-01-09-2: Bangalore-based company seeks $1-5 M for expanding specialized value-added services for the food retail and hospitality sector. The company serves as the exclusive Indian representative, importer and distributor of top food and beverage brands for a range of imported foods sector. The capital will be used to create a pan-India distributio…

Equity Derivatives House of the Year! (A "Couldn't Resist" Post)

From Risk magazine's profile of the winner of its Equity Derivatives House of the Year-2008 (announced in January 2008).
Newspaper headlines in August were dominated by the credit markets - the rise in US subprime mortgage delinquencies, the nasty losses reported by banks, hedge funds and structured investment vehicles, and the sharp squeeze in liquidity. However, the equity markets also had a rough ride. Most notable was the plight of quantitative hedge fund strategies, many of which racked up sizeable mark-to-market losses in just a few days in early August. But the sharp rise in correlation and volatility also caused some pain for dealers.

With one of the largest exotics books on the Street, one would imagine that (the winning firm's) Corporate and Investment Banking would be licking its wounds and coping with hundreds of millions of euros in losses. There was some impact, but the losses have been relatively minor and entirely manageable, says Christophe Mianne, (the winning …

"China Investment Corp. is Most To-Be-Feared SWF"

Breakingviews.com has created a "Risk Index" that ranks the top 20 prominent Sovereign Wealth Funds (SWFs)" according to the potential risk they present to western interests". The index scores each fund on three criteria: Transparency (or the lack of it), Strategic Control (or the intent to acquire) and Political Threat. The higher the no. of points, higher the risk.

China Investment Corporation, the giant $200bn fund that recently acquired stakes in Morgan Stanley and Blackstone is top with 11 points. Anything in double digits is considered a high potential risk to western investor interests. But only two other funds are placed in this category: the Qatar Investment Authority and Venezuela's National Development Corporation both scored 10 points. All three scored high marks for lack of transparency.

Interestingly, the SWFs active in India - GIC & Temasek (Singapore), Istithmar (Dubai), Dubai International Capital and Khazanah Nasional (Malaysia) - figure qui…

Trouble at Indian commodities markets?

Businessworld has a cover story on the functioning (or the lack thereof) of Indian commodities markets.
The government, for its part, has erected artificial barriers such as hedging limits through the FMC, rendering the market platform useless in many cases. For instance, Indian companies manufacture 28 million tonnes of sugar annually but the hedging limit per company is just 10,000 tonnes. “A company wants to hedge its future production today to ensure that a downward price movement doesn’t hurt it. Sugar is produced only four months in a year and sold throughout. It is ridiculous to impose a limit of 10,000 tonnes on say, Bajaj Hindusthan, which has a capacity of two million tonnes a year!” says Kiran Wadhwana of International Trading Co, which advises companies on hedging practices.

...The increasingly unhealthy rivalry between NCDEX and MCX only worsens matters. Their opposing views on vital issues, such as public listing, delay policy decisions. NCDEX believes that markets have no…

Will the new Competition Act slowdown M&As?

Businessworld has a cover story on the issue.
What India Inc. seems to agree on is that the most retrograde aspect of the law is its view on mergers and acquisitions (M&As). Except for some notable exceptions, such as Rajiv Kumar, chief executive officer of the Indian Council for Research on International Economic Relations (ICRIER), and Subir Gokarn, chief economist with Standard & Poor Asia Pacific, most CEOs say the Act would deter M&A activity.

Under the law, which was drafted by the Ministry of Corporate Affairs, all M&As in India with a combined turnover of Rs 3,000 crore, or assets in excess of Rs 1,000 crore, will have to be mandatorily reported to the CCI, which will then decide whether to clear them. More significantly, there is also a separate threshold for group turnover (Rs 12,000 crore) and assets (Rs 4,000 crore) specified by the Act.

...The biggest flaw in the Act is that it regulates M&As solely on the basis of the asset size and revenue of the partie…

Stephen Schwarzmann profile in New Yorker

The New Yorker has a lengthy profile of Stephen A. Schwarzman, the chairman and chief executive of the Blackstone Group.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Impact of the IPO pullouts

Here are the takes of two market observers on the pulling of the Wockhardt Hospitals and Emaar-MGF IPOs this week.

Arun Uday of HSBC PE points to the role of IPO rating agencies.
It’s been one hell of a week for the markets, swinging wildly like a yo-yo and if all that wasn’t enough, in the midst of it, we have the Wockhardt IPO fiasco. I can’t recall any other instance in recent memory when such a renowned company had to withdraw its IPO the way Wockhardt has had to. While the management of the company has blamed it on the prevailing weak market sentiment, it’s clear that there’s more to it and that someone somewhere was being overambitious. It’s just incidental that I have been contemplating and blogging on the interplay between perceptual (or “synthetic” as I referred to it earlier) reality and fundamental reality, and in this case, its quite obvious that there was a huge disconnect between the two.

...one of the serious lapses that needs introspection from the regulators is the…

US buyouts will bounce back in 6-9 months: David Rubenstein

Extracts from Knowledge@Wharton synopsis of the Carlye Group founder's recent speech.
According to Rubenstein, the 1970s and 1980s were the "Bronze Age" of private equity, when early buyout deals emerged, culminating in 1989 with Kohlberg Kravis Roberts' leveraged buyout of RJR Nabisco and then the collapse of the proposed buyout of United Airlines. After the recessionary period of 1991 to 1992, private equity entered what Rubenstein calls the industry's "Silver Age." During this time, buyout deals grew larger, sellers turned to private equity as a way to liquidate holdings and sponsors were able to prove their ability to transform companies and earn handsome returns. That era, he said, ended when the technology bubble burst in 2000.

After a two-year break, private equity then entered what Rubenstein calls its "Golden Age," as deals grew to enormous size and private equity firms teamed together in so-called "club" deals to take over ev…

Sovereign Funds: The BusinessWeek take

Extracts from BusinessWeek's article on the favorite business/market topic these days: Sovereign Funds
The fund managers insist that Western businessmen and politicians have nothing to fear. Al Sa'ad ticks off a well-rehearsed list of reasons why CEOs should rejoice at the prospect of having Kuwait as a major shareholder. Reason 1: His fund will agree to multiyear lockups, providing long-term capital. Reason 2: Al Sa'ad expresses concerns to CEOs behind closed doors, not in the press. "If I were a CEO, I'd look for stability," he says.

But recent actions by some funds belie those soothing sentiments. The $50 billion Qatar Investment Authority, run by Qatar's Prime Minister, Sheikh Hamad bin Jassim bin Jabir al-Thani, is working with hedge fund activist Nelson Peltz to shake up British beverage company Cadbury Schweppes (CSG). Dubai Holding was so aggressive in its pursuit of OMX Group of Sweden last summer that it ran afoul of regulators there. Even compani…

Why Real Estate firms are bidding to become telcos

Businessworld has an interview with Unitech’s Managing Director Sanjay Chandra on this topic.

Q: In a sense, telecom is just like the real-estate business. You are capturing a fixed commodity (spectrum).
A: Yes (laughs). Instead of a land bank we are now managing an ‘air’ bank.

...Q: Are you planning to bid for wireless broadband?
A: We want to put our foot in the door and enter the business before we look at other options. I am sure we will look at that. We will look at 3G.

Q: Being successful with that will require real competence.
A: Yes, we are meeting lots of people and reading up. And it is still confusing. I think data is going to be big. CDMA is better for data. But India is seeing a GSM rush. Our services will be on GSM. We won’t be bidding for CDMA licences.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligenc…

Sequoia, UTI Ventures and ChrysCapital win APEX Awards

Sequoia Capital India, UTI Ventures and ChrysCapital emerged as the leading Private Equity/Venture Capital firms in various categories at the Second Edition of the Venture Intelligence APEX Awards.

While ChrysCapital topped in the Private Equity firm category for 2007, UTI Ventures emerged as the winner in the Private Equity Firm-Growth category and Sequoia Capital India took home the award in the Best Venture Capital Firm category.

Among PE/VC-backed companies, Genpact received the Private Equity-backed Company award, Firstsource the Private Equity-backed Company–Growth award and MindTree Consulting was adjudged the Best Venture Capital-backed Company.



Sumir Chadha of Sequoia Capital India receiving the Best VC Award from B. Anantharaman of Max India



Raja Kumar and other members of the UTI Ventures team receiving the Best PE Firm-Growth Award



Gaurav Ahuja of ChrysCapital receiving the Best PE Firm Award



Krishnakumar Natarajan of MindTree receiving the Best VC-backed Company Award from Mofa…