In a year which saw the Indian stock market slide by about 50 percent and billions of dollars withdrawn from listed Indian equities, private equity investments in the country followed a similar trend as fund managers turned more cautious in 2008, a report has shown.
Private equity firms announced deals worth $10.4 billion in India from January until 15 December 2008, a 45 percent drop in total deal volume compared with 2007, a year in which deals worth $19 billion were executed, according to data from accounting firm Grant Thornton.
The total number of private equity deals completed in the country dived 24 percent from 405 in 2007 to 306 last year.
While investments made in the first half of 2007 and 2008 were comparable, total investments in the second half of 2008 declined sharply compared with the second half of 2007, CG Srividya, a partner at the specialist advisory services division of Grant Thornton, told PEI Asia. The decline was primarily due to the global slowdown in the financial and stock markets, she said.
Srividya also pointed to a valuation mismatch between firms wanting to buy stakes at prices pegged to those of listed stocks and business owners unwilling to consider a stock market-based valuation. As such, many deals did not go through. Furthermore, even deals that did complete were at lower valuations, resulting in a fall in average deal size from $47 million in 2007 to $34 million last year.
Providence Equity Partners' $640 million investment for a 20 percent stake in Aditya Birla Telecom was the largest investment of 2008 followed by London-based Symphony Capital's $450 million investment in construction firm DLF's subsidiary DLF Assets.
Private equity investors showed a preference for the real estate and infrastructure sector, which received investments of $3.3 billion, with telecom coming next with investments worth $1.4 billion.
Srividya expects deal flow to pick up in the medium term as the gap between buyer and seller expectations closes. “Also, India is a lucrative growth market for investors and there will be continued focus on this market by international funds, especially in the current situation where several other economies are unlikely to show growth,” she added.
ASIA IN BRIEF
PERMIRA JAPAN HEAD DEPARTS
Tomoya Shiraishi has left global buyout firm Permira Advisers' Japan operation. The former co-head of the Tokyo office is “taking some time off to pursue his own personal interests” according to a statement.Alex Emery, previous ly co-head alongs ide Shiraishi, has taken the role of head of Permira Advisers. “As co-heads, our responsibilities were shared, so the move to a single head does not affect Permira's approach to the Japanese market,” Emery said.
NEW HORIZON CLOSES RMB FUND
China-focused private equity firm-New Horizon Capital has closed its first RMB-denominated fund on RMB1 billion ($146 million), said Henry Huang, director of finance at New Horizon. The fund will invest in growth-stage companies in sectors such as pharmaceuticals, consumption, high-tech manufacturing and alternative energy. The firm is also currently raising its third dollar-denominated fund, New Horizon Capital III, which is targeting a close on $750 million in the second quarter of 2009.
AHUJA STEPS UP AT 3I
UK-headquartered private equity firm 3i has appointed Anil Ahuja as its head of Asia.Ahuja was until now cohead of Asia along with Mark Thornton, who is a partner and the head of the firm's Southeast Asian operations. Ahuja will lead 3i's investment teams in Asia and work with the local business heads in China, India and Singapore. He will continue to report to Chris Rowlands, chairman of 3i Asia, and also continue to head 3i's India team.
INDIAN CONGLOMERATE LAUNCHES FUND
Aditya Birla Private Equity, a subsidiary of Indian industrial giant Aditya Birla, has started fundraising for a $250 million India-focused fund. The Aditya Birla Private Equity Fund I has a hard cap of $350 million, Bharat Banka, managing director and chief executive of the firm, said in an interview. The $28 billion Aditya Birla Group has interests in the mobile telecom, financial services, business process outsourcing and branded apparel sectors, among others.
QANTAS MAN TO HELP PILOT KKR
Global buyout firm Kohlberg Kravis Roberts has appointed Leigh Clifford as a senior adviser to its Australian operations. Clifford joins from Australia's national airline, Qantas Airways, where he was chairman of the board. Before that, Clifford was chief executive of Rio Tinto, a mining and exploration company. He spent 37 years at Rio Tinto, where he held operational and marketing roles in Australia and overseas.
KUWAIT'S GLOBAL COMPLETES LOGISTICS DEAL
Global Investment House, the Kuwait-based investment bank, has acquired a controlling stake in Jassim Transport & Stevedoring, an integrated logistics company in Kuwait. Financial details of the transaction were not disclosed, but a source close to the situation pegged the deal value at around $150 million. The investment was made from the $615 million 2007 Global Buyout Fund.
NEW ASIA SUPREMO AT KPMG
KPMG has appointed Honson To as regional head of private equity for Asia Pacific. To has been head of KPMG China's private equity practice for the last two years and will continue in this role alongside his new assignment. He replaces David Nott, who has handed over the role ahead of his retirement in June, said a spokesman for the firm.
DARBY/HANA JOINT VENTURE BACKS WIND FARMS
Darby Hana Infrastructure Fund Management, which is 70 percen town ed by Dar by Overseas Investments and 30 percent by Korea's Hana Bank, has invested about 35 billion Korean won ($25.8 million) to acquire a 32.4 percent stake in Gangwon Wind Power, a Korean wind farm operator. Established in 2001, the company owns a wind farm in Korea's Gangwon Province and had more than half the country's installed wind power capacity at the end of 2007.
PEEL ASSUMES CARROLL ROLE AT TPG
Global mega-firm TPG has appointed Stephen Peel to head up its emerging markets operation in Asia after the firm's long-time Asia veteran Dan Carroll decided to return to San Francisco for family needs. The move puts TPG's entire emerging markets private equity operations under the supervision of Peel, who had already been responsible for the firm's emerging markets practices in Turkey, Russia, Eastern Europe and India.
JAPAN PONDERS TAX BACKTRACK
Three years after Japanese regulators imposed the so-called ‘Shinsei’ tax on foreign private equity firms' capital gains from deals, the country is now reportedly planning to scrap it. The government hopes to boost investment in the country and make up for banks' reluctance to provide loans to Japan's small- and mediumsized companies, according to the Asian Wall Street Journal.
CAPDYN WINS THAI PENSION MANDATE
Switzerland-based private equity manager and advi ser Capi tal Dynamics will over see the Government Pension Fund of Thailand's (GPF) first private equity investment strategy out side Thailand. The international private equity programme has been allocated 3 percent of the pension's net asset value, currently worth approximately $330 million, which will be invested over a period of three years. GPF is a long standing domestic private equity investor and has more than $10 billion in assets.
HAITONG AND FORTIS LAUNCH CHINA FUND
Haitong-Fortis Private Equity Fund Management , a joint venture between Chinese brokerage house Haitong Securities and Belgian bank Fortis, has launched an RMB denominated fund for China. China-Belgium Direct Equity Investment Fund II is targeting commitments of about RMB3 billion ($439 million), Hanker Gu, chief investment officer of Haitong-Fortis Private Equity, said in an interview. The fund is likely to raise its entire capital from domestic investors and already has commitments of about RMB2 billion from Chinese institutions, he said.