A record $6.5 billion exit, with latest being Reckitt Benckiser Group acquiring Paras Pharmaceuticals, was the highlight of the private equity scene in 2010. Longer term, there are demands for transparency and stringent due diligence
In a business that typically takes five to seven years for investors (Limited Partners or LP) to reap returns on their investments, 2010 turned out to be a record year for private equity (PE) exits.
The latest PE exit was Actis and Sequoia Capital selling their share (totalling over $500 million) in Paras Pharmaceuticals along with the share of the company's founder Girish Patel and his family, to Reckitt Benckiser Group for about $726 million.
Some of the other big exits were ChrysCapital's stake sales in Infosys and Mahindra & Mahindra Financial Services, Sequoia's sale of holdings in Mannapuram and SKS Microfinance and ICICI Venture's holding in VA Tech Wabag and RFCL. The promoters of Patni Computer Systems along with private equity firm General Atlantic are close to selling their stake to a PE-backed suitor.
In 2010, PE deals in real estate companies totalled $1,182 million, compared to $606 million in the previous year. More than 20% of the total PE deals were in the electrical utility or power plants, including renewable energy assets. Out of the total $8.2 billion invested, $1.67 billion was in the power sector.
A consortium of global investors led by Morgan Stanley Infrastructure Partners (MSIP), General Atlantic LLC (GA), Goldman Sachs Investment Management, Norwest Venture Partners (NVP), Everstone Capital and others invested $425 million in energy firm Asian Genco Pte Ltd. GVK Energy, a subsidiary of GVK Power & Infrastructure, raised about $157 million from PE Actis and the Government of Singapore Investment Corporation (GIC). The deal comes after 3i Group invested nearly $180 million in the firm last month.
The sectors that are currently drawing significant interest from PE investors are pharmaceuticals, real estate, finance, education, cleantech, infrastructure, healthcare and some such other untapped sectors. Distribution of financial products, one of the hot areas of 2007, is all but dead. Apnapaisa.com was backed by Sequoia capital, Fundsindia.com is funded by Inventus Capital Partners and Rupeetalk which had early-stage investor Seedfund, was acquired by Noida-based financial services distribution company NetAmbit.
According to Jairaj Purandare of PricewaterhouseCoopers (PwC) India, "Private Equity investment in India between 2004 and 2009 was as high as $40 billion. It is expected to be $70 billion between 2010 to 2013, of which $10 billion will be in venture capital (VC)."
Early stage investments showed some exits this year. Billionaire venture capitalist and co-founder of Sun Microsystems Vinod Khosla, who was one of the early investors in SKS Microfinance gained $117 million from the company's recent listing. Some other profitable investments were InMobi by Mumbai Angels, Mango Technologies by Ojas Venture Partners, Metahelix by Nadathur Holdings and Carwale by Seedfund.
PE investors around the world are closely watching the Vodafone tax case. Following the Bombay High court's directions, the Income-Tax Department has demanded Rs11,297.95 crore from Vodafone towards tax and interest for the company's overseas acquisition of Hutch. Now, a growing number of overseas PE investors are buying tax-liability insurance covers, which provide protection from uncertainty in tax laws. This trend is prevalent in the West, but is new in India.
During this year, several PE experts set up their own ventures. Former head of Citigroup Venture Capital International (CVCI) Ajay Relan raised $515 million for his initiative CX Partners. Renuka Ramnath, ex-ICICI Venture, raised $250 million for her own PE venture, Multiples Alternate Asset Management. Jayanta Banerjee, another ex-ICICI Venture director, floated a $200 million PE fund Pravi Capital.
The domestic realty PE industry went through major consolidation in 2010. Saffron Asset Advisors was acquired by IL&FS investment managers. Religare Enterprises is reported to be close to buying 85% of the Ajay Piramal Group-promoted real estate fund Indiareit Fund Advisors.
The global financial crisis has had an impact on private equity investments with demands on private equity firms (General Partners or GP) for greater transparency, stringent due diligence, sector-specific investments as well as a shortened time frame of an average five to seven years for exiting the investment.
According to Anubha Shrivastava, managing director, Asia, for CDC Group plc, "The world has changed after the crisis. Investors today are hesitant to make blind pool investments. They want industry-specific investment." This is one reason why a host of funds which have announced fund-raising plans, have not achieved a first close till now.
New Delhi: As part of efforts to check corruption, the Central Vigilance Commission (CVC) has sought by early next month financial details of works carried out by different departments during the year for its scrutiny, reports PTI.
The anti-corruption watchdog has directed all central government departments and ministries to submit details of all contracts entered into and payments made to contractors and pending bills.
The Chief Technical Examination Wing of the Commission has set a deadline of 7th January for it.
The departments have been told to furnish all information related to civil and electrical works done by the ministries besides other contracts valued at Rs2 crore or above.
"A circular has been issued on 14th December to chief vigilance officers (CVOs) of all ministries. They have been told to give details of all contracts (including tenders) and civil works. Besides they have asked about financial transactions made to contractor against the work," a CVC official said.
The probity watchdog has specifically sought details of high-value projects, payment details, contractor details, third party examination report and tender documents made in the year.
It has asked for details of mandatory completion certificate, compliance report of CVC's guidelines to check corruption, guarantee bond towards security for work machinery or mobilisation advance, insurance policy for work, material equipment, men etc. and details of pre-contract negotiations among others.
"The Commission came across many irregularities in conduct of different works done by central government departments. However, we timely intimate them to follow our guidelines and check for non-adherence through technical examination," he said.
The Commission has recovered about Rs56 crore after inspecting public procurements and other works carried out by different agencies till November.
The CVC has found alleged financial and administrative irregularities in over 30 Commonwealth Games projects in the national capital and overlays deals by the Organising Committee for the mega-sporting event.
Besides, the CVC has found alleged bunglings in the allocation of 2G spectrum to certain telecom companies. The CBI is probing the matter.
New Delhi: Prime minister Manmohan Singh today wrote to Public Accounts Committee (PAC) expressing his willingness to appear before the panel which is going into the second generation (2G) spectrum allocation scam, reports PTI.
Following up on his announcement at the Congress plenary session, Mr Singh made the offer in his letter to PAC chairman Murli Manohar Joshi, sources said without elaborating.
Addressing the concluding day of the Congress plenary, Mr Singh had said he would be "happy to appear" before the PAC though there was no precedent and he intended to write to Mr Joshi in this regard.
"I wish to state categorically that I have nothing to hide from the public at large and as a proof of my bonafides I intend to write to the chairman of the PAC that I shall be happy to appear before the PAC, if it chooses to ask me to do so," Mr Singh had said.
Contending that the opposition was "falsely propagating" that government was shying away from joint parliamentary commission (JPC) to prevent the prime minister from appearing before it, Mr Singh said he has "nothing to hide from the public".
Mr Singh's letter to the PAC comes on a day when the Comptroller and Auditor General (CAG), whose report on a presumed loss of Rs1.76 lakh crore to the exchequer in 2G spectrum allocation created a storm in Parliament, will appear before the PAC.
The PAC will continue with its examination of the controversial allocation of 2G radio waves and Comptroller and Auditor General Vinod Rai is expected to put forth his point-of-view before the panel.
The CAG report has proved to be quite an ammunition for the opposition, including the BJP and Left parties, to target the government and it is insisting that only a JPC can bring out the truth in what they allege is the "biggest scam in independent India".
The entire opposition stalled proceedings in the month-long Winter Session of Parliament on the demand for JPC into the 2G spectrum scam that resulted in a washout of the session.
The decision to ask Mr Rai to appear before the powerful parliamentary committee was taken during its last meeting earlier this month. The committee has already invited views and suggestions on the 2G spectrum allocation.
A Raja, who has been questioned by the Central Bureau of Investigation (CBI) in connection with alleged irregularities in the spectrum allocation, was forced to resign on 14th November as telecom minister.