The Private Equity Industry in india has ripened to a stage where it needs regulatory legislations so as to accelerate the development of the capital markets in India.
The current SEBI laws do not allow firms to pick up more than minority stakes in Indian entities.The ban on leveraged buy-outs is a constraint, which is the preferred mode of entry for many private equity firms.
Other regulatory obstacles include foreign ownership and investment restrictions, for instance in the aviation and publishing industries, that make departing from this sort of business more difficult.There are cultural barriers where the founding entrepreneur may wish to bring in money and management expertise through PE funds but do not have the appetite for handing over the reins to them.
The recent influx of investors in the stock markets would begin to reduce return which gives a stong case for Private Equity growth in India, though on the flipside PE funds have a history of job sacking and asset stripping realizing huge profits from that.They also have the uncanny ability to takeover businesses at low premiums which might effect investors.These doesnt make things easy for the regulatory authorities and they will find it difficult to give them unmarked access to the Indian markets.
But the real question is that is it the right time to let loose entities who have been labelled by many as 'barbarians'?
On a personal level, i think that the indian markets are not mature enough and still is highly imperfect to sustain a sudden change in the regulatory issues and allow highly risk activities such as LBO'S,which may see a sudden shift in liquidity trends from other AMC'S on the back of global perfomance and may cause a collapse that can trigger financial instability, however i endorse the government taking a stand on this issue and allow such activities over a period of time which will help investors gain more out of the markets and at the same time have the markets realize the cons of getting linked with these funds.The top private equity firms have been consistently outperforming the markets elsewhere and i find no reason why they can't produce the same results in India.
Private Equity activities in India reached its peak after domestic funds were able to raise $1.8 bn from the market and foreign funds from Carlyle to Blackstone betting on the markets.
India was the biggest recipient of private equity investment in Asia last year, with 143 deals worth a total of $2.21bn, according to figures from Thomson Financial, the data group.
Friday, May 11, 2007
Big names gear up to pick up stake in Reliance MF
Big private equity and asset management firms have lined up for a small stake in Reliance MF. Blackstone, the big US PE firm which has operations in India will look to build a relationship base with what is the biggest Asset management company in India and has Assets Under Management(AUM) which are scaling new heights, recently surpassing the 50,000 crore mark.
Reliance MF which is eyeing a valuation of 1.2 billion dollars (10% of the total AUM) is also on the radar of Schroder’s, the British fund with assets of about $260 bn after speculation that it wants to enter the Asset Management business in India and one of the units of US based Capital.
If this deal does go through it will help the foreign investors to cement a relationship with one of the biggest money mangers in the world .The industry’s AUM has witnessed a growth of almost 85% over two years starting 2005 April, and with the future looking bright these foreign firms could not have possibly found a better opportunity to build on a base starting with the leader in the Indian Markets .On the other hand it’s a win-win situation as far as Reliance Capital is concerned as it will give the company valuable know-how and technical proficiency in the Financial Services industry with the biggest names on its board. Valuations are also going crazy with the firm hitting a new high on the BSE.
Even if the offer is not accepted it has showcased the potential for the growth of the industry, with the American and the European markets approaching perfection and that these investors are finding it hard to outperform the markets there, they are looking at offshoring their business to low cost and high return destinations on the long term like India.
Related articles:
Schroders looking to join the AMC brigade
Reliance MF which is eyeing a valuation of 1.2 billion dollars (10% of the total AUM) is also on the radar of Schroder’s, the British fund with assets of about $260 bn after speculation that it wants to enter the Asset Management business in India and one of the units of US based Capital.
If this deal does go through it will help the foreign investors to cement a relationship with one of the biggest money mangers in the world .The industry’s AUM has witnessed a growth of almost 85% over two years starting 2005 April, and with the future looking bright these foreign firms could not have possibly found a better opportunity to build on a base starting with the leader in the Indian Markets .On the other hand it’s a win-win situation as far as Reliance Capital is concerned as it will give the company valuable know-how and technical proficiency in the Financial Services industry with the biggest names on its board. Valuations are also going crazy with the firm hitting a new high on the BSE.
Even if the offer is not accepted it has showcased the potential for the growth of the industry, with the American and the European markets approaching perfection and that these investors are finding it hard to outperform the markets there, they are looking at offshoring their business to low cost and high return destinations on the long term like India.
Related articles:
Schroders looking to join the AMC brigade
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