The Sun Also Sets : PE deals falling through

The chill is moving deeper down the spine. This HT article points out that southbound market is taking a lot of valuations and some of the deals with it. Down.

With 14 PE deals falling through in last 3 months & big 3 in last last month, Feb. PE deals are 55% lower then Jan'08.

The 3 big ones to go down are ICICI Venture-Jaypee Infratech deal, Rs 1200-crore Blackstone-Eenadu group deal and Rs 250-crore Future capital-DishTV deal. The Jaypee deal is shaved from 3200 to 1000 Cr.

PE funds closed over 27 deals in Feb. valued around $1.48 billion, according to a Grant Thornton study. India Inc recorded deals worth $5.06 billion in 116 M&A and PE deals in Jan.

Compared to Feb'07, there was a 50 % rise in PE deals this Feb.

L&T-GreatOffshore-Blackstone for ICICIVenture's Tebma Shipyard

According to a ToI article, L&T, shipping company Great Offshore and private equity funds Blackstone, Abraaj Capital and Apax Partners are eyeing a stake in the south-based Tebma Shipyards.

Tebma Shipyards is India’s third largest private ship-building firm after ABG and Bharati Shipyard. Owned largely by ICICI Venture, Tebma, as part of expansion strategy, plans to build a facility in West Bengal.

The 150 acres Rs 500 crore project ($125 million) will be funded by Debt & . ICICI Venture has been approached by various players.Ship-building players earn operating margins of 20-25% helped by 30% export subsidy

The West Bengal shipyard will be Tebma’s third facility, in addition to its Chengalpattu (70km from Chennai) and Malpe in Karnataka. The company will issue fresh equity to the investor and accordingly, ICICI Venture’s stake in Tebma Shipyards will come down, market sources said. The new shareholder is likely to get upto 26% stake for $100 million in Tebma Shipyards. The Rs 400 crore Tebma has an order book position of $400 million.

Similar to publishing firm Infomedia and heat resistant cement products maker ACE Refractories, Tebma too has been a buyout deal by ICICI Venture. Last year, the private equity arm of ICICI Bank bought a 33% stake in Tebma Shipyards and increased its holding to 53% by acquiring additional shares through open offer. Several small investors hold the remaining shares in the company.

The second largest shareholder is Balan, founder of Tebma, who holds about 9% stake.

Lehman completes a Trimurti of senior hires

Lehman Brothers has made the last in a trimurti of senior hires to its Indian investment banking unit with the appointment of a venture capital specialist Jayanta Banerjee to run its private equity business in the country, as reported by Reuters.

Jayanta Banerjee joins from ICICI Ventures where he was a committee member on India’s largest private equity fund, the $810m India Advantage Fund Series 2.

By hiring Banerjee, Lehman has appointed new heads for its three main growth businesses in India this year. In January the bank hired Surojit Shome as head of investment banking before appointing Pankaj Vaish as head of equities and fixed income markets in April. Both were earlier working with Citigroup.

Banerjee will report to Tarun Jotwani, the chief executive of Lehman’s business in India, and Christopher Manning, head of the bank’s Asia investment management division.

ICICI Ventures buys stake in Radiant Research

ICICI Venture has acquired majority control in US-based clinical research company Radiant Research for an undisclosed amount, as reported by Economic Times.

Last year Radiant Research had sold a part of its clinical research business, constituting eight clinical pharmacology centres, to US-based clinical research company Covance for $65 million. With 26 other clinical centres, the current deal could have been valued at $150 million plus.

Apart from clinical centres, Radiant compromises of a full service CRO and a centralised patient recruitment company, employing over 400 clinical research professionals. Radiant Research had clocked revenues of $73.5 million in 2003.

ICICI Venture has multiple exposure in the life sciences business. Its investment portfolio includes Arch Pharmalabs, Malladi Drugs, Bharat Biotech, I-Ven Pharma, RFCL, Metropolis, Perlecan, Avesthagen, Biocon, Medicorp and Intas Pharma.

ICICI Ventures contemplating innovative fund structure

ICICI Ventures, one of India’s biggest domestic private equity outfits is contemplating a possible restructuring of the entire fund structure, which if successful, could emerge as a model for several tax-hit VCFs in the country In a move to overcome the adverse tax impact, ICICI Ventures has proposed that stocks it currently holds be transferred to investors.

What is now being mooted is that shares be transferred to investors, both foreign as well as domestic, (unlike in the traditional model, where the shares are held by a trust, which in turn issues units to the investors), while the asset management company of the VC fund will continue to manage the investment. The advantage here is that since the ownership of shares would shift from the trust to investors, the trust would be spared of tax.

The Finance Bill 2007 has proposed that only those VC funds which invest in specified sectors would enjoy tax exemption. So far, a VC fund was exempted from tax where only investors paid tax, and not the trust. The structure proposed by ICICI Ventures would help in restoring this.

Read The Economic Times article.
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ICICI Ventures invests Rs. 82 crores in engineering firm Electrotherm

ICICI Ventures has invested Rs. 82 crores in engineering company Electrotherm India Limited, for an undisclosed stake. The investment will part-fund the second phase of Electrotherm’s expansion plans of Rs. 400 crores. In addition to the investment made by ICICI Ventures, the promoters would bring in Rs. 58 crores to meet the equity portion. Terms loans worth Rs. 200 crores and internal accruals of Rs. 60 crores would meet the balance funding requirements of the proposed expansion plans. The term loans have been sanctioned and disbursed and the Company has already invested Rs. 300 crores out of the total planned expenditure of Rs. 400 crores. KPMG Corporate Finance was the sole advisor for the transaction.

Electrotherm is an engineering and manufacturing company with major strength in power electronics. Leveraging its core strength in power electronics, the Company through its in house R&D facilities developed a battery-operated scooter, which has been a commercial success in Gujarat, and has also seen good response from other customers as well.

For more on Electrotherm, read the article on Equitybulls.com.

HDIL in talks with PE funds for pre-IPO stake sale

Mumbai-based real estate developer Housing Development and Infrastructure Limited (HDIL) is in talks with private equity and real estate funds such as ICICI Ventures, Kotak Realty and HDFC Realty for selling a 4% stake for about Rs. 550 crores. It is quite possible that these three firms together can subscribe to the pre-IPO portion.

HDIL is in the process of diluting 4% stake in the company as part of its pre-IPO placement. It plans to do an IPO to raise over Rs. 2000 crores some time soon. HDIL has developed approximately 72.8 mn square feet of saleable area and 5.5 mn square feet of rehabilitation housing area so far. The company is in the process of expanding its property development activities to other parts of India.

Article in The Economic Times.

Software testing company up for sale by stakeholders ICICI Ventures and Acer Technologies

Bangalore-based independent software testing company RelQ has been put up for sale by ICICI Ventures and computer-maker Acer Technologies of Taiwan, the majority shareholders of the company. UBS is working on the mandate of bringing in the potential buyer. Companies such as KPIT Cummins, NIIT and CGI have already shown interest in buying RelQ.

RelQ is present in test automation, game testing and embedded software testing and has invested around $3 million towards infrastructure and test labs. RelQ is growing at a CAGR of 40% with revenues of $21 mn for the FY 2005-06 and estimated revenues of $33 mn for the FY 2006-07. It has a major presence in Bangalore with offices in the US, Europe and Singapore and a headcount of around 800. It has already acquired two companies, one in France and in the UK each.

The global market for testing services is estimated to be at $15 bn, of which $2-6 bn is expected to be outsourced to India by 2007. The CAGR for the independent outsourced testing market is estimated to be over 60%. Maveric and Thinksoft in Chennai and AppLabs in Hyderabad are some of the prominent independent testing companies in India.

Read the article in The Economic Times.

Avesthagen sells 20% stake for €25 mn

Bangalore-based integrated life sciences company Avestha Gengraine Technologies Limited (Avesthagen) has closed Series C of private equity fundraising of around €25 mn by divesting 20% equity to external investors. The investment values the company at € 115 mn (Rs. 667 crores). The investors in the company are Fidelity International (10%), the Limagrain Group of France (5%), Daninvest of the Danone Group (4.57%), and Bennett, Coleman & Company Limited (2.4%). The total foreign investment in the company is now over 31%. The existing investors of Avesthagen include ICICI Ventures, Cipla, Godrej Industries, Tata Industries and bioMerieux. The company has also commenced preparations for its initial public offering scheduled to hit the market by mid-2008.

The company commenced its operations as an agri-biotech company in 2001 and then moved on to become a healthcare technology company, pursing its vision of convergence of food, pharmaceuticals, and population genetics, leading to preventive personalized medicine. The other activity of the company has been agri-biotech product development of scientifically validated bioactive nutraceuticals, derived from Indian medicinal plants, as well as the development of bio-similar drugs. The company has four strategic business units: bio-pharmaceuticals, food for medicine (bio-nutritionals), seed for food (agri-biotech) and science and innovation. The company registered Rs. 1.1 crore in profit and Rs. 18 crore revenue in 2005-06.

The funds will be used for Avesthagen’s infrastructure expansion plans, including setting up of manufacturing units and research and development laboratories, and acquisition of technology companies to scale up production and marketing.

Read the article in Business Standard.

FirstSource acquires US outsourcing company BPM for $30 mn; sells stake to US-based technology firm Metavante and hedge fund Galleon Partners

BPO company FirstSource Solutions, formerly known as ICICI OneSource, has acquired a Delaware-based healthcare claims' outsourcing company called BPM and its two wholly-owned subsidiaries MedPlans 2000 and MedPlans Partners for an estimated $30 mn. This is FirstSource’s second US acquisition after it had acquired Account Solutions Group In September 2004.

The acquisition will allow FirstSource to penetrate the healthcare vertical with capabilities in complex claims' adjudication. FirstSource will now offer clients database management, policy administration, claims processing and complex claims adjudication capabilities.

The company, by virtue of this acquisition, has also acquired a client portfolio that includes six Fortune 1000 companies and adds three centres in Rockford, Illinois; Fort Scott, Kansas and Louisville, Kentucky to its current 17 delivery centres globally which includes 11 in India, 3 in the US, 2 in the UK and 1 in Argentina. The company has a workforce of 9,018 full-time employees and 61 clients as of September 30, 2006. With this acquisition, the US headcount of FirstSource Solutions has risen to 800.

Read The Economic Times and Business Standard articles.

In a related development, the ICICI Group has divested around 19% stake in FirstSource to US-based banking technology solution provider Metavante and US hedge fund Galleon Partners in a pre-IPO placement. Metavante already holds an 11% stake in Firstsource which it had acquired in April last year through a combination of primary infusion and secondary purchase. The deal has been reported at $$75-80 mn; the ICICI spokesperson has confirmed the deal but declined to comment on its size.

Along with group companies ICICI Bank and ICICI Ventures, Sequoia Capital and Temasek Holdings also holds stake in FirstSource. Sequoia Capital has invested $17 mn in FirstSource for 11% stake and hopes to make $60 mn on its initial investment in the company’s upcoming IPO. Temasek Holdings has invested $50 mn for picking 11-12% stake in the company.

Metavante has picked up a 14% additional stake in the company, taking its total shareholding in the company to 25%. Galleon Partners has acquired 5.84%. FirstSource is planning a public issue of 95.6 mn equity shares, including a fresh issue of 60 mn equity shares and 35.6 mn equity shares, to be offered for sale by the ICICI Group.

Read The Economic Times article.

Pantaloon Retail to divest stakes in subsidiary companies

Pantaloon Retail India Limited (PRIL) is planning to dilute stakes in its subsidiary companies for expansion-related purposes. The companies that are lined up are Future Media, Future Capital, Future Logistics and Central and dilution of stakes would either be way of IPOs, preferential allotment or strategic sale.

Future Media targets developing retail space and malls as an outdoor media option. PRIL is in talks with WPP for a strategic partnership in Future Media. Future Logistics deals in supply chain and distribution management. Future Capital is a PRIL subsidiary that focuses on asset management and consumer finance. It manages Horizon and Kshitij, two real estate investment funds and Indivision, a consumer-related private equity fund, and soon plans to get into insurance, consumer credit and other consumer-related financial products and services. Central is a chain of lifestyle retail stores.

Equity analyst Edelweiss Securities estimates that of PRIL’s total requirement of Rs. 4500 crores, equity dilution would get the company Rs. 1000 crores. Quoting the company’s internal projections, the research firm also says that in all Mr. Biyani’s company needs approximately Rs. 2300 crores from external sources of which Rs. 1300 crores will come in the form of debt. Pantaloon’s expansion plans are targeted at taking the group’s total retail space to about 30 mn square feet by the end of 2011 from the current 3.5 mn square feet. By the end of FY10, Mr. Biyani is looking at 80 Pantaloon stores in various parts of the country from the current number of 23. Similar expansion is in the pipeline for Big Bazaar and Food Bazaar, where the company aims to take the number of stores to 225 and 250 respectively, growing from the current 35 and 53 respectively

In October 2006, ICICI Ventures and Kotak SEAF India had picked 15% and 6% stakes respectively in another PRIL subsidiary, Home Solutions Retail, bringing an investment of about Rs. 120 crores.

Read the article in The Economic Times.

ICICI Ventures plans bigger investments

Dec 26, 2006

ICICI Ventures, the private equity arm of ICICI Bank, and one of India’s leading private equity firms, is planning to raise the size of investments, to counter competition from other PE firms, banks, securities markets, hedge funds and other investment sources to fund Indian companies as accelerating economic growth pushes up stock valuations. Where earlier the size of investments would range around $25-30 mn, the firm now intends to buy stake as large as $125 mn.

More on this on Bloomberg.com.