India
(January 2003 to December 2003)
For India, 2003 was a jubilant year. The Sensex streaked to finish the
year up 73%, marking the index’s highest levels in three years and winning
it the title of second best performing market in Asia. On the back of a strong
monsoon, a stable political situation, solid progress in economic reform
efforts and relatively low corporate valuations, the Indian economy delivered
a robust 7% economic growth and saw corporate profits soar.
For private equity, however, the glowing economic backdrop failed to
spark an equally vigorous response. While incoming funds did increase
over 66% from the previous year, they remained significantly below 2001
levels. The year’s foreign private equity investments in India even saw a
slight drop-off from 2002 – in stark contrast to the ten-fold increase seen in
investments in neighbouring China.
Indian private equity rallied around several core trends – the continued
INDIA
sponsorship of BPO; a budding interest in banking and finance, a burgeoning
buyout scene, and the flourishing of investment in biotech, pharmaceuticals
and healthcare.
Number of Private Equity Firms: 74 (as at March 2004)
Number of Professionals: 144 (as at March 2004)
Fund Pool
Funds raised in 2003 amounted
to US$236.4 million, a 66% Funds Raised (Jan 01 - Dec 03)
increase over 2002 but a 9% drop
on 2001 figures. 300
Funds for traditional private
US$ million
200
equity again took the lion’s share
100
of the fund pool, at 95% in 2003.
Technology fund raising efforts 0
2001 2002 2003
dropped precipitously, from over
US$146 million in 2001 to
US$13.4 million in 2003 in a sign of investors’ branching interest to embrace
the other sectors of India’s burgeoning economy.
Funds in India are gaining both local and foreign institutional interest.
During the period under survey, IL & FS Investment Managers’ Leverage
asia pacific Private Equity Bulletin
India Fund with a target of US$100 million was launched which enlisted
Punjab National Bank as one of the latest institutions to enter India’s private
equity foray. There were also active initiatives coming from various state
governments, such as those coming from the Hyderabad government in
sponsoring a biotechnology fund.
Significantly, however, it is the US$100 million Merlion India Fund jointly
sponsored by the Standard Chartered Bank and Temasek Holdings that
expresses the growing foreign institutional interest in the country.
Investments
Although the transaction total
Investment Profile (Jan 03 - Dec 03)
in India has been sitting
stubbornly at an average US$450 1. Stages of Investment
million since 2003, it is an
erroneous assumption that Development/ Buyout
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investment in India has failed to Expansion 123456789012 10%
INDIA
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89% Seed/Early
stir interest. The decline of 1%
average deal sizes from US$21.4
million in 2002 to $18.2
2. Industry Preference
million in 2003 suggests a
Banking and Finance
rational valuation benchmark Media 2345 1%
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being exercised by companies. 8% 2345 123456789012
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2345 123456789012
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Food and 2345123456789012
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In 2003, India was beginning 2345123456789012
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Beverage
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to shed its technology focus as 11% 2345123456789012
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evidenced by the significant Service
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Healthcare
decline of early/seed stage deals. 23456789012345678901234567
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Of the US$456 million
transaction amount recorded, a
mere 1% fell into this category, down from an average 11% in the preceding
three years. It was also the first time that India indicated it is beginning to
join the rest of the Asian market in taking on buyout activities with 10% of
the year’s investment aggregate being directed to this segment. Companies
in development/expansion stage were keenly pursued by private equity
investor, as they captured 89% of the year’s transaction total.
Unlike in the past, when information and telecommunications
dominated private equity investors’ company profile, healthcare and
pharmaceutical took up close to 40% of investment dollars. Business
support services took up the next largest slice of the pie with US$82.8
asia pacific Private Equity Bulletin
million, a staggering 80% increase compared with the amount recorded in
the same period in 2002.
The year registered the first significant buyout transaction in India when
Actis (then known as CDC Capital Partners) took control of the state-
owned Punjab Tractors with a US$47.6 million commitment.
Estimated Amount Available for Investment: US$18 billion (as at March
2004)
Five Largest Private Equity Firms (by fund pool under management)
Private Equity Firm Fund Pool (US$)
ICICI Venture Funds Management Co. Ltd. 525 million
ChrysCapital Investment Advisors 400 million
IL&FS Investment Managers Ltd. 151 million
WestBridge Capital Partners 140 million
IDFC Asset Management Co. 140 million
INDIA
Five Largest Transactions
Investee Company Private Equity Investors Deal Size (US$)
Matrix Laboratories Newbridge Capital, Temasek Holdings 133 million
Radhakrishna Foodland Ltd Warburg Pincus 50 million
Punjab Tractors Ltd CDC Capital Partners 48 million
Lupin Ltd CVC International (Direct Investor) 27 million
Hindustan Times Media Ltd Henderson Global Investors 27 million
asia pacific Private Equity Bulletin
