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www.abplgroup.com - Asian Voice 7th June 2014
Dear Financial Voice Reader,
So is it now time to invest in India. My private equity asset management company of course invests in Indian companies. I started the company back in 2004. And our last fund which went through the credit crunch has delivered 17%+ annually after all fees and costs. So what do you need to know about investing in India? These are my key thoughts: (PE means private equity and VC means venture capital – both are funds which invest in private Indian companies to provide profits for their investors). After all India desperately needs capital. Will a change of government make a big difference? • Number of PE/VC firms conducting deals in the Indian market grew by 10% from 2012 to 2013, reaching 314 firms • Largest deal in 2013 in India was the USD 1.26 billion into Bharti Airtel (telecommunication sector) by Qatar Foundation Endowment in the second quarter of the year • About 50% of funds target to invest more than USD 50 million in India on an annual basis in 2014 and even more (~60%) in the next one to three years Negative developments/Threats: • In 2013, funds allocated towards Asia-Pacific on a regional level continued to expand but countryfocussed funds declined for India by 40% • India’s attractiveness as a market has declined as other investment opportunities arise (such as Sub-Saharan Africa and Latin America) 1. How has the fundraising outlook for Indian private equity improved as it enters its next phase of growth? • India is seen as the toughest fundraising market by domestic GPs (General Partners run funds and raise funds to invest from places like pension fund managers) • About 60% of GPs (surveyed by Bain & Capital) expect fund-raising to stay tough in 2014 as LPs have intensified their scrutiny of who they trust with their fund commitments • India is benefitting from capital allocations from Asia-Pacific and global funds • GPs will focus on building good investment and exit records to enable easier fund-raising • 60% of Indian GPs state the current fundraising environment as very negative, 40% as negative, nevertheless there is a slight improvement to 2012, where 90% of Indian GPs stated the fundraising environment as very negative and 10% as neutral 2. What should overseas investors be made aware of when embarking into India? • India is lagging behind competitors with regard to • Currency stability • Ease of doing businesses • Corruption • FDI restrictions • Simple taxation system 3. How has India’s private equity industry matured over recent years? What lessons have been learnt from recent years? • 90% of deals in 2013 were minority stake, but GPs are inclined towards majority-stake deals in the future • After a period of deceleration in the Indian PE industry (2011-2012), there are signs of positive changes • In the last few years, PE investments remained one of the major sources for long-term capital (2010: twice as much PE investments as IPOs, 2011: nine times as much PE investments as IPOs, 2012: six times as much PE investments as IPOs (in investment volume)) With a new Government we are hoping more India PE funds and that means more investment into India because Government spending alone will not be enough.
RBI cuts SLR ratio by 50 bps to release Rs 390 bn for banks
In a move that will release over Rs 390 billion of funds locked in government bonds, the Reserve Bank of India has cut the mandatory statutory liquidity ratio (SLR) requirement for banks by 50 basis points to 22.5% in its bimonthly policy on Tuesday. SLR is the portion of bank deposits that banks have to mandatorily invest in government bonds. In keeping with expectations, RBI governor Raghuram Rajan left the repo rate, the rate at which the RBI lends to banks, unchanged at 8%. The governor appears to have taken a pragmatic decision by holding his own on rates but at the same time addressing concerns of the finance ministry of adequate credit to businesses by releasing liquidity. The biggest beneficiaries of this move will be private banks and foreign banks who are close
Raghuram Rajan
to the statutory limit on SLR. In his first policy statement post election, Rajan said, "the decisive election result, together with improved sentiment should create a conducive environment for comprehensive policy actions and a revival in aggregate demand as well as a gradual recovery of growth during the course of the year." He, however, said that the first quarter continued to be sluggish and the outlook for agriculture is clouded by the meteoro-
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logical department's forecasts of a delay in the onset of the south-west monsoon with a 60% chance of the occurrence of El Nino. "The ongoing contraction in the production of consumer durables and capital goods, coupled with moderation in corporate sales and non-oil, non-gold imports is indicative of continuing weakness in both consumption and investment demand," Rajan said. On inflation, the governor said that while Elnino and geopolitical situation was a threat to food prices, these risks were balanced by the possibility of stronger government action on food supply and better fiscal consolidation as well as the pass through of recent exchange rate a p p r e c i a t i o n . "Accordingly, at this juncture, it is appropriate to leave the policy rate unchanged, and to allow
the disinflationary effects of rate increases undertaken during September 2013-January 2014 to mitigate inflationary pressures in the economy," Rajan said in a statement. In his statement, Rajan said that since the April policy, global economic activity is evolving at different speed. He also nudged the government to do its bit like easing domestic supply bottlenecks and proceed with reviving stalled projects which should brighten the outlook for both manufacturing and services. The resumption of export growth is a positive, he added. The stock markets, meanwhile, did not take kindly to the apex bank's stance. The key sensitive index (Sensex) of the Bombay Stock Exchange (BSE) even fell 30 points. But it immediately staged a recovery and eventually closed 175 points, or 0.7 per cent higher.
Tony De Nazareth, who has over 30 years’ experience in investment banking, venture capital and lending, has launched Crowd for Angels, a platform to provide funding for companies from the beginning till it is listed. The launch pitches include film company, The Series Ltd, which is looking to raise funds for TV drama, the Mughals, Bet Fast Ltd, a mobile software company and AIM listed company Advanced Oncotherapy, a provider of radiotherapy systems, which has a £22.7 m market cap and recently raised £6 m through traditional channels. Tony Nazareth said that this was the first time that a directly regulated crowd funding platform combines debt and equity pitches in one place. He said that he wanted to bring innovative and appealing products to the crowd, fund companies through all phases of their
growth cycle and also enable companies to find funding outside of traditional circles. He said that the beauty of his platform was that a company could begin with raising seed capital and carry on being funded through to PreIPO and when listed. He said that for the investors there were no fees. Up to 50% tax relief on investments through SEIS and EIS. Short term convertible loans, thereby reducing the probability of default with the option of converting before maturity. You can invest as little as £25 and can potentially make returns of over 10 per cent. For companies, funds are released on the minimum target being reached. It provides funding for the entire growth cycle – from seed to listed. Two funding targets, that allows companies to gain access to funding more quickly.
Crowd for Angels provides funding for companies
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