India Mutual Fund\Venture Capital Fund Updates

In this issue:

Regulatory Updates

Mutual funds gear up for zero

entry load from Aug 1

SEBI Asks For Rs 5 Cr Firm

Commitment From Foreign VCs

Taxing LLPs at entity level a

dampener for PE, VC companies

Foreign Venture Capital

Investments (FVCI) - Licensing

and Pitfalls

Press News

Kotak PE-Backed Pride Hotels To

Do Rs 200 Cr IPO In Jan 2010

FIPB rejects Indium's proposal to

invest $500 mn in India Value Fund

India Financial Inclusion Fund To

Invest in Allahabad-based MFI

Pizza Corner Looks For PE

Funding

Sequoia Capital Buys Early

Investor's Stake in Just Dial For

Rs 40 Cr

Lightspeed Leads Rs 50 Crore

Round in Itz Cash Card

Mutual Funds And Venture Capital

Funds Updates

Issue No 7

July 2009

Regulatory Updates

Mutual funds gear up for zero entry load from Aug 1

Investors will no longer be charged a 2.25 per cent distribution commission up front by

mutual funds beginning tomorrow following a Sebi directive. Market regulator Securities

and Exchange Board of India (Sebi) recently said that "there shall be no entry load for

schemes, existing or new", a directive that has forced the mutual funds industry to gear

up for a new fee structure from August 1. Association of Mutual Funds in India (AMFI)

Chairman A P Kurian told PTI that "it is a new system. It is investor-centric. All three

stakeholders — distributors, fund houses and investors — will have to adjust to the new

system". Currently, as much as 85-90 per cent of the industry's business is generated

through distributors, Kurian said.

More

SEBI Asks For Rs 5 Cr Firm Commitment From Foreign VCs

Market regulator Securities and Exchange Board of India (SEBI) has said that it is

mandatory for foreign venture capital investors (FVCIs) to get a firm commitment of at

least $1 million (Rs 5 crore) from their investors for registration. This step by SEBI

would bring the regulations for foreign funds at par with those of domestic funds.

The order stated that "―Each scheme launched or fund set up by a venture capital fund

shall have firm commitment from the investors for contribution of the minimum

stipulated amount before the start of operations by the venture capital fund.‖

Post-Satyam, VCs adopt stricter

scrutiny

Cleantech Biggest Investment

Opportunity Of The Century: Ajit

Nazre

Fung Capital Picks Up 26% In

Future Logistics For $30 Million

Japan's Shinsei, UTI Joint Venture

Raises $100 million

Grassroots Capital Raises $60M

To Make Microfinance Investments

Warburg Pincus Sells 5.6% Stake

in Max India

Banks lower MF exposure by 27%

to meet capital adequacy norms

Navis Capital Fund VI Raises $400-

550 M; Aims Final Close At $1.25 B

Rabo PE fund eyes stake in Future

arm

Nayak joins private equity player

VC investment drops 71% to $117

mn in H1

NVP picks up 8% in Shriram City

Union

PE, VC investments in healthcare

dip

Rabo Equity to raise $25 mn more

for agri fund by Dec

VCs gear up to provide seed fund

to Indian start-ups

Helix Invests Under $10 Million In

LearningMate

The move is expected put restrictions on shell venture capital companies which are

used by promoters of various companies to undertake transactions.

More

Taxing LLPs at entity level a dampener for PE, VC companies

Private Equity (PE) and Venture Capital (VC) firms which have been using the trust

route as vehicle for funds to pass through the tax at entity level are divided if they

should opt for Limited Liability Partnerships (LLPs).

The government had introduced the LLP mechanism on April 1 this year, giving PEs

and VCs hope of an alternative to the trust route. However, yesterday‘s Budget

announcement with regard to taxing LLPs at the entity level has created some

disappointment. ―It is out of sync with international practices,‖ said Nishith Desai,

founder of Mumbai-based corporate law firm Nishith Desai Associates. ―In a cross-

border scenario, issues relating to application of tax treaties and availability of tax credit

to foreign partners will arise. There are also problems on the treatment of losses in the

hands of the partners,‖ he said.

More

Foreign Venture Capital Investment (FVCI) - Licensing and Pitfalls

Foreign investors invest in India primarily via two routes - Foreign Direct Investment

(FDI), and Venture Capital (VC) Investment. India has attracted foreign investments

through Foreign Venture Capital Investments (FVCI) route of Rs 23,047 crores

compared to Domestic Venture Capital Investments (DVCI) of Rs 14,531 crores for the

financial year 2008-09, according to the website of SEBI, the capital markets regulator.

Recently, considering the chunk of FVCI concentrating in certain sectors regulators

have become stringent to grant the FVCI registration.

More

Press News

Kotak PE-Backed Pride Hotels To Do Rs 200 Cr IPO In Jan 2010

Kotak Private Equity backed Pride Hotels Ltd is planning a Rs 200 crore IPO in January

UTI AMC seeks foreign ally for PE

fund

PE players banking on sponsor

commitments

UTI Ventures to raise 3rd fund

India Value Fund Closes Fund IV

At $725M

Inventus Capital Backs Bus

Ticketing Firm redBus

Tata Capital's PE Head Shailendra

Bhandari Quits

Vineet Buch Leaves BlueRun

Ventures; Back To His Startup

India may get 40% of Carlyle’s $1

bn fund

VCs take a fancy to health,

education

UTI AMC Joins Hands With HSH

Nordbank, Noor Financial For

$500M Fund

International News

Korea Investment Corp. To Raise

Equity Allocation To Asia

Goodyear In Shock Exit From

Singapore's Temasek

KKR Euronext Listing Moves

Closer; Sees Profit

Carlyle earmarks up to $75 mn for

investment in single firm

2010, reports The Hindu Business Line. The company has appointed Edleweiss Capital

as a lead manager. The IPO proceedings will part fund its Rs 800-crore expansion plan,

while the balance will be raised through a mix of internal accruals, debt and private

placement of equity.

The company is also in talks with private equity funds to raise capital. S.P. Jain,

Managing Director, told Business Line that the company will offload around 30% equity

to meet the fund requirements.

In 2007, Kotak Private Equity invested $11.3 million to pick up about 11% stake in the

company.

The company plans to operate 30 hotels by year 2015, while it currently has five five-

star properties and another five business hotels and resorts, which comprises of 1,000

rooms.

More

FIPB rejects Indium's proposal to invest $500 mn in India Value Fund

NEW DELHI: The Foreign Investment Promotion Board (FIPB), the nodal body that

clears foreign investment into India, has rejected Mauritius-based investment fund

Indium‘s proposal to park $500 million (Rs 2,500 crore) in a fund managed by private

equity firm India Value Fund (IVF).

The nodal body refused to clear the proposal on the ground that Indium is not yet

registered as a foreign venture capital (VC) fund, said a person with direct knowledge of

the development.

More

India Financial Inclusion Fund To Invest in Allahabad-based MFI

India Financial Inclusion Fund (IFIF) has made a commitment to invest in Sonata

Finance Pvt Ltd, an Allahabad-based microfinance institution (MFI). The fund is in talks

with another investor to finalise the investment in the MFI, which has a presence in

eastern part of the Uttar Pradesh. Sonata had earlier raised funding from Bellwether

Microfinance Fund.

Hyderabad-based Caspian Advisors manages Bellwether Microfinance Fund and

advises India Financial Inclusion Fund.

Sonata Finance started operations in January of 2006 and since then has reached out

to nearly 85,000 women clients, in more than 15 districts with a portfolio outstanding of

over Rs 42 crore. The firm has a target to expand this portfolio to Rs 80 crores by

March 2010 and Rs 150 crores by March 2011.

Sonata has been promoted by Anup Singh, Rakesh Dubey, Ashish Kumar Gupta,

Swaminathan Ankaleshwar Aiyar (the noted journalist) along with Bellwether

Microfinance Fund.

More

Pizza Corner Looks For PE Funding

Pizza Corner-owners Global Franchise Architects (GFA) is considering raising funds

through private equity investment or through venture capitals as it looks to a 30-40 per

cent compounded growth in the next three-four years.

The food service chain, which also owns food service brands such as Pizza Corner,

The Donut Baker, Coffee World and The Cream and Fudge Factory, is considering

raising funds by the end of the year, said Mr Joseph Cherian, Chief Executive Officer,

GFA India, and Managing Director, Global Services.

He did not say how much funds the company plans to raise or how much of a stake it

intends to offload.

More

Sequoia Capital Buys Early Investor's Stake in Just Dial For Rs 40 Cr

Sequoia Capital India has picked up a stake in Mumbai-based local search firm Just

Dial Pvt Ltd for Rs 40 crore (~$8 mn). The Silicon Valley headquartered venture capital

firm has picked up a little less than 10% stake from an early investor in a secondary

deal. Sandeep Singhal, Managing Director, Sequoia Capital India, will join the board of

Just Dial.

The investment has been made from Sequoia‘s $300 million venture capital fund, which

the company raised in 2007. Sequoia manages over $1.8 billion in capital for India

investments.

Just Dial earlier raised funding from Asia focused private equity fund SAIF Partners and

US-based hedge fund Tiger Global Management. It raised Rs 50 crore from SAIF in

2006, followed by a Rs 77 crore investment by Tiger in 2007. SAIF and Tiger, which

hold over 20% stake each in the firm, have also picked up additional stakes in the

secondary deal.

More

Lightspeed Leads Rs 50 Crore Round in Itz Cash Card

Lightspeed Venture Partners has led a Rs 50 crore second round of funding in Itz Cash

Card Ltd, a multi- purpose pre-paid card company. Exisiting investors Matrix Partners

India and Intel Capital also participated in the round. The funds will be used by Itz Cash

Card to further expand into retail payment space, besides ramping up the product

portfolio and diversifications.

The firm, which is part of the Subhash Chandra promoted Essel Group, raised $10

million from Matrix Partners and Intel Capital in 2007. Value card and payment firms

have attracted funding from other players too. Another funded player in the space is

Prizm Payments, which has been backed by Sequoia Capital India. QuikCilver, which

offers stored value cards, has also raised funding from Helion Ventures and Accel India.

More

Post-Satyam, VCs adopt stricter scrutiny

Following the Satyam scam, venture capital (VC) firms are looking beyond financial

numbers before funding a family-owned business

While the first level of caution is on family-run companies, VCs are increasingly doing a

closer scrutiny of legal aspects and businesses of prospective investee firms.

―Post-Satyam, we have become more vigilant while investing in a family business. We

prefer two-three partners who come together with a business plan over one that is

owned by a family or by extended family members. We carry out extensive due

diligence before investing in a family-owned business,‖ said Nexus India Capital Partner

Suvir Sujan. ―We have become more careful and cautious before investing in any

family-owned business. Now we look beyond just numbers,‖ added Milestone Managing

Partner Rajesh Singhal.

More

Cleantech Biggest Investment Opportunity Of The Century: Ajit Nazre

Cleantech is looked at as one of the most attractive investment opportunities across the

world with venture capital and private equity investors pouring billions into the sector.

Kleiner Perkins, Caufield & Byers or KPCB, one of the most successful venture capital

firms in the world, is leading investments into this sector. The blue chip venture capital

firm was the largest investor in the sector globally in April-June quarter, with five deals

in the space. Silicon Valley-based KPCB has an India portfolio of eight companies, with

its first cleantech investment in Kotak Urja, a maker of solar water heaters and solar

photovoltaic modules and systems.

More

Fung Capital Picks Up 26% In Future Logistics For $30 Million

Hong Kong-based private equity firm Fung Capital has agreed to invest about $30

million for a 26% stake in Future Group's logistics arm Future Supply Chain Solutions.

The company will use the capital to expand the firm's supply-chain network.

The agreement was signed today in Hong Kong between Future Group founder and

CEO Kishore Biyani and Fung Capital, the private equity investment arm of the Li &

Fung Group.

The capital will be investd in phases with $10 million coming in immediately. PTI

reported, quoting Biyani, that Fung Capital has taken up to 26 per cent stake. A

statement said that the capital would be used for enhancement of the logistics

infrastructure, strengthening of technology platforms and expansion of supply chain

network of the company.

More

Japan's Shinsei, UTI Joint Venture Raises $100 million

UTI International (Singapore), the Singapore-headquartered asset management joint

venture between Japan's Shinsei Bank and India's mutual fund house UTI have raised

$100 million since September‘08 when the operations of the JV was started. The period

coincided with the post-Lehman gloom clouding the global financial services business.

UTI International (Singapore) is engaged in products primarily focused at the

institutional clients. It also markets the existing domestic and offshore products of UTI

Mutual Fund to the institutional and NRI clients in various Asian and South/South East

Asian countries. Earlier in 2006 UTI had successfully launched two Indian funds in

Japan at a time and raised $550 million, utilising Shinsei's distribution channels.

More

Grassroots Capital Raises $60M To Make Microfinance Investments

Netherlands based investor company PGGM, which has about €75 billion ($106 billion)

of assets under management will invest $60 million in a microfinance private equity fund

managed by Grassroots Capital, reports Pionline.com. Grassroots Capital's Global

Microfinance Equity Fund will invest primarily in India, Latin America and Africa.

―In the same way that (major financial institutions globally) have been capital-

constrained, the microfinance community is also seeking to bolster its balance sheet,‖

said Alex van der Velden, head of responsible equity strategies — PGGM .

―We expect microfinance private equity to achieve competitive returns and also

generate a social dividend — that makes it attractive as an asset class,‖ van der Velden

added.

Grassroots Capital will invest the amount in countries including India, Latin America and

Africa. It has offices in New York, London and Hyderabad.

More

Warburg Pincus Sells 5.6% Stake in Max India

Private equity major Warburg Pincus has sold more than 5.6% stake in insurance and

healthcare firm Max India through multiple block deals on Friday. The PE firm, which

has been one of the oldest and largest investors in India, sold the stake for Rs 246

crore on BSE and NSE. The stake was sold at a price of Rs 197 per share, which is at a

discount to Max India's trading price of Rs 213.

Before the stake sale, Warburg Pincus held a 22.55% stake in Max India through its

entities Madison Holdings, Melany Holdings and Parkville Holdings. The PE major still

has around a 17% stake in Max, which amounts to more than Rs 800 crore as per

company's market capitalisation at close of trade on Friday.

Warburg invested in Max India in 2004, pipping ChrysCapital to the deal. It picked up a

29% stake in the firm for Rs 200 crore, subscribing to shares at a price of Rs 200 per

unit.

More

Banks lower MF exposure by 27% to meet capital adequacy norms

Banks lowered their exposure to mutual funds (MFs) by 27 per cent, or Rs 33,705

crore, during the fortnight ended July 3 to avoid setting aside funds to meet the capital

adequacy norm.

According to data released by the Reserve Bank of India on Friday, banks‘ combined

investment in MF instruments fell to Rs 89,472 crore at the end of July 3, as against Rs

1,22,547 crore at the end of the previous fortnight. A year ago, banks had invested Rs

36,779 crore in these instruments. Over the last 12 months, growth in credit has

dropped from 25.5 per cent to 16.3 per cent.

Though bank lendings rose to Rs 28,000 crore in the last fortnight, bankers said the

main reason for the fall in their MF exposure was their need for funds to meet the

capital adequacy norms at the end of the quarter. Banks do this at the end of every

quarter since MF investments carry a risk weight of 100 per cent basis points. Other

instruments such as call money carry a risk weight of 20 basis points.

More

Navis Capital Fund VI Raises $400-550 M; Aims Final Close At $1.25 B

Navis Capital Partners, a private equity firm focused on controlled deals, has managed

to reach halfway towards its sixth Asia fund. Navis Asia Fund VI, which is aiming to

raise around $1-1.25 billion, has managed to raise commitments of between $400-550

million, reports peHUB.

The fund had initially planned to raise an amount of around $2 billion, but had cut its

target after the financial meltdown. The Malaysia headquartered private equity firm is

presently investing out of Navis Asia Fund V, which closed at $1 billion in 2007.

Sachindra Rudra, a Senior Investment Director with Navis in India, denied to comment

due to regulatory reasons.

More

Rabo PE fund eyes stake in Future arm

MUMBAI: The offshore private equity (PE) fund of the Dutch financial services group

Rabobank is in talks to buy a stake in Future Group‘s rural retailing business, Aadhaar

Retail. According to persons familiar with the discussions, India Agri Business Fund —

the Mauritius-based investment vehicle of Rabo — may pick up a little over 25% stake

in Aadhaar. However, they did not comment on the possible valuation.

Kishore Biyani-controlled Future Group is believed to be in touch with a string of PE

funds to raise money for expanding its businesses. It feels that the government‘s focus

on developing rural markets could pave the way for more private equity investments in

food and agri business.

India Agri Business is Rabo‘s first agri-focused PE initiative in Asia, and the

negotiations are being carried out by the group‘s PE firm Rabo Equity Advisors. When

contacted, Rajesh Srivastava, CMD of Rabo Equity Advisors, said: ―We are interested

in several businesses the group is in. However, that we are in discussion does not

mean there is a deal on the table.‖ Future Group CEO Kishore Biyani declined to

comment.

More

Nayak joins private equity player

PJ Nayak, the former chairman and CEO of Axis Bank, has joined private equity (PE)

firm Advent International. He will advise the PE player on investment opportunities in

India and develop its business in the country.

Advent said Nayak would help it spot investments, especially in the financial services

space. Advent is planning to open an office in India in 2010.

The former bureaucrat, who was instrumental in shaping Axis Bank, left the private

sector lender in late April, three months before his term was to come to an end. He

resigned after the bank‘s board did not agree with him on appointment of his successor.

More

VC investment drops 71% to $117 mn in H1

Investment by Indian venture capital (VC) companies fell by over 71 per cent to $117

million during January-June 2009, as against $413 million during the first half of 2008.

During the period, the number of deals also fell from 67 to 27, a study released by

Venture Intelligence and Global-India Venture Capital Association (GIVCA) said.

―While the uncertainty in the global financial markets over the last six months has

affected VC investing in India, there are clear signs of revival over the last couple of

months – especially in emerging markets such as India,‖ said Sudhir Sethi, director of

GIVCA. He is also the founder and chairman and managing director of IDG Ventures

India.

More

NVP picks up 8% in Shriram City Union

Norwest Venture Partners (NVP), a global venture capital firm, has bought an 8 per

cent stake in Shriram City Union Finance for Rs 120 crore. NVP picked up the stake

from Indopark Holding, a subsidiary of Merrill Lynch.

This will be Norwest‘s fourth later-stage investment in the first half of this year and first

in the financial sector. Since the beginning of this year Norwest has invested around

$100 million in India.

Niren Shah, managing director, NVP India, said, ―When you look at the retail-level credit

market, semi-urban and rural areas are under-served. Shriram is better placed to serve

that market. The company has done very well, especially in the last 8-12 months, when

markets were stressed. The size of the consumer finance market in India is expected to

grow significantly over the next four-five years.‖

More

PE, VC investments in healthcare dip

Private equity (PE) investment into the country‘s healthcare and life sciences (HLS)

sector dropped by 75 per cent and 40 per cent, respectively.

Investment by PEs into HLS sector dropped to $203 million in 2008-09 from $836

million in 2007-08, while the number of deals dropped 51 per cent to 21 from 43 deals.

Similarly, VC investments also declined to $48 million from $80 million. In terms of

deals, they dropped to 11 from 14.

Meanwhile, Chennai-based research firm Venture Intelligence, which compiled the

figures, stated that it would be a temporary phenomena and the investors were certainly

bullish about the Indian HLS companies. He noted over $2 billion (around Rs 10,000

crore) was invested in HLS companies in India over the past five years.

More

Rabo Equity to raise $25 mn more for agri fund by Dec

Rabo Equity Advisors will float a second private equity fund focusing on the food and

agribusiness sector in India in the second half of 2010, Chairman and Managing

Director Rajesh Srivastava said today.

―Once we have invested close to 70 per cent of our existing fund, that is the time to start

raising capital for the second fund. By the latter half of the next year, we should be up

with that,‖ he said. While Srivastava did not share any details on the corpus of the

second fund, he stressed that food and agribusiness will continue to be the focus of the

company.

―There are a lot of opportunities in the food and agribusiness sector. It is our core

competence. That will be the centerpiece (of second fund),‖ he said. Rabo Equity

Advisors currently manages a single fund — India Agri Business Fund — which invests

in food and agribusiness companies.

More

VCs gear up to provide seed fund to Indian start-ups

In what can be seen as an expression of growing confidence, venture capital (VC)

funds are now coming forward to support and fund Indian start-ups even at the stage of

ideation.

So far, VCs used to fund start-ups which either had product prototypes ready or had

some customers on board. But now a clutch of VCs such as Morpheus Venture

Partners, Opdrage Venture Partners, Telnet Venture and Centre for Innovation,

Incubation and Entrepreneurship are not only mentoring start-ups, but are also ready to

invest in them when a business plan is still at an ideation stage.

Most of such investment models replicate US-based Y Combinator, which provides

‗seed funding‘ in the range of $15,000-$20,000 to early-stage firms and takes small

stakes in them.

More

Helix Invests Under $10 Million In LearningMate

Mumbai based private equity firm Helix Investments has invested under $10 million in

LearningMate Solutions Pvt Ltd, a Mumbai based provider of e-learning education

solutions. LearningMate‘s services include content development, learning application,

and learning management systems solutions. The company has customers like

McGraw Hill Education, Pearson, Thomson, Penn Foster, W.H. Freeman, Worth

Publishers, and Oxford University Press. It has offices in the US and the UK, besides

India.

LearningMate, founded in 2001 by Samudra Sen and Atul Sabnis, was a part of

Educomp Solutions Ltd. The company got hived off as a separate entity in 2003 and

Educomp was bought out by Carlyle Group, the private equity investor. Carlyle later

exited the company. Samudra Sen and Atul Sabnis had earlier helped establish and

manage the e-learning content development operation for Aptech Ltd, which later came

to be known as Mentorix.

More

UTI AMC seeks foreign ally for PE fund

The upcoming infra-focused fund aims to raise about $250 million in the next four

months.

UTI Asset Management Company (UTI AMC), the country‘s oldest mutual fund, is on

the lookout for another foreign partner to float its first-ever infrastructure focused private

equity fund.

The AMC is seeking another partner as Shinsei Bank of Japan, with whom UTI AMC

had signed a deal along with HSH Nord Bank of Germany in 2007, HAS suffered heavy

financial losses.

Hit hard by the global sub-prime crisis, Shinsei Bank lost 143 billion yen ($1.45 billion)

in the financial year ended March 31. ―We did not see much value addition by Shinsei

Bank, so the earlier agreement lapsed. We have decided to ink a fresh agreement with

another partner for the fund,‖ an official said.

More

PE players banking on sponsor commitments

At a time when raising funds is a concern for private equity (PE) players globally,

sponsor commitments are increasingly gaining relevance among funds as a committed

source of capital.

Experts said that in many cases, it has rescued the funds which were unable to achieve

closures due to inadequate commitments.

The trend has become especially prominent in the last few months when limited

partners (LPs) tightened the flow of capital to private equity funds.

Sponsor commitment or anchor investment is the amount of capital committed by the

sponsors of a fund. The anchor investment is made at the initial stage of fund-raising to

start the process and provide a sense of confidence to LPs.

More

UTI Ventures to raise 3rd fund

The $400-mn fund will focus on infra services, domestic consumption & outsourcing

UTI Ventures, the venture capital (VC) arm of UTI Asset Management Company (AMC),

is raising a Rs 1,500 to Rs 2,000-crore ($350 to $400 million) fund and hopes to

complete the process by December.

The third from the UTI Ventures stable, the fund would focus on deals in the range of

$10-15 million (Rs 50-75 crore). Though the fund would invest across sectors, it would

largely focus on areas such as infrastructure services, domestic consumption and

outsourcing.

UTI Ventures is looking at domestic institutional investors (DIIs) — including insurance

companies, mainly Life Insurance Corporation of India (LIC), and banks — and foreign

investors such as sovereign wealth funds, endowment funds and private pension funds.

Over the last 12-18 months, hedge funds have completely disappeared from the

market.

More

India Value Fund Closes Fund IV At $725M

In a difficult fund raising environment, leading Indian private equity fund India Value

Fund Advisors (IVF) has closed at $725 million for its fourth fund. When contacted, a

spokesperson for India Value Fund Advisors confirmed the development to

VCCircle.com. He refused to comment further.

In this period of tight liquidity and limited partners (the investors in private equity funds)

backing out of commitments, achieving the close of a fund of this magnitude for Indian

market is significant.

PEI Asia, a private equity tracker based in Singapore, first reported that IVFA has

achieved the close of its fourth fund.

More

Inventus Capital Backs Bus Ticketing Firm redBus

Pilani Soft Labs Pvt Ltd, the company behind bus ticketing service redBus, has raised

second round of funding led by Inventus Capital Partners. Seedfund, an existing

investor, also participated in the round. redBus has a network of over 500 bus operator

partnerships covering over 5,000 routes in India.

The funds will be used by redBus to further increase the number of bus routes and

tickets available on its platform while expanding its geographical footprint across the

country. Parag Dhol from Inventus Advisory Services will join redBus‘ board.

Another venture capital backed firm in this space is Ticketvala, which raised $2 million

from Bangalore-based early stage venture firm Footprint Ventures in 2007. Heavily

funded travel portals like MakeMyTrip and Yatra also have a presence in bus ticketing.

More

Tata Capital's PE Head Shailendra Bhandari Quits

Shailendra Bhandari, the head of Tata Capital's private equity business, has quit less

than a year after he joined the firm. Bhandari, who was former managing director and

CEO of PE-controlled Centurion Bank of Punjab (CBoP), will leave to pursue other

opportunities by the end of July 09, a Tata Capital statement said. It is not yet known

where Bhandari is headed.

Bhandari had earlier worked with HDFC Bank, and thereafter became the CEO of ICICI

Prudential Mutual Fund. He later became the CEO of Centurion Bank, and

spearheaded its acquisitions like Bank of Punjab and then Lord Krishna Bank before

Centurion Bank of Punjab itself was bought out by HDFC Bank.

More

Vineet Buch Leaves BlueRun Ventures; Back To His Startup

Vineet Buch, a venture partner at BlueRun Ventures, has left the investing job and has

returned to Like.com Inc, a startup he helped found in 2004. Buch is joining Like.com as

Vice President, Corporate Development, reports Wall Street Journal.

Like.com is a visual-search company, which helps improve shopping experience of

people. WSJ quotes from Buch's email to his contacts: ―We are building the leading

fashion shopping experience at Like.com, and are expanding our offerings through

strategic acquisitions as well as organic growth.‖

Like.com, which has raised more than $50 million from a bunch of venture firms

including BlueRun, is looking at making some strategic acquisitions to expand its

offering to fashion shopping. Buch currently serves on the board of Like.com.

More

India may get 40% of Carlyle’s $1 bn fund

MUMBAI: The Carlyle Group, the world‘s largest private equity (PE) investment firm, on

Tuesday announced the closure of its fourth Asian growth capital fund at $1.04 billion,

of which around 40% is likely to be invested in Indian companies. The fund, Carlyle

Asia Growth Partners IV (CAGP IV), will invest between $15 million and $75 million in

each company, said Shankar Narayanan, managing director of the firm, responsible for

CAGP‘s investments in India.

―We will look at a 20-35% stake. We generally invest in unlisted companies and will

target those that are growing at 40-50% on a compounded basis,‖ he added. The PE

firm is likely to earmark around 80-85% of the fund for investment in India and China.

This is the first major fund launch targeting Indian companies in the past few months by

a large PE group. Last year, Actis had raised a $2.9-billion fund, of which around $1

billion was for Investments into India. A couple of months ago, Ajay Relan, former head

of Citi Venture Capital in India, had raised around $220 million.

More

VCs take a fancy to health, education

Technology sector falls out of favour.

Pranav Parekh, managing director of Q Investments, is now examining a host of

proposals to identify his next set of investments in India.

Q Investments, which incubated Xcel Tower, invested some $40 million in the venture

and later sold it to American Tower Corporation for $150 million, is not bullish on

technology companies at present.

―Technology is very well-researched and very well-invested. There is no significant

value add. So, we are pursuing a theme of unorganised to organised. Be it agriculture,

retail, healthcare, education or restaurant, these are all sectors that have remained

unorganised but now you are seeing the emergence of organised players,‖ said Parekh.

More

UTI AMC Joins Hands With HSH Nordbank, Noor Financial For $500M Fund

UTI Asset Management Company has set up a private equity fund worth $500 million in

partnership with Germany's HSH Nordbank and Kuwait's Noor Financial Investment

Company, the firm said on Thursday.

The fund will mainly tap offshore clients and invest in unlisted infrastructure firms

engaged in sectors such as roads, ports, power, logistics, airports and energy among

others, the company said in a statement.

UTI AMC's PE fund is separate from UTI Venture Funds Ltd, which has now become an

independent entity even though UTI AMC is the largest stakeholder in the firm.

More

International News

Korea Investment Corp. To Raise Equity Allocation To Asia

Korea Investment Corp., South Korea‘s $30 billion sovereign wealth fund is looking to

raise asset allocation to equities later this year targeting markets in the US and Asia.

In an interview with Bloomberg, the fund‘s Chief Investment Officer Scott Kalb said ,

"It's unlikely that bonds are going to continue to outperform stocks from here over the

long term. We‘re moving more towards equity."

As of now equities account for 40% of the ‗traditional‘ portfolio of KIC which it plans to

hike to 50% within the next five months. Equities and fixed income securities makes up

90% of KIC‘s total assets which means $2.7 billion worth of additional funds finding its

way into equity.

More

Goodyear In Shock Exit From Singapore's Temasek

Charles "Chip" Goodyear, the CEO-designate at Temasek Holdings, pulled out barely

six months after accepting the post at Singapore's best-known wealth fund.

Temasek said on Tuesday Goodyear had decided not to become the chief executive of

the state investment firm due to differences over strategy, adding that Ho Ching, the

wife of Singapore's prime minister and current CEO, would continue as executive

director and chief executive.

Goodyear was widely expected to trim Temasek's financial holdings and move

aggressively into commodities and energy and into emerging market infrastructure and

consumer retail sectors, analysts and investment bankers said.

They cited his appointment as a clear move that Temasek was angling for more

resources deals.

More

KKR Euronext Listing Moves Closer; Sees Profit

Private equity firm Kohlberg Kravis Roberts & Co on Monday moved a step closer to

merging with its Euronext-listed fund after receiving approval from the board of the fund

to combine businesses.

Combining with KKR Private Equity Investors LP is a roundabout way for KKR to gain a

European listing, and is a step towards it following rival Blackstone Group in becoming

a New York Stock Exchange-listed company.

KKR, one of the world's most powerful private equity firms, also gave more details on

the planned combination with KPE, including a proposed equity-incentive plan.

It provided an update on its profit outlook, saying earnings for the second quarter were

expected to be between $345 million and $370 million. The most recent comparison are

figures it released in May, which showed a loss for 2008 of $1.2 billion.

More

Carlyle earmarks up to $75 mn for investment in single firm

MUMBAI: Carlyle Group, the world's second biggest buyout firm, has identified India as

one of its key markets and would invest in companies across sectors, earmarking

between $15-75 million for investment in each company.

Carlyle successfully closed its fourth Asian growth capital fund called Carlyle Asia

Growth Partners IV (CAGP IV).

It raised $1.04 billion in 14 months from a broad geographical range of investors in the

US, Europe and Asia despite a difficult fund-raising environment.

More

Regulatory Updates

Mutual funds gear up for zero entry load from Aug 1

Press Trust of India – 31 July 2009

Investors will no longer be charged a 2.25 per cent distribution commission up front by mutual funds beginning tomorrow

following a Sebi directive. Market regulator Securities and Exchange Board of India (Sebi) recently said that "there shall be no

entry load for schemes, existing or new", a directive that has forced the mutual funds industry to gear up for a new fee

structure from August 1. Association of Mutual Funds in India (AMFI) Chairman A P Kurian told PTI that "it is a new system. It

is investor-centric. All three stakeholders — distributors, fund houses and investors — will have to adjust to the new system".

Currently, as much as 85-90 per cent of the industry's business is generated through distributors, Kurian said.

Taurus Mutual Fund CEO Waqar Naqvi said the new system is good from the investor point of view but not so for the fund

houses. "People will take time to reconcile to the new structure. The fund flow to the industry could get affected over the next

three months," he said.

According to him, though the size of the MF industry at present is about Rs 6,00,000 crore, the total profit of asset

management companies together is only about Rs 550 crore. There is a regulatory cap on expenses that a fund house can

incur in a year. There is a cap on earnings. The fund houses can make money only by increasing volumes. But the new fee

structure would affect the aggressive plans of fund houses to penetrate the market, Naqvi said. Asked whether collections

would now fall given that distributors would not have any incentive to sell mutual fund products, Kurian said initially there could

be some problems but over a period of time, the industry would get adjusted to the new system. Each mutual fund will

formulate its own strategy, he said, adding investors would need to be educated about the new fee structure.

There are an estimated 1-lakh distributors pan-India, and according to AMFI, 85-90 per cent of the collection of the mutual

fund industry is through distributors. The practice of charging distribution commission has been in existence since more than a

decade and the industry feels this has helped in considerably growing its business. The implications of the new rule are

considerable as distributors will now not have any incentive to push mutual fund products and investors may not be inclined to

pay distributors separately for advice.

Given that Sebi's new measure would come into effect from August 1, several mutual funds launched their new offerings in

July itself to avoid being hit by the new rule. At present, there are as many as six New Fund Offerings (NFO) being marketed.

Of these, three NFOs would end on July 31 and the rest in August. Meanwhile, ICICIdirect, one of the largest financial product

distributors in India and the first one to revise its commissions on funds post SEBI's directive, has announced that it has

waived off transaction fees for its HNI (high networth individual) mutual funds customers.

As per the new fee structure, there will be no commissions for customers with cumulative MF investment of more than Rs 8

lakh. However, customers with cumulative investments of less than Rs 8 lakh will have to pay nominal fees of Rs 30 per SIP

(Systematic investment Plan).

Vineet Arora, senior vice-president and head (product & distribution), ICICI Securities, said: "We welcome the Sebi guidelines

on removal of the mutual fund entry load and we believe that it will immensely benefit our customers in allocating their funds

appropriately. Given that the new rule is here to stay with Sebi ignoring the protests by distributors and the courts refusing to

accept the pleas made by them.

However, all is not lost for the distributors. Fund houses would still be able to charge an exit load of one per cent when

investors sell their investment. And fund houses would also compensate distributors through trail commission (a commission

that depends upon the duration an investor stays in a scheme), he said.

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SEBI Asks For Rs 5 Cr Firm Commitment From Foreign VCs

V.C.Circle – 4 July 2009

Market regulator Securities and Exchange Board of India (SEBI) has said that it is mandatory for foreign venture capital

investors (FVCIs) to get a firm commitment of at least $1 million (Rs 5 crore) from their investors for registration. This step by

SEBI would bring the regulations for foreign funds at par with those of domestic funds.

The order stated that "―Each scheme launched or fund set up by a venture capital fund shall have firm commitment from the

investors for contribution of the minimum stipulated amount before the start of operations by the venture capital fund.‖

The move is expected put restrictions on shell venture capital companies which are used by promoters of various companies

to undertake transactions.

FVCI, a term used for foreign private equity and venture capital investors, should obtain the requisite amount now at the time

of the submission of application.

Last month SEBI cut the fees for FVCI's in order to attract investment. The application and registration fees for FCVI has

beencut by half to $2,500 and $10,000, respectively..

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Taxing LLPs at entity level a dampener for PE, VC companies

V.C.Circle-8 July 2009

Private Equity (PE) and Venture Capital (VC) firms which have been using the trust route as vehicle for funds to pass through

the tax at entity level are divided if they should opt for Limited Liability Partnerships (LLPs).

The government had introduced the LLP mechanism on April 1 this year, giving PEs and VCs hope of an alternative to the

trust route. However, yesterday‘s Budget announcement with regard to taxing LLPs at the entity level has created some

disappointment. ―It is out of sync with international practices,‖ said Nishith Desai, founder of Mumbai-based corporate law firm

Nishith Desai Associates. ―In a cross-border scenario, issues relating to application of tax treaties and availability of tax credit

to foreign partners will arise. There are also problems on the treatment of losses in the hands of the partners,‖ he said.

Internationally, PE and VC firms work in partnership, where investors are limited partners (LPs) and fund managers general

partners (GPs). In this, the partners are taxed at individual levels. But in India, partnership firms are taxed at the entity level

and there is no legal position of LPs and GPs. This gave rise to the trust route, which allowed a pass-through to taxation at the

entity level. But taxation at individual levels gave the flexibility to plan an account to set off some taxes.

―The industry would have liked to have an option for taxation at entity or individual levels,‖ said Rajeev Agarwal, chief

executive officer, Ambit Pragma Ventures. The industry primarily attracts investments from institutions and high net worth

individuals (HNIs) from the US and Europe for PE and VC business. But now since this business is witnessing a growing

number of Indian investors, market players are divided over the government‘s announcement.

―Taxation at the entity level for LLPs definitely makes sense for onshore investors, although it has no meaning for offshore

investors,‖ said Shahzad Dalal, vice-chairman and managing director, IL&FS Investment Managers. ―Operating at the trust

level is amorphous and is a much neater structure,‖ he said.

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Foreign Venture Capital Investment (FVCI) - Licensing and Pitfalls

V.C.Circle – 20 July 2009

Foreign investors invest in India primarily via two routes - Foreign Direct Investment (FDI), and Venture Capital (VC)

Investment. India has attracted foreign investments through Foreign Venture Capital Investments (FVCI) route of Rs 23,047

crores compared to Domestic Venture Capital Investments (DVCI) of Rs 14,531 crores for the financial year 2008-09,

according to the website of SEBI, the capital markets regulator. Recently, considering the chunk of FVCI concentrating in

certain sectors regulators have become stringent to grant the FVCI registration. In this article, key issues pertaining to FVCI

approval from Reserve Bank of India‘s (RBI) perspective has been outlined.

The journey of FVCI regulations in India

Venture Capital (VC) finance is an important source of funding seed capital for start-up ventures and technology projects. A

committee on Development of SME in 1973 for the first time highlighted the need for introduction of VC in India.

The formalization of VCs began in 1995 whereby the Government framed guidelines for Overseas Venture Capital

Investments (OVCI) in India. In 2000, pursuant to K B Chandrasekhar Committee recommendations, the OVCI guidelines

were withdrawn and SEBI was made a nodal regulator for VCFs to provide a uniform, hassle free, single window regulations.

SEBI (FVCI) Regulations, 2000 requires FVCI to make minimum investment of 67.77 % of investible funds in unlisted Indian

Venture Capital Undertaking (IVCU) and balance 33.33 % in listed securities or debt instruments, primarily with a view to foster

investments in unlisted start-ups. IVCU should be a company not engaged in an activity under the negative list specified by

SEBI.

The FVCI Edge

Venture capitalists invest at an early stage to enable companies to meet their long term funding requirements. Since the

pricing at investment stage is not necessarily in sync with the book value of assets, RBI guidelines (ie the pricing guidelines

generally applicable to a foreign investor) relaxes this condition for an FVCI on purchase and sale of shares.

FVCI‘s key role is to provide initial capital and it generally does not get involved in day to day management of companies.

Unless these funds are unlocked, these funds cannot be used for other start-ups. Considering this, SEBI provides following

two relaxations :-

No lock-in for shares held by FVCI post listing of shares so long as FVCI has stayed invested at least for 12 months before the

company files Draft Red Herring Prospectus.

If FVCI decides to stay invested even after listing, it can sell its stake to promoter without trigging ‗open offer‘ under the

takeover code.

Besides an attempt to provide funds for new businesses, it is also recognized by Government that FVCI only financially

nurtures business venture and does not undertake management functions. Hence, additional relaxations are available as

under:-

No approval is required even if investments are made in ‗same‘ field in India – Press Note 1 of 2005 restriction applicable to

other investors.Restrictions applicable to a promoter under SEBI (Disclosure & Investors Protection) Guidelines, 2000 are not

applicable to FVCI.

FVCI is permitted to make investments in DVCF under the automatic route subject to certain conditions.

RBI Concerns

It appears that RBI is granting FVCI approval after its concerns relating to investments in Real Estate sector and thin

capitalization are met.

Real Estate

In 2004, FVCI regulations were amended to permit investments in companies engaged in Real Estate sector. Vide Press Note

No. 2 (2005) foreign investors are allowed to invest through FDI route in townships, housing, built-up infrastructure and

construction-development projects subject to fulfillment of certain conditions.

Given the above, RBI wants to direct foreign investors to invest in Real Estate sector through FDI route and not to enjoy the

advantages of investing through FVCI regime.

In order to mitigate the delay in obtaining the FVCI approval, the foreign investors should, at the time of registration, make

clear and appropriate disclosures of its investment strategy and in addition, also explicitly state that it is not intending to invest

in Real Estate sector.

Thin Capitalization

Till recent past, RBI, on a reference by SEBI, did not clear FVCI applications for want of cash flows and capitalization of FVCI

Company. Recently, SEBI has relaxed this norm vide Circular No 1/ 2009 dated July 3, 2009 which requires FVCI to obtain

only ‗firm commitment‘ from its investors for a contribution of an amount of atleast USD 1 million at time of the registrations. It,

therefore, appears that FVCI now only need to produce documentary evidence of ‗firm commitment‘ as against actual

capitalization of the company.

New areas of concern

Though FVCI approvals are nowadays being considered positively by RBI, it is learnt that RBI wants to link the FVCI approval

with nine sectors listed under section 10 (23 FB) of the Income-tax Act, 1961. It would be important to mention that DVCF are

not restricted to make investments outside these nine sectors but FVCI are restricted to make investments outside nine

sectors thereby making FVCI route unattractive.

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Press News

Kotak PE-Backed Pride Hotels To Do Rs 200 Cr IPO In Jan 2010

V.C.Circle - 25 July 2009

Kotak Private Equity backed Pride Hotels Ltd is planning a Rs 200 crore IPO in January 2010, reports The Hindu Business

Line. The company has appointed Edleweiss Capital as a lead manager. The IPO proceedings will part fund its Rs 800-crore

expansion plan, while the balance will be raised through a mix of internal accruals, debt and private placement of equity.

The company is also in talks with private equity funds to raise capital. S.P. Jain, Managing Director, told Business Line that the

company will offload around 30% equity to meet the fund requirements.

In 2007, Kotak Private Equity invested $11.3 million to pick up about 11% stake in the company.

The company plans to operate 30 hotels by year 2015, while it currently has five five-star properties and another five business

hotels and resorts, which comprises of 1,000 rooms.

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FIPB rejects Indium's proposal to invest $500 mn in India Value Fund

V.C.Circle - 25 July 2009

The Foreign Investment Promotion Board (FIPB), the nodal body that clears foreign investment into India, has rejected

Mauritius-based investment fund Indium‘s proposal to park $500 million (Rs 2,500 crore) in a fund managed by private equity

firm India Value Fund (IVF).

The nodal body refused to clear the proposal on the ground that Indium is not yet registered as a foreign venture capital (VC)

fund, said a person with direct knowledge of the development.

Indium, which is looking at investment opportunities in India, was initially planning to invest $90 million (around Rs 450 crore)

in IVF‘s fourth fund, IVF IV. This proposal was rejected in April this year as both IVF IV and Indium are not Sebi-registered

foreign VC funds. Since then, IVF has obtained an in-principle registration as a domestic VC fund from market regulator Sebi.

Indium had raised the amount it planned to invest in IVF IV to $500 million and filed a fresh application with FIPB. It was

planning to invest in a wide range of industries across diverse sectors in India. IVF, which usually picks up controlling equity

stakes in small and mid-sized companies, currently has over $1-billion funds under its management. It invests in healthcare,

retailing, outsourced services and media & entertainment. Its recent investments include taxi fleet operator V-Link Travel

Solutions, which operates under the Meru brand, besides Kerala-based hospital chain DM Healthcare. The firm had reportedly

raised $725 million (Rs 3,516 crore) for its fourth fund recently. IVF manages $610 million across its three other funds.

As per senior executives in the private equity industry, a number of foreign firms are now looking at investment opportunities in

India, as its economy is growing at a steady rate at a time when the world economy is undergoing a recession. Foreign PE

firms that have opened offices in India last year include Kohlberg Kravis Roberts & Co and Bain Capital.

PE firms invested $889 million in 44 deals in three months to June, compared with $2,587 million in 92 deals in the year-ago

period. The fall in numbers and the amount invested can be attributed to the cautious approach adopted by PE firms, as the

corporate sector is yet to show good earnings growth.

Currently, there are over 366 PE firms operating in India. The industry witnessed a significant growth in the last few years with

investments going up from $2 billion in 2005 to close to $17 billion in fiscal 2007-08.

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India Financial Inclusion Fund To Invest in Allahabad-based MFI

V.C.Circle - 24 June 2009

India Financial Inclusion Fund (IFIF) has made a commitment to invest in Sonata Finance Pvt Ltd, an Allahabad-based

microfinance institution (MFI). The fund is in talks with another investor to finalise the investment in the MFI, which has a

presence in eastern part of the Uttar Pradesh. Sonata had earlier raised funding from Bellwether Microfinance Fund.

Hyderabad-based Caspian Advisors manages Bellwether Microfinance Fund and advises India Financial Inclusion Fund.

Sonata Finance started operations in January of 2006 and since then has reached out to nearly 85,000 women clients, in more

than 15 districts with a portfolio outstanding of over Rs 42 crore. The firm has a target to expand this portfolio to Rs 80 crores

by March 2010 and Rs 150 crores by March 2011.

Sonata has been promoted by Anup Singh, Rakesh Dubey, Ashish Kumar Gupta, Swaminathan Ankaleshwar Aiyar (the noted

journalist) along with Bellwether Microfinance Fund.

"Sonata is one of the most impressive and efficient microfinance institutions in the region, both financially and socially. Sonata

has a uniquely strong position in its areas of operation, especially in the state of Uttar Pradesh, which other microfinance

institutions have found difficult to emulate," said S. Viswanatha Prasad, Managing Director of Caspian.

MFI has seen the most active venture capital dealflow within the banking and financial sector since January 2008. Of about 50

private equity deals worth $1 billion in banking and finance in the last 18 months, MFIs alone accounted for 20 deals worth

over $200 million of Rs 960 crore. The investors in the space are increasingly looking at relatively unpenetrated regions of

North and West India. In one of the most recent deals, Pune based Suryoday Microfinance raise Rs 4.5 crore from Aavishkaar

Goodwell. "Through an investment in this round, we will further build capacity in this exceptionally well-run MFI, which will

facilitate it to penetrate into relatively-unreached markets within UP and other neighbouring states," added Prasad.

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Pizza Corner Looks For PE Funding

V.C.Circle – 24 July 2009

Pizza Corner-owners Global Franchise Architects (GFA) is considering raising funds through private equity investment or

through venture capitals as it looks to a 30-40 per cent compounded growth in the next three-four years.

The food service chain, which also owns food service brands such as Pizza Corner, The Donut Baker, Coffee World and The

Cream and Fudge Factory, is considering raising funds by the end of the year, said Mr Joseph Cherian, Chief Executive

Officer, GFA India, and Managing Director, Global Services.

He did not say how much funds the company plans to raise or how much of a stake it intends to offload.

Pizza market

The organised pizza market comprising three-four large MNC brands is estimated at Rs 700 crore and growing at the rate of

30 per cent a year, according to the Food Franchising Report 2009. GFA‘s Pizza Corner is estimated to have 10-12 per cent of

the market share.

Outlets

GFA, currently, has 62 outlets in India: 44 Pizza Corner stores, six Coffee World outlets, eight The Donut Baker outlets and

four The Cream and Fudge Factory outlets. The plan is to grow this number to 100 by March 2010 through both company-

owned and franchised stores.

Currently, 60 per cent of the 62 outlets are company-owned and the rest are franchised. About 30 per cent of the existing

outlets are located in malls, Mr Cherian said.

Combo offer model

In a strategic move, the company is now offering a combination of two or three of its brands in a single outlet. ―This will be

more viable as we will have a larger target audience,‖ points out Mr Cherian.

In fact, a few outlets that have followed this combo offer model are now seeing a 30 per cent increase in revenues, according

to him. The company recently partnered with a master franchisee for eastern India which will take its complete portfolio to the

region through 35 outlets. GFA intends to have a presence in the North and the West and is looking for partners in these

regions. GFA is a privately-held company based in Geneva, Switzerland, with corporate offices in Thailand, India, the US and

the UAE. Globally, Thailand and India contribute about 75 per cent the company‘s revenues.

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Sequoia Capital Buys Early Investor's Stake in Just Dial For Rs 40 Cr

V.C.Circle - 23 July 2009

Sequoia Capital India has picked up a stake in Mumbai-based local search firm Just Dial Pvt Ltd for Rs 40 crore (~$8 mn). The

Silicon Valley headquartered venture capital firm has picked up a little less than 10% stake from an early investor in a

secondary deal. Sandeep Singhal, Managing Director, Sequoia Capital India, will join the board of Just Dial.

The investment has been made from Sequoia‘s $300 million venture capital fund, which the company raised in 2007. Sequoia

manages over $1.8 billion in capital for India investments.

Just Dial earlier raised funding from Asia focused private equity fund SAIF Partners and US-based hedge fund Tiger Global

Management. It raised Rs 50 crore from SAIF in 2006, followed by a Rs 77 crore investment by Tiger in 2007. SAIF and Tiger,

which hold over 20% stake each in the firm, have also picked up additional stakes in the secondary deal.

Just Dial achieved revenues of Rs 91 crore in FY09, and expects to reach Rs 130 crore this year.

The local listing space has attracted interest from both corporates and investor community. In December '08, internet giant

Yahoo acquired a 30% stake in Chennai-based Network Management Co. Pvt. Ltd, which owns the telephone-based directory

search service Call Ezee. Another corporate active in this space is Television Eighteen India Ltd (TV18), which acquired

Infomedia18 from ICICI Venture in 2007.

Other venture-backed players in this space include AskLaila of Four Interactive (Lightspeed, Matrix and SVB), Sulekha

(Norwest, Indigo Monsoon) and GETIT Infoservices (Helion Ventures). The most recent deal in this space was Nexus India

Capital's $5 million investment in New York-based classifieds firm OLX, which has a presence in markets besides India like

Portugal, Mexico, South America and China.

Though there is competition in the space, especially on the web, but Just Dial is unique in offering services over the phone,

said Sandeep Singhal of Sequoia. Its services are available on call, through SMS, and also on internet. Singhal believes that

Just Dial has a strong connect with the consumers.

Just Dial claims to have over a 90% market share in the local search space. The firm reaches to 400 million mobile customers

across 240 cities and 40 million user on the internet. Just Dial, which was founded by VSS Mani in 1994, caters to over 25

million unique users and over 200 million searches in a year.

The company also forayed into print, but is now pulling out as it didn‘t work out. ―We did that as we were looking at widening

our revenue base, and there were some of our customers who were targeting print ads,‖ said Mani.

Just Dial plans to now focus on offering local information through online and technology enabled services. For starters, it‘s

planning to launch its classifieds pages by first or second quarter of next year, which Mani says ―will be mother of all

classifieds.‖ It‘s also planning to foray overseas with local search in the US.

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Lightspeed Leads Rs 50 Crore Round in Itz Cash Card

V.C.Circle – 22 July 2009

Lightspeed Venture Partners has led a Rs 50 crore second round of funding in Itz Cash Card Ltd, a multi- purpose pre-paid

card company. Exisiting investors Matrix Partners India and Intel Capital also participated in the round. The funds will be used

by Itz Cash Card to further expand into retail payment space, besides ramping up the product portfolio and diversifications.

The firm, which is part of the Subhash Chandra promoted Essel Group, raised $10 million from Matrix Partners and Intel

Capital in 2007. Value card and payment firms have attracted funding from other players too. Another funded player in the

space is Prizm Payments, which has been backed by Sequoia Capital India. QuikCilver, which offers stored value cards, has

also raised funding from Helion Ventures and Accel India.

Itz Cash was established in 2004 and has managed to reach an annual gross turnover of Rs 1,700 crore. The company offers

prepaid cards offer cashless payment solutions for individuals and businesses. The company has tied up with IRCTC for rail

booking, Municipal Corporation of Greater Mumbai (MCGM) to facilitate online payment of property tax and water bills, among

others. Itz Cash has a network of more than 5,000 merchants in 1800 Tier I & II towns.

"We believe there is significant growth potential for this product given that cash accounts for approximately 97% of the

country‘s retail payments, which exceed $500 billion," said Bejul Somaia, Managing Director, Lightspeed Advisory Services

India, who will also join the board of Itz Cash. "We have been looking to invest in financial services, especially businesses

which are at an intersection of financial services and technology," he added in an interview to VCCircle.

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Post-Satyam, VCs adopt stricter scrutiny

V.C.Circle – 22 July 2009

Following the Satyam scam, venture capital (VC) firms are looking beyond financial numbers before funding a family-owned

business

While the first level of caution is on family-run companies, VCs are increasingly doing a closer scrutiny of legal aspects and

businesses of prospective investee firms.

―Post-Satyam, we have become more vigilant while investing in a family business. We prefer two-three partners who come

together with a business plan over one that is owned by a family or by extended family members. We carry out extensive due

diligence before investing in a family-owned business,‖ said Nexus India Capital Partner Suvir Sujan. ―We have become more

careful and cautious before investing in any family-owned business. Now we look beyond just numbers,‖ added Milestone

Managing Partner Rajesh Singhal.

Generally, VCs look at business models or plans that entrepreneurs have along with legal and financial documents before

deciding on their investment since it takes at least five years for a business to turn profitable. Also, since the companies VCs

invest in are not in the public sector, information regarding their businesses is confidential.

VCs carry out due diligence mainly on business and legal aspects to verify the accuracy and authenticity of statements made

by an entrepreneur.

Legal due diligence involves verification of documents such as memorandum and articles of association, important contracts,

patents and copyrights by VCs. Business due diligence involves quality of people, quality of business and quality of

investment. VCs emphasise on quality of people and find it as one of the most important criteria.

Following the due diligence, VCs either issue a term sheet, which is an indication that they are seriously looking at the

proposal, or reject the idea.

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Cleantech Biggest Investment Opportunity Of The Century: Ajit Nazre

V.C.Circle – 21 July 2009

Cleantech is looked at as one of the most attractive investment opportunities across the world with venture capital and private

equity investors pouring billions into the sector. Kleiner Perkins, Caufield & Byers or KPCB, one of the most successful venture

capital firms in the world, is leading investments into this sector. The blue chip venture capital firm was the largest investor in

the sector globally in April-June quarter, with five deals in the space. Silicon Valley-based KPCB has an India portfolio of eight

companies, with its first cleantech investment in Kotak Urja, a maker of solar water heaters and solar photovoltaic modules

and systems.

Ajit Nazre, a partner at KPCB, also leads KPCB‘s India investment initiative. He joined KPCB in 2003 from SAP, where he

played a key role in formulating and executing the company‘s internet strategy, and co-founded and led SAPMarkets. Nazre

did his undergraduation in Mechanical Engineering from College of Engineering Poona (COEP), in India, after which he went

on to to do an MS in Mechanical Engineering from Michigan Tech, a PhD in Biomechanics from the Technical University of

Hanover, Germany and an MBA from the Harvard Business School. VCCircle's Madhav A Chanchani catches up with Nazre

on what makes the cleantech space so hot, the investment prospects, and why India should not miss the opportunity. This is

the part one of the two part series interview with Nazre.

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Fung Capital Picks Up 26% In Future Logistics For $30 Million

V.C.Circle – 20 July 2009

Hong Kong-based private equity firm Fung Capital has agreed to invest about $30 million for a 26% stake in Future Group's

logistics arm Future Supply Chain Solutions. The company will use the capital to expand the firm's supply-chain network.

The agreement was signed today in Hong Kong between Future Group founder and CEO Kishore Biyani and Fung Capital, the

private equity investment arm of the Li & Fung Group.

The capital will be investd in phases with $10 million coming in immediately. PTI reported, quoting Biyani, that Fung Capital

has taken up to 26 per cent stake. A statement said that the capital would be used for enhancement of the logistics

infrastructure, strengthening of technology platforms and expansion of supply chain network of the company.

The company would also change the name from Future Logistics Solutions to Future Supply Chain Solutions. The company

currently operates 30 supply chains, services over 1,100 retail outlets with a fleet of over 500 vehicles playing across India.

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Japan's Shinsei, UTI Joint Venture Raises $100 million

V.C.Circle – 20 July 2009

UTI International (Singapore), the Singapore-headquartered asset management joint venture between Japan's Shinsei Bank

and India's mutual fund house UTI have raised $100 million since September‘08 when the operations of the JV was started.

The period coincided with the post-Lehman gloom clouding the global financial services business.

UTI International (Singapore) is engaged in products primarily focused at the institutional clients. It also markets the existing

domestic and offshore products of UTI Mutual Fund to the institutional and NRI clients in various Asian and South/South East

Asian countries. Earlier in 2006 UTI had successfully launched two Indian funds in Japan at a time and raised $550 million,

utilising Shinsei's distribution channels.

Formely known as Long-Term Credit Bank of Japan became the ‗90s precursor of Lehman Bros‘08, laden with bad debts and

was eventually bought for a pittance by a consortium led by Ripplewood Holdings and later restructured and renamed under

JC Flowers as Shinsei Bank.

As per this report, the company is looking to create unit trusts and distribute through Shinsei‘s channels in Japan, South

Korea and Taiwan, quoting Rahul Gupta, a senior Shinsei executive.

Incidentally, Gupta broke a glass ceiling when he joined the board of Shinsei last month, the first banker of Indian origin to sit

on the board of a Japanese bank. Gupta who is also Shinsei's senior managing executive officer and chief financial officer,

joined the Japanese bank in 2005 from DBS Bank, where he was group financial controller for five years. Meanwhile, Shinsei

is reportedly in talks with Aozora Bank for a merger which would make the combined entity the sixth largest bank in Japan.

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Grassroots Capital Raises $60M To Make Microfinance Investments

V.C.Circle – 20 July 2009

Netherlands based investor company PGGM, which has about €75 billion ($106 billion) of assets under management will

invest $60 million in a microfinance private equity fund managed by Grassroots Capital, reports Pionline.com. Grassroots

Capital's Global Microfinance Equity Fund will invest primarily in India, Latin America and Africa. ―In the same way that (major

financial institutions globally) have been capital-constrained, the microfinance community is also seeking to bolster its balance

sheet,‖ said Alex van der Velden, head of responsible equity strategies — PGGM . ―We expect microfinance private equity to

achieve competitive returns and also generate a social dividend — that makes it attractive as an asset class,‖ van der Velden

added. Grassroots Capital will invest the amount in countries including India, Latin America and Africa. It has offices in New

York, London and Hyderabad.

It is founded by Paul DiLeo, who has 10 years of experience in microfinance investing. Prasad Viswanatha , the founder of

Caspian Capital Partners, an Indian fund management company and co-founder of The Bellwether Microfinance is a Managing

Partner with Grassroots Capital.

PGGM is a privately owned investment farm and is interested in managing pension funds. It also invests in public and private

equity, debt markets, real estate, commodities and infrastructure markets across the globe. Microfinance investments coming

to India has seen an upward trend in terms of volumes.

Another limited partner, CDC Group, the UK government-backed fund of funds with net assets of $4 billion, recently invested

$30 million in two microfinance funds. CDC has invested $20 million in India Financial Inclusion Fund, which is managed by

Caspian Advisors Pvt Ltd. CDC had also put in $15 million in Catalyst Microfinance Investors, which invests in greenfield

microfinance institutions in India, Pakistan, Nigeria and Ghana. Recently, SKS Microfinance, India's largest microfinance

institution, received a strategic investment of Rs 50 crore from insurance firm Bajaj Allianz Life Insurance.

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Warburg Pincus Sells 5.6% Stake in Max India

V.C.Circle – 18 July 2009

Private equity major Warburg Pincus has sold more than 5.6% stake in insurance and healthcare firm Max India through

multiple block deals on Friday. The PE firm, which has been one of the oldest and largest investors in India, sold the stake for

Rs 246 crore on BSE and NSE. The stake was sold at a price of Rs 197 per share, which is at a discount to Max India's trading

price of Rs 213.

Before the stake sale, Warburg Pincus held a 22.55% stake in Max India through its entities Madison Holdings, Melany

Holdings and Parkville Holdings. The PE major still has around a 17% stake in Max, which amounts to more than Rs 800 crore

as per company's market capitalisation at close of trade on Friday.

Warburg invested in Max India in 2004, pipping ChrysCapital to the deal. It picked up a 29% stake in the firm for Rs 200 crore,

subscribing to shares at a price of Rs 200 per unit.

Max India later went for a stock split in 2007 in a ratio of 1:5, which brings down Warburg's average investment per share to Rs

40. The PE firm has managed to make nearly 5x from stake sale on Friday, not taking into account the dividend it may have

recieved over the years.

Several portfolio companies of Warburg Pincus have become ripe for an exit. As the Indian markets start picking up again,

Warburg may look at exiting these investments in next couple of years. Warburg has held to some of its portfolio companies

now for 8-10 years. It holds a stake in Rediff, in which it invested in 1999, Moser Baer (2000), WNS (2002) and Kotak

Mahindra Bank (2004). All of these companies are listed, either in India or in the United States.

Warburg Pincus raised $15 billion for its latest private equity fund in April 2008. One of its recent investments is $35 million in

Gangavaram Port Ltd, India's deepest port in Andhra Pradesh.

Max India recently raised Rs 150 crore from IFC, the private investment arm of the World Bank, to expand its hospital

business. The firm is also raising Rs 400 crore through a Qualified Institutional Placement (QIP). The funds raised through the

QIP will be used to expand the group‘s insurance company Max New York Life Insurance, a 74:26 joint venture between Max

India and US-based New York Life.

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Banks lower MF exposure by 27% to meet capital adequacy norms

V.C.Circle – 18 July 2009

Banks lowered their exposure to mutual funds (MFs) by 27 per cent, or Rs 33,705 crore, during the fortnight ended July 3 to

avoid setting aside funds to meet the capital adequacy norm.

According to data released by the Reserve Bank of India on Friday, banks‘ combined investment in MF instruments fell to Rs

89,472 crore at the end of July 3, as against Rs 1,22,547 crore at the end of the previous fortnight. A year ago, banks had

invested Rs 36,779 crore in these instruments. Over the last 12 months, growth in credit has dropped from 25.5 per cent to

16.3 per cent.

Though bank lendings rose to Rs 28,000 crore in the last fortnight, bankers said the main reason for the fall in their MF

exposure was their need for funds to meet the capital adequacy norms at the end of the quarter. Banks do this at the end of

every quarter since MF investments carry a risk weight of 100 per cent basis points. Other instruments such as call money

carry a risk weight of 20 basis points.

Banks announce capital adequacy ratio (CAR) at quarter end. They have to put aside additional capital or make provisions for

Capital adequacy ratio is a ratio of banks‘ capital to its risk and determines the capacity of the bank in order to meet the

liabilities and other risks.

Over the last six months, banks have continuously parked around Rs 1,00,000 crore in mutual fund instruments saying that

there was low demand for funds. Some fund house chiefs have, however, said that banks were playing safe by investing

money in instruments issued by mutual funds, which in turn subscribed to papers issued by companies including real estate

players top whom banks were reluctant to lend. ―While banks compromise on returns, they pass on the risk to the fund houses,

which are always trying to boost the assets under management,‖ said the managing director of a large fund house.

After liquidating a part of investment in these instruments, banks are deploying extra surplus in call money market or the

reverse repo window. Call rates are hovering in 4-4.5 per cent while reverse repo rate is 3.5 per cent at present. On Friday,

banks parked Rs 1,09,000 crore with RBI through the reverse repo window, which is used to suck out excess liquidity from the

system.

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Navis Capital Fund VI Raises $400-550 M; Aims Final Close At $1.25 B

V.C.Circle – 17 July 2009

Navis Capital Partners, a private equity firm focused on controlled deals, has managed to reach halfway towards its sixth Asia

fund. Navis Asia Fund VI, which is aiming to raise around $1-1.25 billion, has managed to raise commitments of between

$400-550 million, reports peHUB.

The fund had initially planned to raise an amount of around $2 billion, but had cut its target after the financial meltdown.

The Malaysia headquartered private equity firm is presently investing out of Navis Asia Fund V, which closed at $1 billion in

2007. Sachindra Rudra, a Senior Investment Director with Navis in India, denied to comment due to regulatory reasons.

The California State Teachers' Retirement System (CalSTRS) has been a limited partner in funds IV and V of Navis, with a

commitment of $30 million and $100 million, respectively. Navis Asia Fund IV, which had a special focus on India, has now

been completely drawn out with an IRR of 22.79%. The fund has invested in India Hospitality Corporation (IHC), Nirula's and

Mars Restaurant (Exited to IHC in 2007). The last two investments by Navis have been in India - tertiary & executive education

service provider ITM Trust and BSE-listed lubricants manufacturer Sah Petroleums.

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Rabo PE fund eyes stake in Future arm

V.C.Circle – 16 July 2009

The offshore private equity (PE) fund of the Dutch financial services group Rabobank is in talks to buy a stake in Future

Group‘s rural retailing business, Aadhaar Retail. According to persons familiar with the discussions, India Agri Business Fund

— the Mauritius-based investment vehicle of Rabo — may pick up a little over 25% stake in Aadhaar. However, they did not

comment on the possible valuation.

Kishore Biyani-controlled Future Group is believed to be in touch with a string of PE funds to raise money for expanding its

businesses. It feels that the government‘s focus on developing rural markets could pave the way for more private equity

investments in food and agri business.

India Agri Business is Rabo‘s first agri-focused PE initiative in Asia, and the negotiations are being carried out by the group‘s

PE firm Rabo Equity Advisors. When contacted, Rajesh Srivastava, CMD of Rabo Equity Advisors, said: ―We are interested in

several businesses the group is in. However, that we are in discussion does not mean there is a deal on the table.‖ Future

Group CEO Kishore Biyani declined to comment.

Local laws allow 100% Foreign Direct Investment (FDI) in the wholesale cash-and-carry business and 51% FDI in single-brand

retail ventures. Modern retailing businesses in India are predominantly located in cities. But, there‘s a growing feeling tha t in

the coming days, rural markets may grow at a faster pace than urban centres. Even today, businesses, such as FMCG,

durables and automobiles are recording higher growth from rural markets, perceived to be untouched by the downturn.

The proposed deal could stoke PE interest in a sector that has drawn a lot of attention in recent years. Rabobank has a special

focus on food and agri business worldwide. It has over 9 million customers in 39 countries, with assets of over e570 billion

globally. Launched in 2008, India Agri Business Fund was sponsored by Rabobank, which committed 25% of the capital. Other

investors in the fund include IFC Washington, the Dutch development bank FMO, the German institution DEG and some

private investors. The British group CDC also committed $10 million. The fund will invest in companies operating in many

subsectors of food and agri business, as well as in related infrastructure, such as cold chain logistics and warehousing.

In 2008, Future Group had bought out from Godrej 70% stake in Aadhaar, which provides agri-services in rural areas, besides

retailing. The Godrej group currently holds 30% stake in Aadhaar Retail. The other key shareholder is A Mahendran, who is

the FMCG director of Godrej Group. The Fund will target more than 38 sub-sectors of food and agri business, and will

additionally aim to invest in agri-infrastructure projects like cold chain logistics, warehousing, dedicated ports and auction

markets, among other things.

The Future Group plans to develop Aadhaar as a major supply chain of commodity and agri-produce, and even a distributor of

the group‘s financial products like co nsumer finance and insurance at a later point. There are about 100 Aadhaar outlets

across Maharashtra, Gujarat, Punjab, Haryana, Andhra Pradesh, Tamil Nadu, Orissa and West Bengal. The outlets provide

technical guidance, soil and water testing services and serve as retail outlets for top brands of leading companies. It also

facilitates credit to farmers, besides offering them a platform to sell their produce.

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Nayak joins private equity player

V.C.Circle - 16 July 2009

PJ Nayak, the former chairman and CEO of Axis Bank, has joined private equity (PE) firm Advent International. He will advise

the PE player on investment opportunities in India and develop its business in the country.

Advent said Nayak would help it spot investments, especially in the financial services space. Advent is planning to open an

office in India in 2010. The former bureaucrat, who was instrumental in shaping Axis Bank, left the private sector lender in late

April, three months before his term was to come to an end. He resigned after the bank‘s board did not agree with him on

appointment of his successor.

Nayak is the second high-profile banker to shift to the world of private equity. Earlier this year, Sanjay Nayar, Citi‘s CEO for

South Asia, joined KKR. Founded in 1984, Advent International focuses on international buyouts, strategic repositioning

opportunities and growth buyouts in five core sectors.

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VC investment drops 71% to $117 mn in H1

V.C.Circle - 16 July 2009

Investment by Indian venture capital (VC) companies fell by over 71 per cent to $117 million during January-June 2009, as

against $413 million during the first half of 2008.

During the period, the number of deals also fell from 67 to 27, a study released by Venture Intelligence and Global-India

Venture Capital Association (GIVCA) said.

―While the uncertainty in the global financial markets over the last six months has affected VC investing in India, there are clear

signs of revival over the last couple of months – especially in emerging markets such as India,‖ said Sudhir Sethi, director of

GIVCA. He is also the founder and chairman and managing director of IDG Ventures India.

With 14 investments worth $75 million, Information Technology and IT-Enabled Services (IT & ITeS) companies accounted for

52 per cent of the deals (63 per cent in value terms) during H1 2009.

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NVP picks up 8% in Shriram City Union

V.C.Circle - 16 July 2009

Norwest Venture Partners (NVP), a global venture capital firm, has bought an 8 per cent stake in Shriram City Union Finance

for Rs 120 crore. NVP picked up the stake from Indopark Holding, a subsidiary of Merrill Lynch.

This will be Norwest‘s fourth later-stage investment in the first half of this year and first in the financial sector. Since the

beginning of this year Norwest has invested around $100 million in India.

Niren Shah, managing director, NVP India, said, ―When you look at the retail-level credit market, semi-urban and rural areas

are under-served. Shriram is better placed to serve that market. The company has done very well, especially in the last 8-12

months, when markets were stressed. The size of the consumer finance market in India is expected to grow significantly over

the next four-five years.‖

Norwest‘s focus on the secondary market is recent. The firm has been actively investing in early and mid-stage firms. In a

similar deal, it had bought 5 per cent in Onmobile, which provides mobile value-added applications, and 2.11 per cent in the

National Stock Exchange for Rs 250 crore.

Shah says the firm is in for a long haul and will stay invested for three-five years. ―Generally, we would like to have an IRR

(internal rate of return) of 25 per cent. But in the growth segment, a 2x return is fine. We have been investing through the

downturn and will continue to look at opportunities,‖ said Shah.

Shriram has private equity investors like Chrys Capital, ICICI Ventures and TPG Capital. As a deposit-accepting non-banking

financial company, Shriram City is one of the leading financial services company specialising in small-ticket retail finance. The

company serves 1.5 million customers across India.

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PE, VC investments in healthcare dip

V.C.Circle - 15 July 2009

Private equity (PE) investment into the country‘s healthcare and life sciences (HLS) sector dropped by 75 per cent and 40 per

cent, respectively. Investment by PEs into HLS sector dropped to $203 million in 2008-09 from $836 million in 2007-08, while

the number of deals dropped 51 per cent to 21 from 43 deals. Similarly, VC investments also declined to $48 million from $80

million. In terms of deals, they dropped to 11 from 14.

Meanwhile, Chennai-based research firm Venture Intelligence, which compiled the figures, stated that it would be a temporary

phenomena and the investors were certainly bullish about the Indian HLS companies. He noted over $2 billion (around Rs

10,000 crore) was invested in HLS companies in India over the past five years.

The research firm had released a study titled ―Private Equity Pulse on Healthcare & Life Sciences‖ in which it stated that

investors would focus on segments such as diagnostic services, medical devices, hospital chains and wellness products. The

research firm had surveyed more than 60 PE and VC firms.

―Given the fragmented nature of both the hospital and pharmaceutical sectors, investors also see potential for tapping into

consolidation opportunities, in partnership with growth-oriented entrepreneurs,‖ said Arun Natarajan, chief executive officer,

Venture Intelligence. ―Comparing the data of any industry to FY08 will show only a decline,‖ he added.

On a quarter-on-quarter basis, HLS has probably shown the strongest signs of recovery. During the first quarter of 2009, the

industry saw only two deals worth $22 million (around Rs 110 crore) fructifying, whereas in Q2, it was six deals worth $129

million (around Rs 645 crore).

In comparison, IT & ITES saw 14 deals worth $100 million (around Rs 500 crore) in Q1, while in the second quarter 12 deals

worth $67 million (around Rs 335 crore).

The report features articles by leading PE/VC investors (like Baring Private Equity India, India Value Fund and IDG Ventures

India) as well as advisory firms (like The Parthenon Group, Ernst & Young, KPMG and PwC).

Despite the overall optimism, the report indicates that PE/VC firms have a set of specific concerns including long gestation

period, scalability and talent shortage are among the top concerns in the healthcare sector.

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Rabo Equity to raise $25 mn more for agri fund by Dec

V.C.Circle - 15 July 2009

Rabo Equity Advisors will float a second private equity fund focusing on the food and agribusiness sector in India in the second

half of 2010, Chairman and Managing Director Rajesh Srivastava said today.

―Once we have invested close to 70 per cent of our existing fund, that is the time to start raising capital for the second fund. By

the latter half of the next year, we should be up with that,‖ he said. While Srivastava did not share any details on the corpus of

the second fund, he stressed that food and agribusiness will continue to be the focus of the company.

―There are a lot of opportunities in the food and agribusiness sector. It is our core competence. That will be the centerpiece (of

second fund),‖ he said. Rabo Equity Advisors currently manages a single fund — India Agri Business Fund — which invests in

food and agribusiness companies.

India Agri Business Fund, which has a committed capital of $95 million, is planning to raise another $25 million over the next

four months.

―By November, we should be able to raise another $25 million,‖ Srivastava said. With blue-chip names like International

Finance Corp, Dutch developmental financial institution FMO and Germany‘s DEG as lead investors, India Agri Business Fund

recently signed on UK-government owned CDC Capital Advisors as another major investor.

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VCs gear up to provide seed fund to Indian start-ups

V.C.Circle - 15 July 2009

In what can be seen as an expression of growing confidence, venture capital (VC) funds are now coming forward to support

and fund Indian start-ups even at the stage of ideation.

So far, VCs used to fund start-ups which either had product prototypes ready or had some customers on board. But now a

clutch of VCs such as Morpheus Venture Partners, Opdrage Venture Partners, Telnet Venture and Centre for Innovation,

Incubation and Entrepreneurship are not only mentoring start-ups, but are also ready to invest in them when a business plan is

still at an ideation stage.

Most of such investment models replicate US-based Y Combinator, which provides ‗seed funding‘ in the range of $15,000-

$20,000 to early-stage firms and takes small stakes in them.

Having mentored many start-ups, Sameer Guglani and Nandini Hirianniah of Morpheus Venture Partners (MVP) are now

looking at investment opportunities in a few more upcoming firms. They have plans to invest at least Rs 5 lakh in each firm. In

fact, they are in the process of closing a fund.

―We ideally like to come into the picture in the first 12 months of the firm — a stage that is considered as ‗valley of death‘,‖

says Guglani, founding partner of MVP.

MVP follows the model set-up by Y Combinator and plays the role of a co-founder. The VC firm conducts a business

accelerator programme for entrepreneurs twice a year. The programme is for a period of four months and Morpheus partners

spend 15 hours per week per firm, he adds.

Guglani and his partners are planning to select six firms from the third batch that is underway at present. The venture firm

takes 4-8 per cent in equity for mentoring and has close to 20 firms in its portfolio.

So far, most of the VC firms used to only mentor start-ups with no or very minimal monetary assistance. But firms like MVP

and Opdrage would work closely with start-ups on their business plan, product road map and vision of the team along with

mentoring. Once a start-up is ready, these firms also help them in getting funds from Angel Investors and other VCs. But that

seems to be changing now.

Opdrage is in the process of raising $1 million. Set-up in 2008, the Delhi-based firm has so far been acting as a mentor and as

an advisory group. Opdrage already has 20 firm in its portfolio.

―We have been mentoring many firms. In some cases, we have taken equity and in some other cases we have charged a fee.

Later, we realised that a lot of these firms need funds at a crucial time, but then we were not in a position to fund them,‖ says

Dipankar Sarkar, associate at Opdrage, which is planning to invest up to $50,000 per company. To start with, the VC firm will

tap its existing portfolio firms.

iAccelerator, a programme run by IIM Ahmedabad‘s Centre for Innovation, Incubation and Entrepreneurship (CIIE), started

investing in firms from this year onwards. In 2008, CIIE organised the iAccelerator for the first time. It was a two-month

programme in which it took care of the expenses of the participating teams. In the summers of 2009, iAccelerator was

expanded to a four-month program in which it also funded companies.

―Typical investment is of the order of Rs 2-5 lakh. These companies are mostly idea stage or at started-developing-something

stage. The first year was a learning process for us as well. But we realised that the two-month programme was more like a

summer internship. Now we are hoping that the mentoring and funding will sustain these firms for six to eight months. Then,

we can again invest or even help them raise funds,‖ says Pranay Gupta, joint CEO, CIIE.

In lieu of the investment, CIIE takes 5-10 per cent stake in a start-up. Each iAccelerator session hopes to take 10-15 start-ups

with a fund of approximately Rs 2-5 lakh each. The programme is supported by both government and private organisations.

Krishna Jha and Hemant Sharma of Telnet Ventures are gearing up to play the role of co-founding investors and are close to

signing a deal with a start-up providing mobile location-based applications. ―The overall allocation that we have is around Rs 6-

8 crore and we will invest in the range of $100,000 to $1million per firm. We were ourselves entrepreneurs and, after a

successful acquisition, have funds to invest,‖ says Jha.

Being a co-founder, both Jha and Sharma will be working with these firms on a regular basis. Precisely because of such

involvement, the VC will invest in two-three firms a year at the most.

How much equity the VC will look at in these firms? In the range of 25-30 per cent, says Jha.

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Helix Invests Under $10 Million In Learning Mate

V.C.Circle– 9 July 2009

Mumbai based private equity firm Helix Investments has invested under $10 million in LearningMate Solutions Pvt Ltd, a

Mumbai based provider of e-learning education solutions. LearningMate‘s services include content development, learning

application, and learning management systems solutions. The company has customers like McGraw Hill Education, Pearson,

Thomson, Penn Foster, W.H. Freeman, Worth Publishers, and Oxford University Press. It has offices in the US and the UK,

besides India.

LearningMate, founded in 2001 by Samudra Sen and Atul Sabnis, was a part of Educomp Solutions Ltd. The company got

hived off as a separate entity in 2003 and Educomp was bought out by Carlyle Group, the private equity investor. Carlyle later

exited the company. Samudra Sen and Atul Sabnis had earlier helped establish and manage the e-learning content

development operation for Aptech Ltd, which later came to be known as Mentorix.

The equity infusion by Helix Investments will be used to expand in the US and India, Samudra Sen, CEO, LearningMate, told

VCCircle. The company currently employs 200 people.

LearningMate is in a space which is fast growing, and has attracted private equity interest. In the US, there is a move away

from traditional print based text books to online and digital courseware, which is also supported by huge government funding.

The PE funds are betting on this transition, which, according to sources in the private equity industry, is a market worth $1

billion a year in the US alone. Besides, the space is growing at 40% a year. Also the similar companies in the US are trading at

a PE multiple of 25-30 times in Nasdaq.

In fact, e-learning space got into prominence when Mysore based e-learning solutions provider Excelsoft Technologies

provided its earlier backer UTI Ventures 50 times returns on its original investment, which is believed to be the highest multiple

of returns by an Indian fund. In April 2008, private equity fund DE Shaw bought out the entire 35.5% stake of UTI Ventures in

Excelsoft for $31 million. UTI Venture's original investment (in 2000) in the company was only Rs 2.5 crore or $600,000. In

September 2008, ExcelSoft raised about $10 million by diluting 10% stake to Singapore based Arohi Asset Management.

The other companies in the space are Hurix Systems, backed by Helion Venture Partners, and Brainvisa Technologies,

backed by Sequoia Capital India. The US and India-based e-publishing firm Pre-Media Global USA Inc (PMG) is also entering

e-learning. The company raised $18 million from JM Financial India Fund, a joint venture between JM Financial and Old Lane

Fund (currently owned by Citigroup), in January 2008. In August the same year, Pre-Media raised another $4 million from NEA

Indo-US Ventures.

For Helix Investments, this is the second investment in the education space. In August 2007, the private equity firm invested

$12 million in Mahesh Tutorials, a Mumbai based test prep education company Helix is an India-focused investment fund

backed by members of the Cullman and Bloomingdale families of New York.

Education - either as a provider of technology and content solutions to the industry or as a direct provider of education to the

consumers - has emerged as one of the hottest investment segments for the Indian private equity firms. Recently, Tutorvista

raised $19 million in its third round of funding from the publishing giant Pearson Group and existing investors Lightspeed

Venture Partners and Manipal Education and Medical Group (MEMG). TutorVista provides online tuitions to students in

markets like the US and the UK, besides India, while it also provides curriculum support and technology solutions to schools in

India.

The other segments of education that received funding are test prep (Career Launcher Pvt Ltd and IMS), pre-school (Tree

House Education), spoken English training (Veta and Speakwell), and vocational training (Global Talent Track).

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UTI AMC seeks foreign ally for PE fund

V.C.Circle – 9 July 2009

The upcoming infra-focused fund aims to raise about $250 million in the next four months.

UTI Asset Management Company (UTI AMC), the country‘s oldest mutual fund, is on the lookout for another foreign partner to

float its first-ever infrastructure focused private equity fund.

The AMC is seeking another partner as Shinsei Bank of Japan, with whom UTI AMC had signed a deal along with HSH Nord

Bank of Germany in 2007, HAS suffered heavy financial losses.

Hit hard by the global sub-prime crisis, Shinsei Bank lost 143 billion yen ($1.45 billion) in the financial year ended March 31.

―We did not see much value addition by Shinsei Bank, so the earlier agreement lapsed. We have decided to ink a fresh

agreement with another partner for the fund,‖ an official said.

Recently, UTI AMC had signed a fresh agreement with HSH Nord Bank to launch the fund, with a target to raise nearly $500

million over the next three years, after inducting a new foreign partner, sources said.

While each partner was committed to invest $25 million in the fund‘s corpus, the two foreign partners expected to mobilise

around $200 million each through institutional investors. A final agreement in this regard is likely to be signed this month.

The fund, which will invest in areas such as roads, power, telecom and airport among others that are operating in the public

private partnership (PPP) model, aims to raise about $250 million in the next four months. UTI has also a joint venture

company with Shinsei Bank called UTI International (Singapore) for investment management and distribution of financial

products in the South East Asian region.

UTI AMC already has an infrastructure equity fund, which invests in the stocks of the companies like metals, building

materials, oil and gas, power, chemicals and engineering among others.

Mutual fund houses have been focusing at infrastructure, given the government‘s target of spending for the sector at $500

billion by 2012.

In the 2009-10 Budget also, Finance Minister Pranab Mukherjee said the government aimed to increase infrastructure

spending to 9 per cent of the gross domestic product by 2014.

Top

International News

PE players banking on sponsor commitments

V.C.Circle-8 July 2009

At a time when raising funds is a concern for private equity (PE) players globally, sponsor commitments are increasingly

gaining relevance among funds as a committed source of capital.

Experts said that in many cases, it has rescued the funds which were unable to achieve closures due to inadequate

commitments.

The trend has become especially prominent in the last few months when limited partners (LPs) tightened the flow of capital to

private equity funds.

Sponsor commitment or anchor investment is the amount of capital committed by the sponsors of a fund. The anchor

investment is made at the initial stage of fund-raising to start the process and provide a sense of confidence to LPs.

Sponsor commitment has become much more relevant with a recent ruling by the Securities and Exchange Board of India

which made it mandatory for foreign venture capital investors (FVCIs) to obtain a firm commitment from their investors for

contribution of at least $1 million (about Rs 5 crore) for registration with the market regulator.

Here, sponsors or anchors could act as the much needed source of capital for getting registered with Sebi.

For example, Lazard pumped in Rs 125 crore in Lazard India Growth Fund which it raised recently.

It is a sector-agnostic fund which will focus on mid-sized firms. Similarly, the Aditya Birla group has invested $100 million

(around 470 crore) in its $250 million (around Rs 1,200 crore) private equity fund. Religare, which recently announced its

private equity initiative with Milestone has pumped in Rs 60 crore in Religare Milestone India Build Out fund I.

Vikram Utamsingh, Head of Private equity group at KPMG said, ―New funds without a track record have been facing problems

in fund raising. Getting a sponsor adds to the credibility of the fund. Sponsors generally commit 10-20 per cent to the fund and

it becomes easier when the PE fund manager goes looking for a $5-10 million cheque.‖

He further added, ―This is especially important for India-dedicated funds as a lot of PE funds are chasing India as a theme right

now.‖

The Tata group which recently forayed into private equity through one of its arms, Tata Capital, has infused an undisclosed

sum into its $350 million (around Rs 1,645 crore) fund which is currently in the process of fund-raising.

TVS Shriram‘s growth fund received Rs 160 crore in funding from TVS and Shriram board of directors.

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UTI Ventures to raise 3rd fund

V.C.Circle-8 July 2009

The $400-mn fund will focus on infra services, domestic consumption & outsourcing

UTI Ventures, the venture capital (VC) arm of UTI Asset Management Company (AMC), is raising a Rs 1,500 to Rs 2,000-

crore ($350 to $400 million) fund and hopes to complete the process by December.

The third from the UTI Ventures stable, the fund would focus on deals in the range of $10-15 million (Rs 50-75 crore). Though

the fund would invest across sectors, it would largely focus on areas such as infrastructure services, domestic consumption

and outsourcing.

UTI Ventures is looking at domestic institutional investors (DIIs) — including insurance companies, mainly Life Insurance

Corporation of India (LIC), and banks — and foreign investors such as sovereign wealth funds, endowment funds and private

pension funds. Over the last 12-18 months, hedge funds have completely disappeared from the market.

―The number of institutions investing in VCs has come down, though there is more due diligence now. That is why fund-raising

has become tougher now than what it was two years ago. As usual, investors continue to look at past performances of funds,‖

said UTI Ventures Director Private Equity Sunil Kolangara.

He, however, added that for UTI Ventures, raising the third fund was relatively easier than the first two.

Typically, VCs find it easier to raise funds in the second and subsequent rounds while the first-timers face difficulties.

UTI Ventures has completely utilised its second fund by investing in 17 deals. The second fund had a corpus of Rs 750 crore

and its average deal size was around $10 million (roughly Rs 50 crore). In 2008, the second fund had made its last investment

in Bangalore-based Deepak Cables.

The VC firm has completely exited its first fund Vintage 2000 and partially come out of one of the companies where it had

invested from its second fund.

UTI Ventures has investments in sectors as varied as urban infrastructure services, apparel retail and alternative energy

infrastructure. Some of its portfolio companies include Koutons Retail, Laqshya Media, Primus Retail, Shriram EPC and Subex

Azure.

According to industry estimates, private equity (PE) players are likely to raise around $10 billion (approximately Rs 50,000

crore) this year. The turbulence in global markets has reduced investor appetite, thereby making it tough for PE firms to raise

funds.

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India Value Fund Closes Fund IV At $725M

V.C.Circle-7 July 2009

In a difficult fund raising environment, leading Indian private equity fund India Value Fund Advisors (IVF) has closed at $725

million for its fourth fund. When contacted, a spokesperson for India Value Fund Advisors confirmed the development to

VCCircle.com. He refused to comment further.

In this period of tight liquidity and limited partners (the investors in private equity funds) backing out of commitments, achieving

the close of a fund of this magnitude for Indian market is significant.

PEI Asia, a private equity tracker based in Singapore, first reported that IVFA has achieved the close of its fourth fund.

The fund close comes at a time when the markets, although recovering, still remain cautious. The competition for fundraising is

also tough. There are 78 India-focused funds on road looking to raise $24 billion, according to data by Prequin, a UK based

fund tracker.

There are about 117 pan-Asia private equity funds – which have India as one of its geographies - on road currently targeting to

raise an aggregate capital of $59.2 billion.

Some of the major India-focused funds that have managed to close this year are NYLIM Jacob Ballas Capital, Actis and Avigo

Capital Partners. IL&FS Investment Managers, who was able to announce final close of both its real estate and growth equity

funds, had a mixed response to its funds.

While its real estate fund raised $895 million, exceeding target of $750 million, its growth equity fund had to close at $225

million, way short of its $400 million target.

Actis, which focuses on emerging markets, raised $2.9 billion, of which around $1 billion is expected to come to India. NYLIM

Jacob Ballas raised a $440 million growth fund, while Avigo Capital and CX Partners were able to announce the first close of

their funds.

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Inventus Capital Backs Bus Ticketing Firm redBus

V.C.Circle-6 July 2009

Pilani Soft Labs Pvt Ltd, the company behind bus ticketing service redBus, has raised second round of funding led by Inventus

Capital Partners. Seedfund, an existing investor, also participated in the round. redBus has a network of over 500 bus operator

partnerships covering over 5,000 routes in India.

The funds will be used by redBus to further increase the number of bus routes and tickets available on its platform while

expanding its geographical footprint across the country. Parag Dhol from Inventus Advisory Services will join redBus‘ board.

Another venture capital backed firm in this space is Ticketvala, which raised $2 million from Bangalore-based early stage

venture firm Footprint Ventures in 2007. Heavily funded travel portals like MakeMyTrip and Yatra also have a presence in bus

ticketing.

This would be Inventus‘ third investment from a fund that invests in technology-powered companies addressing high-growth

global and local markets.

―The fragmented bus travel market in India offers a significant aggregation opportunity. In redBus we see a set of young,

enthusiastic entrepreneurs addressing a large and largely untapped opportunity. We hope to work closely with the founders,

existing investor and advisors to create a unique and valuable brand," said Kanwal Rekhi, co-founder of Inventus Capital

Partners.

―We have seen tremendous growth since inception, with bus operators and consumers validating our model. With this

investment we hope to accelerate growth and further strengthen our position as the leading bus ticketing company,‖ said

Phanindra Sama, co-founder and CEO of redBus.

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Tata Capital's PE Head Shailendra Bhandari Quits

V.C.Circle – 4 July 2009

Shailendra Bhandari, the head of Tata Capital's private equity business, has quit less than a year after he joined the

firm. Bhandari, who was former managing director and CEO of PE-controlled Centurion Bank of Punjab (CBoP), will leave to

pursue other opportunities by the end of July 09, a Tata Capital statement said. It is not yet known where Bhandari is headed.

Bhandari had earlier worked with HDFC Bank, and thereafter became the CEO of ICICI Prudential Mutual Fund. He later

became the CEO of Centurion Bank, and spearheaded its acquisitions like Bank of Punjab and then Lord Krishna Bank before

Centurion Bank of Punjab itself was bought out by HDFC Bank.

The company added in its statement that "Tata Capital remains fully committed to it‘s Private Equity strategy and the launch of

the Company‘s funds are well on track."

Tata Capital launched its ambitious private equity foray, planning multpile funds last year. The firm is planning to launch its first

fund of $350-500 million focusing on mid-cap firms in coming months, according to reports. It's also planning a $100 million

fund for the technology sector to be followed by a healthcare fund.

Tata PE also appointed Lauris Capital's Harshawardhan Sabale to co-head its private equity division. Sabale has also left the

firm, and is no longer associated with Tata Capital, a spokesperson informed. Another co-head of the fund is Pramod Ahuja.

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Vineet Buch Leaves BlueRun Ventures; Back To His Startup

V.C.Circle – 3 July 2009

Vineet Buch, a venture partner at BlueRun Ventures, has left the investing job and has returned to Like.com Inc, a startup he

helped found in 2004. Buch is joining Like.com as Vice President, Corporate Development, reports Wall Street Journal.

Like.com is a visual-search company, which helps improve shopping experience of people. WSJ quotes from Buch's email to

his contacts: ―We are building the leading fashion shopping experience at Like.com, and are expanding our offerings through

strategic acquisitions as well as organic growth.‖

Like.com, which has raised more than $50 million from a bunch of venture firms including BlueRun, is looking at making some

strategic acquisitions to expand its offering to fashion shopping. Buch currently serves on the board of Like.com.

Buch was also one of the co-founders of Riya.com, a visual serach firm founded by the same team of Like.com Inc. Buch had

left the startup and joined BlueRun Ventures in 2005.

In his previous roles, Buch had also co-founded systems management software provider, Karient. He was also the CTO at

Karient.

He has also served as the director of product management and software development at Oracle Server Technologies, which

develops the Oracle Database and Application Server. He was also the senior director of engineering at Corio, an application

service provider that was acquired by IBM. Buch has an MS in Computer Science from Cornell University and a B.Tech. in

Computer Science from IIT, Kanpur.

Even though Buch is out of BlueRun, he will continue to invest as an angel investor in early-stage start-ups, the report says.

BlueRun was earlier known as Nokia Venture Partners. It changed its name in 2005 when it decided to become independent

from the Finnish mobile company, Nokia. In April this year, BlueRun closed on just under $250 million for its fourth fund..

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Shinsei AMC launches its two maiden debt funds

V.C.Circle – 1 July 2009

MUMBAI: Shinsei Asset Management Company (India) on Wednesday launched its two maiden schemes - ‗Shinsei Liquid

Fund‘ and ‗Shinsei PSU Bond Fund – Ultra Short Term Plan‘. The new fund offer for both the schemes opened for subscription

on Tuesday, June 30 and will close on July 6..

Shinsei PSU Bond Fund is an open ended income scheme which seeks to generate income from a portfolio constituted of debt

and money market securities issued predominantly by public sector undertakings and nationalized banks. The Fund will invest

over 80 per cent of its corpus in government securities and debt securities issued by public sector undertakings and

nationalized banks. Upto 20 per cent of the corpus of the fund may also be invested in debt securities issued by companies

other than public sector undertakings.

The AMC has launched one plan, the ‗Ultra Short Term Plan‘ of the Shinsei PSU Bond fund. The average residual maturity of

the portfolio under this plan will not exceed one year. This scheme is rated ‗Credit Risk Rating mfA1+‘ by ICRA.

The second scheme launched is ‗Shinsei Liquid Fund‘, an open ended liquid scheme which seeks to generate reasonable

returns commensurate with low risk and high liquidity, from a portfolio constituted of money market instruments and short term

debt instruments with a residual maturity of up to 91 days. Investments in money market instruments will be over 80 per cent of

the corpus and upto 20 percent may be invested in debt securities. This scheme too is rated ‗Credit Risk Rating mfA1+‘ by

ICRA.

Speaking on the occasion, Mr. Piyush Surana, CEO, Shinsei AMC, said ‗we are pleased to offer our two maiden funds to the

investor community – we believe that each of these schemes fulfills a specific need of the investor‘.

Shinsei AMC is promoted by Shinsei Bank, Japan (75%), Mr. Rakesh Jhunjhunwala (15%) and Freedom Financial Services

Private Limited (10%).

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India may get 40% of Carlyle’s $1 bn fund

V.C.Circle – 1 July 2009

MUMBAI: The Carlyle Group, the world‘s largest private equity (PE) investment firm, on Tuesday announced the closure of its

fourth Asian growth capital fund at $1.04 billion, of which around 40% is likely to be invested in Indian companies. The fund,

Carlyle Asia Growth Partners IV (CAGP IV), will invest between $15 million and $75 million in each company, said Shankar

Narayanan, managing director of the firm, responsible for CAGP‘s investments in India.

―We will look at a 20-35% stake. We generally invest in unlisted companies and will target those that are growing at 40-50% on

a compounded basis,‖ he added. The PE firm is likely to earmark around 80-85% of the fund for investment in India and China.

This is the first major fund launch targeting Indian companies in the past few months by a large PE group. Last year, Actis had

raised a $2.9-billion fund, of which around $1 billion was for Investments into India. A couple of months ago, Ajay Relan,

former head of Citi Venture Capital in India, had raised around $220 million.

Carlyle normally invests under the CAGP series, only with a shareholding agreement and a board seat. This is one of the

reasons why the company is not too keen in listed companies and buyouts. ―We run away from buyouts in CAGP,‖ Mr

Narayanan said.

The three older funds under the CAGP series had fund sizes of $129 million, $164 million and $680 million. The firm has

completely invested the corpus of the third fund. Till now, around a quarter of the CAGP investments have been invested in

Indian companies.

Carlyle has invested around $650 million in HDFC through another fund. The total investments by Carlyle into India is a tad

less than a billion dollars. Investments by PE firms into Indian companies reached a high of $6.8 billion in 2007 before falling to

$2.8 billion in 2008 and $931 million in 2009 (till date), according to Thomson Reuters.

According to industry watchers, PE investments into India would have picked up if the market had not revived in the past

couple of months. Some of the PE funds have been facing problems in raising fresh funds.

The new fund has seen 40% new investors. ―We see a significant increase in government pension funds and major financial

institutional groups in the fourth fund, showing their recognition of our attractive risk-adjusted returns and no-leverage

investment strategy. These investors account for over 50% of the fund‘s capital commitment,‖ he said. The fund‘s investors

came from all five key regions in the world — North America, South-Central America, the Middle East-Africa, Europe, and

Asia. The new fund is likely to focus on two broad themes — domestic consumption and outsourcing.

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VCs take a fancy to health, education

V.C.Circle – 1 July 2009

Technology sector falls out of favour.

Pranav Parekh, managing director of Q Investments, is now examining a host of proposals to identify his next set of

investments in India.

Q Investments, which incubated Xcel Tower, invested some $40 million in the venture and later sold it to American Tower

Corporation for $150 million, is not bullish on technology companies at present.

―Technology is very well-researched and very well-invested. There is no significant value add. So, we are pursuing a theme of

unorganised to organised. Be it agriculture, retail, healthcare, education or restaurant, these are all sectors that have remained

unorganised but now you are seeing the emergence of organised players,‖ said Parekh.

Q Investment is not alone. Many other venture capital (VC) and private equity (PE) funds too don‘t find technology to be a hot

investment option. While returns might be the driving force, sectors such as education, health, retail, agriculture, alternative

energy and waste management are also seen to be recession-proof.

Since 2006, $300 million has been invested in Indian education ventures. Similarly, during the last 18 months, PE players have

invested $686 million in the healthcare sector. According to industry estimates, another $800 million is expected to flow into

these sectors over the next 12 months. With an estimated $40-billion market for private institutions, it is no surprise that PE

and VC investors are looking to ramp up their investments in education. A Venture Intelligence survey revealed that more than

80 per cent investors planned to make an investment in education over the next six-eight months. Within education, vocational

training, tutoring and test preparation drew significant PE-VC interest. Already, Sequoia Capital and Lightspeed Ventures have

invested $18 million in Tutor Vista, while Intel Capital and Helion Ventures have put $6.5 million in Global Talent Track.

In healthcare, the opportunity is being seen mainly in diagnostic services, medical devices, hospital chains and wellness

products. ―India has a huge competitive advantage in clinical research. Hospitals are yet another area where a lot of

investment is going to be seen as the average number of beds is the lowest in India. A 20-25 per cent internal rate of return

(IRR) should be possible,‖ said Rajiv Maliwal, partner, Sabre Capital.

Sabre Capital has set up a company called Spring Healthcare and plans to invest Rs 250 crore in hospitals, labs and clinical

research organisations (CROs). Through Spring Healthcare, the fund plans to make acquisitions and has already invested Rs

65 crore in Pune-based Oyster and Pearl Hospital.

With Blackstone‘s investment in Nuzivedu Seeds and Morgan Stanley‘s in Biotor Industries, agriculture-led investments seem

to have picked up fast in the PE space. Citigroup Venture Capital, New Silk Route and Baring recently invested in KS Oils.

―While the demand for consumption is increasing, land remains a fixed asset. Hence, there are investment opportunities in

agricultural inputs as well as processed foods. There is a huge potential in food processing with India having a significant

share in global trade of food products,‖ said Rabo Equity Advisors Chairman & Managing Director Rajesh Srivastava.

Rabo Bank recently raised a $100-million food-and-agri fund that will invest in Indian food and farm sectors.

Cleantech or renewable energy also saw increased interest from PE funds in 2008. IDFC private equity invested $91 million in

SE Forge, a wind energy equipment supplier. Orient Green Power Ltd, a renewable energy company, raised $55 million from

Olympus Capital.

―Climate change concern is one of the key drivers for the alternative energy sector. Regulations in India (where 10 per cent

power is generated from renewable sources) and the developed world are very positive for the sector. The power sector needs

significant investments and there are a number of projects on the anvil. However, the pace of financial closure, especially on

the debt side, has delayed execution of these projects,‖ said Karthikeyan Ranganathan, head of investments, Baring Private

Equity Partners.

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UTI AMC Joins Hands With HSH Nordbank, Noor Financial For $500M Fund

V.C.Circle – 24 July 2009

UTI Asset Management Company has set up a private equity fund worth $500 million in partnership with Germany's HSH

Nordbank and Kuwait's Noor Financial Investment Company, the firm said on Thursday.

The fund will mainly tap offshore clients and invest in unlisted infrastructure firms engaged in sectors such as roads, ports,

power, logistics, airports and energy among others, the company said in a statement.

UTI AMC's PE fund is separate from UTI Venture Funds Ltd, which has now become an independent entity even though UTI

AMC is the largest stakeholder in the firm.

ICICI Bank is also reportedly raising a $150-200 million fund, which is separate from ICICI Venture, mainly targeted at SMEs..

Top

International News

Korea Investment Corp. To Raise Equity Allocation To Asia

V.C.Circle – 22 July 2009

Korea Investment Corp., South Korea‘s $30 billion sovereign wealth fund is looking to raise asset allocation to equities later

this year targeting markets in the US and Asia.

In an interview with Bloomberg, the fund‘s Chief Investment Officer Scott Kalb said , "It's unlikely that bonds are going to

continue to outperform stocks from here over the long term. We‘re moving more towards equity."

As of now equities account for 40% of the ‗traditional‘ portfolio of KIC which it plans to hike to 50% within the next five months.

Equities and fixed income securities makes up 90% of KIC‘s total assets which means $2.7 billion worth of additional funds

finding its way into equity.

KIC is seeking a mix of value buys in US(where markets have crashed) and selective growth pick in Asia which has performed

better than the developed nations despite the global economic slowdown.

KIC already owns shares of Bank of America Corp after its holding in Merrill Lynch was converted(post the merger of Merrill

Lynch and BoA). The fund had invested $2 billion in Merrill Lynch in January 2008, less than a year before it was sold to Bank

of America following the credit crisis which killed other peers such as Lehman Brothers.

At the same time KIC is also planning to start investing $1 billion this year in "alternative investments," including real estate,

commodities and private-equity and hedge funds as per a statement of its CEO last week. Initially these investments will focus

on assets that would hedge against inflation. The sovereign wealth fund set up in July 2005 targets inflation adjusted returns of

4-5% on its investments.

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Goodyear In Shock Exit From Singapore's Temasek

V.C.Circle – 22 July 2009

Charles "Chip" Goodyear, the CEO-designate at Temasek Holdings, pulled out barely six months after accepting the post at

Singapore's best-known wealth fund.

Temasek said on Tuesday Goodyear had decided not to become the chief executive of the state investment firm due to

differences over strategy, adding that Ho Ching, the wife of Singapore's prime minister and current CEO, would continue as

executive director and chief executive.

Goodyear was widely expected to trim Temasek's financial holdings and move aggressively into commodities and energy and

into emerging market infrastructure and consumer retail sectors, analysts and investment bankers said.

They cited his appointment as a clear move that Temasek was angling for more resources deals.

Goodyear was ready to take over from Ho on Oct 1 and take a pro-active on the board. He will now step down on Aug 15.

The former chief of BHP Billiton hails from the halls of Ivy League universities and Wall Street, but is best known for his reign

at the Australian mining giant.

He descends from a U.S. lumber baron and was schooled at Yale and Wharton School of Finance.

Goodyear joined then debt-ridden BHP in 1999 as chief financial officer, and was instrumental in growing the company into the

world's top miner, via a merger with South Africa's Billiton, with a market value bigger than the GDP of some countries it

operated in.

He was one-half of an American duo, with Duke Energy's Paul Anderson, imported to staunch the bleeding at "The Big

Australian" and rebuild after a series of investment blunders.

After the two men joined BHP, it closed mines, cut 2,000 jobs and swallowed a A$2.3 billion loss (worth $1.5 billion at the time)

before the Billiton merger. Anderson left, but Goodyear stayed on and was later named CEO.

Though schooled in the 1980s through Wall Street brokerage Kidder Peabody, Goodyear managed to endear himself as much

to BHP's legion of mom and pop investors then as he did to the big institutions that took stakes in BHP over his tenure.

He was reputed for calling just about everyone by their first name and in turn was always Chip, never Charles, or Mr.

Goodyear.

Goodyear has been described as an impeccably groomed American investment banker who is urbane and rarely flustered.

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KKR Euronext Listing Moves Closer; Sees Profit

V.C.Circle – 21 July 2009

Private equity firm Kohlberg Kravis Roberts & Co on Monday moved a step closer to merging with its Euronext-listed fund after

receiving approval from the board of the fund to combine businesses.

Combining with KKR Private Equity Investors LP is a roundabout way for KKR to gain a European listing, and is a step

towards it following rival Blackstone Group in becoming a New York Stock Exchange-listed company.

KKR, one of the world's most powerful private equity firms, also gave more details on the planned combination with KPE,

including a proposed equity-incentive plan.

It provided an update on its profit outlook, saying earnings for the second quarter were expected to be between $345 million

and $370 million. The most recent comparison are figures it released in May, which showed a loss for 2008 of $1.2 billion.

Fee-related earnings for the three months were expected to be between $45 million and $55 million, it said. It also said assets

under management for the end of June were expected to be $50.8 billion, a 7 percent rise from the $47.3 billion it disclosed in

May. KKR, co-founded by "buyout king" Henry Kravis, has investments in numerous household names such as Toys R Us Inc,

mattress maker Sealy Corp and asset manager Legg Mason Inc. The economic meltdown hit the valuations of private equity

firms' portfolios, their ability to raise money from the large pension funds that invest in their funds, and their ability to do

leveraged deals. However, KPE's net asset value is expected to be $3 billion for the end of June; a 14 percent rise from the

$2.6 billion reported for the end of March, the firms said. On a per unit basis, KPE's net asset value is expected to be between

$14.55 and $14.75 per unit, a 13-15 percent rise from the $12.82 reported for the end of March. The figures are down from the

same period a year earlier, however, when KPE's net asset value was $4.6 billion, or $22.25 per unit.

Valuations have been helped by a rebound in the equity markets over the last few months. Private equity firms have to value

their portfolio companies as if they were selling them today; rather than years in the future. In its first-quarter figures, KKR

wrote up its investments in companies including discount chain Dollar General and hospital company HCA.

KPE has investments in six KKR private equity funds.

NYSE LISTING PLANS

KKR launched plans to list on the NYSE via a traditional initial public offering in July 2007, a month after Blackstone went

public and just before the markets started to tumble.

It later proposed a more complex method of going public, by combining with KPE, delisting the fund from Amsterdam and

listing in New York. In June, it formally withdrew the proposed New York IPO plan, but kept the door open for such a move,

saying it had the ability to seek a listing in the future.

This was re-iterated in Monday's press release, which said KPE and KKR would have the ability to "require that the other use

its reasonable best efforts to cause KPE's interests in the combined business to be listed and traded" in the U.S.

After six months KKR would have the ability to seek a listing of the combined business in the U.S., and after 12 months, KPE

would have that right, they said.

The deal agreed on Monday is a revised deal to the original terms KKR proposed. Under the deal agreed Monday, KPE will

own 30 percent of the combined business, which would keep the Euronext listing. The original plan called for a delisting of the

fund and would have seen KPE own 21 percent of the company.

INCENTIVE PLAN

The combined company would also have an equity-incentive plan under which 15 percent of the fully diluted interests of the

business may be issued, the pair said in an annex to Monday's statement. That was consistent with other publicly traded U.S.

alternative asset managers, they said.

Any grants made under that plan after the combination would dilute KPE and KKR principals' interests in the combined

business. However, no grants would be made to senior members of KKR until either one year after the combination, or the

business was listed in New York, they said.

The companies stressed that KKR's executives were not selling equity under the deal with KPE.

KKR on Monday said the board of KPE had unanimously approved the deal, although it still required the consent of KPE

unitholders. Those owning 44 percent of KPE's outstanding shares have agreed to the deal. Provided that consent is obtained,

the deal is expected to occur on October 1.

KKR co-founders Henry Kravis and George Roberts said in a statement that the combined business would be well positioned

to take advantage of "exciting opportunities in asset management and financial services." The original deal gave an implied

value for KPE shareholders of $16 to $19.20 per share, according to a KKR presentation at the time. It is unclear what the

implied value is under the new deal. Shares in KPE closed on Friday at $5.38. Shares in KKR's listed rival, Blackstone, have

fallen significantly since their June 2007 IPO at $31, and closed on Friday at $10.39.

Citi is advising KPE, Lazard is advising the independent directors, and Goldman Sachs and Morgan Stanley are advising KKR.

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Carlyle earmarks up to $75 mn for investment in single firm

V.C.Circle – 1 July 2009

MUMBAI: Carlyle Group, the world's second biggest buyout firm, has identified India as one of its key markets and would

invest in companies across sectors, earmarking between $15-75 million for investment in each company.

Carlyle successfully closed its fourth Asian growth capital fund called Carlyle Asia Growth Partners IV (CAGP IV).

It raised $1.04 billion in 14 months from a broad geographical range of investors in the US, Europe and Asia despite a difficult

fund-raising environment.

"We will invest between $15-75 million in a company. Our sweet spot is typically a stake between 20-35 per cent," Carlyle

India Advisors' Managing Director M Shankar Narayanan told PTI here.

The bulk of the $1.04 billion would be invested in China, followed by India and Korea, he said.

With a sector-agnostic approach, Carlyle plans to invest in companies spanning across domestic healthcare to FMCG, media

and entertainment to engineering products and services to IT and IT-enabled services firms.

It is singling out companies "that have a track-record of profitability" besides the potential to grow by 30-50 per cent, both in

topline as well bottomline, Narayanan said.

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