FOREIGN VC FUNDS EAGER TO PROVIDE CAPITAL TO INDIAN COMPANIES
Indian entrepreneursâ€™ increasing appetite for foreign companies is drawing private equity firms with saleable companies in their portfolio to set up shop in India.
London-based private equity firm Apax partners is raising a 8.5 billion fund, part of which it hopes to invest in Indian companies that are likely to grow quickly as well as help those that are looking to buy foreign assets, many of which could come from its own portfolio.
Apax is looking for long-term investment and buyout opportunities in the fast-growing technology, telecom, retail and consumer, media, healthcare and financial services sectors. It also has several companies in its portfolio that may interest Indian firms as they scout for foreign assets to expand their reach and size.
Apax Partners Asia chairman said that already many Indian companies are teaming up to bid for foreign assets. Apax was one of three private equity firms that sold its ownership in Belgian wind turbine gear maker Hansen Transmissions to the Indian company Suzlon Energy in a $465 million all cash deal. The $20 billion fund could do similar deals in other sectors too.
The top 10 private equity firms now own about 60% of the businesses in Europe. Several of them could be scouting for exit opportunities now that the companies have grown in value.
Many Indian drug makers, for example, are searching for companies in Europe and the US. Recent example is Dr Reddyâ€™s buying German drug maker Betapharm.
Currently foreign banks dominate the overseas-acquisition financing market in India. Private equity capital would be much cheaper for Indian companies compared to the high-cost bank funding.
A commerce ministry official was recently quoted in a report as saying that the total lending of foreign institutions to Indian companies had gone up to $17 billion last fiscal, up from $13 billion two years before. A CII-Crisil study found that in 2005-06, the average amount of investment of India companies abroad was roughly $61million with the largest investment being $777million and the smallest being $1.32 million.