PE Symposium 2008

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The Event

The Finance Society
Faculty of Management Studies

Presents

Private Equity Symposium 2008

at ITC Sheraton, Delhi
on 20th September 2008

List of speakers

Key Note Speaker - Mr. Gopal Nair, Director, Capital markets, Ministry of Finance

Session 1
Private Equity: The road ahead for “Brand” India
Time : 11:30 - 13:00 hrs

• Mr. Randhir Kochhar, Director, DE Shaw Advisory
• Mr. Sajeev Krishan, Executive Director, PwC
• Mr. Shailesh Pathak, Senior Director, ICICI Ventures
• Mr. Pinaki Bhattacharyya, Principal, IDFC Private Equity
• Mr. Ajay Kapur, CEO, SIDBI ventures
• Mr. Vivek Shekhar, Chairman and CEO, 2i Capital
• Mr. Munish Dayal, Senior Partner, Baring Partners

Session 2
Growing Chase for the right Buyer
Time - 14:00 - 15:30 hrs

• Mr. Rahul Raiurana, Managing Director, Standard Chartered, PE Advisory
  
• Mr, Ravip Shankar, Director, Global Markets, Deutsche Bank
• Mr. Ajay Tandon, Director, Citi Ventures
• Mr. Deepak Chhabria, Director, Equities, Collins Stewart
• Mr. Sunil Godhwani, CEO and MD, Religare
• Mr. K Mahesh, Senior Vice-President, I Banking, Edelweiss Capital
• Mr. Tarun Khanna, Director, I Banking, Yes Bank

Schedule for the day

11:00-11:30
Inauguration Ceremony and Key note address
11:30-13:00
Panel discussion on ‘Private Equity: The road ahead for “Brand” India’
13:00-14:00
Lunch
14:00-15:30
Panel discussion on ‘Growing Chase for the right Buyer’
15:30-16:00
Tea

For delegate Passes contact Gaurav Puri ( # 9810391503)
The passes are available for Rs 2500 per person ( this includes both the sessions + lunch + tea + breakfast). Also available are special discounts on more than 5 participants.

News this Week

The buzz this week started with Infosys acquiring Axon Group for $ 753 million which is by far the largest overseas acquisition by an Indian IT company. The only other 2 acquisitions of Infosys have been Expert Information Systems Pvt. Ltd and the back-office services assets of Royal Philips Electronics.

More takeovers were witnessed with the Oil and Natural Gas Corporation buying Imperial Energy, an oil-exploration company working in Russia, for $2.6 billion. The funding will be treated in its books, as a loan to ONGC Videsh Ltd.

News on a relevant topic, considering FinSoc’s upcoming Private Equity Symposium-Reliance Capital, a subsidiary of the Reliance Anil Dhirubhai Ambani Group (ADAG), has set up a $1-billion private equity fund to focus on sunrise sectors such as services, logistics, realty and pharma.

Coming to the volatile situation in Singur the Tatas were struck a double blow this week, with the imminent closure of the Nano plant, and the abandonment of their $3-billion investment plans in Bangladesh due to political instability.

On a positive note, long awaited reforms were finally implemented with the Union Cabinet’s clearance of the Companies Bill, 2008, that calls for stricter disclosure norms, speedier incorporation of companies, more powers to shareholders to streamline the approval process for mergers and acquisitions, offering scope for expanding their businesses considerably.

Inflation figures as per wholesale price index were still at a high at 12.40% for the week ended August 16. The real inflation is, however, hovering at 8.4% if the prices of all goods and services such as construction, hotels and financial services are considered. Nonetheless considering the 5.9 % inflation for the corresponding period last fiscal it remains a cause of concern for the government.

Market regulator SEBI is making headlines once more by implementing a new payment system for public issues called Applications Supported by Blocked Amount (ASBA) wherein retail investors are exempted from paying advance fees, letting the amount be retained in bank accounts till allotment is completed. This is done to ensure that the investors’ money is not blocked unless the shares are actually allotted. However considering the number of intermediaries involved in the entire process such as investors, exchanges, merchant bankers, underwriters to the issue, registrar and transfer agents it is bound to take some time for the entire mechanism to be operational.

In the aviation sector a welcome relief was experienced by airline companies with the 16% drop in ATF prices by public sector oil marketing companies. Even though it is by far the biggest cut in fuel prices of Rs 11,784 per kilolitre, airline companies are not looking at slashing their rates as they would want to exploit the upcoming peak season .It would make sense for them to wait till a clear trend of the movement in jet fuel prices emerges before lowering their rates. In addition, the fuel cut serves as an opportunity to recover heavy losses incurred during the lean season.

Overall the events this week are critical in terms of long term trickle effect .If the Nano plant is to be moved from Singur it would have far reaching implications on not only the bottom lines of the Tatas but also have serious repercussions on future industrial development of West Bengal. Clearance of the Companies Bill and the policy changes introduced by SEBI to streamline processes are greeted with optimism but tangible benefits will arise only upon effective implementation. In conclusion, a wait and watch approach will now be of relevance and the eyes of the nation will be focused on how these issues ultimately play out.

Private Equity Demystified

Continuing with the build up of the events leading to the Big Bang, i.e. the PE Symposium 2008 on the 20th of september, we have this post which answers everyting about PE that you ever wanted to know.

Private Equity....what is it??

Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity. Capital for private equity is raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet.

Private equity first emerged in the early 1980s, with Kohlberg, Kravis and Roberts (KKR) opening the first, and still among the largest LBO (Leveraged Buy Out) firms. The logic for LBO firms, at least initially, was this: Publicly traded companies are forced to focus on extremely short-term (often quarterly or monthly) results, thus making decisions which may not be in line with their long-term goals. Going 'private' or delisting from the exchanges allows them to focus on these goals. Leveraging, that is, taking debt to buyback these shares as well as spending on longer-term expansion, etc allowed managers to run their companies the way they wanted to. Moreover, the LBO firms were often run by investment bankers and consultants who contributed significant financial and industry expertise. Over time, however, the deals also began to be 'hostile', that is, the LBO managers perceived value in firms which they felt were mismanaged, so they would buy them out, restructure them, and then sell them off once more.

The other side of private equity investment comes from the world of venture capital, where small companies that need to grow but are cash-strapped and too small to list on exchanges approach (or are approached by) VC firms to take a stake in the company, as well as hand-hold them onto a growth path.

India and PE

In India, private equity is reasonably young, dating back to the mid-1990s. The environment heated up in the end of the ‘90s with the IT boom, with companies investing (and getting their fingers burnt) with their investments. In recent years, there has been a resurgence of these firms, with India’s stock markets booming and sectors like the life sciences, infrastructure and most recently, real estate being growth stories for the future. Global firms such as Warburg Pincus, Blackstone and the Carlyle Group have a presence in India while Indian players like ICICI Venture and ChrysCapital also have a large presence.

India’s private equity sector is moving to the big league. Fund sizes have increased dramatically from US $0 to US $25 million just a few years ago, to between US $400 million and US $ billion today. The minimum deals now start at around US $25 million, eclipsing the average deal size of US $8 million in 2002. With the strong global interest in the Indian market continuing, the challenge is no longer about raising private equity funds, but how to extract value from
the portfolio investments, turning the focus from financial capital to human capital.

Where does the Moolah come from??

Essentially, PE funds raise money from high net worth individuals, financial institutions, etc. for a period of seven-ten years and then invest in opportunities as and when they arise, either in early-stage, maturing or even public companies. The work involves of course, valuing the companies that approach you and deciding how much of the company your stake is actually worth, what the company’s growth prospects are, etc. Structuring the transactions for tax-efficiency and industry-specific reasons is also part of the job. Post-stake taking, day-to-day monitoring and growth plans are monitored by the fund, with a senior director taking a seat on the company’s board. Since the target is also to exit the investment in a few years and return money to investors, the deal teams also constantly monitor the capital markets for suitable times to do an Initial Public Offering or find a strategic investor to sell to.

Whats in it for You..

Outside of entrepreneurship, private equity arguably offers the best shot you’ll get at ‘being the boss’ yourself, and not just being just an employee. Since the money is, in some sense, your own, the attachment you would have with your investments is much greater than in most jobs. Additionally, the nature of work offers an unparalleled opportunity to understand a variety of industries and also get to know many of the movers and shakers in the corporate world, investment banking, etc.

Monetarily, private equity is possibly the most highly-paid post-MBA job you can hope to get. The biggest incentive in this industry is the concept of carried interest, which means that the firm keeps a portion (typically 20 pc) of the profits made for its investor, which is then distributed to employees.

What they want ??

The skill set necessary for a PE job includes significant financial expertise, an intuitive understanding of capital markets, but most importantly, an eye to capture the right businesses and entrepreneurs at the right time.

Some good websites on this are:

www.vccircle.com
www.indiape.com

I am Still Bullish.......