Indian PE affected by meltdown

ET has a piece on PE investments slowing down and deals taking more time to close.

The current global meltdown propelled by subprime concerns has left its mark on the Indian market too, which is also evident in the number of private equity deals slowing down.

Industry experts say unlike in the past when term sheets were signed in six-seven days, the duration has now increased to a month. Fund managers are taking a longer time to make up their minds on investments. They are also agonizing over what valuations ought to be. Some are even backing out of deals.

This bit, about players backing out after the termsheet is signed, is especially interesting. Can readers comment if there are more examples in the recent past?

For instance, Indivision, a part of the Future Group backed out of an impending deal with DishTV after signing the term sheet. Sources said, this was because valuations were driven down. Then, sources added, there is the case of General Atlantic Partners backing out of Essar Power, once again, after signing the term sheet.

6 Responses to “Indian PE affected by meltdown”

  1. Krish: ICICI finally bought into JP. 1150 cr. with 250 cr. equity and the rest as a loan.

    They’ve decided to tranche the fund raising, which is perhaps the way forward for a lot of entrepreneurs who wanted to raise cash.

    As for binding term sheets – after the Jet-Sahara fiasco, is anything binding? That thing had problems even AFTER the takeover; back-outs will definitely happen where regardless of number of below-dotted-line-signatures on random pieces of paper, unless the signature is the RBI governor’s, on a special paper with Gandhi’s pic on it.

    In the US, PE deals are seeing extreme difficulty in closing. See the clearchannel $19 bn take-private scheme go down for lack of funding. (http://online.wsj.com/article/SB120647527104363151.html)

    Also, grapevine info: managers are trying to get debt or mezzanine funding rather than equity, because of current market conditions. This may not be of interest to many VC/PE funds. Convertible debt has now become equity due to regulation, so that’s not an option either.

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