ICICI Ventures contemplating innovative fund structure

ICICI Ventures, one of India’s biggest domestic private equity outfits is contemplating a possible restructuring of the entire fund structure, which if successful, could emerge as a model for several tax-hit VCFs in the country In a move to overcome the adverse tax impact, ICICI Ventures has proposed that stocks it currently holds be transferred to investors.

What is now being mooted is that shares be transferred to investors, both foreign as well as domestic, (unlike in the traditional model, where the shares are held by a trust, which in turn issues units to the investors), while the asset management company of the VC fund will continue to manage the investment. The advantage here is that since the ownership of shares would shift from the trust to investors, the trust would be spared of tax.

The Finance Bill 2007 has proposed that only those VC funds which invest in specified sectors would enjoy tax exemption. So far, a VC fund was exempted from tax where only investors paid tax, and not the trust. The structure proposed by ICICI Ventures would help in restoring this.

Read The Economic Times article.
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ICICI Ventures invests Rs. 82 crores in engineering firm Electrotherm

ICICI Ventures has invested Rs. 82 crores in engineering company Electrotherm India Limited, for an undisclosed stake. The investment will part-fund the second phase of Electrotherm’s expansion plans of Rs. 400 crores. In addition to the investment made by ICICI Ventures, the promoters would bring in Rs. 58 crores to meet the equity portion. Terms loans worth Rs. 200 crores and internal accruals of Rs. 60 crores would meet the balance funding requirements of the proposed expansion plans. The term loans have been sanctioned and disbursed and the Company has already invested Rs. 300 crores out of the total planned expenditure of Rs. 400 crores. KPMG Corporate Finance was the sole advisor for the transaction.

Electrotherm is an engineering and manufacturing company with major strength in power electronics. Leveraging its core strength in power electronics, the Company through its in house R&D facilities developed a battery-operated scooter, which has been a commercial success in Gujarat, and has also seen good response from other customers as well.

For more on Electrotherm, read the article on Equitybulls.com.

HDIL in talks with PE funds for pre-IPO stake sale

Mumbai-based real estate developer Housing Development and Infrastructure Limited (HDIL) is in talks with private equity and real estate funds such as ICICI Ventures, Kotak Realty and HDFC Realty for selling a 4% stake for about Rs. 550 crores. It is quite possible that these three firms together can subscribe to the pre-IPO portion.

HDIL is in the process of diluting 4% stake in the company as part of its pre-IPO placement. It plans to do an IPO to raise over Rs. 2000 crores some time soon. HDIL has developed approximately 72.8 mn square feet of saleable area and 5.5 mn square feet of rehabilitation housing area so far. The company is in the process of expanding its property development activities to other parts of India.

Article in The Economic Times.

Software testing company up for sale by stakeholders ICICI Ventures and Acer Technologies

Bangalore-based independent software testing company RelQ has been put up for sale by ICICI Ventures and computer-maker Acer Technologies of Taiwan, the majority shareholders of the company. UBS is working on the mandate of bringing in the potential buyer. Companies such as KPIT Cummins, NIIT and CGI have already shown interest in buying RelQ.

RelQ is present in test automation, game testing and embedded software testing and has invested around $3 million towards infrastructure and test labs. RelQ is growing at a CAGR of 40% with revenues of $21 mn for the FY 2005-06 and estimated revenues of $33 mn for the FY 2006-07. It has a major presence in Bangalore with offices in the US, Europe and Singapore and a headcount of around 800. It has already acquired two companies, one in France and in the UK each.

The global market for testing services is estimated to be at $15 bn, of which $2-6 bn is expected to be outsourced to India by 2007. The CAGR for the independent outsourced testing market is estimated to be over 60%. Maveric and Thinksoft in Chennai and AppLabs in Hyderabad are some of the prominent independent testing companies in India.

Read the article in The Economic Times.

Avesthagen sells 20% stake for €25 mn

Bangalore-based integrated life sciences company Avestha Gengraine Technologies Limited (Avesthagen) has closed Series C of private equity fundraising of around €25 mn by divesting 20% equity to external investors. The investment values the company at € 115 mn (Rs. 667 crores). The investors in the company are Fidelity International (10%), the Limagrain Group of France (5%), Daninvest of the Danone Group (4.57%), and Bennett, Coleman & Company Limited (2.4%). The total foreign investment in the company is now over 31%. The existing investors of Avesthagen include ICICI Ventures, Cipla, Godrej Industries, Tata Industries and bioMerieux. The company has also commenced preparations for its initial public offering scheduled to hit the market by mid-2008.

The company commenced its operations as an agri-biotech company in 2001 and then moved on to become a healthcare technology company, pursing its vision of convergence of food, pharmaceuticals, and population genetics, leading to preventive personalized medicine. The other activity of the company has been agri-biotech product development of scientifically validated bioactive nutraceuticals, derived from Indian medicinal plants, as well as the development of bio-similar drugs. The company has four strategic business units: bio-pharmaceuticals, food for medicine (bio-nutritionals), seed for food (agri-biotech) and science and innovation. The company registered Rs. 1.1 crore in profit and Rs. 18 crore revenue in 2005-06.

The funds will be used for Avesthagen’s infrastructure expansion plans, including setting up of manufacturing units and research and development laboratories, and acquisition of technology companies to scale up production and marketing.

Read the article in Business Standard.

FirstSource acquires US outsourcing company BPM for $30 mn; sells stake to US-based technology firm Metavante and hedge fund Galleon Partners

BPO company FirstSource Solutions, formerly known as ICICI OneSource, has acquired a Delaware-based healthcare claims’ outsourcing company called BPM and its two wholly-owned subsidiaries MedPlans 2000 and MedPlans Partners for an estimated $30 mn. This is FirstSource’s second US acquisition after it had acquired Account Solutions Group In September 2004.

The acquisition will allow FirstSource to penetrate the healthcare vertical with capabilities in complex claims’ adjudication. FirstSource will now offer clients database management, policy administration, claims processing and complex claims adjudication capabilities.

The company, by virtue of this acquisition, has also acquired a client portfolio that includes six Fortune 1000 companies and adds three centres in Rockford, Illinois; Fort Scott, Kansas and Louisville, Kentucky to its current 17 delivery centres globally which includes 11 in India, 3 in the US, 2 in the UK and 1 in Argentina. The company has a workforce of 9,018 full-time employees and 61 clients as of September 30, 2006. With this acquisition, the US headcount of FirstSource Solutions has risen to 800.

Read The Economic Times and Business Standard articles.

In a related development, the ICICI Group has divested around 19% stake in FirstSource to US-based banking technology solution provider Metavante and US hedge fund Galleon Partners in a pre-IPO placement. Metavante already holds an 11% stake in Firstsource which it had acquired in April last year through a combination of primary infusion and secondary purchase. The deal has been reported at $$75-80 mn; the ICICI spokesperson has confirmed the deal but declined to comment on its size.

Along with group companies ICICI Bank and ICICI Ventures, Sequoia Capital and Temasek Holdings also holds stake in FirstSource. Sequoia Capital has invested $17 mn in FirstSource for 11% stake and hopes to make $60 mn on its initial investment in the company’s upcoming IPO. Temasek Holdings has invested $50 mn for picking 11-12% stake in the company.

Metavante has picked up a 14% additional stake in the company, taking its total shareholding in the company to 25%. Galleon Partners has acquired 5.84%. FirstSource is planning a public issue of 95.6 mn equity shares, including a fresh issue of 60 mn equity shares and 35.6 mn equity shares, to be offered for sale by the ICICI Group.

Read The Economic Times article.

Pantaloon Retail to divest stakes in subsidiary companies

Pantaloon Retail India Limited (PRIL) is planning to dilute stakes in its subsidiary companies for expansion-related purposes. The companies that are lined up are Future Media, Future Capital, Future Logistics and Central and dilution of stakes would either be way of IPOs, preferential allotment or strategic sale.

Future Media targets developing retail space and malls as an outdoor media option. PRIL is in talks with WPP for a strategic partnership in Future Media. Future Logistics deals in supply chain and distribution management. Future Capital is a PRIL subsidiary that focuses on asset management and consumer finance. It manages Horizon and Kshitij, two real estate investment funds and Indivision, a consumer-related private equity fund, and soon plans to get into insurance, consumer credit and other consumer-related financial products and services. Central is a chain of lifestyle retail stores.

Equity analyst Edelweiss Securities estimates that of PRIL’s total requirement of Rs. 4500 crores, equity dilution would get the company Rs. 1000 crores. Quoting the company’s internal projections, the research firm also says that in all Mr. Biyani’s company needs approximately Rs. 2300 crores from external sources of which Rs. 1300 crores will come in the form of debt. Pantaloon’s expansion plans are targeted at taking the group’s total retail space to about 30 mn square feet by the end of 2011 from the current 3.5 mn square feet. By the end of FY10, Mr. Biyani is looking at 80 Pantaloon stores in various parts of the country from the current number of 23. Similar expansion is in the pipeline for Big Bazaar and Food Bazaar, where the company aims to take the number of stores to 225 and 250 respectively, growing from the current 35 and 53 respectively

In October 2006, ICICI Ventures and Kotak SEAF India had picked 15% and 6% stakes respectively in another PRIL subsidiary, Home Solutions Retail, bringing an investment of about Rs. 120 crores.

Read the article in The Economic Times.

ICICI Ventures plans bigger investments

Dec 26, 2006

ICICI Ventures, the private equity arm of ICICI Bank, and one of India’s leading private equity firms, is planning to raise the size of investments, to counter competition from other PE firms, banks, securities markets, hedge funds and other investment sources to fund Indian companies as accelerating economic growth pushes up stock valuations. Where earlier the size of investments would range around $25-30 mn, the firm now intends to buy stake as large as $125 mn.

More on this on Bloomberg.com.