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MUMBAI: The newly announced public listing norms for small and medium
enterprises (SMEs) are expected to benefit small-ticket private funds
and venture
capitalists (VCs) who are willing to make seed and growth-stage investments. Easier listings will guarantee good exit options for strategic investors in these otherwise illiquid companies, say industry experts.
Small businesses usually approach strategic investors (especially VCs) for raising working capital needs. As the sector is characterised by high processing costs, often exceeding the returns, banks are generally reluctant to extend credit to the SMEs. High failure rates, low capitalisation and vulnerability to market risks also deter financiers from funding SMEs. That’s the main reason why SMEs approach VCs and small-ticket private funds.
“The main problem faced by strategic investors is getting an exit route. With easier listing norms, companies can consider public fund raising upon reaching a decent size. This will give venture capitalists an easy exit route as well,” said Anil Bhardwaj, secretary general, Federation of Indian SMEs (FISME).
According to experts in corporate financing, seed and growth stage investments have been declining over the past few years with most VCs turning their focus on larger deals in medium-to-large-sized companies (typically acting as private equity funds in the process). Lack of exit route in SMEs and longer investment time-frame — say 8 to 10 years — were deterring VCs from making seed and growth-stage investments.
According to PE tracker Venture Intelligence, VC firms invested just about $117 million (Rs 585 crore) over 27 deals in the first half of 2009 vis-à-vis $413 million (Rs 2,065 crore) invested across 67 deals during the same period last year. However, it is not clear as to how many funds made seed and growth stage investments during the considered periods.
“Actual investments into SMEs may be be a miniscule portion of overall venture capital investments. VC firms will restart seed and growth funding once they are assured of a profitable exit option. If implemented in true spirit, we could see several investment firms redrawing their strategies around SMEs over the next few years,” says CG Srividya, partner, Grant Thornton.
Sebi has eased SME listing norms by laying down low paid-up capital requirements (at Rs 10 crore), relaxed eligibility norms applicable to IPOs and allotted market makers (through merchant bankers) for ensuring liquidity, post listing. While the intent is clear, Sebi has laid a few stumbling blocks for SMEs on the road to easier public listings. The need for adhering to Clause 49 (pertaining to the appointment of independent directors) could be the biggest impediment, say experts.
“Most SMEs are family-owned businesses or managed by single proprietors. Clause 49 will force us to appoint an equal number of external directors. This will increase our costs of doing business,” said Mr Bhardwaj. “Sebi could have kept aside Clause 49 requirements, as merchant bankers are mandated to stay invested (holding 15% equity) in the company for three years,” he added....
China`s industrial output up 16.1 percent in October
India iip at 9.1 %...
they couldnt overtake the fear of harmless DALAI lama.phobic bully,moron intellectually....
thanks for the information. keep posting such messages...
thanks for your post...
stocktobuy-So now the MD & CEO S Gopalakrishnan has acquired four lakh shares in the company of Sudha Murthy,through open market purchases!!Am i right???
...
WASHINGTON: India`s purchase of $6.7 billion worth of gold from the International How to invest in gold and key price drivers
Few tips to buy gold
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Why is India buying IMF gold?
Monetary Fund (IMF) is a pointer that New Delhi sees a dim How to invest in gold and key price drivers
Few tips to buy gold
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Why is India buying IMF gold?
future for the dollar and is
making a bullish call on the precious metal, according to a leading US business magazine.
"The move is already profitable as the Indians bought their gold at prices averaging around $1,000 an ounce. Gold closed at a record $1,085 an ounce Tuesday in New York," Robert Lenzner, National Editor of the Forbes magazine, noted in a commentary on Wednesday.
The big buy from India, bulking up its gold reserves by 55 per cent, follows months of huge gold accumulation by Chinese authorities as well as hedge fund operators like John Paulson and others amid growing anxiety about the viability of the dollar as the world`s reserve currency, he noted.
Comparing history`s most successful investor Warren Buffett`s $34 billion bid for the rest of Burlington Northern Santa Fe, Lenzner said: "India, by comparison, is making a direct bullish call on gold, just as China, its major rival in Southeast Asia, did some months ago.
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"India`s purchase of $6.7 billion gold from the IMF at prices above $1,000 an ounce says plenty about some central banks` preference for gold over dollars," said Lenzner.
"Gold went from $100 in 1976 to $850 in 1980. This gold bull began at $250, suggesting a peak around $2,125 an ounce before this one`s over.
"What`s interesting is that the growth part of the world is the buyer," Forbes cites Frank Holmes, CEO of US Global Investors, a mutual company in San Antonio that specializes in natural resource stocks, as saying.
"This is another sign of the wealth shift from the developed toward the developing markets," says Holmes, noting the Indians` "cultural affinity" for gold.
"It`s how they store their wealth, and they can wear it as jewellery."
"Could the Indian purchase be the catalyst that finally triggers a massive wave of speculation that drives gold to $1,200 or $1,300 an ounce, or even $2,300, where it would equal the former peak price when adjusted for inflation?" Lenzner wondered.
Reached by Forbes in Toronto, Canadian venture capitalist and mining entrepreneur Frank Giustra, who has been since 2002 recommending investors diversify out of dollars and hedge their portfolios with at least 15 per cent in gold, opined: "No one wants US dollars, and this is one way central banks can diversify out."...
BANGALORE: Sudha Murthy, the better half of the first couple of India’s IT industry, has
made her second big venture capital investment. When
husband N R Narayana Murthy
was setting up Infosys in 1981 on a wing and a prayer, she gave him Rs 10,000 from her savings. Look what has happened to that money.
On Thursday, an Infosys announcement made clear that not much had changed between the couple in 28 years. This time, Mr Murthy’s big idea is called Catamaran — a venture capital fund — and his wife is helping him with a small matter of some Rs 430 crore.
The social worker and author sold 20 lakh Infosys shares owned by her, boosting the corpus of Catamaran to Rs 605 crore. Mr Murthy announced two weeks ago that he had sold eight lakh shares in the company he founded to establish a venture capital fund which will assist young entrepreneurs, mainly from India.
The couple don’t have any immediate plans to raise any more capital for Catamaran.
“Sudha Murthy selling shares is a good thing and it is nice to see somebody step away and help others become successful,” observed Sourabh Srivatsava, president of the India Venture Capital Association.
“We are beginning to see individuals and families getting active in this space,” he added, referring to similar ventures by the Future Group, Azim Premji’s PremjiInvest and the Religare Group.
Infosys’ shareholding pattern at the end of September showed Mr Murthy and his family owning a 4.97% stake in the company. His wife owned 1.62%, daughter Akshata 1.41% and son Rohan 1.39%.
Close observers of the venture capital industry believe that Mr Murthy will likely model Catamaran on the lines of Nadathur Holdings, a venture fund set up by former colleague and Infosys co-founder N S Raghavan. A family-administered fund, Nadathur Holdings was set up around nine years ago and backs scientific or business innovation driven startups.
Mr Murthy has said that his fund will help entrepreneurs across sectors such as healthcare, retail, technology with early stage investments. “I have always believed that entrepreneurship is an instrument of creating jobs and is the best way to solve poverty of a country like India.”
Catamaran is likely to be launched during the early part of 2010 and look at funding entrepreneurs as
well as making private equity investments in established businesses. Most of the investment activity is likely to centred around India but it may include some overseas ventures.
“We will not be in a hurry to finish the fund; there’s no limit for spending,” Mr Murthy said two weeks ago.
Infosys also told the stock exchanges on Thursday that its MD & CEO S Gopalakrishnan has acquired four lakh shares in the company through open market purchases, taking his total holding 66.56 lakh shares....
thanks for the information......
stocktobuy-TCS and Wipro gained nearly 5%!!The growth rate for the top IT companies have fallen or remained stable!! ...
will second the motion of thanks...
Half the Indian population will be less than 30 years old. It is much older population in the USA and Britton. So Salary distribution will not the same. Whether per capita income will be higher by 2048 reains to be seen. Also, the Income inequality is screweed up real bad in the US....
thanks for the information...
Top IT stocks have remained more or less stable despite the volatility in the broader market. This is on account of better performance by these
companies in the September quarter and their improved guidance for future quarters. However, analysts reckon that current valuations fully reflect this optimism and fresh purchase is advisable only on declines.
In the past one month, which encompassed the quarterly results season, the benchmarks, including the Sensex and the Nifty, dropped by 3%. In contrast, stocks of TCS and Wipro gained nearly 5% on bourses whereas Infosys and HCL Technologies dropped just a tad 1-1.5%.
The stable performance of top IT counters reflects renewed confidence of investors in the long-term IT growth story. “We have seen some stability in these stocks, after the companies indicated that business conditions are improving. The Street feels that things no more look that bad and the worst is behind us,” says Dipen Shah, Sr VP, Kotak Securities.
The global economic slowdown has eroded the sequential growth rate for the top IT deck from 6-8% two years ago to just over 1-3%. However, a positive outcome is that it has made their operations more efficient. Thus, even though there was a deceleration in topline growth, companies now have slightly better operating margins.
Higher component offshoring in the global delivery model and rationalisation of human resources resulting into
higher employee utilisation are the key drivers behind improved efficiency. This also means, IT companies are more than ready to take advantage of the next phase of all round recovery. “While coming out of the recession, more clients would rely on outsourcing to increase value out of every dollar in IT spends,” Mr Shah feels.
However, the extent of this readiness would differ depending upon the past moves of these companies. For instance, TCS, Wipro, and HCL Tech undertook key acquisitions to strengthen their existing set of deliverables over the past one year. This is likely to help these companies register higher volume growth.
Despite this, analysts feel that Infosys would not see much of a change in the premium its valuations get over its peers. According to RBS’ IT analyst Pankaj Kapoor, Infosys has been maintaining superior margins irrespective of market conditions. “Infy’s valuations reflect its strong operating margins. Also, it is sitting on nearly $3 billion of cash, which can be utilised to take on any organic opportunities,” he says.
Mr Kapoor feels that Infosys is cautious while acquiring companies and the company’s strong cash base is not of much concern since Infosys can put it for a prudent use. Analysts expect a limited uptick in prices of IT stocks from hereon in the absence of any major trigger. “The Street expects dollar revenues to grow at a CAGR of about 20% for next two years. We don’t see any major trigger that can push the growth beyond this threshold,” says Mr Kapoor....
me too... ...
