1. SEBI registered Venture Capital Fund (VCFs) are permitted to invest in securities of foreign companies in terms of regulation 12(ba) of the SEBI (Venture Capital Funds) Regulations 1996. Reserve Bank of India (RBI) vide its Circulars dated April 30, 2007 and May 04,2007, issued in this regard, has permitted these VCFs to invest in equity and equity linked instruments only of off-shore venture capital undertakings, subject to overall limit of USD 500 million and applicable SEBI regulations.

2. Accordingly, SEBI registered VCFs, desirous of making investments in offshore Venture Capital Undertakings may submit their proposal for investment (in the attached format) to SEBI for its prior approval. It is clarified that no separate permission from RBI is necessary in this regard.

3. For the purpose of such investment, it is clarified that –

1. “Offshore Venture Capital Undertakings” means a foreign company whose shares are not listed on any of the recognized stock exchange in India or abroad.

2. Investments would be made only in those companies which have an Indian connection (i.e. company which has a front office overseas, while back office operations are in India) and such investments would be upto 10% of the investible funds of a VCF.

3. The allocation of investment limits would be done on ‘first come- first serve’ basis, depending on the availability in the overall limit of USD 500 million.

4. It is clarified that in case a VCF who is allocated certain investment limit, wishes to apply for allocation of further investment limit, the fresh application shall be dealt with on the basis of the date of its receipt and no preference shall be granted to it in fresh allocation of investment limit.

5. An applicant VCF shall have a time limit of 6 months for making allocated investments in offshore venture capital undertakings. In case the applicant does not utilize the limits allocated in the stipulated period of 6 months from the date of its approval, SEBI may allocate such unutilized limit to other VCFs/applicants whose applications are pending with it.

4. These investments would be subject to necessary amendments to Notification No. FEMA120/RB-2004 dated July 7, 2004 [Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004], and will also be governed by the related directions issued by the RBI from time to time.

Public sector non-banking lender Power Finance Corp (PFC) plans to launch a private equity (PE) fund in the overseas market to raise resources for the domestic power sector. The PE fund, with an initial corpus of over $1 billion, would support the last-mile equity requirement of power projects. The company is in talks with leading investment bankers including Goldman Sachs for launching the fund.

PFC plans to launch the new fund in overseas tax havens like Mauritius, Cyprus or Isle of Mann to get maximum tax benefits for the investors and encourage them to increase exposure to the power sector. Mauritius may be the first priority for the company.

The power financing major plans to encourage equity investment from leading domestic and international investors operating multi-billion-dollar funds into its own proposed vehicle. The company has already solicited interest from power developers for any type of equity funding support they may require for the project. The new fund, which may be in the form of a special purpose vehicle of PFC or a separate company, would restrict its exposure to a maximum of 10% of the total project cost.

It is said that all the approvals from the power and finance ministries have been obtained and the company may announce the fund later this month. The corpus of the fund would be raised as the requirements grow. It is estimated that of the total projected investment of Rs 10 lakh crore, the projects would require equity support of Rs 3 lakh crore ($75 billion), all of which cannot be met by the companies alone.

Apart from the PFC PE fund, Rural Electrification Corp (REC) is also likely to float a similar equity fund.

The government has set a target to add fresh generation capacity of 78,500 mw during 2007-12, along with necessary transmission and distribution network. Apart from the equity plans, the government is also in talks with international multilateral financing agencies, including the World Bank and the Asian Development Bank, to get more funds for meeting the 11th Plan power capacity addition target of 78,500 mw.  (Economic Times) .

Private Equity firms invested about $3.2 billion in 76 Indian companies during the quarter ended June, against 67 deals totaling $1.9 billion during the same period last year, according to a study by Venture Intelligence, a research service provider, focused on private equity and venture capital. Another study by the same firm, in association with US-India Venture Capital Association, placed the venture capital investments in India during the quarter at $112 million across 19 deals, against $40 million during the same period last year.

The largest private equity investment reported during April-June ‘07 was the about $760-million investment raised by HDFC from Carlyle Group and Citigroup. It was followed by New York-based Avenue Capital Group's $500-million investment in SKIL Infrastructure. The Information Technology and IT-Enabled Services (IT & ITES) industry retained its status as the favourite among PE investors during the latest quarter, accounting for over 25 deals worth over $550 million. Led by the HDFC investment, the banking, financial services and insurance (BFSI) industry emerged as the second most favourite industry among the PE investors accounting for about 15 deals worth almost $1.3 billion.

Other industries that attracted significant PE interest during the period included healthcare & life sciences, engineering & construction and shipping & logistics. In venture capital space, with 17 deals worth about $110 million, IT and ITES industry retained its status as the favourite among VC investors during April-June 2007. (Economic Times).

DREAM-II a scheme of DHFL Venture Capital Fund, a trust registered with SEBI as a domestic venture capital fund under SEBI (Venture Capital Funds) Regulations, 1996 propose to invite investments by various overseas investors in units to be issued by DREAM II. DREAM II shall be managed by DHFL Venture Capital India Private Limited, whose principal shareholder includes Dewan Housing Finance Corporation Ltd., a company engaged in home loan financial activities and registered with the National Housing Bank as a Housing Finance Company.

DREAM II Scheme proposes to issue 4 Classes of Units as follows:

(i) Class A units will be issued to only domestic investors

(ii) Class B units will be issued to offshore investors

(iii) Class C units will be issued as ‘Carry Units’ to the investment manager being a domestic investor for carry (i.e., share in profits from the Units issued to domestic investors i.e., Class A Units)

(iv) Class D units will be issued as ‘Carry Units’ to the investment manager being a domestic investor for Carry (i.e., share in profits from the Units issued to offshore investors i.e., Class B Units

ACTIS acquire 51% voting shares of Nilgiris Dairy Farm for Rs 300 crore.

Nilgiris Dairy Farm has already sold a 51% controlling stake to private equity firm Actis for nearly Rs 300 crore, while Trent acquired a 76% stake in Chennai-based book store chain Landmark for Rs 103 crore- Economic Times

Warburg to invest  250 million dollar in Indian property

US private equity firm Warburg Pincus has invested $250 million for Indian property at a time when developers were planning to launch IPO’s and attracts foreign partners. Warburg Pincus has already invested in a fledgling hotel business, as well as other private equity property funds run by the likes of Morgan Stanley, JPMorgan and Merrill Lynch. Warburg is also spending 25 to 30 per cent of a $1.2 billion fund closed in October. With foreign investor enthusiasm for Indian property on the rise, London's secondary Alternative Investment Market has become a popular listing arena for Indian developers, with Dev Property Development Plc's planned $530 million IPO the latest offering.

Presently, pre-issue shares of an unlisted company making an Initial Public Offering (IPO) are not required to be locked in, if the same are held by Venture Capital Funds (VCFs) or Foreign Venture Capital Investors (FVCIs) registered with SEBI. Now the benefit of this exemption from lock-in is restricted only to the following:

1. shares held by VCFs or FVCIs registered with SEBI, for a period of at least one year as on the date of filing draft prospectus with SEBI;

2. shares issued to SEBI registered VCFs/ FVCIs upon conversion of convertible instruments during the period of one year prior to the date of filing draft prospectus with SEBI, provided that the period of holding such convertible instruments as fully paid up, together with the period of holding shares resulting from conversion, by the VCFs and FVCIs, is at least one year as on the date of filing the draft prospectus with SEBI.

In other words now only those VCs & PEs who have invested more than a year before the company goes for IPO can sell their stakes on listing  The restriction regarding lock-in, shall be applicable to all offer documents, which are yet to be registered with the Registrar of Companies. (30-10-06)

Common key personnel between mutual funds and venture capital funds

In order to avoid conflict of interest between the activities of Mutual Funds (MF) and Venture Capital Funds (VCF), pursuant to Section 30(1) of the Securities and Exchange Board of India Act, 1992 (15 of 1992), SEBI has issued guidelines that no key personnel of a MF shall be on the Board of Asset Management Company / Investment Manager / Investment Advisor / Investment Committee of a VCF.  Key Personnel of a MF includes Chief Executive Officer (whatever his designation may be), Chief Investment Officer, Fund Managers and Head of other departments in a AMC.  The VCFs are advised to confirm compliance of the above as early as possible as but not later than 2 months from 18th October 2006. (30-10-06)

US private equity firm Providence Equity Partners Inc. has took around 16% stake in Idea Cellular. The deal involves investment worth $400 million. The deal is the first investment by Providence in Asia, although it has made investments in the telecoms sector before - in 1992 it made a $63 million investment in VoiceStream Wireless, which it sold to Deutsche Telekom in 2001. (28-10-06)

Small Industries Development Bank of India has launched SME GROWTH FUND, a new venture capital fund with a large corpus of Rs. 500 crore, dedicated to the SME sector. The 8-year life Fund is being established with an objective to meet the long-term risk capital requirement of innovative and technology oriented units in this sector. source www.sidbi.in   (16-10-06)

Leading private equity firm WL Ross & Co. has entered into Indian market by acquiring a majority stake in OCM India. WL Ross & Co LLC private equity investor enters India with the acquisition of OCM India Limited for $37 million in cash (Rs. 170 crores). The acquisition of OCM is being made pursuant to a Scheme of Arrangement between Birla VXL Limited and its existing lenders, creditors and shareholders and OCM and its shareholders and being carried out through The Asset Reconstruction Company of India.   (10-10-06)

Web18 Caymans, a subsidiary of the TV18 Group has raised funding of USD 10 Million from Tracer Capital. Web18 Caymans is a subsidiary of TV18 Group Companies. All the Internet assets of the Group – including moneycontrol.com, ibnlive.com; commoditiescontrol.com; cricketnext.com, compareindia.com, jobstreet.com, yatra.com, tech2.com and urbaneye.com - are held by Web18 Caymans.  source moneycontrol.com   (08-10-06)