The stock market crash has heavily hit private equity (PE) investments in open market deals as well as the PIPE (private investment in public equity) space. However, PE investors remain unperturbed over the current situation and expect no impact on long-term investments.
In one of the largest falls, the value of PIPE investment by US-based Apollo Management in Welspun Corp declined about 70 per cent today. The value of Apollo’s investment of $286 million to acquire 13.3 per cent in Welspun Corp, being completed this month, went down to about $85 mn, when shares of Welspun hit a 52-week low of Rs 136 and closed at Rs 141 on the Bombay Stock Exchange.
According to data from VCCedge, the value of PIPE deals decreased from $3 billion in 2007 to $456 mn in 2010. Till date in 2011, about 15 deals worth $459 mn took place.
| TOP PE DEALS IN LISTED FIRMS | ||||
| Target | Buyer | PE Type | Deal Size ($mn) | Stake (%) |
| Welspun Corp | Apollo | PIPE | 286.87 | 13.30 |
| IDFC | Khazanah, Actis | PIPE | 179.00 | 10.91 |
| Magma Fincorp | IFC, KKR | PIPE | 98.25 | 27.75 |
| Redington | Standard Chartered PE | Open market | 97.90 | 12.00 |
| Ruchi Soya | Siva Ventures | Open market | 48.69 | 12.00 |
| MindTree | Global technology ventures | Open market | 30.56 | 7.99 |
| Source: VCCedge | ||||
Three of the top five open market deals by PE firms got affected by the market crash and the valuations declined about 30 per cent. The value of Blackstone’s $28-mn investment in Monnet Ispat went down to $26 mn. Blackstone had acquired 3.89 per cent in Monnet through the open market. DE Shaw’s $15.7 mn investment in New Delhi Television Ltd in April to buy 14.2 per cent stake went down to $10 mn. Shares of NDTV went down to a 52-week low of Rs 53 on Monday on the BSE.
The value of ChrysCapital’s 4.15 per cent stake in NCC Ltd, which got acquired for $18.82 mn in May, decreased to $15 mn today.
Sanjiv Kaul, managing director, ChrysCapital Investment Advisors, said, “Typically, PE players invest with a long-term view, irrespective of deals in PIPE or un-listed space. Variations in the market should not be the criterion, but judgment on the company and the sector concerned.” The entry point into the company is the important criterion in a PIE deal, he added.
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New Silk Route’s 14.59 per cent stake in Nectar Lifesciences Ltd, valued at $54.7 mn in January 2010, decreased to $15 mn on Monday.
Most of the PIPE and open market transactions done in 2010 remain stable. About 22 open market transactions worth $257 mn have taken place till date in 2011 by PE firms against 24 deals worth $289 mn in the same period in 2010. In 2009, it was 30 deals worth $194 mn.