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MOTLEY COLLECTION OF BUSINESS AND ECONOMIC NEWS |
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 Loaded future: VC funds worth US$ 900 million set to flow in
Budding entrepreneurs have something to cheer about. Funds worth $900 million are waiting to be deployed in the venture capital (VC) space over the next one year. While this includes the six new funds that have been recently launched, it also includes $150 million that is expected to flow into India through the European Venture Capital Association (EVCA) and similar amounts through the American VC association.
In fact, Europe has recently passed a mandate whereby India and China have been identified as the top two destinations for all VC funding outside Europe. “The projects that I have seen in India are very good and the quality is as good as those seen in America. At least 30-odd Indian companies should get $150 million as VC funding from Europe this year. We have passed a mandate for India and China as the countries where all VC funding outside Europe will flow into,” says Javier Echarri, secretary general, European Venture Capital Association.
Funding from Europe will flow only into tech companies and those that are either creating software in the oil and natural gas domain or for environment friendly projects, added Mr Echarri. Even with so much money flowing into the VC space, experts say there is no dearth of projects that will find the backing of VCs. “There is too much hype about the fact that there is excessive money in the VC space.
Even with funds worth $900m, most VCs will find the right projects at reasonable valuations,” said Kanwaljit Singh, managing director and Investment advisor, Helion Venture.
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 HSBC pumps US$ 200 million in India operations
The Hongkong and Shanghai Banking Corporation (HSBC) has infused fresh capital to the tune of $200 million (Rs 904 crore) into its India operations to support business expansion in a high growth economy.
With this additional investment, the British bank’s capital base India has grown from Rs 4,001.3 crore at the end of March 2006 to Rs 4,909.5 crore now. The fresh capital infusion was done on October 31, 2006. The bank’s capital adequacy ratio which stood at 10.6% at the end of March 2006 will go up to almost 13% computed on the asset base of March 2006, Anurag Adlakha, CFO of HSBC India, said.
As of March 2006, the bank’s asset base stood at Rs 37,500 crore. “Last year the growth in assets was 35%. We are seeing similar growth this year,” Adlakha said. The capital will be used to support the bank’s growth in India. This capital infusion has come after an infusion of $150 million in March 2005. “The last infusion took us through a year and a half. This will take care of our immediate needs,” a senior official of the bank said.
The bank’s tier I capital at the end of March 2006, was 9.80% and tier II capital stood at 0.81%. The capital adequacy of the bank had fallen from 14.03% in March 2005 to 10.61% at the end of March 2006. At present, HSBC has 46 branches spread across 26 cities in the country.
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  TCS, Satyam to tune Qantas systems
Tata Consultancy Services (TCS) and Satyam Computer Services today signed seven-year contracts worth US$145 million with leading Australian airline Qantas Airways.” TCS said the expected value of the contract—to provide a range of IT applications, transformation and maintenance services to Qantas—was around A$120 Million ($90 million).
Satyam said its agreement covers application development and maintenance services for over 150 applications across a wide portfolio of technologies and was valued at around A$71 million ($55
million). “The Qantas engagement is a significant milestone for TCS’s airline business and is the result of our extensive investments in building domain expertise that has helped create innovative solutions for companies,” S. Ramadorai, CEO & MD of TCS, said.
“We believe technology has a strong role to play in enabling the travel and hospitality sector companies to retain customers and build new business models,” Ramadorai added. According to N. Chandrashekhar, executive VP and head of global operations of TCS, the AST outsourcing programme launched by Qantas is the largest single contract awarded to an Indian outsourcing company in Australia to date.
“This is the largest in terms of committed spend bagged by an Indian IT company and TCS expects the contract to be accretive to earnings in our fourth quarter,” he said.
TCS will service the airline from its recently set up Innovation Lab for Travel and Hospitality, for which the company would be recruiting around 220 personnel.
The company also expects total revenues of $500 million from its travel and hospitality business, even as it is looking at tie-ups. Satyam said the contract it has bagged follows the recent Oracle e-Business suite contract announced in August between Qantas and the company for the implemented elements of Qantas’s eBusiness systems.
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 Genpact plans India’s biggest listing in US
General Electric and a clutch of private equity funds are planning to list Gurgaon-headquartered BPO major Genpact in the US market in what could be the biggest ever initial offering from this country. Sources close to the transaction said that plans are being drawn up for a public float of Genpact in the next three to four months.
GE, which promoted the company and later sold 60% stake to Oakhill Capital and General Atlantic, is expected to sell a portion of its stake along with the private equity funds. The company is also expected to raise some money.
With an estimated revenue of about $620m in 2006, the proposed float is expected to value Genpact between $3.5bn and $5bn, or 6-8 times projected sales. Going by the recent IPO deals on the Nasdaq, such as WNS (which secured a valuation of five times its sales despite being a much smaller firm), and EXL Services, analysts expect Genpact, the largest BPO firm in the country with an employee base of about 26,000 and projected revenue of about $1.2bn in 2008, to command a higher valuation. Genpact has the potential to raise more than a billion dollars if it divests 18-20% of equity, they say.
At $1bn, it will also be the largest ever initial offering from the country. GE and private equity funds Oakhill Capital and General Atlantic Partners (GAP) are likely to make a killing once Genpact lists in the US.
The two funds had bought 60% stake from GE in ‘04, and in less than two years will multiply their investment by at least five times.
“The returns for GAP and Oakhill will compare or may be even higher then the gains that Warburg Pincus made on its Bharti investment. It is a two-year-old investment and their returns are going to be really high. They won’t exit at the IPO, they will dilute their holding, and hold the remaining stake for a couple of years after the IPO,” said a private equity partner. |
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December 2006
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