Investment Scenario
American fund houses such as Direxion Shares and Direxion Funds, managed by Rafferty Asset Management, have launched five more India-specific exchange-traded funds (ETFs) to tap the growth potential of Asia’s third-largest economy. ETFs are open-ended funds that are designed to track specific indices and trade just like any other stock. ETFs have become big investors in India, basically because the US retail investor has accepted India as part of his global equity portfolio, according to the Singapore-based Helios Capital Management.
The Aureos India Fund, an initiative of Aureos Capital—a Mauritius-based private equity fund management company—and ePlanet Ventures, a global venture capital firm headquartered in Silicon Valley, together have invested US$ 16 million in Continental Warehousing Corporation (Nhava Sheva) Ltd (CWCNSL).
International Finance Corporation, a member of the World Bank Group, has proposed to be an investor in South Asia Clean Energy Fund (SACEF) by investing US$ 20 million. The fund is an Alberta, Canada limited partnership and will target companies located in India amongst others.
J P Morgan Securities and Morgan Stanley & Co have jointly invested US$ 103 million in the ADS (American Depositary Shares) offering of Sterlite Industries.
Shareholding pattern (April-June quarter) of public sector unit (PSU) companies reveal that FIIs have been big buyers in PSU banks. FII holdings in Central Bank, Vijaya Bank, Union Bank, IDBI Bank, Indian Overseas Bank, SBI and term lenders IFCI and IDFC have gone up significantly during the first quarter of FY 2009-10.
A clutch of foreign and domestic institutional investors and mutual funds have acquired stakes in engineering firm Texmaco—a K K Birla group company—through a recently completed US$ 37.3 million qualified institutional placement (QIP).
Canadian investment firm, Urbana Corporation, is likely to buy a 5 per cent stake in the National Stock Exchange, India’s largest bourse.
Overseas fund, Norwest Venture Partners, has signed an agreement to acquire 2.11 per cent state in NSE for US$ 52.6 million, valuing the exchange at over US$ 2.53 billion.
The US-based private equity fund major, Fire Capital, has earmarked US$ 500 million equity investment to be spent over a period of five years on various realty projects, particularly on integrated townships, across the country.
Investors, such as ATE Enterprises, Denmark-based Best Seller, Sequoia Capital, the Netherlands-based Cordaid etc., from the US and European countries are keen to invest around US$ 420.84 million to promote and equip small and medium enterprises engaged in green business, according to New Ventures India (NVI).
The Road Ahead
Venture capitalists are expected to increase their investments in India over the next three years, according to Deloitte's 2009 Global Venture Capital survey released recently. About 43 per cent of the 725 respondents to the survey said they expect to increase their investments in India over the next three years.
India is well placed to attract FII flows over the long term. According to Sandip Sabharwal, CEO, Prabhudas Lilladher Markets, “As economic growth accelerates and tax compliance improves over the next few years, fiscal deficit will come under control. FII flows into India will continue to be strong.” India may also get its fair share of inflows by way of increased allocations made to BRIC (Brazil, Russia, India and China) countries as “the group will continue to hold the interest of long-term investors”, says Andrew Holland, CEO-Equities, Ambit Capital. Corroborating this, the dedicated BRICs Equity Funds, as tracked by EPFR Global, are improving investment inflows.
Exchange rate used:
1 USD = 48.14 INR (as on August 2009)
1 USD = 48.41 INR (as on September 2009)