Private Equity India Companies
Private Equity Talks with India Companies Stall
Private equity investment in India companies has developed impressively despite the recession but talks have stalled between top consumer retain chains and private equity firms. Large retail chains including Tata's Croma and Videocon's Next and Planet M disagree with buyout firms over valuation.Private equity firms are trying to get a stake of the rapidly expanding consumer durables sector which is expanding an estimated 15-20% riding an increase in demand. Yet firms such as Northbridge Capital, TVS Capital Funds, SAC Capital Partners, Citi Venture Capital International (CVCI), Avigo Capital Partners and Samara Capital are struggling to buy up stakes in Indian retail companies. Buyout firms are valuing the specialty retailers far less than what the businesses optimistically project. Part of the issue is that the private equity firms are skeptical of the emerging retail market as it is less developed as that of other countries'.
Most of the chains are still in a learning and correction stage. Valuations are dependent on such factors, especially in an uncertain market,” said the CEO of a leading PE fund, who asked not to be named.Read about the increase in India family office investors
Private equity funds usually pick up around 15-20% stake in retail chains or companies with an eye on returns within the next 3-5 years. Valuations of retail formats are determined by factors such as turnover, number of outlets, sales per sq ft and gross margins.
The new age chains are selling a large number of premium products such as LED (light emitting diodes)/LCD (light crystal display) TVs, top-end refrigerators and front-loading washing machines. Organised retail currently constitutes 9-10% of the total Rs 60,000 crore consumer durables, IT & telecom market. Retailers are not in a mood to bargain. These chains, backed by some of the largest corporate houses in the country, are not willing to accept anything less than what they feel is ‘a fair valuation’. Source
Other articles about private equity in India: Private Equity India; Value of Private Equity Deals in India Drops; Private Equity Boom in India
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Tags: private equity india, indian private equity, buyout india, private equity and india companies, private equity retail, private equity retailers, durables, valuation, india valuation
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