Financial Daily from THE HINDU group of publications
Monday, Oct 06, 2003
Financial Daily from THE HINDU group of publications Monday, Oct 06, 2003 |
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Venture Capital Info-Tech - Outsourcing Angel funds look outside of IT BPO still the hottest; in consolidation mode: Survey Our Bureau
Chennai , Oct. 5 TWO trends are evident in the latest survey of venture capital and private equity activity for the quarter ended September 2003: that business process outsourcing (BPO) continued to be the hot favourite for investors, and VCs are now willing to look beyond the IT and BPO spaces too. According to data available with TSJ Media - which tracks venture capital and merger and acquisitions (M&A) activity involving Indian-founded companies worldwide, BPO witnessed eight deals during the quarter and hence showed up as the hottest sector for private equity investments. The media and entertainment sector emerged second with a significant pick up in deal activity. According to Mr Arun Natarajan, Editor, TSJ Media, "TheWarburg-Radhakrishna, ICICI Venture-Tata Infomedia, StanChart-NDTV deals, and CDC's buyout of the Punjab Government's stake in Punjab Tractors showed the willingness of private equity funds to look beyond the IT and BPO services sectors." According to data collated by TSJ Media, VCs and private equity firms invested over $180 million in 16 Indian companies during the quarter ended September 30, 2003. A release says that the July-September quarter witnessed a sharp pick up in deal flow compared to the April-June quarter, when 10 investments were announced. As many as 10 companies closed rounds of $5 million or more in the quarter ended September, compared to just two companies in the April-June quarter. The single largest investment during the quarter went to RadhakrishnaFoodland, a Mumbai-based food distribution and logistics services company. Global private equity fund Warburg Pincus invested $50 million in the company for a reported 25 per cent stake. This was followed by HT Media Ltd, a part of the New Delhi-based Hindustan Times newspaper group, which received $27.8 million from London-based Henderson Global Investors (part of Australian financial services group AMP). The $22 million received by BPO firm 24/7 Customer was the third largest investment during the quarter. The investment was made by leading Silicon Valley VC fund, SequoiaCapital, and 24/7's co-founder & CEO, Mr P.V. Kannan. Early-stage investments made a comeback with two Chennai-based healthcare BPO services firms — Rev IT Systems and Secova eServices — raising around $2million each during the quarter. Notable trends in the analysis revealed that the BPO space is in an M&A mood. A string of acquisitions of medium-sized BPO companies by their larger Indian counterparts and international IT/BPO services companies is evidence of this. The Bangalore-based call center firm, FirstRing, was acquired by ICICIOneSource, the BPO arm of financial services group ICICI. The quarter also witnessed the Hyderbad-based GMR Group selling its 51 per cent stake in financial services focussed BPO firm, Quintant Services, to iGate GlobalSolutions. Also, US-based private equity fund, General Atlantic Partners, exited its $50 million investment in Brigade Corporation by selling its stake to Brigade's management team, the release said. Mr Natarajan said, "Within the BPO sector, the healthcare BPO space witnessed the highest level of deal activity. In addition to a high level of M&A activity, almost all the first-round investments made by VCs during the quarter went to healthcare BPO firms." VisionHealthsource, a Chennai-based provider of billing and claims solutions for the healthcare service industry, was acquired by the US-based Perot Systems in a $10 million deal. Bangalore-based TRRS Imaging merged with the WestbridgeCapital and Acer Venture Capital funded Indecomm Global Services. Also, ClaimsBPO, the Nashik-based offshore division of US healthcare and insurance BPO firm GreenSnow Inc, was acquired by the Warburg Pincus-backed WNSGlobal. The TSJ Media analysis also showed that the media and entertainment sector witnessed a spurt in deal activity - both private equity and M&A - - during the quarter. NDTV, which needed capital once it decided to part ways with StarNews and launch its own 24-hour news channels, landed $11 million from Standard Chartered Private Equity. The Tata group's decision to sell its 49.9 per cent stake in the publicly listed information products company, TataInfomedia, attracted several private equity funds. ICICI Venture Capital ended up with the winning bid, picking up the stake for $22 million.
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