This story first appeared in DNA Money edition on Saturday, October 01, 2011.
Intel Capital, the global investment arm of chip giant Intel, is bracing for a slower exit pace for its investments in 2012.
Citing liquidity concerns, Sudheer Kumar Kuppam, managing director - India, Japan, ANZ and SE Asia, Intel Capital, said there are too many issues hovering global economic outlook.
“Until we see a solution for some of the issues, 2012 will probably be a little softer on the exits front,” he said.
“In the emerging markets one of the significant trends we have seen over the past few years is that most of our exits have been through an initial public offering (IPO). In the developed markets though, merger and acquisitions (M&A) have been the key mode of exit,”Kuppam said.
As far as overall exit pace for 2012 is concerned, it will be slower, mainly owing to the equity market situation which will not be very conducive for companies going public, he said.
In such a situation, the only fall-back options that venture capital and private equity (PE) firms will have are M&As, followed by secondary transactions (one investor selling to another), which will make for a significant part of exits next year.
“It is very unusual in the PE space that a single mode is used by investors to exit their portfolio companies. Rather, it is always a mix of IPOs, M&As and secondary sales. As far as buyback or put option is concerned, it is typically not pursued because one would always want to generate a decent return on investments which is not possible in case of a buyback,” said a top official from an investment advisory firm.
In 2011, Intel Capital exited 24 investments (4 IPOs and 20 acquisitions) globally, of which one was in India — HelloSoft Inc (which has a R&D centre in Hyderabad) was acquired by UK-based Imagination Technologies Ltd. Till December, the investment firm foresees another possible exit from one of its Indian portfolio companies — MCX — which has got Securities and Exchange Board of India’s approval for listing on the bourses.
“We are hoping it will happen despite unfavourable market conditions and most probably before the end of the year,” said Kuppam.
In another development, Intel Capital announced investments of $20 million across six companies, including FINO, which, in July 2011 received a `150 crore from The Blackstone Group.
With just 20% of the $250 million India Technology Fund left for deployment, Intel Capital is likely to go for its second India focused fund towards the end of 2012. “In 2010 we invested around $45 million while in 2011 year-to-date (YTD) we have done $38 million. We are roughly investing around $45-50 million every year. We still have enough to invest for another 12 months, so the new fund raising would only happen by end of next year,” he said.
The investment firm is not worried much about the non-conducive environment wherein a lot of new and existing investment firms are having a tough time attracting investors in their respective funds, popularly known as Limited Partners (LPs).
Kuppam said Intel is bullish o India for investments. “This is mainly because of the growth profile and huge opportunity with a lot of upside especially in the information technology space which is our focus area,” he said.
Intel Capital, the global investment arm of chip giant Intel, is bracing for a slower exit pace for its investments in 2012.
Citing liquidity concerns, Sudheer Kumar Kuppam, managing director - India, Japan, ANZ and SE Asia, Intel Capital, said there are too many issues hovering global economic outlook.
“Until we see a solution for some of the issues, 2012 will probably be a little softer on the exits front,” he said.
“In the emerging markets one of the significant trends we have seen over the past few years is that most of our exits have been through an initial public offering (IPO). In the developed markets though, merger and acquisitions (M&A) have been the key mode of exit,”Kuppam said.
As far as overall exit pace for 2012 is concerned, it will be slower, mainly owing to the equity market situation which will not be very conducive for companies going public, he said.
In such a situation, the only fall-back options that venture capital and private equity (PE) firms will have are M&As, followed by secondary transactions (one investor selling to another), which will make for a significant part of exits next year.
“It is very unusual in the PE space that a single mode is used by investors to exit their portfolio companies. Rather, it is always a mix of IPOs, M&As and secondary sales. As far as buyback or put option is concerned, it is typically not pursued because one would always want to generate a decent return on investments which is not possible in case of a buyback,” said a top official from an investment advisory firm.
In 2011, Intel Capital exited 24 investments (4 IPOs and 20 acquisitions) globally, of which one was in India — HelloSoft Inc (which has a R&D centre in Hyderabad) was acquired by UK-based Imagination Technologies Ltd. Till December, the investment firm foresees another possible exit from one of its Indian portfolio companies — MCX — which has got Securities and Exchange Board of India’s approval for listing on the bourses.
“We are hoping it will happen despite unfavourable market conditions and most probably before the end of the year,” said Kuppam.
In another development, Intel Capital announced investments of $20 million across six companies, including FINO, which, in July 2011 received a `150 crore from The Blackstone Group.
With just 20% of the $250 million India Technology Fund left for deployment, Intel Capital is likely to go for its second India focused fund towards the end of 2012. “In 2010 we invested around $45 million while in 2011 year-to-date (YTD) we have done $38 million. We are roughly investing around $45-50 million every year. We still have enough to invest for another 12 months, so the new fund raising would only happen by end of next year,” he said.
The investment firm is not worried much about the non-conducive environment wherein a lot of new and existing investment firms are having a tough time attracting investors in their respective funds, popularly known as Limited Partners (LPs).
Kuppam said Intel is bullish o India for investments. “This is mainly because of the growth profile and huge opportunity with a lot of upside especially in the information technology space which is our focus area,” he said.
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