PIPE deals: PE players caught on the wrong foot

Ahhhh…. sounds like consolation, but it’s not just retailers losing money in the market. Even the valuation experts were taken by storm in the recent bull market.

Apart from the usual investment in unlisted companies with 2-3 years timeline, Private Equity (PE) players invest in some listed companies as well. These kinds of deals are known as private investment in public enterprises (PIPE).

It not a written law in some market bible that PE firms can’t invest in listed companies, but they usually refrain from doing so and for good. Last bull market saw many PE firms charting PIPE deals at exorbitantly high valuations only to see their money vanishing in a jiffy.

A market study by Venture Intelligence shows at least 33 such deals are already out of money. The impact gets magnified with additional information that PE players striked 51 PIPE deals last year.

The deal book has all big names including Carlyle's investment in Allsec Technologies, Reliance Capital's in Maxwell Industries, Goldman Sachs Investments' in Spentex Industries, New Vernon's in JB Chemicals and Unichem Laboratories, Clearwater's in Kopran, ICICI Venture's in Geometric Software. Nalanda Capital lost heavily in Vaibhav Gems where it invested at Rs230 per share. The scrip is trading at Rs70 nowadays.
However, the deal format is not likely to fade away. Most players see market reaction as a temporary blip and are really not bothered. The PE funds are likely to play a more activist role in running their investee companies.

Comments

Post a Comment

Popular posts from this blog

Startup Valuations: Too much, too early?

Corporate valuations of the cleantech firms have always been an issue of fervent debate. On one hand, a set of market participants advocates usage of traditional valuation methods (discounted cash flow, comparable company analysis etc.) to arrive at a figure, while another school of thought propagates the consideration of intangible variables like the impact of new technology on common masses and the quantum change the technology promises to bring in daily life of an average user. Automotive battery and electric vehicle manufacturers are no exceptions with a number of low sales, concept stage companies receiving high valuations. Here are a few examples. A123Systems Inc. The company was incubated in MIT in 2001. After initial rounds of funding and dropping the original idea of self-organizing batteries, A123 scored big with a contract to supply batteries to Black & Decker power tools in 2005. The company has raised around US$300m in as much as six rounds of funding excluding the com
Read more

Alternative Propulsion Systems: ETV Motors gets US$12m in initial round of funding

Alternative energy storage and powertrain investments have been on rise lately. Apart from many venture capitalists taking a U-turn on their investment policies ( Vinod Khosla being the prominent one), encashing the old industrial investments and dedicating significant portion of their corpus for clean technology (Former president candidate Al Gore's Generation Investment Management Fund et al). After the recently completed investments of Berkshire Hathaway in BYD and GE ’s investment in A123 (battery manufacturer) and Think Global (makers of TH!NK City electric vehicle), an Israeli company has raised US$12m in Series A funding for the development of electric vehicle propulsion technology. Quercus Trust and 21Ventures LLC jointly invested in ETV Motors . The company is developing micro-turbine technology , another possible ‘game changer’ in plug-in hybrid-electric vehicle (PHEV) market. ETV is contelplating the vehicle propulsion system as a combination of high voltage lithium
Read more

Lead Carbon: Rising upto the challange

Automotive battery market is heating up. Last week, the state of Michigan approved investments by four battery producers amounting to US$1.7 billion . Lithium-ion battery technology, which is often touted as the most mature technology for the automotive use dominated the investment space in the state. However, the week also witnessed a rather unusual deal between battery major Exide Technologies and relatively unknown Axion Power International . Axion is a small company focusing on Lead Carbon battery technology. The company is working on the similar lines as Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO) in developing the activated carbon battery. Axion Power is taking a slightly different approach with its battery technology replacing the negative electrode with microporous activated carbon. The company is confident that by doing so it will be able to overcome major drawbacks of lead acid batteries namely high weight and low energy density. Whil
Read more