GEORGE TOWN, Grand Cayman, Aug. 21 /PRNewswire/ -- Walkers, the global
offshore law firm of choice for companies, financial organizations, and
international law firms reports that private equity has emerged as a
popular financing option in India for capital investment and expansion
programs.
"The global credit crunch has tightened the availability of banking
finance, forcing investors in India and worldwide to reach out to private
equity funds as an alternative source of funding their capital
investment/expansion programs. Despite India's recent weakened economic
outlook and inflation at a 13-year high, the infrastructure sector
continues to attract global equity funds," Caroline Williams, Private
Equity partner in Walkers' Cayman office, said. "Additionally, India is
realizing increased interest from offshore money, which will be invested
into the national infrastructure program over the next five to seven
years."
In 2007, India attracted more private equity funds than China, and also
has more private enterprises. The high priority for development of
infrastructure, anticipated to need US$500bn in the next five years, makes
construction one of the most popular segments for investments. As an
example, last month, Red Fort announced an infrastructure fund focused on
ports and power station development that is estimated to raise in excess of
US$600m by the end of 2008. The company has already closed seven deals in
the real estate market worth US$200m in the first half of 2008 and
anticipates investing another US$300m by the end 2008 to make a total of
around 10-12 deals in 2008.
"The driving motivation for foreign direct investment inflows into
India continues to be double tax treaties associated with offshore
jurisdictions. Private equity funds establish wholly-owned subsidiaries in
offshore jurisdictions to invest into the Indian target company," said
Philip Millward, a Private Equity partner in Walkers' Hong Kong office.
"Clients of Walkers' Hong Kong office have established Special Purpose
Vehicles (SPVs) in the Cayman Islands and British Virgin Islands to operate
as holding companies for investments into India. These SPVs typically
invest into underlying Indian investee companies via a wholly-owned
subsidiary established in a country that has a double tax treaty with
India, namely Mauritius, Singapore, or Cyprus. By creating an offshore
holding structure, the private equity fund may avoid transferability
restrictions on an eventual exit from the underlying investment."
Despite some concern over valuations of Indian companies, the high
growth of the Indian economy has kept it attractive to private equity.
Private equity investment has risen consistently from US$2.03bn in 2005 to
US$17.14bn in 2007. And the deals are getting bigger. In 2007, 48 deals of
over US$100m were closed compared to 11 deals of over US$100m in 2006.
"Private equity funds are extremely keen to identify and invest in
growth opportunities in the Indian pre-IPO market. This enthusiasm, coupled
with a lack of viable investment opportunities in other markets, has made
private equity financing an easier source of capital than financial
institutions that are scaling back their lending activities in emerging
markets," said Richard Addlestone, a Private Equity partner in Walkers'
Cayman office. "However, private equity's insistence on taking
quasi-management positions within the investee companies can be perceived
as an encroachment on the funded company's ability to independently control
the growth and direction of the business. This can often lead to a focus on
short- to medium-term growth to facilitate an exit for the private equity
fund, not longer term strategies."
Sovereign wealth funds ("SWF"), such as Temesek, Dubai Investment
Corporation and others are also investing heavily in India. SWFs tend to be
known more for providing cash rather than management expertise. However,
SWFs are evolving, hiring staff with similar skills to those in private
equity houses and morphing into a type of private equity firm, themselves
and so leveling the playing field.
"While India does present some challenges due to the strict
restrictions of the Indian Companies Act, 1956 and the material regulatory
barriers if a fund investing in India is not a member of IOSCO, we
anticipate continued interest in India, and more activity from India
investors," continued Mr. Millward. "By working with a sophisticated law
firm that has vast experience both in private equity funds and in the Asian
markets, institutional investors and global financial organizations can
leverage the power of this emerging market."
About The Walkers Group
From offices in the Cayman Islands, the British Virgin Islands, Dubai,
Hong Kong, Jersey, London, and Tokyo, the Walkers group provides legal and
management services to leading FORTUNE 100 and FTSE 100 global corporations
and financial institutions, capital markets participants, investment fund
managers, and growth- and middle-market companies.
The Walkers group is comprised of leading offshore law firm, Walkers;
fund services provider, Walkers Fund Services Limited; and SPV and
corporate services providers, Walkers SPV Limited, Walkers (Jersey)
Limited, and Walkers (BVI) Limited.
In 2006, Walkers was named as the Who's Who Legal Law Firm of the Year:
Cayman Islands, the PLC Which Lawyer? Yearbook Leading Cayman Islands Law
Firm, The Lawyer's Offshore Law Firm of the Year, and was one of two firms
honored as "Offshore Legal Team of the Year" by the Society of Trust and
Estate Practitioners (STEP).
For more information on the Walkers group, visit us on the Web at
http://www.walkersglobal.com or contact us by e-mail at info@walkersglobal.com. To
contact Walkers by phone, call our Cayman Islands office at +345-949-0100.
SOURCE Walkers
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CONTACT:
Melissa Arnoff of Levick Strategic
Communications, for Walkers, +1-202-973-1336, Mobile:
+1-202-276-0070, marnoff@levick.com
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