FIPB REJECTS MAURITIUS-BASED INVESTMENT FUND INDIUM’S PROPOSAL TO INVEST $500 M IN INDIA VALUE FUND

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THE Foreign Investment Promotion Board (FIPB), the nodal body that clears foreign investment into India, has rejected Mauritius-based investment fund Indium’s proposal to park $500 million (Rs 2,500 crore) in a fund managed by private equity firm India Value Fund (IVF).

The nodal body refused to clear the proposal on the ground that Indium is not yet registered as a foreign venture capital (VC) fund, said a person with direct knowledge of the development.

Indium, which is looking at investment opportunities in India, was initially planning to invest $90 million (around Rs 450 crore) in IVF’s fourth fund, IVF IV. This proposal was rejected in April this year as both IVF IV and Indium are not Sebi-registered foreign VC funds. Since then, IVF has obtained an in-principle registration as a domestic VC fund from market regulator Sebi.

Indium had raised the amount it planned to invest in IVF IV to $500 million and filed a fresh application with FIPB. It was planning to invest in a wide range of industries across diverse sectors in India.

IVF, which usually picks up controlling equity stakes in small and mid-sized companies, currently has over $1-billion funds under its management. It invests in healthcare, retailing, outsourced services and media & entertainment. Its recent investments include taxi fleet operator V-Link Travel Solutions, which operates under the Meru brand, besides Kerala-based hospital chain DM Healthcare.

The firm had reportedly raised $725 million (Rs 3,516 crore) for its fourth fund recently. IVF manages $610 million across its three other funds.

As per senior executives in the private equity industry, a number of foreign firms are now looking at investment opportunities in India, as its economy is growing at a steady rate at a time when the world economy is undergoing a recession. Foreign PE firms that have opened offices in India last year include Kohlberg Kravis Roberts & Co and Bain Capital.

PE firms invested $889 million in 44 deals in three months to June, compared with $2,587 million in 92 deals in the year-ago period. The fall in numbers and the amount invested can be attributed to the cautious approach adopted by PE firms, as the corporate sector is yet to show good earnings growth.

Currently, there are over 366 PE firms operating in India. The industry witnessed a significant growth in the last few years with investments going up from $2 billion in 2005 to close to $17 billion in fiscal 2007-08.

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