Please give a brief description on your firm's business
CLSA Capital Partners is the alternative asset management
arm of CLSA Asia-Pacific Markets, Asia's leading independent
brokerage and investment group. With approximately US$2.6
billion in funds under management and seven offices across the
region, including Hong Kong, Singapore and Tokyo, CLSA Capital
Partners offers a diversified and increasing range of
investment vehicles. Our funds are designed to generate
exceptional returns and combine CLSA's unique understanding in
Asia with a long term investment capability. Our experienced
team with long established roots in the region has helped many
Asian companies realise their potential.
To what extent do you outsource work and to which law
Given our pan-Asian and multi-sector focus, we use a wide
variety of firms for work. This ranges from transactional
investment work, regulatory advice relating to our operations,
and fundraising. In India, the law firms we primarily use are
Trilegal, Amarchand and Wadia Ghandy.
How has the private equity market in India performed this
The dealmaking environment has been fairly sluggish to date.
Investors have definitely become more cautious as a function of
the macro-challenges now facing the Indian economy as well as
the global economic macro situation; added to this are the
ongoing uncertainties around the taxation environment in India,
as well as the inconsistency and lack of clarity around the
enforceability of certain fairly central investment terms.
The Sebi notified the new Takeover Code on September 23
2011. To what extent is this as a positive development?
We see this as a pretty positive step. The new Takeover Code
provides more clarity and has, in a number of areas, sought to
address ambiguities that existed in the previous regime. The
increase in the trigger for an open offer to 25% is certainly a
positive development for those investors, like ourselves, that
tend to lean toward minority/ non-control investments.
To what extent do you think the Code will revolutionise the
investment landscape in India?
"Revolutionise" is perhaps too strong a word. There is
little doubt that, for example, the increased open offer
trigger is favourable to private equity investors who are
looking to minority investments. It broadens the universe of
investments they can look at without triggering open offer
requirements and, with an improvement in the overall macro
environment, will likely support an increase in Pipe
transactions beyond current levels. It will also support
investee companies to obtain more robust capital financing. In
addition to that, takeover issues that have previously affected
or even prevented minority investment exits will be eased.
However, the Takeover Code changes in and of themselves will
have a limited impact given some of the other policy and
regulatory hurdles that exist in the India FDI environment.
What are the key challenges facing the Indian private
The key challenges we are seeing at this time are:
- India still has a structural over-supply of private
equity capital given the volume of quality deal flow.
Therefore, deals are highly intermediated, competitive
tension is typically high for any quality deal and private
equity valuations are not representative of the headwinds
confronting the Indian economy.
- Regulatory hurdles and uncertain policy environment in
various sectors has somewhat shaken investors' confidence.
These uncertainties erode the ability to accurately
anticipate the behaviours of the investment environment and
act as a fetter to inflows of investment capital from
overseas. While our belief in the overall long term growth
story of India remains intact, there is no doubt that the
regulatory inconsistency presents challenges.
- The recent tax law amendments are unfavourable for FDI in
India and there is considerable uncertainty as to how these
changes will be applied and enforced. The application and
enforcement of these changes will likely take some
considerable time to crystallize, during which there will
likely be a drag on overall FDI volumes.
- Forex fluctuations are affecting returns (notional or
actual) in dollar terms.
- Aside from the above issues, the general economic
scenario in India looks very challenging at this point of the
cycle. The high fiscal deficit, high inflation, monetary
tightening and lack of political resolve to execute reforms
across sectors are combining to suppress volumes of FDI that
India could otherwise be seeing. India does remain a
compelling growth story and key investment destination, and
the hope must be that a number of the resolvable regulatory
and policy-led issues can be smoothed out to the benefit of
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