"The loss suffered by these PIPE investments was largely due to the fact that market meltdown was significant, besides expectation of PE funds that market correction was a short term phenomenon went wrong," SMC Capitals Equity Head Jagannadham Thunuguntla said.

1. Thursday January 15, 01:44 AM
PE investments in listed firms suffer loss of nearly $1 billion
New Delhi, PTI:
Private equity investments in listed firms have lost nearly $1 billion so far this year largely due to
the ongoing downturn in the capital market.
An analysis of private investment in public equity (PIPE) in 2008 shows that these deals in the
country have lost funds to the tune of $0.89 billion till January 12 this year.
The PIPEs of 2008 have lost about 53.29 per cent from their investment of $1.67 billion to
current mark to market value of $0.78 billion, representing an absolute loss of $0.89 billion,
Nexgen Capitals, the merchant-banking arm of brokerage firm SMC Global Securities,
said in its latest report.
quot;The loss suffered by these PIPE investments was largely due to the fact that market meltdown
was significant, besides expectation of PE funds that market correction was a short term
phenomenon went wrong,quot; SMC Capitals Equity Head Jagannadham Thunuguntla said.
An industry-wise analysis shows that wealth erosion was all pervasive across the sectors.
There were as many as 30 PIPE deals in the year 2008. Out of those 30 deals, 93 per cent or
as many as 28 were in losses while only two deals amounting to seven per cent of the total deal
volume registered gains.
The two deals that recorded gains were from the oil & gas and the media sectors.
The current mark to market value of Nalanda Capital's investment of USD 21.42 million stood at
USD 24.17 million, representing a return rate of 12.84 per cent. Meanwhile, the mark to market
value of Nevis Capital Partner's USD 6.28 million grew by over 31 per cent and stood at USD
8.26 million. Regarding the outlook for PIPE investments, Thunuguntla said quot;it will take a while
before any recovery comes and before these investments comes into profitquot;.
In the aviation sector, there was a sharp dip in current mark-to-market values of around 53 per
cent in PIPE deals of 2008. While, in BFSI sector the decline was 48 per cent, in education, the
dip was as much as 74 per cent and in energy it was nearly 43 per cent.
Barring the oil and gas sector, all the other segments reported negative returns. Engineering
space reported a loss of 69 per cent, health care 39 per cent, infrastructure 87 per cent,
manufacturing (70 per cent), media (63 per cent), pharmaceutical (82 per cent), retail (81 per
cent) and shipping and logistics (51 per cent).
After very rough performance of PIPEs of 2007 in terms of current MTM values, there is no
respite for private equity investors even from their PIPE investments of 2008.

2. In the year 2008, the capital market was not in a bullish mode, but still these PIPE deals incurred
over 53 per cent loss, which is quite significant, Thunuguntla said.