Private equity and venture capital investment is expected to go beyond $10 billion in India this year for the first time, after figures for the first half compiled by PricewaterhouseCoopers showed the industry had invested over $6 billion already.
This total compares favorably to the $7.9 billion invested during 2006. Private equity investments have also been rising steadily, with over 200 deals during the first half of 2007.
Executive director at PricewaterhouseCoopers, Sanjeev Krishan, said: “The next 12 to 18 months is crucial for the asset class as for the moment the number of divestments can be counted on your hands but my expectation is the amount of exits will go up significantly. The Indian stock markets haven’t stopped for a second since 2003 while pricing ratios have grown but they will keep on growing.”
“Investors often view India as part of their South East Asian focus. The challenge for us is to attract investors to view India as a sole target for funds.”
Buyout firms’ focus in the country has expanded to include real estate, financial services, media and entertainment as well as more traditionally strong Indian sectors such as healthcare, IT and telecoms.
For example, investment in banking & financial services has accounted for around 20 percent of private equity investment in the first half in comparison to 7 to 8 percent in 2005 & 2006.
“There aren’t very many highly leveraged deals and investments are mostly equity and so problems in the debt markets are unlikely to affect the asset class in India,” Krishan said. However, Krishan said the increasing funds directed at the country made it imperative for firms to buy the right asset to secure private equity style returns.
Notable investments in the country include The Carlyle Group and Citigroup’s $786 million acquisition of a 7.11 percent stake in the Housing Development Finance Corporation and The Blackstone Group buying of a 26 percent stake in Ushodaya Enterprises, a television stations owner and operator, for $ 275 million.
Apax Partners is attempting an $800 million buyout of IT company Patni, although it is experiencing resistance from 16 percent shareholder and founder Narendra Patni. However, his two brothers Ashok and Garendra, with a 28 percent stake are keen to sell to the buyout firm.