The Hindu Business Line : ‘Private equity investments into India set to increase’

Hyderabad, Sept. 8 The global economic slowdown, especially in the US and Europe, will drive more private equity (PE) funds into India over next two or three years.

This was the view expressed by experts at a panel discussion on private equity organised by Indian School of Business (ISB) here on Saturday.

Though there has been a tightening of liquidity globally, India is lucky because of the strong domestic spending and would attract the attention of global PE players, according to Mr Deepak Shahdadpuri, Managing Director, Beacon India Advisors.

“Over the next two or three years, 30 per cent of all new funds will go to the emerging markets in which India is a strong player,” he said.

Mr Gaurav Mathur, Managing Director, India Equity Partners, said the possibility of India’s GDP growth at a minimum of six per cent (even if it slows down from the current rate), would drive a fundamental shift in the asset allocation of global investors. “Obviously, more capital is going to land in India from PE,” he said.

Along with the increased PE inflow from abroad, the days to come would also see a renewed focus of PE investors on the performance of assets/sectors, pointed out Mr Mohit Bhatnagar, Operating Partner, Sequoia Capital.

Preference for Unlisted cos

The panelists also observed that the unlisted companies would continue to be the first priority of PEs vis-À-vis the listed ones due to operational flexibilities and growth prospects.

“Most of the PEs, including us, are very keen to stay with unlisted businesses and bullish on expansion capital,” Mr Gul Mukhey, Director of HSBC-PE, said.

Unlike in the West, where PE is being used as distress capital, investing in India is perceived as growth capital with good scope for good valuations while exiting, the panelists said.

Citing a recent survey by Grant Thornton, its Partner (Corporate Finance), Mr H.V. Harish, said the proportion of PE investment below $50 million was as high as 83 per cent during the first half of 2008.

“This was similar for the corresponding period of 2007 and further higher at 91 per cent for the first half of 2006,” he said.

In the first half of 2008, the majority of PE investments in India were concentrated in real estate and infrastructure management (34 per cent) and IT and ITeS, he added.

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