The Hindu Business Line : ‘Private equity deals may decline in 2008’

However, most of the PE fund managers and venture capitalists who had converged in Pune recently for the ‘VC Circle Growth Capital Forum’ , held the view that India’s long term growth story was intact and there was enough opportunities for PE players.

“I see a pause, as the markets could soften further; people are going to sit and watch before going to market. Private equity investment is going to be tough in 2008,” Mr Abizer Diwanji, Executive Director (Advisory), KPMG, said.

Besides market sentiment, there are also a lot of regulatory issues in specific sectors to be kept in mind while investing in India, he added.

“I see lot of deals happening in the IT & ITES space in 3 to 6 months, but lots of things need to stabilise… like the US economy,” said Mr Kartik Parija, Managing Director, Zephyr Peacock.

“There could be a slowdown in PE deals as there is a fair amount of uncertainty which is was going to be there (for some time); but in the long-term, PE is here to stay,” said Mr Nikhil Khattau, Managing Director, Mayfield Fund.

“In the IT & ITES space, valuations and multiples have come down in the short-to-medium term as the valuation of the rupee and the sub-prime crisis is of concern.

These developments have brought down expectations for these companies,” Mr Parija said.

Close to 50 per cent of private equity deals were happening in western India, Mr Parija, said.

“India is one of the most attractive markets for the PE players along with China as well as other markets such as Australia and Vietnam, but to PE investors India gives lesser returns than China,” Mr Abizer said.

There is huge opportunity for growth of PE investments in India.

That requires deeper venture capital penetration as well as sector-specific focus and specialisation, said Mr George Thomas, Partner, India Value Fund, which manages $600 million in capital across three funds in India.

There is a lot of scope for investment in companies that would cater to the infrastructure sector, said a PE fund official. For example, he said, power sector transformers are in short supply.

There are also huge opportunities in the areas of infrastructure leasing, security, and related services, he said.

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