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In the last five years, private equity has emerged a bigger source of funds than capital market for investors and ‘the prime mover of economy,' according to Mr Rajiv Memani, Country Managing Partner, Ernst & Young.
This is good news for small and medium players and new start-ups which are yet to gain the size and scale needed to tap the capital market. In addition, private equity has also focussed on infrastructure over the last one year.
In recent years, investors have raised 50-75 per cent more from private equity than from capital market, not counting the funds raised through disinvestment of public sector units. As a component of foreign direct investment too, private equity accounts for about a third of the funds without counting PE from foreign institutional investors.
In the last five years, private equity has contributed about $45 billion spread across 1,500 transactions with nearly a third of them coming into companies in South India. Of the total number of transactions, about two-thirds are of less than $20 million, he said.
For instance, in 2010 private accounted for about $7-8 billion investments against $4-5 billion from the capital market. Private equity has also driven most of the sectors that have contributed to the growth of the economy, he said.
‘stunning statistic'
These “stunning statistic” show that private equity has evolved into a significant form of capital for Indian companies. Between 2006 and 2010, private equity funds have been “sector agnostic” beginning with telecom, the funds have powered financial services, IT, consumers goods, healthcare and in the last one year infrastructure. These funds have looked at power, roads and ports.
Mr Memani was addressing a seminar on emerging trends in private equity organised today by the Indo-American Chamber of Commerce and Industry.
Mr Andrew T. Simkin, US Consul-General in Chennai, said that an emerging trend in foreign investment is that made by Indian companies in the US. Indian corporate sector's “fierce devotion to cost cutting would be a positive feature to bring into the US to revitalise US business,” he said.
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