Funds raised through the private equity route outpaced those raised through public issues during January-March 2007. Fewer issues getting the go-ahead from market regulator Sebi and volatility on the bourses are said to be the main reasons for the trend.
As per data provided by IVCJ Private Equity Journal, private equity players have invested about Rs 9,912 crore, 102% higher than the corresponding period of the previous year (January-March 2006). According to Prime Database, 34 companies raised Rs 7,840 crore through public issues in comparison to 41 companies raising Rs 7,516 crore in the last quarter of 2005-06.
“Market was volatile during the quarter, so fewer companies decided to go ahead with thier public offerings fearing a cold response. Capital raised through public issues would be higher in the coming months as several IPOs and FPOs are waiting in the wings to hit the market,” said S Ramesh, COO, Kotak Investment Banking. The quarter also witnessed about 20 venture capital deals ringing in about Rs 542 crore. Powering its way through, the IT/ITeS sector bagged 16% of the total private equity investments.
The banking and financial sector pocketed 13% of PE funding, whereas media and entertainment sector received 11% of the net private equity capital during the quarter. Though, there has been an intense private funding activity in other “private equity pockets” like manufacturing and heavy engineering sectors, the above three sectors continue to be hot sectors for private equity investments in India.
According to analysts, though there has been an unrestrained funding to IT and banking firms, allocation to companies in sectors like consumer products, textiles and real estate have increased over the past one year.
“Private equity players have begun looking beyond export-oriented businesses to invest their money. The rise in allocations to non-IT and banking sectors emphasises the fact that PE players are becoming more focused on sectors that cater to the domestic demography,” said an analyst with a PE research firm.
India is also becoming a hot destination for private equity distress funds. The country has distressed assets to the tune of $35 billion. It is a safer bet for PE players to invest in distressed assets as many have a fair potential of recovery and are largely secured against tangible assets including high value real estate.
“Private equity and public issues do not feed the same type of companies. They are separate and distinct in their level of activity. Being very fragmented, there is no clarity on the type or nature of investments made by PE players. Unlike private funding, public issues are definite means to raise capital,” said Prithvi Haldea, managing director, Prime Database.
“Delay in giving approvals (by Sebi) to IPOs is one reason for the slackening of capital raised through equities market. At the moment, there are 65-odd IPOs waiting for Sebi’s approval. The regulator is taking lot of time to give approvals for public issues. This is bad for the market,” Mr Haldea added.
Source : Economic Times