Private equity (PE) is pouring into India, with investments nearly doubling to $2.5 billion during January-March 2007, riding high on six to seven mega deals during the period. In the corresponding period last year, PE investments totalled $1.27 billion. In calendar 2006, PE investments were pegged at nearly $7.6 billion, and given the success of PE as an asset class, this figure could get bettered in 2007 and may even double, industry experts say. Venture capital (VC) investments are pegged at $130 million in the first quarter this year with 20-odd deals, against $125 million with the same number of deals during Jan-March’06.
Not only has the PE activity increased this year in terms of number of deals, but the average size of the deals has gone up significantly. During Jan-March, 90 deals were struck, of which seven were $100 million-plus investments.
In Q1 last year, 75 private equity investors pumped in funds, with a lone mega deal ($100 million plus) of Temasek’s investment in Tata Tele Services. The IT and ITES sectors attracted the maximum number of PE and VC investors, followed by manufacturing, financial services, media and engineering & construction. A similar trend was reflected in PE deals last year, with IT leading the pack.
Says Sanjiv Kaul, MD, ChryCapital “Private equity has demonstrated its superiority as an asset class over the last three years, not merely on the basis of the excellent numbers but based on the feedback and endorsements received from the satisfied promoters of the various portfolio companies that have sought PE funds and intend to seek the same again in the future.”
“Today an entrepreneur has an array of choices when it comes to seeking investment funds from different asset classes, but when it comes to his desire for smart money, PE is perceived as a front-runner”, he added.
Some of the mega deals in the first quarter include a combined deal of about $520 million in the NSE, by a clutch of investors including Goldman Sachs, General Atlantic, Morgan Stanley, Citigroup, Actis in two rounds; Rs 848 crore investment in IDFC by Khazanah Nasional Berhad, investment arm of the Malaysian government, investment in Nimbus Communications of $125 million from British investment firm 3i Group, Cisco Systems and Oman International Fund; ADM, a Hong Kong-based fund’s investment in S Kumars Nationwide, and INX group investment from Temasek-led funds, and Kotak Mahindra Bank’s Private Equity Group investment of Rs 100 crore in DRS Logistics, a logistics and transportation service provider.
Arun Natarajan, founder and CEO Venture Intelligence India, says “the average size of the deal has gone up significantly in this quarter. There is much more activity expected on the PE front this year, with bigger and more number of deals”.
Source : Times of India