Debt funding for new infrastructure projects is facing bottlenecks with private equity (PE) funds exiting from investment commitments. Banking sources said that only the existing pipeline sanctions were being disbursed. However, banks are not prepared to release debt funds to some planned power projects, including ultra mega power projects. This is because promoters have relied substantially on PE funds. PE funds, in the past, had resorted to using leveraged buyouts. This implied using borrowed funds for acquiring equity stakes in new projects. PE funds had committed equity funding in some projects up to 49 per cent. […]

With traditional sources of finance in short supply, most Indian companies, including leading corporate houses, are turning to private equity to raise capital. Private equity is looking more attractive as factors like the ongoing credit crunch, tighter lending norms imposed by banks and slowing demand have forced companies to prioritise their capex plans. According to a cross-section of big ticket PE firms ET spoke to, PE investments could gross $10-12 billion in the next financial year. While this may be less than the previous year, it is a substantial amount in the middle of a global downturn. Investments would start flowing once promoters begin to align valuation expectations to the corrections in the market, officials at a number of PE firms said. […]