Private equity firms in India prefer to be minority stakeholders in their target companies as a study showed only 4% of total deals in last four years were for acquiring a controlling stake.
According to the study by domestic brokerage firm SMC Capitals, “during the period between 2005 and the first quarter of 2009 in India, there were only 46 'controlling stake' transactions out of total 1,185 number of PE transactions during the period”.
The 'controlling stake deals' include deals where an investor acquire 50 per cent or more in the investee company.
The controlling stake PE deals in India are lower than the global average both in terms of number as well as value.
In terms of number, only 4% of total PE deals had acquired a controlling stake in the target company.
Besides, out of $40.87 billion total PE transaction value during the period under review, only $2.48 billion represent 'controlling stake' transactions, indicating 6% which is also lower than global average of 18-20%.
“This probably because of the fact that Indian promoters are 'emotionally' attached to their companies in comparison to promoters in developed markets,” SMC Capitals Equity Head Jagannadham Thunuguntla said.
Source: Business Standard