The private equity (PE) industry is likely to witness a slowdown by as much as 50% by 2010, say industry experts. After riding on a boom and witnessing stupendous growth year-on-year, PE players such as Baring Private Equity Partners, ChrysCapital, India Value Fund Advisors and Kotak Private Equity Group among others have indicated that they will soon take a conservative approach towards investments.
According to Baring, PE firms are overexposed in India. While valuations on the country’s share market have more than quadrupled over the last five years, corrections too are slated to happen.
“After fuelling a boom, PE investments will witness a slowdown. India will see half the number of investments in the next couple of years,” Baring Private Equity Partners (India) managing partner Rahul Bhasin told ET.
According to industry experts, export-oriented sectors such as IT and ITeS and real estate will witness lesser number of deals in the next two years. Also, the global slowdown will have some impact on the economic growth in India and that in turn could impact the demand for growth capital.
Says Actis partner JM Trivedi, “With the global slowdown, the pace of growth in PE investments could slow down as well. A large part of PE deals last year were PIPE (private investment in public equity) deals and with the stock markets correcting, preIPO and PIPE deals will slow down.”
Certain deals are likely to fall apart as valuations have skyrocketed to unrealistic figures. “Investors should focus more on fundamentals rather than speculations. It’s time they appreciate that returns are going to be less attractive than before,” said ChrysCapital MD Sanjiv D Kaul.
But, there is no reason to panic as quality deals will continue to happen, say experts. “Entrepreneurs are recognising the value that PE brings, to help them capitalise on the enormous growth opportunities, both domestic and global,” said Blackstone Advisors India CMD Akhil Gupta.
Kotak PE CEO Nitin Deshmukh feels that the stock market fall in the last couple of months will bring down the number of PE investments this year but the growth trajectory will be maintained in the next two years. According to a study by Evalueserve, there are more than 366 PE firms operating in India. A total of 386 deals were struck in India in 2007.
Source: Economic Times