India has emerged the third largest destination for private equity in the Asia-Pacific region in 2007, next only to Australia and Taiwan, both in terms of value and volume of transactions.
According to data compiled by research outfit Thomson Financial, PE investments in India during the year have touched $2.49 billion, as against $1.05 billion in Hong Kong , $1.47 billion in Singapore and $752.2 million for the Chinese market. The total PE funding in India is nearly equal to the PE funding that has come into Hong Kong and Singapore together.
“The trend of India witnessing higher levels of PE funding than its Asian peers is just a reflection of its growing importance in the global economy. Going forward, we can expect continued buoyancy in both these markets as investors start seeing returns in the backdrop of abundance of high growth opportunities. However, with investors having figured out ways to secure exits from Chinese investments, China may just gain an edge over India,” said Srinivas Baratam, Director, UTI Ventures
According to Thomson Financial , 29 PE deals have been struck in India this year, next only to Australia (67) in the entire Asia Pacific region. Though there were 28 PE deals in China, the size of the deals were much smaller. While the average size of the deals in India is $85 million, the deal size in China was only $26 million and $188 million for Australia.
India is also a hot-bed for strategic buys, which include M&A activities, with $29.74 billion worth of strategic deals being struck, again the third highest in the Asia Pacific region. While Australia leads the pack with $76.07 billion of strategic deals, China reported $36.88 billion of such deals.
There were a total of 331 M&A deals worth $44.34 billion in India in the first seven months of 2007, as compared to 328 M&A deals worth $10.36 billion in 2006.
“Indian economy is in an expansion mode, most companies are gearing up for both organic and inorganic growth and PE funding would continue pouring in. However, most deals will continue to be in the PIPE (private investment in public enterprises) space though a few deals in unlisted companies may also happen,” Mahesh Chhabria, director- growth capital, 3i India.
The private equity juggernaut has been growing at a fast pace in India in the last two years. The Thomson Financial data says that in 2006, Indian companies have received PE funding worth $1.6 billion. This, however, is in sharp contrast with the data compiled by accounting firm Grant Thornton which said that in 2006, Indian companies received $7.5 billion as PE funds, while in the first half of 2007, $5.7 billion of PE deals have been struck.
The month of June alone reported $1.8 billion of PE deals in India, according to Grant Thornton Consequently most global PE major have made sizeable allocations for their India investments including Texas Pacific Group (TPG) and Citigroup Venture Capital (CVC) which are upping the ante on their India portfolio.
Both are allocating $1 billion each for future India investments out of their new funds. “We are looking to make investments of more than $1 billion in India out of the emerging markets fund and future investments will be made out of CVC. The one big advantage of the change is that it allows us to do bigger deals in India,” said Managing Director Citigroup Investments India, Ajay Relan.
Experts say over 100 PE firms are waiting to deploy $20 billion in Indian companies.
Source: Economic Times