In the first two months of this year, as many as 84 private equity or venture capital deals worth nearly $4.1 billion have already been announced, the report added. Though investments in the private equity arena are flowing in, the year 2008, it would be little 'cautious', because of the downturn in the US economy, appreciating rupee, high oil prices among others, Four-S Services said. However, the global credit crunch would not impact India much, as the major portion of the over 8% growth of the country would be driven by domestic demand. The PE investments would get a further fillip from the reasonable valuations that are prevailing after the 20-25% market correction so far this year. The Indian markets are expected to witness a further correction before investments picks up. "The investment momentum is expected to rise in the second half of 2008, that is post July," the report added. The report however pointed out that some of the factors that could pose challenges to the PE investment sector include lower growth rates for export-based industries due to strong rupee, high oil prices which is one of the reason behind high inflation, potential capital gains tax on external funds routed through Mauritius. Management buyouts and leveraged buyouts are set to grow in India based on market evolvement and different types of funds - Hedge, equity and Mezzanine will continue to seek a portion of the Indian market pie.
In the year 2007, PE and VC investments in India, hit $19.5 billion, ahead of China and neighboring Bric countries which received only $12.8 billion in PE. The total PE or VC investments announced in Indian companies was $19.5 billion across 394 deals in 2007, compared to $7.6 billion across 298 deals in 2006. The average deal size nearly doubled compared to 2006 ($41.7 million from $21.7 million), as even smaller investors that earlier used to look for $5-10 million deals began looking for $20-25 million deals.