Private equity investment in India shot up an impressive 57% in the first six months of the year, a $2.098 billion rise over $3.661 billion in corresponding period in 2010. The numbers are impressive at a time when foreign investors have invested only $1.92 billion in the stock markets in the same period.
Kunal Shrivastava, Research director, VCCEdge said, ?Besides aggressive dealmaking by investors, there also seems to be a surge in appetite for private equity capital stemming from sluggish stock markets. Add to this the significant hikes in interest rates that make the credit markets unattractive for raising capital.?
Between January to June 2011 India clocked 240 deals worth $5.759 billion compared to 183 deals worth $3.661 billion in corresponding period in 2010. On a quarter to quarter basis too there is an marked growth of 72% from $1.83 billion in Q2 2010 to $3.14 billion in Q2 2011. Deal volume also shot up from 90 to 137 during the same period, as per the latest data released by VCCEdge, the data division of PE and VC tracking firm VCCircle. Interestingly, private equity deals under $50 million accounted for 67.15% of total deal volume in Q2 2011 and big-ticket deals ($100 million and above) constituted 47.02% of the total private equity capital invested during the quarter. As the stock markets are dull, exits have dipped with just $620 million realised across 26 deals as compared to $1.34 billion across 41 deals in Q2 2010.
Speaking on the trends Amit Chander, head of investments Healthcare and Pharma, Baring India, said, this surge in deal activity is also on account of the base effect of 2010 which was not a very active year for investments owing to global uncertainties.
?Now, both the funds and entrepreneurs have gone through a learning curve and understand the risk reward ratio better. They factor the risk well before making the investment. Entrepreneurs are going in for expansion, keeping in view the global reality.? Chander adds that he sees PE investments continue to be robust in the next 3-4 years as the money that was raised prior to 2009 is still to be deployed by funds.
The Blue eyed sectors for PE investment was industrials with deals worth $989, Materials at $664, and consumer discretionary at $479 million. Sanjeev Bhalla, head of equities & alternative investments, Bank of Bahrain & Kuwait, said, ?Foreign companies want to capture insatiable demand of Indian consumer, the trend which will continue for some more time.