With its debut investment of over Rs 250 crore in India, Bain Capital seems to have started the biggest rally of private equity (PE) investment in the country for 2010. According to PE experts, the Indian PE sector will witness maximum number of deals in the January-March quarter of 2010. The proposed investments of Rs 600 crore by Blackstone in Gharda Chemicals and $250 million proposed investment by Standard Chartered and Providence in Sony MSM are a few deals to get announced soon.
Apart frm the recently announced buyout of 15% stake in Himadri Chemicals by Bain Capital for Rs 252 crore, Bain will invest an additional Rs 328 crore for tender offer for 20% in Himadri. Standard Chartered?s another proposed deal in Ramki Infrastructure will see a Rs 150 crore investment, while another $300 million investment in Asian Infrastructure Pte Ltd by a clutch of PE firms such as Morgan Stanley and Goldman Sachs. According to Bhavesh Shah, executive director, JM Financial Consultants Pvt Ltd, PE deals worth a billion dollar could be signed during January-March quarter. He said, ?After a long dull period, the deal activities started picking up during August-September, and those deals are expected to be concluded in January-March quarter.?
Alok Gupta, managing director & CEO of Axis Private Equity, said, ?We can say confidently that the number of PE deals will go up in 2010 as compared to 2009. However, pricing expectation is still high, the factor which may keep the investors away from concluding the deals again.?
According to Venture Intelligence, a research service on Private Equity and M&A, PE firms invested about $1,392 million across 84 deals during the quarter ended December 2009, against $1,215 million invested across 72 deals during the same period last year.
It is higher than $807 million invested across 53 deals in the immediate previous quarter. The total PE investment in 2009 was $3,824 million across 232 deals as against the $10,468 million across 443 deals during 2008.
Arun Natarajan, managing director& CEO, Venture Intelligence, said, ?Our recent poll of PE/VC fund managers also indicates that investors expect the pace of deal closures to increase in 2010.? However, one of the challenges faced by PE funds in India in closing the deals is the low hit rate of deals reaching completion. According to a recent KPMG survey, the average hit rate for funds shows 2% of deals reaching completion. ?Deals are rejected outright as they do not meet the basic criteria of PE deals in terms of size of the deal, or poor management team or poor financial orregulatory reporting. Second, some private companies may suffer from poor corporate governance standards, and third, in line with the market view, valuations may be over-stretched, which may make investment unlikely,? the study said.
?Corporate India, which sees a momentum in activities such as expansions, is seriously looking for money. At the same time, PE firms are keen for good investments, which will witness a proper demand-supply equation,? another expert said.