Private equity players look beyond IT to invest resources

The Indian private equity market will see a greater momentum as PE players look beyond sectors like information technology and start streamlining their resources to other industries like infrastructure and construction, alternative fuels, retail, media, financial services etc.

Written by Papiya De

August 18, 2007 00:00 IST

The Indian private equity (PE) market will see a greater momentum as PE players look beyond sectors like information technology (IT) and start streamlining their resources to other industries like infrastructure and construction, alternative fuels, retail, media, financial services etc.

?India will witness a lot more action once PE players broaden their portfolio. Sectors like IT have become not only overheated but also overvalued. If one looks beyond IT, the trillion-dollar economy has much to offer. I expect to see a lot of action in industries like infrastructure and construction, pharma, auto components, media, financial services, travel and the hospitality industries,? said Nainesh Jaisingh, managing director, Standard Chartered Private Equity.

A study by Venture Intelligence, a research service focused on private equity and venture capital, reveal that private equity firms invested about $3.2 billion across 76 Indian companies during the quarter ended June 2007, out of which over 25 deals worth over $550 million were in IT and ITeS.

However, from a share of nearly 70% of the total PE investments, IT now accounts for around 30-33%.

Apart from sectors like online broking, media, infrastructure and construction, sectors like bio-fuels, pharma and biotechnology will attract PE players soon.

Says Arun Natarajan, founder and CEO, Venture Intelligence India, ?BFSI (banking, financial services and insurance) and manufacturing apart, industries like healthcare and life sciences are generating a lot of interest among PE players.?

?We have seen quite a lot of investment in media, manufacturing and BFSI. I will say that the PE sector is fairly secular. Right now, retail is the buzzword amongst PE players and we expect investment flowing in retail in a big way,? says Alok Mittal, executive director, Cannan Partners India.

In 2006, 34% of all investments fell in the $10-25 million category, followed by 24% in the sub-$5 million category. As deals start moving from IT to capital intensive sectors like infrastructure, construction and pharma, the average deal size will also increase, say industry experts.

This article was first uploaded on August eighteen, twenty seven, at zero minutes past twelve in the am.