In a development that clearly underlines that there’s a large pool of capital available for investment in domestic companies, around 135 alternative investment funds (AIFs), comprising hedge funds, private equity and venture capital firms, are sitting on a cash pile of nearly Rs 25,000 crore, as per data compiled by market regulator Securities and Exchange Board of India (Sebi).
The dry powder (funds raised but not yet invested) as on March 31 increased by 52% from the corresponding period last year, to Rs 24,759.84 crore. AIFs invested Rs 7,356.81 crore, while commitment and funds raised added up to Rs 32,116.65 crore.
Increasing dry powder indicates more capital available for investment into domestic companies that seek to expand their scale of production. Vishakha Mulye, managing director and chief executive of ICICI Venture, says there are many unlisted companies that have great potential, adding that she expects private equity investments to increase by around 25% in calendar year 2015.
“We like sectors that are consumption-related, financial services and infrastructure services sectors like logistics.
Within financial services, our focus goes beyond banking to other financial intermediaries,” Mulye added.
Despite a rise in dry powder due to higher capital raised, industry watchers are confident that AIFs have learned from past mistakes and now attach greater weightage to the sector and ‘right’ valuation of the company they invest capital in. “Global funds remain very positive on India. But quality of deals and sensible valuations will drive actual investment,” observes Vikram Hosangady, head of transaction and restructuring at KMPG India.
In the past, as per McKinsey data, the quantum of funds available for investment to PE fund managers increased from $0.1 billion in 2004 to $22.5 billion in 2009. This led private equity firms to increasingly shift allocation towards the infrastructure industry.
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