A tale of two emerging giants

Until the financial and economic crises took hold, China and India were at the forefront of emerging markets private equity – and were believed to be forging ahead at a roughly equal speed. Until now, that is. While observers of the private equity market in China can see green shoots sprouting up all around them, in India the leaves appear to have withered on the vine.

The Deloitte Private Equity Confidence Survey's Global Emerging Markets Comparative Report finds that half of GP respondents expect investment activity in China to increase, while only 13 percent expect a decrease. In marked contrast, only 20 percent expect deals to accelerate in India, compared with fully 60 percent predicting a decline.

The way in which sentiment has reversed in India since the first half of 2007 can be seen in the chart below. Back then, 84 percent were awaiting a market upturn, while not one single respondent imagined deal flow would slow down. Underlying the newfound pessimism are three factors cited by respondents: overall market conditions, low liquidity and sellers' [unrealistic] value expectations. “There is a lot of uncertainty in the market, and it is difficult to close transactions,” says a source. “You have to be very careful when selecting deals.”

In buoyant China, the following view was expressed: “People are more receptive to private equity than before. Overall, there are bigger deals, more people and resources.” Full steam ahead for China – will India be left lagging behind?