Private equity investments in India fall by 67%

To date, the year 2009 has not been a great one for private equity firms investing in India. In the first 11 months of the year, private equity firms invested a total of $3.25 billion in the country, a sharp fall of about 67 percent from the $9.81 billion they invested in the country in the same period last year.

The number of deals has also fallen significantly to 204 in the first eleven months of 2009 from 423 deals struck in the corresponding period last year, according to Venture Intelligence, an Indian private equity-focused data service.

In terms of sectors, IT and IT-enabled services saw $590 million being invested in 53 transactions, the most of any sector. This was followed by $409 million being invested in 13 deals in the energy sector. The banking and financial services sector was next with $324 million worth of investments, although in terms of the number of deals, the sector was more active than energy and saw 27 deals. Telecom and media and entertainment were other popular sectors with investments of $291 million and $273 million respectively.

“In the first nine months of 2008, the private equity investments were carrying on from 2007 and going quite strong,” Arun Natarajan, managing director and CEO of Venture Intelligence, told PEI Asia. “In 2009 however, private equity investments are yet to recover significantly despite a strong uptick in public markets,” he added.

In his view, liquidity issues among limited partners and the challenging environment for new fundraising was one of the key reasons for a slower pace of investments in 2009.

In 2009 so far, 12 private equity funds have raised a total of $3.7 billion. Last year, a total of 23 funds had raised $5.1 billion.

Two of the largest funds closed this year are India Value Fund IV, which closed on $725 million in June, and NYLIM Jacob Ballas India Fund III, which closed on $440 million in January.

Some of the other firms currently in the market for India-focused funds are Reliance Capital, Tata Capital, Aditya Birla Private Equity, UTI Ventures, ICICI Venture, Multiples Alternate Asset Management, CX Partners, Edelweiss Capital, Halcyon, Milestone Religare, UTI Asset Management, SIDBI Venture Capital and Kaizen Global.

According to Natarajan, while it is unlikely that private equity investments in 2010 will hit 2007 levels when a total of $13.7 billion was invested in 480 deals, activity levels may reach 2006 levels when a total of $7.8 billion was invested across 338 deals.