Sonia

Riding high on the Indian growth story, private equity investments in the country have crossed $2 billion during July alone and can touch $15 billion by the end of this year, a study by global consultancy firm PricewaterhouseCoopers said today.

The surge in PE investments is the result of huge returns of over 25-30 per cent which Indian firms provide to investors. “This by far exceeds any other market in the developed countries,” PwC Executive Director Sanjeev Krishan said.

Of the total, 55-60 per cent investments are made by overseas PE firms, he said, added that “for the year ahead, leading PE firms such as ChrysCapital and Henderson Equity Partners have several deals in the pipeline”.

Though some concerns have been raised by the PE firms regarding valuations, the sequential growth witnessed by the Indian economy has made them stay interested, the PwC report on ‘M&A in the first half of 2007 in India’ said. Going ahead, these PE funds are expected to favour consumers in retail, power equipment, healthcare, entertainment, media and the banking and financial services sectors, the report said.

Private equity investments have been rising steadily with over 200 deals worth over $ 6 billion during the first half of this year, compared to $7.9 billion in the whole of 2006.

There has also been a shift in sector focus by private equity funds with industries such as real estate, banking and financial services and media and entertainment witnessing tremendous growth in investment vis-a-vis traditional sectors such as IT, ITeS, pharmaceuticals, healthcare and telecom, the report added.

Investment in banking and financial services accounted for over 20 per cent of total private equity investment in the first half this year compared to just 7-8 per cent in 2005 and 2006.

Some significant private equity deals during the first six months of 2007 include Carlyle Group and Citigroup Inc’s investment of 786 million dollars for a 7.11 per cent stake in Housing Development Finance Corporation Limited.

NYSE Group Inc, Goldman Sachs Group Inc, General Atlantic LLC and Softbank Asian Infrastructure Fund invested about 500 million dollars in National Stock Exchange for a 20 per cent stake.

Deutsche Bourse and Singapore Stock Exchange picked up a 5 per cent stake in Bombay Stock Exchange for $42.7 million each.

In one of the largest FDI deals in Indian realty, Morgan Stanley invested $152 million in realtor Oberoi Constructions for a 10.75 per cent stake.

According to another global consulting firm, Grant Thornton, the total number of announced private equity deals stands at 30 worth $2.79 billion during July this year as against 36 with a value of $1.81 billion in June.

Foreign direct investment in India have jumped 75 per cent to $19 billion in 2006-07 from $11 billion of in-bound investments in 2005-06. The ministry of commerce and industry expects FDI flows in the current fiscal to touch $30 billion dollars.

- Business Standard