Despite rebound, PE funds on the decline
Friday, 22 January 2010, 14:50 IST   |    3 Comments
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Despite rebound, PE funds on the decline
Mumbai: Private equity players investing in India are having a tough time convincing both domestic and overseas investors to put money into their funds. This is despite stable economic growth, buoyant stock markets and a favourable investment climate, reports Economic Times. Continuing credit crisis in the U.S. and Europe, coupled with fear among domestic investors to invest in an illiquid asset class, has made private equity fund raising an uphill task. Logging a near 60 percent fall, net PE mobilization has declined from 1,944 crore in 2007 to 792 crore in 2009 (till January 15, 2010), according to data collated by PE research firm Venture Intelligence. The number of PE funds hitting the road to raise money has halved from 30 in 2007 to 15 in 2009. Surprisingly, in 2008, when the whole financial world was in the middle of the worst economic turmoil, PE funds raised over 1,116 crore through 22 funds. Globally, private equity fund raising is currently phasing through its worst period since 2004, with only $246 billion raised by 482 funds worldwide. "The first nine months of 2009 were indeed very difficult times for private equity funds intending to raise money," said Rajesh Singhal, Managing Partner, private equity, Milestone Capital Advisors. "Mobilisation period - overall fund raising cycle - has increased from 3-4 months to 6-9 months over the past several months. Things have begun improving over the past couple of months though." According to researchers, PE funds are trying to attract investors by reducing investment time-frame, from 8-9 years to about 5-6 years. Several funds have reduced their minimum investment levels to include more retail investors. Special effort is also being taken to dole out periodic dividends to investors. Experts say that the absence of leverage buyouts in the U.S. and Europe is the main reason why investments in PE funds have declined. With credit becoming dearer in developed markets, investors have no source to leverage on their assets to make debt-funded investments.

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