Private Equity Investments to touch $13.5 Bn in 2007

Date:   Friday , December 07, 2007

As the global private equity (PE) players are in a hustle to invest in the country, India is expected to log $13.5 billion in PE investments during 2007, and the figure could rise to almost $20 billion by 2010.

The first half of the current year has already registered 173 deals worth $5.47 billion against $7.46 billion of PE deals announced in 2006. This is expected to further accelerate in the second half of 2007, when an estimated over 250 deals are projected to bring another $8.02 billion.

As per research and analytics firm, Evalueserve, there are over 366 investment-related firms currently operating in India and another 69 have raised, or are in the process of
raising funds.

In its latest research report, Evalueserve said, “In total, these PE firms seem to have amassed $48 billion earmarked for investment in India between July 2007 and December 2010. Clearly, this is in stark contrast to 1996, when Indian companies only received $20 million.”

Against a typical PE investment threshold of $25 million for the U.S. and Europe, the Evalueserve analysis indicated that with wages in India being a fraction of U.S. wages and with other costs, including hardware, software, machinery, office furniture, and real estate in the large cities remain the same. The comparative benchmark for
PE investment in India was about $10 million.

The IT and BPO sectors marked 22.3 percent of the overall deal sizes of at least $10 million in 2006. Out of this, financial services contributed 12 percent, manufacturing 10.6 percent, medical and healthcare 1.6 percent and others 53.5 percent. In the first half of 2007, IT/ITES made up for 14.3 percent of such investments, with financial services accounting for 28.5 percent, manufacturing 3.3 percent, medical and healthcare 1.4 percent, and others 52.5 percent.

Dr. Alok Aggarwal, Chairman, Evalueserve said, “Beyond the tech-heavy activity that has driven much of the earlier investment opportunities, there are many new areas that private equity and venture capital firms are now aggressively looking to invest in. These include manufacturing, financial services, healthcare, real estate and construction.”