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PE-Investments-saw-a-downfall-in-2011
SI Team
Monday, January 2, 2012
It was predicted that 2011 will see smooth exits from its investments since most portfolio investments will ripe. Around 800 deals made through 2007 with an investment of around $15 billion in PE fund portfolios were expected to exit in 2011. But due to high inflation and political uncertainty, the Indian PE market saw a downfall this year. This uncertainty will make it difficult for the investing firms to exit with good returns in 2012. But it will also provide a good thrust to these firms to pump funds in fresh investments and expect bigger valuations.

Prequin, a research firm, said that 170 exits were completed in the fourth quarter with a total value of $28.4 billion, which is the lowest quarterly total since the first quarter of 2010. About a third of the PE investments are currently losing money. India’s economic growth has propelled PE investments in the country to $8.2 billion in 2010; way up from the $470 million in 2003.But political uncertainty and high inflation became hindrance in this growth. However, the Indian environment offers a greater diversity of exit options, such as secondary sales, M&A and buybacks that are an important source of liquidity for underperforming investments. About 68 percent of the share of private equity funds targeted at emerging markets goes to faster growth countries like India and China, says a study by the Emerging Markets Private Equity Association. Moreover, India and China accounts for 54 percent of the total number of completed PE transactions in the first half of 2011.

India saw PE deals worth $7.7 billion this year with 347 transactions announced during the period, reports consultancy firm Grant Thornton. The highest PE investment was made in the Real Estate segment with $1,700 million during 2011. The exit value up to September was less than half of the PE exit value witnessed in 2010. The years, 2007, 2009 and 2010 have generated the highest volume of exits and this shows the close correlation between a vibrant capital market and PE exit, reports KPMG study. The PE investments in India touched $6.3 billion in the first six months of 2011 with the IT and ITeS sector attracting the maximum number of deals. In April – June quarter, $2,916 million was invested across 112 deals while the previous quarter saw an infusion of $3,363 million across 91 deals reports Venture Intelligence, a research service focused on PE and M&A transaction in India.

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