Private equity (PE) has emerged as a major investor class in India in a decade and investments under this category have grown significantly in the last few years. India ranked among the three private equity destinations in emerging economies and the activity has picked up significantly in 2010-11, according to Rajiv Memani, Country Managing Partner, Ernst & Young.

At a recent seminar on “Emerging trends in private equity” organised by Indo-American Chamber of Commerce (IACC) in Chennai, Mr. Memani said the last five years saw private equity investments to the tune of $37 billion, which were more than one-third of total foreign direct investment.

According to him, private equity played a major part during this period emerging as a bigger source than the capital market. In the last five years, more than 1,500 deals took place covering industries such as telecommunications, infrastructure, real estate, financial services, consumer products, healthcare, education, information technology and IT-enabled services.

In the first nine months of the calendar year ended December 2010, total PE investment was more than $5.6 billion against $3.5 billion received during the whole of 2009. In the last one year infrastructure sector attracted the attention of private equity funds. In the near-term, the robust PE market would serve as an attractive alternative for raising growth capital, especially for emerging companies in India, Mr. Memani observed.

Ernst & Young Private Equity, in its July-September report on private equity activity in India, has stated that PE activity is gathering upward momentum with an encouraging improvement in India's economic environment. The third quarter of 2010 saw the best PE deal quarterly performance of the last eight quarters, with total deal value at $2.1 billion.

Large-sized deals

The significant rise was due to nine large-sized PE deals worth $1.2 billion. After a subdued 2009, where total deal value reached $3.5 billion across 180 deals, PE deal activity in the first nine months has already surpassed last year's value by more than 50 per cent, says the E&Y report.

Infrastructure continued to attract significant PE investments accounting for nearly 30 per cent of deal value in the third quarter of 2010. The financial services sector has also seen consistent PE activity over the past few quarters. In terms of deal volume, technology attracted the highest number of PE deals in the current quarter (13) closely followed by infrastructure (11). It is significant to note that power sector under the infrastructure space attracted the maximum PE funding with 11 deals collectively worth $626 million. Notable among them was Moser Baer Projects, a company engaged in power generation, which attracted $300 million.

The coming months are expected to see a rising trend in PE deal activity, as global investors look for attractive investment opportunities in the emerging markets, especially India and China.

Leading private equity players include Macquarie-SBI Infrastructure Fund, Baring Private Equity Partners, IDFC Private Equity, Morgan Stanley Infrastructure Partners, General Atlantic, Goldman Sachs, Temasek Holdings Advisors India, Blackstone Advisors India, Olympus Capital Holdings Asia Sequoia Capital India, Chrys Capital Management and TVS Capital Funds.

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