India Inc draws $7.1 bn private equity funds in six months

Investors see bright prospect due to positive economic growth trends, rising foreign exchange reserves, lower oil import bill and success of Indian professionals across the world, say experts

By Sai Nikesh D

Indian companies seem to have gained more trust of private equity investors who have already pumped in more than $7 billion in the past six months, more than 38% invested during the first half of last year.

With $7.1 billion commitment involving 460 deals with IT&ES (Information Technology and IT-enabled services), banking & finance and pharmaceuticals sectors, private equity funds’ participation in H1 of 2015 witnessed 38% year-on-year growth, said Associated Chamber of Commerce and Industry (ASSOCHAM), in its study.

Arvind P Mathur, president, Indian Private Equity & Venture Capital Association (IVCA), said,Private equity players are focusing prudently and selectively in diverse range of Indian enterprises. They may take minority or control stakes depending on the nature of the opportunity.”

He felt that the formation of Narendra Modi led government has created an air of optimism among investors.

The underlined economic rationale is strong due to factors such as positive economic growth trends, rising foreign exchange reserves to record levels, lower oil import bill and the mastery shown by talented Indian professionals in different parts of the world, including mainland USA and India, Mathur said.

In addition, start-up ecosystem has become vibrant attracting some of the world’s premiere Venture Capital (VC) funds like Tiger Global, Accel Partners, Soft Bank and other crème-de-la-crème towards India, Mathur said, adding, “Future prospects for the private equity sector are considered positive by the private equity players internationally.”

Stating that various challenges are being encountered in other markets like the former Soviet Russia, Brazil and the mainland China, which recently experienced unprecedented market volatility, he suggested ‘Indian government should take urgent steps to strengthen infrastructure to maintain the investment flow’.

According to ASSOCHAM, the first half of 2015 witnessed more high value deals compared with that of the same period last year. While 15 deals valued above $100 million each, 19 were in the range of $50-100 million. And, the top 30 deals accounted for around 60% of the total deal value in H1 of 2015, the industry body said.

The ASSOCHAM study also found that the equity inflows in H1 of 2015 point to the higher interest generated, in terms of number of deals, which have gone up by 62% year-on-year. In value terms, the deal sizes this year compare quite well against $5.11bn in the same period of 2014 and $5.64 in 2013, the study noted.

Besides, Indian industries saw 277 Mergers and Acquisitions (M&As)deals(excluding Private Equity) worth $15.8 billion between January and June, 2015 against 269deals worth around $17.2 billion during the same period last year and 255 deals worth $12 billion a year ago.

The inbound M&As also earned higher interest up to $7.4 billion this year against $4.8 billion last year, reflecting increased global interest in the Indian economy.

The top three sectors that attracted maximum equity inflows included IT & ITes (38%), followed by Banking & Financials Services (14%) and Pharma, Healthcare & Biotech (11%), the study said. “While the M&A opportunities remain robust, especially when there are companies on the block with high level of leverage, enhanced interest by the private equity players certainly remains a noteworthy point,” said D S Rawat, Secretary General, ASSOCHAM.

Few high value mergers during the period include $2,300-million Vedanta-Cairn India deal, $1,200-million Center bridge Partners – Suzlon Energy deal and others.

           This article was published in The Dollar Business on August 17, 2015

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