Investment drops as PE firms consider exit
New Delhi: Indian economy's recovery does not seem to encourage the private equity (PE) firms in India, as many of them are considering an exit from the country. Firms like Candover, a UK-based buyout specialist, and Strategic Value Partners (SVP), are in the process of closing down operations in India.
According to Venture Intelligence, the Indian companies received a total investment of $2,360 million in nine months of 2009 marking 140 deals, as compared to $9,479 million invested across 365 deals last year. As compared to $964 million generated in 47 deals last year in the Q3, the Indian firms received an investment of $765 million in same number of deals.
The IT and ITES industry registered 12 deals worth $340 million during Q2 09, followed by BFSI securing eight deals worth $101 million. The shipping and logistics, healthcare and life sciences and manufacturing attracted five investments each during the period.
Around half a dozen PE firms are exiting from India due to the slowdown in PE transactions. The average number of deals in a month is less than half as compared to last year. Investors have become more cautious in spending money. There has been some improvement in the number of PE deals over the last few months but the transactions are well below the level which was reported prior to September 2008 when investment bank Lehman Brothers declared bankruptcy.
Candover, a firm which has a total capital commitment of more than 8.7 billion euros globally, entered India in 2008-end and had roped in Harsha Raghavan from Goldman Sachs to head its India unit. Raghavan has however left the firm. An e-mail sent to Candover elicited this response: "The Candover Asia office has been closed down," according to Economic Times.
Analysts tracking the sector said that investments in the near future are unlikely to witness a big boom. "Private equity firms were over-exposed till about two years ago. There has been a much-needed correction over the past few months and that has only helped investors understand and appreciate the fact that returns are now going to be less attractive than before," said Monish Chatrath, Executive Director, Mazars, a firm that specialises in audit tax and advisory, to Economic times.
Australian investment firm Babcock & Brown, London-headquartered Englefield Capital and FirstRand, a financial services company in South Africa, have also shut down operations in India in past few months.
According to a data compiled by advisory firm Grant Thornton, in the January-August period this year, the total number of PE deals stood at 131 with an announced value of $5.61 billion as against 245 deals amounting to $8.52 billion during the same period in 2008. The total number of PE deals announced during the calendar year 2008 stood at 312 with a value of $10.59 billion.
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