PE investments in India down by 15% to $8.85bn

Aggregate private equity investment in India last year declined by 15 per cent to USD 8.85 billion due to "adverse sentiment", consultancy firm PwC today said. "Aggregate PE investments declined 15 per cent, at USD 8.85 billion across 406 deals, compared to USD 10.35 billion from 481 deals in 2011...the adverse sentiment significantly impacted PE investments for the year," it said in a report. "(a) factor which caused a lot of grief to the investment community was the complete policy inertia, as the government struggled to deal with various corruption scandals," it added.

The report said the investment community is specifically looking for a "progressively liberal" regulatory regime and "a pragmatic end to the tax and regulatory challenges of 2012". During the calendar year gone by, information technology and healthcare witnessed the highest dealmaking activity, PwC said. In IT, there were 162 deals worth USD 3.25 billion. The USD 1 billion Genpact deal contributed greatly to the rise in the deal value (from USD 1.85 billion in 158 deals last year) during the year for the sector, it said. For healthcare, the activity grew both in the deal values and number of deals, the report said. 2012 witnessed 48 deals worth USD 1.23 billion compared to USD 418 million across 38 deals in 2011. "As PE funds focused on consumer-centric investment, healthcare proved to be a perfect defencive play for them," the report said.

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In line with the overall gloom on the economic front, deals in energy, engineering and construction (E&C) and manufacturing witnessed the largest declines. In energy and E&C, the total investments decreased to USD 478 million from USD 1.7 billion, and to USD 366 million from USD 1.09 billion respectively, it said. For manufacturing, the deal value dropped to USD 345 million from USD 1.57 billion. "The infrastructure sector also suffered in terms of fresh investments due to lack of a clear policy regime, further accentuated by policy inertia," the report added. It, however, said factors like promoters getting more pragmatic, uptick in global environment and recent actions on the policy front like the relaxations in the foreign holding in some sectors, make it optimistic. "Apart from investing activities, a number of PE firms will be focused on raising their next round of funds, and this will be an indicator of how the global investment community looks at India," it said.

On exits by investors, the report said 2012 saw USD 4.2 billion in value through 98 exits by funds as compared to previous year's USD 2.8 billion in 80 deals. It, however, said the uptick in the stock markets following the reform measures and the announcement of the third round of quantitative easing by the US Federal Reserve gives a good exit opportunity for PE funds.

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