PE invst in India at $4bn far ahead of China with $570mn

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Private Equity investments (PE) in India have grown to about two times the value to $4 billion in the first quarter ended March 31 of the calendar year 2008 when compared to the corresponding period last year, maintaining its position as the hot destination in Asia (excluding Japan) surpassing China that recorded just $570 million in investments so far.

 

India had first achieved the milestone of surpassing China in attracting PE investments towards the end of the second quarter of the calendar year 2007 when it had grossed $10 billion compared to China's $8 billion. China received $13 billion in private equity investments in 2006 compared with $7 billion in India during the same period. The equation has changed since then, with India well in the lead now.

 

The Indian real estate and infrastructure sector has again been the key contributor to this increasing trend this year so far as it emerged favorite with 28% share in value of all private equity investments at $1.12 billion, followed by Power sector having received about 13% share of the pie with $520 million so far this year. Banking & Finance and Telecom sectors tied for the third most favorable sectors for investments with 8.7% of the deals at more than $340 million each.

 

Globally, real estate & infrastructure fundraising by international real estate private equity funds, has been brisk, with as much as $130 billion raised over the last two, according to estimates. A large percentage of these funds raised are focused outside of the U.S. for investing in emerging markets such as India and China.

 

"With the economic downturn in developed economies intensifying and the application of capital becoming dearer and pressurizing the expected Return on Investments (RoIs); PE firms are finding their way in to safer investment heavens, that is, emerging markets which have decoupled from the developed markets." says Bundeep Singh Rangar, Chairman of IndusView, the India-focused cross-border advisory firm.

 

China will overtake the U.S. by 2025 as the world's largest economy. China's economy is expected to continue to grow to become about 130% the size of the U.S. by 2050, according to estimates. India will grow to almost 90% of the size of the U.S. by 2050, while Brazil is expected to overtake Japan by 2050 to move into fourth place. Russia, Mexico and Indonesia all have the potential to have economies larger than those of Germany or the U.K., by the middle of this century.

 

"India continues to enjoy a favorable investment flavor among investors due to liberal economic initiatives on the part of the government when compared to China which is much regulated." added Rangar

 

The Indian government has responded to an urgent demand for new infrastructure, announcing that 9% of the country's GDP will be spent on infrastructure by 2012, presenting an unprecedented investment opportunity. Renewed interest in the Indian infrastructure sector has seen fresh fund raising of up to $8 billion in the pipeline this year with financial entities such as India's State Bank of India (SBI), Australia-based Macquarie Capital Group Ltd, the U.K. based private equity firm 3i Group, the U.S. based Blackstone Group among others, chipping in. 

 

"Emergence of the non-tech sectors, as favorite for investments is symbolic of the realization of the need to develop world class infrastructure to accelerate growth in the Indian economy to 10%, which will see the inflow of a resource base of incremental funds, application of internationally applicable best practices and experienced global management expertise & technology." said Rishi Sahai, Board Director, IndusView.

 

A significant share of international real estate funds will find their way in to the Indian real-estate and infrastructure market, which has the capacity to absorb as much as $500 billion over the next five years, according to government estimates.

 

Global private equity funds such as Temasek Holdings (Pte) Ltd, the investment arm of the Singapore government; Blackstone Group L.P., a global private equity and investment management firm; Warburg Pincus, with approximately $14 billion under management; The Carlyle Group, Washington, D.C. based private equity investment firm with more than $75 billion of equity capital under management; Actis Capital LLP, a leading private equity investor in emerging markets with $3.5 billion of funds under management have mapped out investment strategies for the Indian market. 

 

Sourced From : Indus View Advisors Private Limited