PE enthusiasm in infrastructure, real estate fading: Report

Private equity players have lost some of their enthusiasm for India, especially in infrastructure and real estate. So says a report by Grant Thornton. The report says PE investment in India fell to 7.4 billion dollars in 2012, against 8.8 billion dollars in 2011- that is a 15 percent fall. Kritika Saxena finds out whether this appears to be a lasting trend.

Prime Minister Manmohan Singh's government took various steps towards the end of 2012 to coax investors back. However, as far as 2012 went, it was too little too late.

A report by Grant Thornton shows that 2012 saw a 7.5 percent fall in overall mergers and acquisition deal flows, with private equity investment into the country falling 15 percent from levels seen in 2011 and the number of private equity deals increased by 0.4 percent to 244,

Overall inflows have dropped and the average deal size fell 21.7 percent to 18 million dollars. However, Grant Thornton is optimistic of things turning around in 2013

Harish HV, partner, Grant Thornton India says, "We believe that 2013 we see better numbers in terms of value investment, may be the number of  deals does not change so much but average size deal much see larger numbers hopefully in 2013."

This optimism stems from the fact that the buzz on deal street picked up towards the last three months of the year. So which sectors stood out in 2012?

Infrastructure was the biggest disappointment, with investments in the sector falling a sharp 59 percent. PE players also gave real estate a wide berth, and investments in the space fell 33.4 percent. Deals in the banking and financial services sector also fell 15.7 percent.

However, the IT & ITes sector got some relief thanks to Bain Capital's one billion dollar investment in Genpact up 19 percent this year.

But interestingly, the Indian pharma, healthcare & biotech space has seen investments spiking over 200 percent.

Deals that stand out include Advent International's 105 million dollar investment in Care Hospital, GIC's 100 million dollar investment in Vasan Healthcare and Olympus Capital's 100 million dollar investment in DM Healthcare.

Indications are that this sector will continue to see strong investor interest through 2013. And if interest in other sectors picks up thanks to the government's efforts to woo foreign investors, deal street will be choc-a-block in no time.