India saw private equity firms and venture capitalists investing close to USD 8 billion into the market in 2010. Most of the funds were largely invested in the energy sector. In 2009, it was almost half the amount at a little over USD 4 billion. Also, FII flows stood at almost USD 29 billion in 2010. FIIs however have been net sellers so far in the current year.
In an interview with Deepak Shadadpuri, MD, Baer Capital, gave his perspective on flows, private equity investment and the debate on emerging markets versus developed markets. Below is a verbatim transcript. Also watch the accompanying videos. Q: What have you made of what has been rough start for India and this whole EM versus DM debate that had this year? A: I think it is an interesting debate. Emerging markets are probably down about 17% this year, India probably down slightly more than that. But I think it is a healthy correction. At least from an India perspective the underlying foundations for long term growth are very much in place. There are some macro concerns which are at least from a FII perspective are leading to short-term outflows. This includes persistent and sticky inflation numbers. A couple of the issue with the corporate scams. But I think longer-term India will continue to be a very attractive investment destination. Unlike Alok (Sama) who looks more at the public market side I focus on Baers private equity business. We are actually very optimistic about the future and a short-term correction like this leads the private unlisted market recalibrate prices which are starting to look rather on the expensive side. Q: Just to understand the flow situation better though what is your sense of where it is stemming from are people pulling out money from this market, is it redemption call issues or is it just a cash call issue right now where people are choosing to up their cash portions waiting to see how India is panning out? A: I just came back from a two week trip to meet some of the investors in Europe. I think it is two things from the feed that I heard from our investors. One is many of our investors missed out on the rally in the developing markets last year and have underperformed so are reallocating some of their capital to more developed markets results in the last couple of quarters both from the US, UK and European markets have shown a good quality growth, resilient growth that is one reason why they are putting more money into developing markets. Secondly they are upping their cash proportion a little bit. But I do not see this as a long-term negative for India. I think it is a healthy rebalancing. India will start showing healthy flows very soon on the FII side. On the private equity side, there is a lot of capital yet to be deployed unlike FIIs. Private equity capital is very sticky. Significant amount of funds have been raised to be deployed into India. I think you'll continue seeing healthy inflows over the next 3-5 years. Q: A lot of that money is usually routed towards infrastructure projects, power projects, power providers and on that entire space the secondary market has actually completely de-rated the entire sectorDiscover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
