Changing dynamics of private equity landscape in India
India, being the world’s fastest growing major economy with growth soaring above 7 per cent, has continued to remain an attractive destination for investors amidst heightened volatility in global financial markets, making Asia’s third biggest economy the top destination for private equity (PE) and venture capital (VC) investors.
Over the past few years, private equity as an asset class has had an interesting journey in India. Let’s have a look:
Ups and downs of PE industry
Private equity in India has witnessed euphoric highs and exasperating lows since the start of the millennium. The private equity industry has only added to the India’s growth story by investing more than USD 100 billion into over 3,100 companies between 2001 and 2015.
Buoyed by strong economic growth and positive global outlook for Indian economy, the PE industry garnered gross returns of 21 per cent till 2007.
However, it soon succumbed to the global economic crisis of 2008, dipping the returns to almost 7 per cent. The shift was largely weighed down by factors including a sharp slowdown in macroeconomic environment, coupled with difficult investment climate. A weakened rupee also dampened dollar-based returns.
The modern day picture of PE landscape
Renewed economic strength in the country backed by strong macroeconomic fundamentals, favorable business sentiments and downward trend in interest rates has brought PE investment back again in the limelight.
The year 2015 witnessed an all-time high record in the number of private equity investments in India as investors smacked a record USD 22.4 billion in investments, registering a surge of 31.8 per cent from theprevious high of USD 17 billion in 2007. The principal sectors that attracted investors included consumer technology, real estate and banking, financial services and insurance. It accounted for almost 65 per cent of the total deal value.
Investing for improving India and uplifting Bharat
7 年Good compilation of what has happened in India as far as numbers are concerned. But what it fails to mention is the number of PE shops that closed down due to losses. There have been new fund managers who have proven their worth elsewhere and established players who have found it easier to raise capital. The number of success stories would be far lower than failures.