With global private equity (PE) players rushing to invest in the country, India is expected to log $13.5 billion in PE investments during 2007, and the figure could rise to almost $20 billion by 2010.
Against $7.46 billion of PE deals announced in 2006, the first half of the current year has already registered 173 deals worth $5.47 billion. This is expected to further accelerate in the second half of 2007, when an estimated over 250 deals are projected to bring another $8.02 billion.
Raising funds
According to research and analytics firm, Evalueserve there are over 366 investment-related firms currently operating in India and another 69 have raised, or are in the process of raising funds and are planning to start their operations soon — a clear indication that India is in reckoning for top PE dollars.
“In total, these PE firms seem to have amassed $48 billion earmarked for investment in India between July 2007 and December 2010. Clearly, this is in stark contrast to 1996, when Indian companies only received $20 million,” Evalueserve said, in its latest research report.
Against a typical PE investment threshold of $25 million for the US and Europe, the Evalueserve analysis indicated that with wages in India being a fraction of US’ wages and with other costs, including hardware, software, machinery, office furniture, and real estate in the large cities remaining the same, the comparative benchmark for PE investment in India was about $10 million.
New areas
The IT and BPO sectors accounted for 22.3 per cent of the overall deal sizes of at least $10 million in 2006, with financial services contributing 12 per cent, manufacturing 10.6 per cent, medical and healthcare 1.6 per cent and others 53.5 per cent. In H1 of 2007, IT/ITES made up for 14.3 per cent of such investments, with financial services accounting for 28.5 per cent, manufacturing 3.3 per cent, medical and healthcare 1.4 per cent, and others 52.5 per cent.
“Beyond the tech-heavy activity that has driven much of the earlier investment opportunities, there are many new areas that private equity and venture capital firms are now aggressively looking to invest in. These include manufacturing, financial services, healthcare, real estate and construction,” Evalueserve, Chairman, Dr Alok Aggarwal said.