Private equity investment in the country is set to touch 13.5 billion dollars during this year, making India one of the top seven recipients of such funding in the world, a new study says.
Further, private equity funding is projected to be reach around 20 billion dollar by 2010.
According to a study by research firm Evalueserve, currently there are more than 366 PE firms operating in India while another 69 are planning to start their operations soon. "In total, they seem to have amassed 48 billion dollar earmarked for investment in India during the next three and a half years," says the report.
Interestingly, investments made by private equity firms in India has seen a drastic rise touching 7.46 billion dollars in 2006 from 299 deals, whereas the figure was just 20 million dollars from five deals in 1996. In 2005, such investments stood at 2.18 billion dollars from 146 deals.
"... If indeed, Indian companies end up receiving 20 billion dollars in such funding then this would represent a thousand-fold increase between the fourteen years of 1996 and 2010," the report pointed out.
However, it must be noted that such investments had come down drastically during 2001-03 due to dotcom bubble burst.
Meanwhile, the total value of PE deals above each 10 million dollar, stood at 4.97 billion dollars from 95 deals in the first half of 2007 while it was just 1.73 billion dollars (65 deals) for the year 2005.
in 2006, the total value of 169 deals each above 10 million dollar stood at 6.94 billion dollars. Also, in the same year the PE investment made up 7.5 billion dollars or 0.8% of India`s total Gross Domestic Product (GDP) of 910 billion dollars.
By 2010, the Indian economy is likely to be 1,490 billion dollars. However, by then even after incorporating the projected 20 billion dollars, PE investment would account only for about 1.35% of GDP, the study added.
Sectors such as high-end manufacturing and infrastructure, retail, hospitality and hi-tech services and products are likely to be lucrative for private equities and hedge funds.
Striking a cautious note, the study says a slow-down in the growth of the Indian economy or a tightening of liquidity around the world are among the factors that could lead to a lower PE investment in India.