RISE OF PRIVATE EQUITY AND VENTURE CAPITAL IN INDIA
- By YASH KHAJANCHI
Every morning across all business newspapers, across different business channels you see the words PRIVATE EQUITY (PE) & VENTURE CAPITAL being mentioned in every other sentence, you read about the new investments by the different PE firms from $25 million to $500 million , and you wonder till what point in time can this possibly go on ? The answer, lies right in front of you as you read the news .Private Equity and Venture Capital in India are moving into the big league. Fund sizes have increased dramatically over the years. With the strong global interest in the Indian economy continuing, new avenues have opened up, infrastructure, media and retail to name a few and the existing ones continue to flourish at a feverish pace .Investors are looking to capitalize on this strong growth and everyone wants to be a part of the Indian growth story. - By YASH KHAJANCHI
The phenomenal rise of PE in India is reflected in the numbers. Whereas in all of 2006 total value of announced PE deals was $7.86 billion it has already crossed the $10 billion* mark this year with three months left to go. The YoY growth in the investments by the different PE funds reflects the optimism inside the industry and perception of the Indian marketplace around the world. Over the last one and a half year leading PE funds from all over the globe have set up shop in India. These include BLACKSTONE, 3i, CARLYLE, TEMASEK. The major deals announced recently include.
PE FUND TARGET COMPANY VALUE BLACKSTONE GOKALDAS EXPORTS 682.1 BLACKSTONE NAGARJUNA CONSTRUCTIONS 615 CARLYLE GROUP HDFC 2638.35
*(in Rs. crores) This rising interest in Indian companies stems from the fact that over the past three years most of the investments by the PE firms have yielded enormous returns due to the steep rise of the Indian economy.
Venture capital is another sector which has seen a phenomenal rise .Design thinking and innovation are the new mantras for entrepreneurs and venture capitalists are ready to roll out the cash for people brave enough to pursue their dreams. Venture capitalists generally take a long term view of the company. Venture capitalists invest in these new innovative ideas and are willing to take greater risks for potentially higher returns. Till a year back most of the VC funding was mainly focused in and around the IT and IT SERVICES sector but this is undergoing a rapid change. Venture capitalists have realized that they must broaden their perspective beyond the traditional avenues and strive to diversify into other rapidly growing areas such as retail, real estate and infrastructure and media.
Among the major players in the VC space are Angel Investment Group, Citigroup Venture Capital and a horde of other local VC Funds. Venture capital funds suffered a major setback during the dot com bust but have since been on a comeback trail with a steady rise. One of the major factors driving growth and influencing investments in India is the economic policy.
Strong improvements in corporate performance, powered through productivity gains and Ongoing economic reforms will tend to have a multiplier effect and act as further growth drivers.
India today represents a huge opportunity for Private Equity funds and Venture Capitalists which simply cannot be overlooked and with the Indian economy firing on all cylinders and showing no signs of a slowdown everyone who is a someone will be looking to have a slice of the pie.
India today is amongst the most favored destinations for investments and with a large young population, vast diversity, vibrant culture and a booming economy there are no obstacles on the road to success.
The economist summed up this essence of India in few words “INDIA HAS A DYNAMISM WHICH HAS NEVER BEEN SEEN BEFORE”-the economist Oct, 2005.
Yash.V.Khajanchi is a PGDM student at WELINGKAR INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH
