November 2007
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India attracts more US PE funds than China

India has scored over China in terms of total private equity (PE) investments received from the United States over the last eight years, but China is well ahead of India in terms of PE investments this calendar.
 
According to a study by Thomson Financial, “India appears to be emerging as a new favourite among global PE investors.
 
Over the last eight years, it has received $2.51 billion in PE investments compared to $2.4 billion in China. Nevertheless, India still lags in terms of growth as PE investments have grown at a CAGR of 26.7 per cent over the last seven years.”
 
Thomson Financial is an arm of the Thomson Corporation, one of the world’s leading information companies, focused on providing integrated information solutions to business and professional customers.
 
PE investments from the US to China is growing at a compounded annual growth rate of 36.5 per cent (over the last eight years), but private equity investments have grown by 108 per cent (through October 2007) compared to a year ago, the Thomson study said.
 
US PE firms are among the largest investors and play a pivotal role in the growth of such investments in the two Asian countries. Since 2000, these US firms have constituted 96.8 per cent of all PE investments in China and 73.4 per cent in India.
 
Since 2000, China has maintained its lead over India in total US PE investments of more than 30 per cent.
 
Since the past three years, China’s US PE investments are growing at a CAGR of 25 per cent, while India has seen 50 per cent growth. Since 2006, India has received more PE investments in value terms than China.
 
China and India continue to maintain their dominance in the manufacturing and services sectors. In some cases, such as manufacturing (where India is proving to be a tough competitor) and financial services (where China is taking the lead), the level of competitiveness between the two countries is apparent, according to the study.
 
However, it appears as if the US private equity firms are the big winners, as PE activity has grown at the rate of 31 per cent in both countries.
 
US PE firms have been successful in identifying those industries in which to make investments, and it is these industries that will be responsible for driving the growth of such activity in China and India.

Source: Business Standard

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