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PE investment in India to fall by a third in 2009

Private equity investment in
India in 2009 is expected to tumble by more than a third to $5
billion to $7 billion, similar to the fall in 2008, as investor
aversion rises and asset owners stick to high price
expectations, industry players said.

PE firms will also be busy tending to Indian portfolios
battered in the stock market meltdown, speakers at a private
equity conference in Mumbai said on Thursday.

“The sustainable private equity deal volumes in this market
would be just about 50 percent of the last couple of years,”
Puneet Bhatia, managing director at PE firm TPG, said at the
conference.

“The price of being prudent and diversified has just not
delivered,” he said, referring to the sharper fall in
developing market indices than in major industrial markets.

India's benchmark stock index fell 52.4 percent in
2008, its worst year ever, ending a five-year bull run that saw
the market rise six-fold. It is down 6.3 percent so far in
2009.

Private equity investments in India fell 38.1 percent to
just over $10.7 billion in 2008, in line with the drop across
the Asia-Pacific region, according to Asian Venture Capital
Journal research.

Almost three-quarters of the private equity investment in
India over the last two years was in listed entities that have
dropped sharply and these are weighing on PE firms' ability to
invest, said Nitin Deshmukh, CEO of private equity at Kotak
Investment Advisors.

The best opportunities in 2009 would come from buying
non-core assets or distressed units of large conglomerates and
picking up stakes in non-cyclical sectors, said Parvinder
Singh, principal at Bain Capital.

PE firms were likely to shy away from cyclical industries
such as real estate, as sliding realty prices and sales scare
them away from one of the hottest investment destinations of
recent years, the speakers said.


“It is a cycle. In good times you raise and invest oodles
of money in bad times you try and stay away,” said Ashish
Dhawan, senior managing director at ChrysCapital, which manages
$2.5 billion of assets.
Source: Reuters

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