October 2009
« Sep   Nov »

Contact us

Many PE firms may shut shops in India

Several private equity (PE) firms are reviewing whether to continue operations in India even as the domestic economy is showing clear signs of recovery. Around half a dozen PE firms are said to be in the process of shutting shop including Candover, a UK-based buyout specialist, which has recently closed shop in India and Strategic Value Partners (SVP) which is close to winding up operations in the country.

This is attributed to the slowdown in PE transactions with the average number of deals in a month more than halved compared to last year as investors have turned cautious in putting in fresh money.

Although there has been some improvement in PE dealmaking over the last few months, the transactions are well below the level which was reported prior to September 2008 when investment bank Lehman Brothers declared bankruptcy.

Candover, a firm which has a total capital commitment of more than 8.7 billion euros globally, entered India in 2008-end and had roped in Harsha Raghavan from Goldman Sachs to head its India unit. Mr Raghavan, however, is learnt to have left the firm. An e-mail sent to Candover elicited this response: “The Candover Asia office has been closed down.”

Despite repeated attempts, ET failed to contact SVP executives. An e-mail sent to Ajay Khosla, the chief executive officer of SVP, did not yield any response. SVP, headquartered in the UK, manages hedge funds and PE funds for its clients focusing on distressed assets. It is not clear how much capital the firm deployed in Indian companies.

Analysts tracking the sector said that investments in the near future are unlikely to witness a big boom. “Private equity firms were over-exposed till about two years ago. There has been a much-needed correction over the past few months and that has only helped investors understand and appreciate the fact that returns are now going to be less attractive than before,” said Monish Chatrath, executive director, Mazars, a firm that specialises in audit tax and advisory.

Some of the other PE firms which have shut down operations in India over the past few months include Australian investment firm Babcock & Brown, London-headquartered Englefield Capital and FirstRand, a financial services company in South Africa.

First Rand Bank Limited India chief executive Theunie Lategan said: “We launched in mid-2007 and invested about $20 million before a decision was taken to close the firm down by the end of 2008.”

In the January-August period this year, the total number of PE deals stood at 131 with an announced value of $5.61 billion as against 245 deals amounting to $8.52 billion during the corresponding period in 2008, according to a data compiled by advisory firm Grant Thornton. The total number of PE deals announced during the calendar year 2008 stood at 312 with a value of $10.59 billion.

Source: Economic Times

Comments are closed.