October 2008
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PE firms prefer to play safe in Indian markets

One of the largest global private equity (PE) fund was close to finalising a deal with a north-based company. However, following the changes in the global economic environment, the fund’s US-headquarters instructed the Indian arm to go slow over the deal citing concerns over the falling valuations. There are many such instances where deals are taking a longer time to close or at times PE firms are going back on their commitments.

Compared to the first nine months of last year, this year has seen a dip in the number of transactions as well as the ticket size. Private equity firms have begun to cherry pick on deals and are becoming cautious in their investment strategy, unlike in the past where there was too much money chasing such deals.

J M Trivedi, partner (Mumbai) of PE firm Actis, says: “Everybody is adopting a wait and watch policy, not just private equity players but even promoters are on the same mode, till markets stabilise.”

In the recent past years, India along with Brazil, Russia and China has attracted the attention of global investors and the year 2007 emerging market private equity has achieved a number of milestones in the development of the asset-class.

Fund-raising hit records across the emerging markets. In 2007, fund sizes broke historical records, as new emerging market dedicated PE funds raised close to $59 billion, nearly double the $33 billion raised in 2006, according to Emerging Markets Private Equity Association (EMPEA).

The liquidity crisis and slowdown in growth across the globe has made private equity investors risk-averse.

Rajeev Gupta, Managing Director, Carlyle India Advisors, says: “We have a huge appetite to invest in India. The reason we are unable to invest presently is due to SEBI floor pricing in preferential allocations.”

Source: Economic Times

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