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Private equity funds expect tougher year ahead

Private equity (PE) deals in India may further slow down in 2009 as raising funds is getting tougher and marginal players are feeling the pressure of exits.

According to Grant Thornton, the global accountancy firm, the value of PE deals is expected to shrink over 40 per cent during 2008. Between January and December 15, 2008 the value of PE deals was estimated at $10.42 billion, as against $19.03 billion in 2007.

“Marginal players and hedge funds are already on their back foot,” said Kotak Private Equity Group Nitin Deshmukh. “Next year the number of deals will be fewer as the number of players will come down,” he said suggesting that the small players will exit the business.

The economic crisis in the US and its global consequences has brought down the value of stocks in almost all markets. It has made the high net worth individuals and other contributors to private equity funds re-align their portfolio and only PE players with a long and proven record are able to raise funds. “It is not an easy time to raise funds. Everyone is worried about the fate of his money,” said an executive who is hoping to raise $1 billion corpus.

This year there were 306 PE deals down from 405 achieved in 2007, according to Grant Thornton data.

“Extreme volatility has made the life of investors difficult. If the stock markets remain stable for the next six months, with not more than 10-15 per cent growth, PE deals will come back as the expectation of promoters (in terms of valuations) will also get rationalised,” said Ambit Pragma CEO Rajeev Agarwal.

“Vauations have come down and we expect more deals next year from the players who have money,” added India Equity Partners Managing Director Sudarshan Sampathkumar.

PE players expect the realistic picture on investment to emerge from the second quarter of next year.

Source: Business Standard

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