Further, according to the study, the private equity funding in the country is projected to be reach around $20 billion by 2010.
More in pipeline
According to a study by research firm Evalueserve, currently there are more than 366 private equity firms operating in India while another 69 are planning to start their operations soon.
“In total, they seem to have amassed $48 billion earmarked for investment in India during the next three and a half years,” says the report. Interestingly, investments made by private equity firms in India has seen a drastic rise touching $7.46 billion in 2006 from 299 deals, whereas the figure was just $20 million from five deals in 1996. In 2005, such investments stood at $2.18 billion from 146 deals.
Drastic dip
“... if indeed, Indian companies end up receiving $20 billion in such funding then this would represent a thousand-fold increase between the fourteen years of 1996 and 2010,” the report pointed out. However, it must be noted that such investments had come down drastically during 2001-03 due to dotcom bubble burst.
Value of deals
Meanwhile, the total value of private equity deals above each $10 million, stood at $4.97 billion from 95 deals in the first half of 2007 while it was just $1.73 billion (65 deals) for the year 2005. In 2006, the total value of 169 deals each above $10 million stood at $6.94 billion.
Also, in the same year the private equity investment made up $7.5 billion or 0.8 per cent of India’s total Gross Domestic Product (GDP) of $910 billion.
By 2010, the Indian economy is likely to be $1,490 billion. However, by then even after incorporating the projected $20 billion, private equity investment would account only for about 1.35 per cent of gross domestic product, the study has pointed out.
Sectors such as high-end manufacturing and infrastructure, retail, hospitality and hi-tech services and products are likely to be lucrative for private equities and hedge funds.
Striking a cautious note, the study says a slow-down in the growth of the Indian economy or a tightening of liquidity around the world are among the factors that could lead to a lower private equity investment in India.
