Private Equity deals decline by 80% in Oct-Nov
Mumbai, December 26, 2008: Private equity investments have declined by as much as 80 per cent in the
first two months of December quarter with the ongoing credit crunch casting its shadow on the investment
space of the country.
The private equity investment in 41 companies during the October-November period stood at USD 969.22
million, a whopping 80 per cent plunge over the same period last year.
In the last year, there were as many as 71 deals during the corresponding period attracting an investment
of USD 4,753.98 million, as per data compiled by Nexgen Capital, the merchant-banking arm of
brokerage firm SMC Global.
\"With FII selling offsetting the investment this year and slowdown in the global economy there is a lack of
clarity about the entire economic scenario in the country. Hence, PE funds are adopting a wait-and-watch
approach before investing their money,\" Venture Intelligence Founder and CEO Arun Natarajan said.
Meanwhile, analysts feel that volatility in the currency market has put pressure on the PE investors in the
country as they are confused over the valuation of the company.
\"The number of PE deals are coming down this quarter and the road ahead is also quite competitive for
the corporates as redemption pressure and lack of conviction are forcing PE players to hold back
investment,\" Nexgen Capital Equity Head Jagannadham Thunuguntla said.
Also slowdown hit corporates, who are witnessing value erosion, would now see the average PE deal
size coming down substantially from the previous period.
“The average deal size in October-November 2007 period was at USD 40-45 million, which has come
down to USD 5-10 million this year. We see the trend to continue in the coming quarters till a sense of
rationality comes back to the investors. Going forward such a situation is expected to continue till mid or
end of 2009,” Thunuguntla said.
Corporates who want investment are not able to attract fund, while companies, in which funds are
interested, says they are offering low valuations, he added.
Also growing number of funds are now shifting focus to the India centric companies being confident of
assured returns. “PE funds are now investing in companies which have maximum sales within the
country. The funds have now started believing that the India centric companies are on the growth
trajectory vis-a-vis their foreign centric peers,” Natarajan added. Also an analysis of the preferences on
PE fund investment shows that the funds are now concentrating more on education, healthcare and
pharma related companies — which are more defensive in their approach rather than going after high
growth companies like— IT and auto.
“Increasingly the interest is shifting towards late stage companies where returns are less but assured.
Funds are now going for quality companies as they are scaling down their investment destinations,”
Thunuguntla added.