Investing in India by PE firms boosts the confidence of global investors

Investing in India has been a major factor in the rise of the Indian economy in terms of Gross Domestic Product (GDP) and vice versa. Investment advisers who have advised investors on the prospects for cheap investments in India are quite optimistic. In one such trend, which is quite evident lately, private equity (PE) and venture capital (VC) investments in India have been somewhat notable. This trend further strengthens the confidence of all investors equally.

There is renewed confidence in the Indian market among the leading global PE investors, according to a recent report by global consulting firm Bain & Company entitled ‘India PE Report 2010’. Private equity and venture capital investments are expected to reach $17 billion this year (approx. Private equity firms invested approximately $2,364 million in 67 deals in the quarter ended June 2010, according to a study by Venture Intelligence.

Funds focused on Indian equities are becoming increasingly popular among these global investors. Dubai-based investment firm Evolvence Capital announced on July 21, 2010 its plan to launch its third India-focused fund – Evolvence India Fund II – which aims to attract US$400 million in size from institutional and senior investors wealthy clients worldwide. UAE-based Khaled al-Muhairy, the Dubai-based alternative investments firm, was also one of the first Gulf mutual funds to enter India as an investment destination in the pre-crisis era as the Gulf looked forward to excess petro funds to invest in India .

Additionally, from January to June 2010, PE actors invested more than $300 million in food processing and agriculture-related companies, according to a Grant Thorton report. In calendar year 2009, PE investments in these sectors were approximately US$398 million compared to US$187 million in 2008 and US$4.3 million in 2007, respectively.

All of these indicators signal the vocal favor that India seems to have found among PE investors. In May 2010 alone, private equity investments in India grew by nearly 200 percent compared to the same period last year. During the month of May, financial services, materials and healthcare were the most popular sectors for PE funding. Major PE investments in May came in companies like Avinja Properties, National Stock Exchange, Fortis Healthcare and Pegasus Assets Reconstruction from PE firms like Kohlberg Kravis Roberts & Co (KKR), Temasek Holdings’ and DE Shaw etc.