PE Investment In India To Fall by A Third in 2009

MUMBAI (Reuters) – Private equity investment in India in 2009 is expected to tumble by more than a third to $5 billion to $7 billion, similar to the fall in 2008, as investor aversion rises and asset owners stick to high price expectations, industry players said.

PE firms will also be busy tending to Indian portfolios battered in the stock market meltdown, speakers at a private equity conference in Mumbai said on Thursday.

“The sustainable private equity deal volumes in this market would be just about 50 percent of the last couple of years,” Puneet Bhatia, managing director at PE firm TPG, said at the conference.

“The price of being prudent and diversified has just not delivered,” he said, referring to the sharper fall in developing market indices than in major industrial markets.

India’s benchmark stock index .BSESN fell 52.4 percent in 2008, its worst year ever, ending a five-year bull run that saw the market rise six-fold. It is down 6.3 percent so far in 2009.

Private equity investments in India fell 38.1 percent to just over $10.7 billion in 2008, in line with the drop across the Asia-Pacific region, according to Asian Venture Capital Journal research.

Almost three-quarters of the private equity investment in India over the last two years was in listed entities that have dropped sharply and these are weighing on PE firms’ ability to invest, said Nitin Deshmukh, CEO of private equity at Kotak Investment Advisors.

The best opportunities in 2009 would come from buying non-core assets or distressed units of large conglomerates and picking up stakes in non-cyclical sectors, said Parvinder Singh, principal at Bain Capital.

PE firms were likely to shy away from cyclical industries such as real estate, as sliding realty prices and sales scare them away from one of the hottest investment destinations of recent years, the speakers said.

“It is a cycle. In good times you raise and invest oodles of money in bad times you try and stay away,” said Ashish Dhawan, senior managing director at ChrysCapital, which manages $2.5 billion of assets. (Reporting by Narayanan Somasundaram; Editing by Mark Williams)