Private equity (PE) investment in the SME sector dipped to $580 million in 2009, down about 68 per cent year-on-year as PE firms shied away from risking their capital in small and medium enterprises in the wake of the slowdown.
PE investment in the SME sector last calendar year stood at $580 million via 81 deals against $1,812 million through 187 deals in 2008, a study by industry body Assocham said.
"Poor returns on investments in the midst of challenging times have forced fund managers to think twice when it comes to putting too much into the (SME) sector," it added.
The global financial meltdown made PE investors wary of the small and medium enterprises (SMEs) as there is a great deal of risk involved when it comes to funding cash-strapped companies, the study noted.
Further, less PE investments made it difficult for these small firms to execute their growth plans, the Assocham study said. Overall, PE deals in India during 2009 numbered 287 amounting to $4.43 billion against 502 in 2008 worth $11.9 billion.