Private equity and venture capital investments riding on the strong economic growth in the country are projected to reach $17 billion (around Rs 80,000 crore) this year, a level last seen in pre-downturn times, a study has said today.
According to 'India PE Report 2010', released by global consultancy Bain & Company, there is renewed confidence among the leading PE investors about the Indian market.
"Private equity (PE) and venture capital (VC) flows are projected to reach $17 billion in India this year, the same as the peak year in 2007, " reads the report forecast.
The report includes a survey conducted across over 75 leading PE investors globally. The survey revealed number of respondents planning to invest in the range of $200-500 million in the next two years has risen four-fold to 27 per cent this year.
"The number of PE firms, both foreign and domestic, continues to grow. This increasing population of hungry deal makers is wielding a lot of dry powder and they’re eager to put it to work", Bain & Co's head of the private equity practice India Sri Rajan said.
"Our estimate is that current investment reserves are deep enough to finance between two and four years of PE deal making," Rajan added.
The report, prepared in partnership with Indian Venture Capital and Private Equity Association (IVCA), forecasts strong growth for the PE industry in the country over the next three years.
Nearly two-thirds of respondents surveyed said they expected the industry to grow between 10 per cent and 25 per cent into early 2011, the survey revealed.
However, though the macro-economic picture is far rosier today than two years ago, PE fund managers face rising acquisition costs and intense competition to land the best deals.
These factors are increasing pressure on them to become more directly involved in value addition to their portfolio companies over a typical 3-5 year ownership period.
"To succeed, it is not enough for PE investors to just be a source of funds. They must be able to position themselves as providers of expertise, in addition to funding," Rajan said.