Private equity (PE) investments in Tamil Nadu dropped 61 per cent during the current calendar year to $330 million from $852 million (Rs 4,174.8 crore) a year ago. The number of deals dropped to 21 from 33 during the period from January 1 to October 13, according to data from VC Circle.
The state, which used to get around 8-10 per cent of the total PE investments into India, is now getting only four per cent, though the investments into the country did not slow down.
Industry players said the state government has to address infrastructure and policy issues to bring back the growth momentum. The data's shows that 2010 was the best year since 2006, when the total deal size stood at $997 million across 388 deals.
Gopal Srinivasan, chairman & MD of TVS Capital Funds Ltd, which manages the Rs 600-crore TVS Shriram Growth Fund I, said the state's share of PE action is muted.
PE investment was $519 million in Karnataka during the same period and $2.6 billion in Andhra Pradesh. The average deal size for Tamil Nadu during 2009-11 was $16 million, he said quoting VC Circle's data.
At a panel discussion organised by VC Circle at Chennai, K Venkatachalam, partner PwC, said PE investors prefer Gujarat, Maharashtra and Karnataka before choosing Tamil Nadu.
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Temasek Holdings Advisors director R Venkatesh said investment in infrastructure including power, roads and ports did not happen, resulting in the state losing growth momentum.
Echoing Venkatesh's view on infrastructure, S M Sundram, partner and CFO, Baring Private Equity, added that it had also to do with conservativeness of entrepreneurs. “PE investment as a partner is the last resort for entrepreneurs, instead of being the first.”
According to Arun Duggal, chairman, Shriram Capital, apart from infrastructure, dynamic leadership is also lacking in the state. “Leadership generating the enthusiasm, aspiration and marketing are missing, while other states like Gujarat and Maharashtra are doing extremely well," he said.