PE investments fall to $4 bn in 2009

Difficult fund raising conditions slowed the pace of private equity (PE) investments in the country by 64 per cent to a four-year low of $3.8 billion in 2009.

Private equity firms made an annual investment of $10.47 billion made in the previous year, according to deal tracking firm Venture Intelligence. Such level of investment was last seen in 2005 when PE firms had invested $2.2 billion through 167 deals.

"It has been a difficult year for PE funds as volatility in public markets and continued uncertainty around the ability to raise new funds caused investment activity to be muted in 2009," Venture Intelligence CEO Arun Natarajan said.

Besides, with quarter-on-quarter numbers on an uptrend, experts are hopeful that by the end of 2010 the country will see investments scaling 2008 levels.

"We expect first half of 2010 to be better. New fund closures during the year will determine how much investments would come in by year end. Fund raising could touch the $10 billion level by year end," he said.

Over 2009 there have been about 232 deals, against 443 in 2008. Compared with high base of 2008, PE investments last year have been low. However, on quarter-on-quarter basis fund raising picked up gradually over the year.

While January-March '09 quarter recorded lowest fund-raising ($655 million), momentum picked up gradually with June quarter seeing investments worth $971 million. Although September quarter saw a slight decline in fund mobilisation at $807 million, PE firms invested $1.39 billion in December quarter over 84 deals in India.

Experts believe the government's thrust on increased spending in infrastructure and education would propel investment in those sectors.

"Investment valuation in IT segment is expected to come down in 2010 and fund raising in infrastructure, education and healthcare spaces would increase," Natarajan said.

Over last year Information Technology and IT-Enabled Services (IT & ITeS) saw 56 investments worth about $617 million. While energy sector was the second highest in value at almost $500 million, BFSI came in next on the volume front with 32 deals.

"With just six investments above $100 million in size in 2009 (compared to 22 such deals in 2008), the year witnessed a clear decline in the appetite for large ticket investments," Natarajan added.