AVCJ India report shows PE making strides

Instead, investors are waiting to see who can produce returns before increasing allocations to the Subcontinent. With FDI down from $37.7 billion to $25 billion year-on-year, private equity's share of that is up, from 11.5% to 30.7%. At the same time, it appears that foreign speculation on public markets is waning - which is a great thing for private equity, as it means that entrepreneurs might finally start to recognize the value of private investors, and the flaws inherent to dumb capital. The industry has not yet made it back to a high of 1.55% of GDP, but it is inching its way back up, in 2010 accounting for 0.54% of the $1.4 trillion economy.

But while there are positives on the board, there are also regulatory, legal and business dynamic hurdles that are precluding private equity from putting capital to work in companies it sees as having real potential to be the domestic, regional and global leaders of tomorrow.

Exits were a big theme in 2010, with IPOs raising nearly $2.3 billion, compared to just $1.3 billion in 2009. Trade sales and non-PE M&A was dominated by a vast number of new, international entrants, buying businesses in pharma, infrastructure, manufacturing, power and more.

Like many emerging markets, there is no single sector that stands out as more attractive than others, but the dominant themes for investment are: growing middle class consumption, cheaper production that is exportable to the world, and under-developed sectors (like financial services) that can benefit from experienced managers and/or corporates.

While forecasts for 2011 growth have been revised down, the country is still growing far ahead of developed countries. So, while India's private equity industry may not have found its firm footing just yet, the industry has begun to establish a track record in which certain groups have showcased consistent success. As many have pointed out, patience is a virtue, particularly in India.

The 2011 AVCJ India Report is available now. For your copy please contact the AVCJ Subscriptions department at AVCJsubscriptions@incisivemedia.com.

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• Topics
• South Asia
• Investments
• Exits
• India Equity Partners