India: Out of the shadows

After a few years of darkness, India's private equity industry is once again seeing the light of the day. In fact, India may be one of the hottest markets for PE investors right now. I am basing this on the rather unscientific observations from some of our recently concluded events, namely the AVCJ Forum in Hong Kong and the AVCJ India Forum in Mumbai.

The general mood at different AVCJ events has always served as a bellwether of the industry's health or sentiment in specific markets. For those of you who are regulars at our conferences, you may recall that two or three years ago, there wasn't much of an audience for the India panel in Hong Kong. But after an encouraging pick-up in 2014 we witnessed a very strong showing in 2015.

The India session of the Investment Summit on November 5 attracted an audience of more than 150 LPs and GPs. Meanwhile, the conference in Mumbai was attended by over 250 delegates and record number of LPs. Perhaps this is a sign that allocations are returning to India-focused managers.

Speaking of our India event, the mood at the conference was generally positive and optimistic. Many speakers acknowledged a successful year, although everyone was quick to point out that lessons have been learned from the previous cycle. The consensus view is that LPs gave too much money to unproven GPs, with the inevitable result. Some capital is still tied up in underperforming portfolios, hence the words of caution.

AVCJ events attendance aside, is India really in the midst of a revival? Well, the industry certainly appears to be doing better than last year on all fronts.

According to AVCJ Research, private equity investment year-to-date stands at $15.1 billion, higher than any 12-month total since 2007. Much of this has gone into technology, with ride-hailing service Ola raising $900 million across two rounds and e-commerce player receiving $700 million in one. However, there has also been some interesting buyout activity, such as Baring Private Equity Asia taking out The Blackstone Group and other shareholders to gain control of CMS Info Systems.

Exits are also on a roll, with more than 100 liquidity events generating cumulative proceeds of $8.3 billion, an all-time record. A small number of trade sales account for the vast majority of this - such as the acquisition of a 51% stake in Viom Networks for $1.2 billion - with public market sales slower than in recent years.

However, a mini-resurgence in IPO activity suggests more money will come out further down the line. There have been 12 offerings so far in 2015 (equal to the previous three years combined) with $823 million in capital raised. Café Coffee Day, a portfolio company of KKR, New Silk Route Advisors and Standard Chartered Private Equity, is the largest of the PE-backed IPOs.

Finally, in terms of fundraising, a total of 23 funds have received $3.7 billion towards incremental or final closes since the start of the year. It is important to look at where the capital is going, though. LPs have focused the bulk of their commitments on a handful of seasoned managers, including the likes of India Value Fund Advisors and Everstone Capital in the private equity space and VC players such as Sequoia Capita and SAIF India.

To conclude, India is certainly a market on the rise, with some investors also looking at the market more favorably than China from a macroeconomic perspective. The fact that the experienced GPs with track records are getting funded could well mean higher level of savviness and discipline in investments and exits in the years ahead. Meanwhile, private equity penetration continues to lag behind markets of similar size, which suggests plenty of opportunities should be available.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• South Asia
• Expansion
• Buyouts
• Fundraising
• Exits
• India
• Fundraising
• Growth capital
• buyout
• Exit