Light at the end of the tunnel

A lot of the troubled GPs, many whom probably shouldn't have been in the PE business in the first place, find they are unable to attract new capital commitments and many are now consigned to a slow death. Consolidation is inevitable.

AVCJ Research figures confirm this. From the highs in 2008, when 60 India-focused funds raised in excess of $9.5 billion, the drop-off has been relentless. So far this year, 19 new vehicles have raised just over $1.7 billion. For those with the luxury of dry powder, it is a good time to invest: they are fewer in number, face less competition and should, in theory, secure assets at good valuations.

This is especially true for US dollar-denominated funds that can take advantage of the weaker rupee, assuming they are confident it will remain stable.

It appears those still in the market are already taking advantage of the conditions. Almost $7.2 billion has been deployed across 353 transactions over the first 11 months of 2013 - that's in line with recent years and probably more if the depressed rupee rate is factored in.

GPs are also spending time focusing on returning capital to investors. A total of 82 exits valued at $4.2 billion have been recorded since January, which means last year's total of just under $5 billion is within reach.

Of course, we should note that there is a bit of double counting as quite a few of these transactions have an element of sponsor-to-sponsor in them. Deals such as Hexaware Technologies (ChrysCapital Partners to Baring Private Equity Asia) and Shriram Transport Finance (TPG Capital to Temasek Holdings) appear in both the investment and exit totals.

The numbers seem to say what many local PE professionals having been telling the market: Indian private equity is in better shape than the market gives it credit for. 

As one GP put it to me, "India is a long and bumpy road. It eventually gets there but it takes a lot longer than you expect." So there will almost certainly be more bumps in the road, but with less competition and reasonable valuations, the current vintage should have the makings of a good one.

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

• Topics
• South Asia
• Investments
• Exits
• India
• Exit
• Growth capital
• buyout