India Ahead Of China In PE Investments In Asia

New Delhi: Private equity (PE) investments in the country have grown to $10 billion from $2 billion in 2005, emerging as the top destination in Asia, after Japan.

The real estate and infrastructure sector in India have been the key contributors to this increasing trend as it emerged favourite with 50 shares in value of all private equity investments, having received about $5 billion in 52 deals this year, according to a study by IndusView Advisors Pvt Ltd.

India has surpassed China that recorded $8.3 billion in investments so far, the study further says.

''India's private equity market can expand fourfold using deal value as a per cent of Gross Domestic Product and maintain the top slot ahead of China, its nearest competing economy, and the infrastructure sector will provide the necessary edge,'' said IndusView Chairman Bundeep Singh Rangar.

Real estate emerged as the favourite segment with 26 per cent share in value of all private equity investments, having received $2.6 billion in 32 deals closely followed by telecommunications with 21 per cent share in value of all investments at $2.1 billion.

Globally, real estate and infrastructure fundraising by international real estate private equity funds, has been brisk, with 116 funds raising as much as $72 billion in 2006, according to estimates and another $50 billion raised in the first eight months of 2007, according to the study.

A large per centage of these funds raised are focused outside of the US for investing in emerging markets such as India and China, it adds.

India’s growth trajectory is the region's steepest, increasing at a 51 per cent annually since 1998. India’s private equity investments as a percentage of the country’s (GDP) at one per cent vis-à-vis Western countries like the US at 2.3 per cent, and the UK at 3.3 per cent best describes the emergence of private equity as an asset class in India with much room for growth.

China received $13 billion in private equity investments in 2006 compared to $7 billion in India during the same period.

The equation has changed since then, with India well in the lead this year.

A significant share of international real estate funds will find their way in to the Indian real-estate and infrastructure market, which has the capacity to absorb as much as $300 billion over the next five years, according to government estimates, with key segments like roads, energy, marine ports and airports identified, among others, as likely contributors to the inflow that currently have a miniscule share of $197 million in private equity investment.

''Indian infrastructure’s favourable investment flavour is its predictable investment climate and a strong entrepreneurial culture as the sector is characterised by developers across small pockets in the country’s diverse geography with immense scope of development and large land holdings,'' said Rangar.

Global private equity funds such as Temasek Holdings Pte Ltd, Blackstone Group L P, Warburg Pincus, the Carlyle Group, Washington, Actis Capital LLP, have mapped out investment strategies for the country.