Pes Invest $4 Bn In First Quarter Of 2008

MUMBAI: India continues to be the most favourable destination for private equity (PE) investments in Asia (excluding Japan) in the first quarter of 2008. The trend, which began in the second quarter of 2007 when India surpassed China in PE investments, intensified with the gap widening between the two countries. India has attracted PE investments worth $4 billion in Q1 of 2008 against China’s $ 570 million.

According to IndusView Advisors, PE investments in India doubled in Q1 of 2008 compared to the corresponding period of 2007, due to huge fund flow into real estate and infrastructure.

These two sectors attracted $1.2 billion, or 28% of total PE investments, during the period, followed by the power sector having received about a 13% share of the pie with $520 million. The finance and telecom sectors were tied for the third most favourable sector for investments with 8.7% of the deals at more than $340 million each.

“India continues to enjoy a favourable investment flavour among investors due to liberal economic initiatives on the part of the government when compared to China which is much regulated," said IndusView chairman Bundeep Singh Rangar.

Expert said an almost dead IPO market and RBI’s stringent norms for raising money through external commercial borrowings and foreign currency convertible bonds are expected to result in India retaining its advantage over China in the PE space this year.

They said the momentum in India is on the rise while it may taper off, albeit marginally, in China after the Beijing Olympics. India’s edge over China can be attributed to the greater transparency and easy exit opportunities the Indian economy provides.

India was lagging behind China in striking PE deals till 2006 when the latter bagged $13 billion against the former’s $ 7 billion. But India turned the table in Q2 of 2007 with signing PE deals worth $10 billion compared to China’s $8 billion. Globally, real estate & infrastructure fund-raising by international real estate private equity funds, has been brisk, with as much as $130 billion raised over the last two.

A large percentage of these funds raised are focused outside of the US for investing in emerging markets such as India and China, said IndusView in a statement. The government’s announcement that 9% of the country’s GDP will be spent on infrastructure by 2012 has created unprecedented investment opportunity.