PE investment grows 22% despite FII withdrawals

“Some time back, private equity players were not too keen to invest at the high levels stocks were trading at. Merchant bankers, at the behest of promoters, were quoting high price to PE players. But with weakness in the secondary markets, they have been tamed and see PE as a good option, which is leading to a spurt in PE placements,” Anagram Stock Broking head of research M K Sharma said. The largest investment reported during the last quarter was the $395 million raised by Sophia Power Company from Lakshmi Mittal-promoted LNM India Ventures and Farallon Capital.

Telecom continued to attract investor interest with KKR and Morgan Stanley investing significant capital into outsourced tower infrastructure firms including Bharti Infratel and TowerVision.

Other companies that raised $100 million-plus rounds during the period included Cairn India, Ballarpur Paper Holdings, travel technology firm InterGlobe Technology Quotient and hospital firm Narayana Hrudayalaya.

“Despite the turmoil in the global financial markets, PE investments during the January-March period this year registered growth over the corresponding period in 2007 thanks to a spurt in deals in the late stage segment which accounted for 60 per cent of the amount invested,” said Arun Natarajan, founder and CEO of Venture Intelligence. “Whilethe steep decline in public markets is leading Indian companies to adopt a wait-and-watch stance vis-à-vis their fund raising plans, in the medium term, the correction is likely to favour PE emerging as an attractive alternative,” he added.

PE investors chose to invest across a broad range of industries during the last quarter. While energy and telecom attracted the maximum capital, information technology and IT-enabled services continued to account for the highest number of deals. Other industries that attracted significant PE capital during the period included manufacturing, healthcare & life sciences and banking, financial services and insurance.

However, the cascading effect of the sub-prime crisis in the US apparently caused tension among those who are in the business of investing in ventures to reap profits later. Venture capitalists — who put money in new projects — cut down the risk appetite in the first three months of the year as they invested 17 per cent lesser than they did in the same period last year.