After seeing a tough 2012, the private equity industry in India is gearing up for another lacklustre spell in 2013, said Indian Private Equity and Venture Capital Association (IPEVCA). The industry is expected to dip at least 15-20% this year , as a slowing economy blocks exit for investors.
“Times are going to be challenging and there won’t be growth. While 2007 was when the India story emerged, return on investments has been difficult to achieve. Investors are finding it tough to even recover the principal amount. Exits would be a challenge in 2013 but not dramatic,” said Mahendar Swarup, President, IPEVCA.
PE investments in India dipped 15% for the year ending December 2012 to Rs. 48,885 crore in 406 deals, said a Venture Intelligence report.
While the forecast is grim there are sectors that will see investment. “Education, healthcare, media and entertainment are sectors where investments will flow, albeit small,” he said.
The industry, a blue-eyed boy for investors in 2005-07 who went for deals with a 5-7 years cycle, is now faced with a tough economic environment, making fund raising a challenge. 2011-12 saw 94 exits, while there were 84 exits in 2010-11.
“Most PE funds are having a tough time delivering returns. Also, policy riders are unattractive for investors,” said Swarup.
“PE managers are more judicious and taking longer period to deploy funds,” said KEC Raja Kumar, founder, Ascent Capital.
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