Global distressed asset management companies are striking private equity (PE) deals in the country's power, textiles, paper and sugar sectors in an attempt to diversify their portfolios.
The latest deal said to be in the works is in the power sector. US-based fund Clearwater Capital Partners is talking to Mumbai-based power distribution equipment company IMP Power for an equity investment.
“Power distribution is the next growth story. That is why companies like IMP Power are being chased by PE firms ,” said a Mumbai-based investment banking source. "PE firms are interested in assets not only in the power generation, but also in the transmission and distribution businesses," said an Edelweiss analyst.
Hong Kong-based ADM Capital, which made major investments in the cement sector, is now targeting paper and textile sectors. ADM recently struck a deal to invest $107 million in Mumbai-based textile major S. Kumars Nationwide Ltd.
Blue River Capital, Brandot Investments and Argonaut Private Equity have collectively invested close to Rs 105 crore in
Coimbatore-based KPR Mills, which was mired in financial problems. Though the retail boom has been giving an impetus to the decentralized Indian textile industry, the market has not reacted positively towards potential growth opportunities in the sector.
"The sector is good, but market has not yet reacted towards the positive growth," said Kamlesh Gandhi, country head, investment banking, Religare Securities.
Distressed management firms are also looking at investments in sugar and paper stocks. There are rumours that ADM is set to make a substantial investment in a paper company."Sugar must be one of the potential sectors for the PE firms where companies are failing to perform in a regulated market environment," said a Motilal Oswal analyst.
"The sugar industry has been in the red for the last several months, which was reflected in the performance of sugar scrip. But the recent government decision to ease sugar exports is a good news though returns may be high only for long term investments," said the analyst.
PE firms have paid a special attention towards the sugar sector, he said.
However, other analysts say given the very disoriented nature of the industry, enterprises are facing difficulties in getting the necessary funds, which will pave the way for larger PE investments. India has emerged as one of world's most- favoured private equity (PE) destinations, attracting $1.24 billion in January and February.