Apparently hit by poor market sentiment, India has seen at least 14 major private equity deals fall through in the last three months with three big ones falling through in the last 30 days. The total number of private equity deals in February 2008 was 55 per cent lower than in January 2008.
With the market in doldrums and valuation of companies looking stretched, financiers are walking away from deals struck in the better days of December.
Hitesh Agrawal, who heads the equity research at Mumbai-based brokerage firm, Angel Broking said, "Globally, there is a liquidity crunch. In a post-sub-prime scenario, private equity players are more answerable to their investors, making it tough for a fund manager to select his investments and at the correct valuation."
At least three major domestic private equity deals have fallen through or cut in size in a span of 30 to 45 days, when the global equity markets have started coming down. These are the ICICI Venture-Jaypee Infratech deal, Rs 1200-crore Blackstone-Eenadu group deal and Rs 250-crore Future capital-DishTV deal. The Jaypee deal likely to be closed next week has been shaved to Rs 1,000 crore from Rs 3,200 crore.
Since the funds have backed out, there are around 14 PE deals have been called off since December. The buzz in the investment banking circles is that private equity and venture capital investors who commenced negotiations last year but could not complete the deals are now backing off.
"It would be difficult to structure or finance a fresh deal at this point," said a foreign investment banker, who does not want to be identified.
However, PE funds have completed over 27 deals during February. The total valuation of these deals would be around $1.48 billion, according to a Grant Thornton study. India Inc recorded deals worth $5.06 billion in 116 mergers and acquisitions and PE deals in January. Compared to February 2007, there was a 50 per cent rise in PE deals this February.