PE funds elude banking industry

The domestic banking industry does not appear to be a major investment hotspot for private equity (PE) players. The absence of clarity on mergers and acquisition (M&A) norms seems to have prompted PE players to adopt a wait-and-watch policy.

The domestic banking industry does not appear to be a major investment hotspot for private equity (PE) players. The absence of clarity on mergers and acquisition (M&A) norms seems to have prompted PE players to adopt a wait-and-watch policy.

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PE firms, which infused Rs 2,250 crore into the banking system in 2007, have developed cold feet in providing funds to the sector, even as the economy showed signs of recovery and PE funding have once again taken off.

The figure had doubled in a span of one year.

However, in 2010, no banks have received any PE funding.

According to Venture Intelligence data, Centurion Bank of Punjab, Yes Bank, UTI Bank, South Indian Bank and ICICI Bank had received PE funding. “Post-economic downturn, several banks received chunks of investment from PE firms. However, in the last few months PE funding has been thin primarily due to the ambiguity in the Reserve Bank of India guideline on exit clauses,” Arun Natarajan, chief executive officer, Venture Intelligence told Hindustan Times.

In the January-April period of the current year, overall investment by PE firms stood at Rs 14,521 crore, an over three-fold jump over the same period in the previous year.

Sectors including energy and healthcare services have received the maximum PE investment this year