Is India still an attractive PE destination?

I think , the private equity investors are finding it even better, in the current context of global meltdown, to invest in India. While other markets that were attracting PE investment have weakened considerably due to factors like weak commodity prices, unstable financial system and deleveraging, India’s strong financial, regulatory and legal framework does stand out, and makes it a more attractive destination, in an environment of increased global economic and business risk.

The long-term perspective of funds, with 7-10 year lock-ins, is aligned with India’s medium- to long-term growth potential.

In my view, India Inc entered 2008 with robust PE activity on the back of strong fundamentals and soaring stock markets. However, the prevalent global crisis slowed down the pace of private equity investments in the following months. During the first nine months of 2008, private equity/venture capital (PE/VC) investors poured in a total of $9,678 million, which is 28% lower than the amount invested during the same period in 2007, while the average deal size has dropped by about approximately 15%.

Given this scenario, will PE investors look at markets like India in the near future? In my view, India still remains an attractive market.

Most estimates still peg the GDP growth rate for India at above 7%, and when compared with more mature and emerging economies, it still remains as one of the most attractive growth rate.