Future of PE in India?

There is a school of thought which says that VC is a small part of PE and there is another, which says that these two are distinct.  Let me take the later assumption.  So long as the markets in the developed countries are underperforming and giving small returns, the PE market in India will be attractive (compared to the developed countries) and so PE funds will come flocking to India.

Another reason why I would say that the future of PE in India will be bright is that all the black money stashed abroad will come back in the form of PE investments.  There is no better place to invest than our home country. 

Third this is acting as a tool to take control of management of the target companies.  When PE funds flow, the PE investors will be entitled to certain rights (which is normally part of the agreement) and they exercise it slowly but steadily to take control of these companies.  This is so one of the methods to circumvent the RBI and FinMin rules and regulations which prevent takeovers easily.

So even if depression comes, we can expect the future of the PE market to be quite bright.

As for VC, most of the Indian investors are risk averse and so would not encourage any startup firms.

Without a doubt, the PE has a bright future in India if India grows as is predicted  by  many economisst and business  analysts (very recent report was published in media  When Mr Pandit of City Bank was here).   

Hi Padmanabhan, interesting question. I throughly agree with what sourabh said. 

Thanks...

Future of PE. Lets break this into 3 components. First, demand side - Will we have enough demand for PE capital? The answer is yes considering alternatives like Banks and IPOs. Businesses, particularly mid-caps, want to avoid Indian banks as much as possible because of cumbersome and lengthy processes and shy from equity markets because of costs involved. The current demographics are such that organizations will grow and so will fund requirements. So demand for PE capital is likely to be strong. Secondly, will funds committed to India grow? The answer is yes. India still attracts a small portion of funds compared to other countries. With the emerging countries story getting stronger there seems enough possibility on this small commitment growing. So, with demand for funds appearing strong and supply side also appearing so, the most important question then to ask is the third one - Whether we have enough credible firms and professionals who can do justice in matching demand with supply of capital? Now, this is where it gets interesting. On this account, PE in India is still to evolve considerably. Currently, its just an extension of investment banking. What I mean by this is that the focus currently is on getting a deal through pretty much like in investment banking. Here, is where a lot needs to happen to ensure investors can commit funds on a long-term basis. So future, according to me, rests on how PE professionals evolve rather than anything else.

The most important thing to know about stock splits is that there is no effect on the worth (as measured by market capitalization) of the company. A stock split should not be the deciding factor that entices you into buying a stock. With the strong global interest in the
Indian market continuing, the challenge is no longer about raising private equity funds, but how to extract value from the portfolio investments, turning the focus from financial capital to human capital.

Domestic and foreign entrants such as Actis Partners, Warburg Pincus, Citigroup Venture Capital, Barings and Westbridge Capital reaping significant multiples on their investments. It is little wonder that other global private equity players such as 3i, Blackstone and Goldman Sachs have been setting up shop in India, each with deep pockets.

The immediate future would probably be slow would be my guess; outside of company results, there are reallocations likely to happen on the LP side (institutions that invest into PE funds); all this will take some time to sort out.