Private equity fund raising dipped in India overall, from $7 billion in 2011 to $3 billion in 2012. And yet a number of new investors - putting in money for the first time - entered India in 2012. The number of active funds increased from 181 funds in 2009 to 285 in 2012, according to Bain and Co's India Private Equity Report 2013. And this increase was driven by a sharp increase in the number of new funds.
Mahendra Swarup, President, Indian Venture Capital Association, says this is a sign of a maturing private equity market. "A number of sovereign funds which earlier invested in India through large global funds are now directly entering the Indian market," he adds. He was referring to funds from Malaysia, West Asia, Singapore, a number of which are now directly investing in India.
The report also lists funds which invested in India for the first time. Interestingly these include some funds which have been in India for some years, but did not make any investments earlier. Arpan Sheth, who leads Bain & Co's Private Equity practice in India, observes that this is an indication of valuations getting real and the supply-demand issue stabilising. "The Indian private equity market had witnessed an influx of global private equity funds, and the number of investable deals being limited pushed valuations to the hilt. These investments are an indication of how valuations are getting real and funds are making investment calls." With fundamental growth drivers in place for India, the
investment and fund raising sentiment is surely poised to pick up in the coming years.
A fund is classified as new if it has not done any deal in the preceding year. For example, new funds include funds that conducted a deal in 2012 but were inactive in the previous year. Data source - Bain and Co. India Private Equity Report 2013
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