Private Equity and VC Sizzle in India; 329 Deals This Year

2006 has been an extraordinary year for private equity, with the value of announced deals hitting a record $700 billion worldwide, according to Thomson Financial data. Private equity deals hit a record $48 billion in the Asia-Pacific region this year, more than four times that of 2005. 

Global private equity has enjoyed a banner year in 2006, with the value of announced deals hitting a record $700 billion worldwide. The PE dealmaking has been furious in India as well. In the first nine months of 2006, India saw 329 venture capital and private-equity investments worth a total of $5.9 billion -- more than double the tally for 2005 -- with some 60% coming from foreign players, according to researcher Venture Intelligence India. 

BusinessWeek has collected some deep insights into the surging Indian market, Private Equity Invades India. Here are some highlights:

  • The size of deals is growing from around $8 million four years ago to an average of $25 million today. 
  • Top deal of the year: Idea Cellular, which in November received $950 million from a group of PE investors including Providence Equity Partners, ChrysCapital, Citigroup, and Spinnaker Capital. 
  • Deal on the horizon: Hutchison Essar, the 4th largest cellular carrier with over 20 million subscribers is on the block. Among others, Reliance Communications is in talks with private-equity players such as Blackstone, Texas Pacific, and KKR to bid for the deal.
  • First major PE win in India: In 1999, Warburg Pincus invested $300 million in regional cellular carrier Bharti Airtel, which has since grown into the country's biggest cellular company with nearly 25 million subscribers, netting Warbug a total of $1.6 billion. Warburg has since  pumped $1.4 billion into companies from hotels and media to jewelry, and India today represents 10% of its global portfolio.
  • PE in fast-growing emerging markets: PE firms often settle for a minority stake, usually between 10% and 30%, in exchange for an infusion of "growth capital." 
  • Exits: The Bombay Stock Exchange's benchmark Sensex index is up 42% since January, spurred in part by IPOs for 15 private-equity-backed companies that raised a total of $887 million.

India's attractiveness to private-equity investors is not merely its sizzling economy. Indian companies also have the highest return on equity in Asia, about 21%, compared with 9% for China, according to Rajeev Gupta, managing director at Carlyle Group in India.

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