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Popping of the PE bubble

Popping of the PE bubble
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First Published: Thu, Apr 09 2009. 12 25 AM IST
Updated: Thu, Apr 09 2009. 12 25 AM IST
Have interesting investment opportunities diminished in India?
Equity market buoyancy is the usual barometer of these possibilities.That has been going south since the middle of last year. Now, private equity (PE) investors are shying away. In the March 2009 quarter, there were 36 PE deals worth $526 million (Rs2,656 crore today), against $3.9 billion and 133 deals during the same period last year. The level recorded this year is the lowest since 2005,a study by Venture Intelligence , a PE information service, noted.
This is puzzling as a downturn is a time when the best deals in terms of valuation can be made: Companies want money and PE investors can get a foothold in promising firms. Even if one agrees that India was caught in a PE investment bubble, the sharp decline in the number and value of deals indicates pessimism about its economic prospects. This is bad news, as PE investors have time horizons wider than those of equity investors. Such discounting indicates they don’t expect a quick recovery.
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First Published: Thu, Apr 09 2009. 12 25 AM IST