Mumbai: Private equity (PE) investors in India have a pessimistic outlook towards buyouts, said 55% of PE industry professionals, according to a poll of domestic and overseas limited and general partners attending a two-day conference that started in Mumbai on Wednesday.
The poll was conducted by organizers of the Private Equity International Conference. Private Equity International, a global financial information group dedicated to private equity, real estate and infrastructure, organized the event.
The Indian PE space needs to execute more buyouts, said the participants in the poll.
Housing Development and Finance Corp. Ltd chairman Deepak Parekh told the conference that the PE model in India was a “buy-in rather than a buyout model”.
“This (private equity model) has evolved as a consequence of default rather than design,” he said with reference to minority stake transactions that form a major chunk of PE deals in India.
At least 36% of the nearly 75 attendees also said deal flow was one of the biggest challenges of buyouts.
According to Sameer Sain, chief executive officer and managing director, Future Capital Holdings Ltd, while deal flow is very reactive to market conditions, management talent is of crucial importance. Vishakha Mulye, managing director and chief executive of ICICI Venture Funds Management Co. Ltd, agreed, saying effective control is more important because it can influence the management team and operational involvement.
At least 68% participants also voted against making investments in listed firms to maximize returns. A study by SMC Capital showed PE funds invested Rs2,574 crore in the listed space known as private investment into public enterprise, or PIPE, deals.
“Don’t be seduced by the return, the risks are clear. As an investor we should look at risk-adjusted returns,” Han Seng Low, executive director of Singapore-based United Overseas Bank Ltd, said of PIPE deals. “The risks are that the valuations are largely influenced by the stock market volatility.”