‘Half of the deals (next year) will not be in technology’

‘Half of the deals (next year) will not be in technology’

Mumbai: There is only one place to party in Mumbai, and that is in Bandra, queen of the western suburbs. Last Wednesday, the party was at the Miranda residence in one of those quiet bylanes just off Turner Road. The Mirandas are Luis Miranda, CEO of IDFC Private Equity, and his better half, Fiona. The party’s theme was pre-Christmas, with a distinct private equity hue. In fact, if you are a private equity (PE) professional in Mumbai, or visiting Mumbai in December, you have to be at this party or you’re not hip enough.

The Mirandas’ bash also marks the close of what still remains the country’s marquee PE conference—the Asian Private Equity and Venture Forum, hosted by Hong Kong information services firm AVCJ Group Ltd. Predictably, the conference, which concluded on Wednesday afternoon, spilled over into the party. This was my first year at the party, but the seventh at the AVCJ conference.

The conference, which saw over 500 attendees this year, has been held here since the mid-1990s. I bring it up here because the evolution of the Indian PE industry can pretty much be charted from the delegate numbers and names each year.

“Do you remember back in the old days, just 80-90 delegates?" remarked AVCJ CEO Daniel Schwartz, the first person I bumped into at the party. The “old days" refers to the 2001-2003 era, when the scars of the Internet bloodbath were still fresh, and venture capital beat a hasty retreat from this market. With its better known variant in disgrace, PE, which typically follows venture capital in the funding cycle, had to tread carefully. So, back in 2001-2003, one would be lucky to just exchange cards with a true-blue PE professional at the conference. Most kept away, and the ones that didn’t were extremely guarded with inquisitive journalists like myself. There were exceptions. ChrysCapital’s Ashish Dhawan, the man who, in my opinion, single-handedly put India’s PE market on the global map, had just made the transition from venture capital to private equity investing, and was usually happy to oblige with interviews.

Some of the names from the old days—Electra Partners, IndAsia Fund Advisors, CDPQ, etc.—are not around any more. Others persisted through the nuclear winter. Firms such as Actis Capital Llp., Warburg Pincus Llc., ICICI Venture Funds Co., Citigroup Venture Capital International and, of course, ChrysCapital, laid the bedrock for what would emerge as the world’s fastest growing emerging PE market. India’s journey, since then, is summed up best by a comment by Patricia Dinneen, from Siguler Duff & Co. Llc., a limited partner (institutions which invest in PE funds), at the conference, “I think we should stop referring to India as ‘emerging’. India has emerged." A public endorsement of the Indian market by a limited partner would have been unimaginable four or five years ago.

Yet, as the party swings into high-octane, the veterans are already raising red flags. As investments in India inch towards $10 billion (Rs39,400 crore), maybe more, for 2007, there are growing concerns around overheating, with too much money flowing in too fast. Valuations of both listed and unlisted companies are at an all-time high. Few people talk about raising funds less than $1 billion, but putting that money to work could be easier said than done. “Business is good, never been better. But I’m a little scared it might get out of hand," said one of the old warhorses as I was leaving the party. He is raising a new fund but has deliberately capped its corpus well below $1 billion. Just in case.

Snigdha Sengupta is Mint’s resident expert on private equity and venture capital.

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