92% PE firms bat for infrastructure this year

92% PE firms bat for infrastructure this year

New Delhi: Private equity (PE) investors are the most upbeat lot when it comes to deal-making appetite in 2010.

Four-fifths of VCCircle’s Deal Outlook 2010 survey participants said they will do more deals this year.

While infrastructure and consumption-focused sectors—the same as last year—continue to remain major attractions, the number of funds looking to invest in these sectors has increased significantly. Around 92% of the PE funds surveyed have voted for infrastructure, compared with 47% last year.

The domestic consumption story has support from 72% of the respondents, while only 20% voted for this segment last year.

More than half the respondents (57%) said they were interested in other investment themes such as financial services and manufacturing.

Emerging sectors on the PE radar are education, healthcare and clean technology-renewable energy.

With India cementing its place as one of the fastest growing economies, more private money will find its way into the country. Nearly 64% of the survey respondents say that there will be an increase in allocation by global PE funds to India. Only 21% think otherwise.

It is quite possible that 2010 will bring more new PE funds into India, particularly those that will revisit their India entry plans. This trend is somewhat visible with the entry of new funds such as Advent International Corp. and OrbiMed Advisors, Llc. But, at the same time, a handful of funds such as Candover Investments Plc and Engelfield Capital Llp have closed their India offices because of troubles back home.

The other dominant trend that emerged from the survey is that India will continue to be a destination for growth capital deals as opposed to buyout transactions. Last year, PE investors forecast that buyouts will increase as a result of divestiture of non-core assets, but such deals did not materialize.

More deals and more PE capital to flow into India—that is the forecast from this investor class for 2010.

Content from VCCIRCLE