But what’s interesting to note is that the amount disbursed in the initial round of funding is down sharply— from $4.2 billion in 2007 to $2.8 billion in 2008 so far. The research firm says that at least 75 of the 246 companies that supposedly received funding did not get anything at all in the initial stage.

It says it’s likely a result of PE funds becoming more cautious and linking disbursement to certain performance benchmarks being met by companies. “While contingencies are not a new phenomenon, given the current crunch facing companies and with PE investments being one of the few avenues left to raise money, PE firms are probably in a much stronger position to dictate terms. This is quite a change from last year, when every large deal had multiple bidders and it was the promoters who had the upper hand," said the report from Evalueserve.

Mint had reported on 6 October about PE firms increasingly building in safety clauses into their agreements with investee companies—be it in terms of put options, convertible instruments or ratchets. These instruments in essence allow the investor a downside protection, and in some instances, the ability to bail out completely if things don’t go quite as well as they had expected.

Where are PE funds investing this year? Data from Evalueserve also indicated that PE investments in the business services segment, which includes business process outsourcing and knowledge process outsourcing outfits, media companies, market relations firms and software solutions companies, have more than doubled in 2008 compared with 2007 (slightly greater than $1 billion from $488 million last year), while those in the consumer-related segment more than quadrupled, from $465 million in 2007 to $2.1 billion year-to-date. Meanwhile, investments in the financial services segment have declined—$738 million year-to-date compared with $2.2 billion in 2007.

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