Private equity firms in India are on track to have their best year yet. The country has been subject to a flurry of investments so far in 2015 and if the trend continues for the remaining months, it will be a record-breaking year for Indian private equity, which has previously struggled.
Private equity has had a troubled past in India
The prediction is based on data from PwC, which estimates that so far this year, total deals in private equity reached the record level of $7.5bn. “Without a doubt, at this point I will be very surprised if 2015 comes second best to any year we have seen,” said Sanjeev Krishan, PwC’s Head of Private Equity in India, speaking to the Financial Times. “At the current run rate we should easily surpass 2007, which was the sector’s best [year] to date.”
Private equity has had a troubled past in India. Between 2001 and 2013 about $93bn worth of Private equity deals poured into the country, according to a paper published by McKinsey&Company in February 2015. According to the paper, “returns fell sharply in following vintages; funds that invested between 2006 and 2009 yielded seven percent returns at exit, below public markets’ average returns of 12 percent. In fact, India’s PE funds in recent years have come up well short of benchmarks: with a nine percent risk-free rate and a 9.5 percent equity risk premium.”
As the paper also notes, just “$16bn of the $51bn of principal capital deployed between 2000 and 2008 has been exited and returned to investors.” The first half of 2015, however, saw an uptick in exits, over $5bn, according to PwC data, and including big names such as Apax Partners TPG Capital.