PE inflows triple during 2006

Mumbai: Private equity (PE) investment inflows into India tripled during 2006, according to a leading Chennai-based firm that tracks such flows.

According to Venture Intelligence India, a division of TSJ Media Pvt Ltd, PE investments into India added up to nearly $7.5 billion, up from $2.25 billion last year. Last week, Anil Ambani, chairman, Anil Dhirubhai Ambani Group (ADAG), said all top international private equity funds were willing to fund Reliance Communication's expansion plans, which could include bidding for Hutchison Essar.

Firms like Blackstone and Kohlberg Kravis Robrts & Co (KKR), have already expressed their willingness to back Reliance Communciation's likely bid for the telecoms giant.

KKR had in 2006 acquired the Indian software business of Flextronics International for $900 million. Industry observers expect the trend to grow this year, and PE inflows could touch the $10 billion mark in 2007.

According to Venture Intelligence, the technology sector attracted maximum funding from PE firms, with nearly 90 deals valued at about $1.5 billion. In 2005, the tech sector attracted less than $450 million in funds through about 45 deals from PE firms.

Adding to the confidence of international investors is the fact that exits are now easier. Warburg Pincus, for instance, last year sold its stake in Bharti Tele-Ventures through the stock markets for a whopping $560 million. Many international PE firms are booking profits and making exits through stock market deals.

PricewaterhouseCoopers (PwC), an international consultancy, notes that "the significance of India on the global PE investment horizon has been established," thanks to the fact that many of the older players have made profitable exits. PwC has a more conservative estimate of PE inflows into India during 2006: it has placed the figure at $5.4 billion (and about 250 deals).

Real estate and infrastructure projects are also attracting a lot of PE investments, and observers believe these two sectors will drive future inflows.