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Private Equity (PE)
2008 has been a difficult year for Private Equity (PE) investments in India, mirroring a global trend. Until the global financial credit crisis, deal sizes were increasing, the market was highly competitive, high premiums were being paid, many trade buyers were often losing out to PE houses, and many PE houses had enjoyed attractive returns on exits.
The scenario has changed dramatically. Mirroring the recent trend, 2009 is expected to be a challenging year with overall deal volumes, the size of investments, fund raising and exits expected to reduce considerably.
There is a silver lining. India continues to be the most favored investment destination in the emerging markets due to its high growth potential. And for those PE firms who have dry powder, the environment could not be better, for attractive investment opportunities. However for most other firms, the focus will be to work with portfolio companies to create value. PE firms will also need to focus on Compliance and Corporate Governance in their portfolio companies.
Alternative sources of capital such as the public markets, debt, foreign convertible bonds all have but dried up making PE capital one of the very few options available for Indian companies to raise funds from. Some Indian business groups have overstretched themselves with large overseas acquisitions and these business groups would need access to capital to replace their debt obligations which fall due from 2009 to 2013. In the last 4 years, there also has been a growing and increasing acceptability by Indian business groups of PE as an acceptable source of capital.
PE capital is also needed for India’s domestic growth. Despite a global slowdown, India is predicted to grow at a GDP rate of > 5% in 2009. And the Indian Government is serious about building India’s infrastructure which needs some USD 300 billion of investment. Thus, it is likely that demand for PE capital will be strong in 2009.
KPMG in India has a premier market position with PE firms and is amongst the first in India to create a coordinated multi-disciplinary PE group that works closely with leading PE investors and their portfolio companies. Our PE group is well positioned to support PE houses on their India transactions, offering extensive services which include financial, tax, integrity, business and commercial due diligence and creating innovative and efficient transaction structures.
Reflecting the needs of the current times, our PE group is experienced in providing a range of services to nurture portfolio companies to create value. The wide range of post deal services include statutory and internal audit, risk assessment and corporate governance, IT advisory, corporate restructuring and cost optimisation solutions.
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