PE funds: new hunt for wealthy investors

Thu, Jul 17 01:05 AM

With the equity markets looking one way down in the year-so-far, India's affluent class is taking an unconventional route to investments in stocks. Following a 40 per cent drop in benchmark equity indices till date in the calendar year, high networth individuals (HNIs) and non-resident Indians (NRIs) are now increasingly parking their funds with venture capital and private equity funds.

As a result, contributions from rich investors to funds have grown by 30-40 per cent in the current year so far, against a measly 10 per cent in the whole of 2007, according to fund mangers. "We have been encouraging such clients to look at private equity and realty funds as an asset class and have an encouraging response in some of the funds raised.

There has been an increase in appetite for private equity investments amongst the HNI and NRI investors," said Nitin Deshmukh, CEO, Kotak Private Equity Group. In April this year, Kotak had raised $440 million (Rs 1897.94 crore) private equity fund, which saw substantial inflows from HNIs and NRIs.

The trend could only get stronger in the coming days as growing pessimism over equities is likely to see more investors throng fund houses. According to fund managers, a few of the investors have shifted entirely from equities to reality funds, which are investing in specific real estate and infrastructure projects.

"Private equity investors are sophisticated, have a long-term outlook and are likely to generate higher than average returns making it an attractive investment option. Thus, we could see more investments pouring in this direction," said Manu Punnose, CEO of Subhkam Ventures, a domestic PE fund house, investing in major non-IT companies.

The fund house is in the process of raising about $100 million (Rs 440 crore) in its first round of fund raising plans. Further, with the primary markets lying almost dormant after companies have either stopped or hold their public offerings.

"All major IPOs have been put on hold due to bad market conditions. Even those, who got approval from the market regulator are looking for an ideal time to launch the offering," said an analyst, working with Mumbai-based brokerage firm, JM Financial.

Even the private equity deals have also came down during the last one quarter, but it is higher compared to last year when the bench mark sensex was in the range of 15000-16000 points, he said. The total number of PE deals stood at 77 valuing $2.8 billion (Rs 12,086 crore) during the April-June quarter compared to 115 deals in the January-March quarter valued $3.6 billion (Rs 15530 crore), according to Venture Intelligence, a research firm tracking PE/VC investments.

RECOMMEND THIS STORY