Private equity deals decline by 80% in Oct & Nov

Mumbai: Private equity investments have declined by as much as 80% in the first two months of the December quarter with the ongoing credit crunch casting its shadow on the investment space of the country. Private equity investment in 41 companies during the October-November period stood at $969.22 million, a whopping 80% plunge over the same period last year.
    In the last year, there were as many as 71 deals during the corresponding period attracting an investment of $4,753.98 million, as per data compiled by Nexgen Capital, the merchant-banking arm of brokerage firm SMC Global.
    "With FII selling offsetting the investment this year and slowdown in the global economy, there is a lack of clarity about the entire economic scenario in the country. Hence, PE funds are adopting a wait-andwatch approach before investing their money," Venture Intelligence founder and CEO Arun Natarajan said.
    Meanwhile, analysts feel that volatility in the currency market has put pressure on the PE investors in the country as they are confused over the valuation of the company.
    "The number of PE deals are coming down this quarter and the road ahead is also quite competitive for the corporates as redemption pressure and lack of conviction are forcing PE players to hold back investment,"Jagannadham Thunuguntla, Nexgen Capital equity head, said. Also, corporates hit by the slowdown, and witnessing value erosion, would now see the average PE deal size coming down substantially from the previous period. "The average deal size in October-November 2007 period was at $40-45 million, which has come down to $5-10 million this year. We expect the trend to continue in the coming quarters till a sense of rationality comes back to the investors. Going forward, such a situation is expected to continue till mid or end of 2009," Thunuguntla said. Corporates which want investment are not able to attract funds. On the other hand, companies in which funds are interested, are playing hard to get bwecause of low valuations, he added. Also, a growing number of funds are now shifting focus to India-centric companies, being confident of assured returns. AGENCIES