Foreign investment funds in India

India has attracted the highest private equity (PE) investments at $10 billion in 2007 so far in the emerging economies including China. According to an India-focused cross-border advisory firm IndusView, China attracted $8.3 billion during the same period.

China received $13 billion in PE investments in 2006 compared to $7 billion in India. The equation has changed since then, with India taking the lead this year, said the firm. In 2005, India had attracted only $2 billion as private equity.

The Indian real estate and infrastructure sectors have been a key contributor to this rising inflows. Out of $10 billion PE fund that India attracted so far, $5 billion came in these sectors.

Real estate emerged as the favourite segment with 26% share in all private equity investments in value terms, receiving $2.6 billion in 32 deals, closely followed by telecom with 21% share, investment touching $2.1 billion.




Globally also, real estate and infrastructure have emerged as the most attractive sectors to invest. In 2006, global real estate private equity funds have raised $72 billion in 2006 and $50 billion in 2007 so far, said the report. A large portion of these funds will be invested in emerging markets such as India and China.

"India's private equity market can expand four-fold, using deal value as a percentage of the gross domestic product and maintain the top slot ahead of China, its nearest competing economy, and the infrastructure sector will provide the necessary edge." says Bundeep Singh Rangar, chairman of IndusView.

India's trajectory in attracting PE fund has grown sharply by 51% since 1998. Private equity investments in the country as a percentage of GDP at 1% is however, when compared to developed countries like the US at 2.3%, and UK at 3.3%.

According to government estimates, India will require around $ 500 billion investments in infrastructure sectors like road, energy, ports and airports. This will create a huge opportunity for foreign investors. "Indian infrastructure's favourable flavour is its predictable investment climate and a strong entrepreneurial culture," added Rangar.

Some of the major PE funds, which are active in Indian market, are Temasek Holdings, investment arm of Singapore government, Blackstone Group, a global private equity and investment management firm, Warburg Pincus, Carlyle Group, Washington and Actis Capital. Warburg Pincus is managing around $14 billion fund. Carlyle has more than $75 billion of capital under management.