PE inflows – India in top two

India has overtaken China in Private Equity inflows for the first time. India had higher inflows than China in private equity investments for the first six months of 2007, and currently ranks second on the Asian (including Japan) PE investments. PEs continued to buy the India story while a few Asian favorites like South Korea saw setbacks.

According to Centre for Asia Private Equity Research data, India has seen $3.7 billion in PE investments during first 6 months of 2007. This puts it just behind Japan, which drew PE funds worth $4.91 billion, but ahead of China’s (including Hong Kong) $2.6 billion in the same period.

For the first half of 2007, Australia has dropped from last year’s first position to sixth this year, with Japan being number one, followed by India and “People’s Republic of China”.

For the first time, India has surpassed China this year in recording $3.7 billion in deal value. The amount is $1.1 billion more than that being recorded by PRC (including Hong Kong) for the same period. In Asia (including Japan), India has been fourth in investment volume for 2004-2006.

India stood fifth in 2003 while Japan and China, meanwhile, have been consistently in the top three positions. Incidentally, Japan has been at number one position since 2003, except for 2006 when Australia topped the charts by growing almost 10 times to touch $14.1 billion.

According to the organization which tracks PE investments in Asia, the average deal size in India is on the rise. The average deal size for the first half of 2007 is $43 million compared to $31 million for the first half in 2006.

The largest deal in the country thus far in 2007 is $650 million, which is the Carlyle Group’s commitment to Housing Development Finance Corporation. There have been an increasing number of buyout deals in India during H1 of 2007 than H1 of 2006.

Incidentally, India is only carrying forward its great performance of 2006, when its deal activity (including PE and VC investments) hit $7.5 billion. Over 65% of this came from PE investments while the rest came from VC funding. This was a 3.3 times growth over the previous year’s $2.3 billion, according to Venture Intelligence, which tracks VC/PE funding in India.

Last year’s growth was propelled largely by six mega deals (above $100 million) including KKR’s buyout of Flextronics International’s software development unit for $900 million, the $950-million investment in Idea Cellular and Temasek Holdings buying 9.9% stake in Tata Teleservices for about $300 million.

It can be concluded India’s progress in Industry and Business is well recognized by Global business and that is why they are investing in Asia particularly now in India. The Indian business must strive to keep up the tempo so as to attract more and more multinationals’ investments into India making India a ‘Global Hub of business’.