At $4 billion PE investments India outpaces China's $570 million in Q1 2008

Despite the slowdown in global venture capital investments, owing to a slowdown in global financial market conditions private equity (PE) investments in India doubled to $4 billion in the first quarter of the calendar year 2008 compared to the corresponding period last year, maintaining its position as the most attrcative destination in Asia (excluding Japan) surpassing China that has recorded just $570 million in investments so far. India had first surpassed China in attracting PE investments towards the end of the second quarter of the calendar year 2007 when it grossed $10 billion compared to China's $8 billion. During the same period in 2006 China had received $13 billion in private equity investments compared with $7 billion in India.
The equation has changed since then, with India well in the lead now, says market research and cross-border M&A advisory firm IndusView Advisors Private Ltd.
The Indian real estate and infrastructure sector has again been the key contributor to this increasing trend this year, emerging a favorite with 28 per cent share in value of all private equity investments at $1.12 billion
The power sector received about 13 per cent share of the pie with $520 million so far this year
Banking & Finance and Telecom sectors tied for the third most favorable sectors for investments with 8.7 per cent of the deals at more than $340 million each.
Globally, real estate and infrastructure fundraising by international real estate private equity funds, has been brisk, with as much as $130 billion raised over the last two, according to estimates. A large percentage of these funds raised are focused outside of the US for investing in emerging markets such as India and China.
''With the economic downturn in developed economies intensifying and the application of capital becoming dearer and pressurising the expected return on investments (RoIs); PE firms are finding their way in to safer investment heavens, that is, emerging markets which have decoupled from the developed markets.'' says Bundeep Singh Rangar, chairman, IndusView.


China will overtake the US by 2025 as the world's largest economy. China's economy is expected to continue to grow to become about 130 per cent the size of the US by 2050, according to estimates.
India will grow to almost 90 per cent of the size of the US by 2050, while Brazil is expected to overtake Japan by 2050 to move into fourth place. Russia, Mexico and Indonesia all have the potential to have economies larger than those of Germany or the UK, by the middle of this century.
''India continues to enjoy a favourable investment flavor among investors due to liberal economic initiatives on the part of the government, compared to China which is much regulated,'' added Rangar.
The Indian government has responded to an urgent demand for new infrastructure, announcing that 9 per cent of the country's GDP will be spent on infrastructure by 2012, presenting an unprecedented investment opportunity.
This has renewed interest in the Indian infrastructure sector with fresh fund raising of up to $8 billion in the pipeline this year with financial entities such as India's State Bank of India (SBI), Australia-based Macquarie Capital Group Ltd, the UK-based private equity firm 3i Group, the US-based Blackstone Group among others, participating.
''Emergence of the non-tech sectors, as favorite for investments is symbolic of the realisation of the need to develop world class infrastructure to accelerate growth in the Indian economy to 10 per cent, which will see the inflow of a resource base of incremental funds, application of internationally applicable best practices and experienced global management expertise & technology.'' said Rishi Sahai, director, IndusView.
A significant share of international real estate funds will find their way in to the Indian real-estate and infrastructure market, which has the capacity to absorb as much as $500 billion over the next five years, according to government estimates.
Global private equity funds that have mapped out investment strategies for the Indian market include some of the largest private equity investore such as:

• Temasek Holdings (Pte) Ltd, the investment arm of the Singapore government .
• Blackstone Group L P, a global private equity and investment management firm .
• Warburg Pincus, with approximately $14 billion under management .
• The Carlyle Group, Washington DC-based private equity investment firm with more than $75 billion of equity capital under management.
• Actis Capital LLP, a leading private equity investor in emerging markets with $3.5 billion of funds under management.