PE, VC investments in India to remain flat in 2013, says E&Y

MUMBAI: Investments by private equity (PE) players and venture capitalists (VC) in India are likely to be remain stagnant at 2012 levels (USD 7.6 billion) this year as the industry is in a transition phase and as a result fund raising will be subdued, Ernst & Young said today.

This year may define the new 'normal' for PE investment in India, the accounting firm said.

"The domestic PE industry is clearly in transition. After a period of deceleration that began in the second half of 2011 and continued into 2012, there are signs of positive changes in the industry... With these changes and key trends observed in 2012 we may have witnessed the beginning of a consolidation phase in the industry," E&Y India Partner for private equity Mayank Rastogi said in a report.

On the likely new fund raising activity, the report said it would remain subdued.

According to the report, total investment by PEs and VCs stood at USD 7.6 billion across 415 deals last year, which is 21 per cent decline in value terms against 2011.

Though investment value declined across sectors, domestic consumption remained the most significant theme for investing here in 2012, the report said adding healthcare, technology, travel and agriculture sectors saw significant jump in the investment values during this period.

E&Y said the sectors related to consumer products, healthcare and financial services will continue to be focus areas in 2013 for PEs and VCs.

"The infrastructure sector can be a major swing factor in the overall activity especially if the government takes appropriate steps, both on the policy a well as on the administrative sides, to boost investment activity."

The report maintained exits and portfolio management would continue to attract significant focus this year.

"LP (limited partner)-level exit activity (sale of LP positions) to be more active, particularly towards the latter part of the year, when a number of funds will be approaching the end of their terms," the report concluded.