India’s private equity market has felt the ripple of the credit crunch but has proved resilient in the face of adversity according to a recent report from business advisory firm Deloitte.
With leverage levels far below that of western markets, 68% of respondents said that the Indian market has remained largely unaffected by the credit crunch. Seventy-nine per cent expect to see private equity investment activity increase or maintain current levels in the next six months.
Infrastructure assets are considered to be the most attractive sector with 23% of respondents expecting infrastructure to provide the most opportunities in the next six months. According to the report, concerns over valuation and competition have been replaced by macro economic and infrastructure challenges.
Managing director of Deloitte, India, Sandeep Gill said: “The current volatile market conditions are creating significant market opportunities for private equity funds as an alternative source of capital. Companies are keen to expand and capitalise on an increasingly wealthy demographic, and with the public markets proving difficult, private equity would appear to provide the next logical step.”
Private equity managers rated the long term growth prospects of the Indian private equity market at an average of 8.5 out of 10, only marginally down from the H2 2007 rating of 8.6.
Although, many are optimistic about India’s ability to weather the economic storm that is affecting much of the western markets, 57% of respondents expect exit activity in the region to decrease over the next six months. Two thirds of respondents also expect a decrease in entry deal multiples compared with just 13% a year ago.
“The global economic problems might create a more steady growth market, compared with the huge bubble witnessed in the West in recent years,” said Gill.