TRESVISTA FINANCIAL SERVICES
Private Investment in Public
Equity – India Focus
– By TresVista Financial Services
This article analyzes the global private equity space and the growth prospects of private investments in public
equity (PIPE) deals. Given the Indian PE market performance, PIPEs will continue to be an important part
of the Indian markets that cannot be ignored. In correlation to the volatility of the market and the subsequent
movement in valuations, PIPEs are here to stay.
Since 2008, the global PE sector
has experienced a significant
downturn in activity given the
Global PE
economic slowdown. However,
Market
2010 was seen as a year of
recovery for PE worldwide, as
the industry has been gradually
recovering. PE continues to remain an important
source of funds for startup and young firms, firms in
financial distress and those seeking buyout financing.
Nearly $180.0bn of PE was invested globally in 2010,
up around 54.0% from the previous year but still down
around 74.0% from the peak in 2006. However, activity
in the industry has been showing positive signs to build
on this recovery and is expected to top $200.0bn in
2011. With bank lending in short supply, the average
cost of debt financing is well up on pre-crisis levels
while leverage is down and PE firms are contributing a
bigger proportion of equity into their deals.
4
In 2010, the epicenters of the global credit crisis,
Europe and North America, recorded deal values up
160.0% and 192.0%, respectively, from the cyclical
trough. A large and rapidly growing number of
PE funds worldwide are said to be sitting on nearly
$1.0tn in committed but un-invested “dry powder”,
and they are looking across the globe for attractive
investment opportunities. In line with the industry’s
revival in developed markets in 2010, PE activity in
India, China and other leading emerging markets also
recovered quickly.
PE Market in India
PE has established strong roots in India over the past
decade, owing to the nation’s phenomenal growth,
dynamic entrepreneurs and hunger for capital to finance
opportunities in nearly every business sector. Over the
past decade, its role increased in significance and PE began
to shape itself to the contours of the Indian economy
INDUSTRY INTELLIGENCE | October 2011