Private Equity industry to see moderate growth during 2012: Study
Google and Facebook have the same number of users. However, Google's net profit and revenue is 10 times that Facebook. Yet, at over $ 100bn, the stock market is giving a market value to Facebook that is only half of Google.
Private equity and venture capital investors expect tempered growth of 10-25 per cent in the PE industry during this calender year largely due to challenges in exiting investments and regulatory uncertainty.
According to the latest findings of Bain & Company's India Private Equity Report, in 2011, the total deal value surged about 55 per cent to $14.8 billion over the previous year, whereas this year over 65 per cent private equity (PE) and venture capital (VC) investors surveyed expect moderate growth of 10-25 per cent.
"We see 2012 building upon the strengths shown by PE in 2011, though there are some variables at play this year," Arpan Sheth, who leads the PE practice for Bain & Company in India said, adding "growth will be somewhat constrained by challenges in exiting current investments and uncertainties around regulations."
The report, which was produced in collaboration with the Indian Private Equity and Venture Capital Association (IVCA), further noted that PE players are becoming more selective about where they park their money as they look to ensure capital protection, better returns and appropriate liquidity.
"For PE to realise its full potential important regulatory hurdles like uncertainties in India's tax regime and limited investment opportunities for foreign investors in several regulated sectors such as multi brand retail need to be addressed," IVCA President Mahendra Swarup said.
Consumer products, healthcare, banking & financial services are some of the most attractive sectors for future PE investments, the report said, adding that the interest in e-commerce, for which deals in 2011 nearly tripled compared to 2010, is set to continue.
India was the fastest-growing PE market in Asia in 2011. PE firms in the country closed 531 deals 40 per cent more than the year before.
Meanwhile, the Bain-IVCA report said 2011 saw a sharp 30 per cent drop in the number of exits over 2010. However, after a bleak 2011, about 60 per cent of the survey respondents believe the number of exits will rise moderately in 2012 because of the growing pressure from pre-2007 vintage deals.
In addition to the valuation challenges around exits,uncertainty around a variety of regulations such as capital gains tax makes the environment less conducive for successful exits, the report said.