Boston Analytics Report Quantifies India's Burgeoning Private Equity Market during 2004-2007
$24.8 billion worth of investment caps four-year period of significant growth, lays groundwork for continuing surge in activity.
Boston, Mass. (PRWEB) April 10, 2008
A new report announced today by leading knowledge services company Boston Analytics titled "Private Equity Landscape in India" has found that 903 private equity investments worth $24.8 billion in value were made in India from 2004-2007, with more than 45 of those deals exceeding $100 million. In 2003, India saw 56 investments of an average size of $8.4 million. By 2007, those figures had grown to 387 deals worth on average of $36.8 million.
According to the report, demographic and economic factors spurred this rapid growth. The liberalization of India's economy coupled with a middle class that grew to more than 300 million provided an increasingly diverse skill base awash with more and more disposable income thereby resulting in a large (demanding) consumer base and a need for a variety of different services.
IT and Financial Services See High Activity
Of the 903 investments made in this time, more than one-quarter involved companies in the IT industry (28%). Manufacturing saw the next-largest number of deals (17%) followed by Banking, Financial Services and Insurance (BFSI) and healthcare (10% each). Although BFSI represented only one-tenth of the number of companies invested in by private equity firms, the sector's 93 deals accounted for the largest share of the $24.8 billion transacted. With eight of those deals worth more than $100 million, financial services totaled 21% of the money exchanged in India's private equity investments. IT investments made up 15% with four deals reaching or exceeding the $100 million mark, while manufacturing and telecom sector each accounted for 13% of the activity within this four-year period. Other industries that attracted attention from the private investment community include textiles and garments, media and entertainment, energy and shipping and transport.
"As many would expect, the IT sector was very active in the past four years," said Swati Chaturvedi, Vice President, Private Equity, Boston Analytics. "However, India's rapid economic growth, relaxation of regulatory constraints in several sectors and active stock markets have made India an attractive destination for private equity investments."
India's Private Equity Market Positioned for Continued Prosperity
The study also found that India's current market situation and the dynamics of its economy are likely to result in continued growth through 2010. Attributes favoring the country's investment climate include:
Rapid GDP growth (projected to be 8.4% in 2008), Favorable demographics (roughly half of the population is under the age of 25), A high domestic savings rates (32.4% in 2005-2006), A comfortable foreign exchange reserves position ($301 billion in February 2008) and A correction in the stock market - the approximate 21% decline in the Indian stock market (BSE Sensex) in the first two months of 2008 has eased valuations of target companies for private equity investments. The telecom and BFSI markets are poised to sustain their success as each is expected to grow by more than 20% in this climate. Specifically for the latter, the retail banking market is estimated to touch $242 billion due to the substantial wealth created by skyrocketing salaries and disposable income of the nation's large and young middle class. Telecom will benefit from a market expected to double in the next three years, including an expected surge in wireless voice and services - India's wireless teledensity is currently 22% (as compared to the U. S.'s 85% teledensity).
India Private Equity Climate Not without Negative Elements
Despite its growth potential, some foreign investors may still see India's opportunities as having too low a ceiling - the median deal during this timeframe (in 2007) was $18 million. In addition, India's government regulates buyouts and PIPE transactions. Moreover, the rising rupee will also cut into the value of India's investments across the board.
"Still, India has many of the elements needed to support productive investments and should be well-positioned to navigate any volatility the global economy brings over the next few years," said Chaturvedi.
The executive summary of "Private Equity Landscape in India" can be found at http://www. bostonanalytics. com/leading_thoughts_research/leading_thoughts. html (http://www. bostonanalytics. com/leading_thoughts_research/leading_thoughts. html). The full 166-page report is available for purchase from Boston Analytics. Contact Swati Chaturvedi at schaturvedi @ bostonanalytics. com or 617-457-7888 ext. 243 for more information.
About Boston Analytics
Boston Analytics provides its corporate, consulting and financial clients the most current, accurate, and actionable research and analytics - so they can be first to uncover and exploit opportunities. The firm's work powers knowledge processes and enables effective decisions at all levels of its clients' businesses. Boston Analytics brings together leading analytical minds worldwide, delivers a robust offering of knowledge services, and works as genuine partners.
Boston Analytics delivers enterprise-wide knowledge advantage by providing fully customized knowledge services as well as flexible, preconfigured knowledge products and repositories. All knowledge services and products are tailored to meet the specific needs of corporations, consulting companies, and financial services firms.
Boston Analytics is headquartered in Boston with offices in New York, London, and Mumbai. More information can be found at www. bostonanalytics. com.
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