STATUS OF PRIVATE EQUITY IN INDIA

By AASHISH KADEL

GROWTH IN INDIA’S PRIVATE EQUITY MARKET HAS BEEN A SHORT BUT BUMPY RIDE…. with the bubblebust ending up wiping most of these players from the market. the industry recovered from a deal-value low point of $470 million in 2003 to a peak of $19.. • In the late 90’s.03 billion in 2007 • . becoming the second largest Asian PE capital recipient after Japan less than two decades later. the dot-com boom in Bangalore fuelled a rapid growth of VC/PE companies. Demonstrating its resilience. • In the late 80’s.

Over $686 million investment has taken place during the last 18 months. • • Healthcare: Significant capabilities in India for clinical research. Supportive regulations are providing a boost to clean tech/renewable energy.THE CURRENT HOT SECTORS FOR PRIVATE EQUITY ARE • Education: Highly attractive with an estimated $40 billion market for private institutions. and more than $800 million investment is being planned over the next 12 months. Over $300 million has been invested in Education ventures since 2006. About $3. • Clean tech or renewable energy: Dire need for a more reliable power supply throughout the country. Low average number of hospital beds will bring in massive investment to build more hospitals throughout the country.5 billion PE investment is expected over the next few years .

IN GENERAL. DRIVERS OF PRIVATE EQUITY INDUSTRY GROWTH IN INDIA CAN BE IDENTIFIED • 1) Sustained rapid economic growth averaging 7% . • 3) Well-established public equity market consisting of over 6.8% annually since 2000. with one of the best higher education systems in the emerging market and widespread knowledge of English. credible legal system. . • 4) Human capital & competitiveness in high-growth sectors.000 companies listed on Mumbai Stock Exchange with reasonable levels of liquidity and trading volume. • 2) Burgeoning domestic customer market with the middle class projected to grow from 50 million currently to 500 million in 2025. • 5) Stable democratic government & credible legal framework as its common-law legal origin has provided the foundation for a well-established.

shown by the relatively low % of PE investments over GDP . • India ranks among the top three of emerging countries when it comes to $ billion of funds invested. • the US had the largest private equity activity. In 2007. the natural starting point is to analyze the different climate facilitating investment. both in PE investments as a percentage of GDP as well as in $ billion of funds invested. but there is still a lot of potential .COMPARISON BETWEEN US AND INDIA: THE FACT • When using US insights to come to an assessment of the PE potential in India’s education sector.

. • The government currently spends 3.• India’s current spend on education is at 5% of average household income.2.7% of the GDP which amounts to around $30 billion. In spite of the higher budget allocation the 11th planning commission has identified a resource gap of Rs.90000 (~$2000 in today’s $ terms) is expected to burgeon from 28% of the total population in 2002 to 48% in 2010. PE IN EDUCATION… • Going forward the consuming class i.. • The country has a network of ~1 million schools out of which 7% are private. showing a Private equity – Outlook on PE in India’s Education sector CAGR of 8.2 Trillion (~ $25 billion) which needs to be filled by private funding. This is subsisted by around $50 billion of private spend which is expected to increase to $80 billion by 2012 growing at a CAGR of 14%.e. with ~40% of enrolled population attending private schools. Households with an annual income >Rs.6%. In addition there are 18000 HEIs.

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