Pe: the Story of Greed, Boom and the Fall of Private Equity in India

5/17/12

PE: The story of greed, boom and the fall of private equity in India - The Economic Times

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17 MAY, 2012, 10.40AM IST, MALINI GOYAL,ET BUREAU

PE: The story of greed, boom and the fall of private equity in India

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The rise was dramatic. Around 2004, private equity in India was niche and small. Few had heard about it and even fewer understood it. By 2007, it had turned into a headline grabber. India was booming. Indian entrepreneurs were celebrated. Valuations were surging. And global PE biggies from KKR to Blackstone - flush with funds - were in full attendance here. PE had turned into the big stake game, their bets swinging fortunes of Indian firms and entrepreneurs overnight. 2012 is a different world. More than third of all PE investments in India will give negative returns, says a KPMG report. The industry with 300 odd funds is sitting on over $20 billion of dry powder or unutilised funds. LPs or fund of funds from whom PEs raise their money, are worried and disappointed. India is one of the worst performing PE markets in the world, many say. Course correction is in the offing - and a shakeout imminent. From 300, some are expecting not more than 50 odd to survive in the next four-five years. "India is at the bottom of a mini dip. We had too many people groups raise capital without a lot of PE experience. This combined with a difficult exit environment created a perfect storm, " says Nirav Kachalia, MD (investments), Morgan Creek. So what went wrong? Partly, India's macro-economic environment is to blame. Its sizzling growth story is no longer hot. And PE's performance in India mirrors that. But there's a...