Though foreign institutional investors (FIIs) have pulled out over $2.5 billion from the stock markets in the last four months, private equity (PE) investment is still going strong. PE firms invested about $3.3 billion across 97 deals in India during the quarter ended March 2008, according to a study by Venture Intelligence, a research service focused on private equity and venture capital.

The amount invested during the quarter was 22 per cent higher than in the same period last year, which witnessed 101 deals totaling $2.7 billion. This has happened at a time when the Sensex fell by nearly 25 per cent from the 20,000-level. However, the investment was lower compared to the immediate previous quarter, which witnessed 131 deals totaling $5 billion. PE firms are long-term players who buy promoters’ stake into companies and wait for capital appreciation in the long-term.

“Some time back, private equity players were not too keen to invest at the high levels stocks were trading at. Merchant bankers, at the behest of promoters, were quoting high price to PE players. But with weakness in the secondary markets, they have been tamed and see PE as a good option, which is leading to a spurt in PE placements,” Anagram Stock Broking head of research M K Sharma said. The largest investment reported during the last quarter was the $395 million raised by Sophia Power Company from Lakshmi Mittal-promoted LNM India Ventures and Farallon Capital.

Telecom continued to attract investor interest with KKR and Morgan Stanley investing significant capital into outsourced tower infrastructure firms including Bharti Infratel and TowerVision.

... contd.