Private equity investors seem to have used the market rally to exit from their investments in Indian companies. Though stock and IPO markets revived, private equity (PE) placement in the July-September quarter (Q2) of this financial year saw a 70 per cent decline as compared to the same period last year.

According to a study by data service provider Venture Intelligence, PE firms invested about $763 million across 47 deals in the third quarter of this financial year while the same period had seen investments of $2,581 million across 132 deals last year. PE firms seemed more keen to ride the bulls and make an exit than investing.

“The continued rally in the public markets enabled PE firms to obtain exit routes for their investments in 25 Indian companies during the quarter, including two via IPOs of Adani Power and Pipavav Shipyard, while there were seven exits (including three IPOs) in the same period in 2008,” said Venture Intelligence chief executive officer Arun Natarajan.

Investors are reeling under pressure and are taking time to regain confidence in the markets, say experts. “Deals with higher valuations which were eminent last year is losing steam now as the risk appetite is still low. We see investments improving in the first quarter of 2010,” said Natarajan.

The largest investment during the July-September quarter was the $255-million investment by KKR to buy out Flextronics’ residual stake in telecom software services firm Aricent. The deal accounted for a third of value of investment during the period. The IT-ITeS industry registered 12 deals worth $340 million during the quarter followed by BFSI (eight deals worth $101 million). Shipping and logistics, healthcare and life sciences, and manufacturing attracted five investments each during the period. Education companies attracted three investments worth $35 million.

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