While foreign inflows to the stock markets have come down after the Sebi imposed curbs on participatory notes (P-Notes), the huge inflow to India Inc and the real estate sector is continuing through the private equity route as never before.

Private equity investments (PE) in India have crossed the $10 billion mark in the first ten months of the current year as against $ 7.9 billion in 2006, $2 billion in 2005 and $1.7 billion in 2004. The real estate and infrastructure sector has become the hot destination of private equity funds with the sector cornering 50 per cent share in value of all private equity investments, having received about $5 billion in 52 deals this year.

India has emerged the top destination in Asia (excluding Japan and Australia) surpassing China that recorded $8.3 billion in investments so far. China received $13 billion in private equity investments in 2006 compared with $7 billion in India during the same period. The equation has changed since then, with India well in the lead this year.

After P-Notes, the surging PE inflows — especially to the realty sector — has become a cause of concern for regulators. The Reserve Bank of India, it is learnt, has already alerted the government on the pitfalls of the PE inflows. As PE inflows are coming under automatic route of the FDI (foreign direct investment), the regulators can do very little to curb them.

According to Indusview, real estate alone cornered 26 per cent share in value of all private equity investments, having received $2.6 billion in 32 deals closely followed by telecommunications with 21% share in value of all investments at $2.1 billion. The latest deal was by DLF, India’s biggest real estate developer by number of properties built and market capitalisation, which raised Rs 1675 crore by selling stakes to private equity firms — mainly Merrill Lynch — in new residential projects.

... contd.