India’s New Wave of Private Equity Investments

In February, the $174 billion Canadian Pension Plan Investment Board (CPPIB) announced that it was getting into a strategic alliance with India’s Piramal Enterprises to invest in residential projects across the country. The two partners will make an initial contribution of $250 million each. “India is a key long-term growth market for us,” says CPPIB spokesperson Linda Sims. “We will continue to pursue investment opportunities in the country, although there is no set allocation or timeline involved.”

CPPIB is part of the newest wave of international private equity (PE) players that have come to India over the years. “India is a key long-term growth market for us,” says company spokesperson Linda Sims. “We will continue to pursue investment opportunities in the country, although there is no set allocation or timeline involved.”

Back in 2006, at the height of the Indian investment boom, there were about 350 firms specializing in private equity in India. The numbers are estimates because the Securities and Exchange Board of India (SEBI) did not regulate the sector until 2012. According to the latest SEBI figures, there were 77 Alternative Investment Funds (under which PE and hedge funds are classified) and 180 venture capital funds registered with it as of September 30.

 Venture Intelligence, a leading provider of data on private company financials, transactions and valuations, puts the number higher. “In our estimate, the number of serious PE-type investors — roughly defined as those that, on average, make more than one investment during a year or have a representative on the ground in the country – is closer to 250,” says managing director Arun Natarajan. Typically, funds that plan to raise money domestically tend to register with SEBI as a venture capital (VC) fund. A lot of others take the FII (foreign institutional investor) route or the FDI (foreign direct investment) route through Mauritius or Singapore.

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Originally Published April 25, 2014, by Knowledge@Wharton.