Global turmoil has not yet affected the inflow of funds into emerging markets like China and India. The two markets raised $28.6 billion in 2007, up 48% from 2006, according to the Emerging Markets Private Equity Association (EMPEA). Much of this will be invested over the next three years. In the first four months of 2008, private equity (PE) investors announced deals worth $4 billion, lower than the same period last year.
The numbers are expected to even out by June. "There has been a marginal drop in valuations," says a fund manager. Mid-sized to large deals are expected in infrastructure, telecom, media and financial services. "Deals may be fewer, but the size will be larger, as investors make value picks," he said.
Many large PE firms are at the end of their fund-raising, which could see deal-making pick up. UK-based Actis Capital is likely to complete its $1 billion India fund by August; likewise, IDFC PE and Kotak PE (about $1 billion each). Then, global firms like Warburg Pincus, which has just raised a $12 billion global fund, and Bain Capital, which is setting up an India office, will enter a new investing cycle here.
Players expect allocations for emerging markets to accelerate, as investors look to de-risk from mature ones. "The strong year-on-year growth indicates that investors have a long-term view that good risk-adjusted returns will persist across these regions," says Sarah Alexander, President, EMPEA.
Source: Outlook Business, 28 Jun 2008 Edition Good times on
