Infrastructure deals dominate private equity in India(2)

With announced deal volumes totalling $3bn in the first eight months of the year, infrastructure and real estate are proving to be resilient investment targets in a year that has seen Indian private equity deal value drop by 20% through September.

Infrastructure and real estate sectors are dominating the private equity landscape in India, with announced deal values totaling about $3 billion through the first eight months of the year, according to data from accounting firm Grant Thornton.

Announced deal value in the sectors for the first six months of the year stood at $2.33 billion, while July and August added $654 million. In both periods, the two sectors dominated total deal value, even though actual deal volume for July and August was higher in the IT services segment of the Indian economy, according to the data.

Deal value in the infrastructure sector was helped significantly by India-based GMR Infrastructure’s purchase of AIG Highstar Capital’s 50 percent stake in energy producer InterGen in June for $1.1 billion. The deal was the largest-ever purchase of an energy utility by an Indian company.

Overall private equity deal activity in India has been sluggish this year as compared with last year. A separate set from Grant Thornton counts 262 deals totalling $9.29 billion in the first nine months of the year as compared with 285 deals totalling $11.73 billion in the first nine months of 2007 – a decrease of 20.8 percent.

Grant Thornton partner CG Srividya said that deal closures are taking longer to accomplish in the current market conditions, leading to both lower deal volumes and values.

Partner Harish HV said the global credit crisis is leading to “a rerating of global valuations” that will “provide some terrific opportunities for India”.