FW: Do both local and foreign private equity firms feature on the dealmaking landscape?
SB: Yes, there is significant activity from foreign and domestic players, as well as direct and syndicated involvement from sovereign funds. While the ‘official’ capital flow is
disproportionately accounted for from places such as The Cayman Islands and Mauritius, the ‘real’ sources vary and represent a truly global investor base. There is a notable lack of significant flow in the form of non-remittance investment from the Indian Diaspora across the world, as well as from countries such as China. The latter is increasing and recent agreements between China and India are positive developments for the PE industry in the region.

FW:. Which sectors are currently attractive to private equity investors?  Do you anticipate this changing in 2009?
SB: Current attractive sectors include: infrastructure, water & environment, energy, financial services, healthcare, pharma, technology, and agriculture to name a few. The massive infrastructure push by Indian Governments at all levels will no doubt lead to more creative dealmaking, as well as more 3P partnerships. Our research shows an increased diversification in industries, as well as more established players from more mature markets taking stronger positions in the Indian market. For example, we anticipate more PE involvement with JV plays and multi-national and multi-firm business ventures, for businesses within India as well as other geographies such as China, EU, and South America.Greater co-operation and pie sharing will become increasingly
common to mitigate risk.

FW: How easy is it for private equity companies to access debt in India?  Does it come at a high premium?
SB: In our opinion, debt within India is somewhat more difficult to attain for foreign-led private equity deals, than for domestic-led ones. This is partially due to lack of strong networks and affiliations with key players within the Indian debt and financial institution space. As it is outside of India, debt premiums are largely dependant on the particular private equity partners, the deal, the industry, etc., and less causally linked to the source of the deal – PE or otherwise.  Some established PE firms are able to secure rates very much inline with their non-PE cousins.

FW: Is India just facing a normal, cyclical recession, or is there more trouble to come?
SB: It has been our stated position for some time that India has been affected by this structural shift because of their more-then-recommended reliance on foreign nations, foreign capital, and service exports up to now, especially from the US. Hence, we feel that while this downturn is not a cyclical or garden-variety recession, the Indian economy – along with some other nations – will continue to grow at a healthy pace, albeit slower than the past 5-6 years. India and China are
not only strong from a fundamentals standpoint, but we believe that their growth trajectory and the steepening of it over the next year or so will lead the world out of this global contraction. Long term, India may present a better opportunity given demographics: China’s “One Child” policy will lead to a population contraction as people age, which may lead to a depression in the 2020’s. The US economy will be slower to recover, and the rising interest rates and inflationary pressure will cause a further stifling effect over 2010-2012. The US Administration has now committed approx. US$10.3 Trillion largely through quantitative measures (not including the latest round of
auto-sector bailouts), and this will eventually have to be reckoned with vis-à-vis inflationary pressures.

FW: Do private equity companies need to act quickly to take advantage of the best opportunities?
SB: We don’t necessarily believe that there is any rash or urgent action required. In fact, the changing landscape in terms of globally growing companies and the shake-up in the equity markets will lead to some very lucrative opportunities within the region. There are no doubt some great deals to be had already, as some very strong Indian assets are under-priced based on fundamentals and growth outlook.  One can obviously make the case that this period of lower market values does present a better buying opportunity than, say, was the case in late 2006 and early 2007. But, timing the market and buying opportunities is less advisable than making acquisitions or investments based on strong long-term growth projections or for strategic reasons.

Conclusion and moving forward
The Private Equity industry in India is relatively strong compared to some of its peers. We feel that the outlook is brighter than in the past, and the current economic climate will allow India to emerge as a stronger and more important player and attractive investment region within capital
markets, provided the stakeholders take the necessary steps to become somewhat less dependant on economies such as the US and Europe. While India will remain a significant
exporter of services – and some products – the next frontier of bilateral trade is between China and India. Indirectly, the fortunes of the PE industry in India and players within it will lie in seeing and moving on opportunities that are more forward-looking and strategic in nature.