Indian pvt equity market to triple to $7bn by 2010

New Delhi, Sep 28: India's differential capabilities and services combined with expanding domestic demand will fuel private equity growth to reach about seven billion dollars by 2010.

Describing this as a conservative approach of India's upside private equity protential, Bain and Company study, ''India Private Equity Outlook'', projected that the private equity investment in the country, will be based on the traditionally smaller growth-capital investments up to the year 2010.

Criticising the government limits on access to forign leverage and the reluctance of family-controlled businesses to cede control, the study noted the recent signs of a change in attitude and said that it could signal the emergence of a nascent buyouts market.

''It is too early to state categorically that a sea change is underway, nonetheless, we have observed early signs that the traditionally strong opposition to change in control issues may be starting to diminish,'' head of Bain and Company's Private Equity Practice in India Sri Rajan said.

The private equity market in India, attracted 2.2 billion dollars in investment capital last year and 3.5 billion dollars in the first half of this year.

The study found that the country has a growing consumer class, which is increasing the demand for hospitality, retail and healthcare industries, and a proficient working class that is finding way in differentiated areas such as services and manufacturing.

''While China has cheaper unskilled labour and lower infrastructure costs, India is developing differentiated capabilities in high value-added manufacturing sectors as auto componenets and pharma. In services, emerging sectors such as knowledge process outsourcing, legal back-office, and engineering services represent an opportunity,'' Mr Rajan observed.

In addition to this, India is likely to maintain its wage rate advantage for skilled labour for several years,'' he added.

The study also stated that the survey, conducted on 250 India private equity deals, showed maturity in the Indian business sector.

''Percentage ownership was greatest in business process outsourcing (27 per cent), and media and entertainment (23 per cent). Less private equity ownership was seen from the year 2000 to the first half of 2006 in emerging sectors such as financial services (18 per cent),'' it revealed.

Bain's study also pointed out certain challenges for prviate equity players in the country. They included ''limited availability of secondary market data which hinders quick decision making, high asset valuation which can prove to be an obstacle towards buyout market creation, and government restriction on company's leverage which is in the process of softening down.'' Bain and Company is a global business consulting firm which serves clients on issues of strategy, operations, technology, organisation and mergers and acquisitions.

UNI