Grant Thornton survey on Global PE singles out India for negativity

A new Grant Thornton report titled “Global Private Equity Report 2012" says "India is the most challenging market globally for this sector".

Extracts from the Grant Thornton press release on the report:

On the Fundraising Outlook

The most dramatic decline in optimism from 2011 is evident in the BRICS: Brazil, Russia, India, China and South Africa. This year, 78 percent of respondents in these markets described the fundraising outlook as “negative” or “very negative”. In 2011, the figure was 39 percent.

On Cross-Border Buyers

...Globally, China and Japan, Europe and North America are the regions from which most GPs expect non-domestic strategic buyers to originate.

Regions as expected sources of non-domestic acquirers

China, Japan, Korea	31%
Europe	24%
North America	22%
South East Asia	11%
India	10%
MENA	1%
Africa	Less than 1%
Latin America	Less than 1%
Russia	Less than 1%

Source: Global Private Equity Report 2012, Grant Thornton

“Of particular interest is the expected significance of Japan, reflecting the fact that the strong Yen coupled with sluggish domestic demand is encouraging international expansion. PEs globally expect to see Japanese buyers, and this is particularly the case in Europe, India and Asia Pacific.”

On Deal Activity

...Many private equity executives expect both China and India to suffer a decline in deal activity in the next 12 months. This represents a dramatic turnaround in sentiment for both countries. In 2011, 78 percent of respondents expected investment activity in India to increase, with the remaining 22 percent expecting it to remain steady. This year, 45 percent expect it to decline.

Knowledge@Wharton has an article exploring why India ranks poorly for which it had sought views from Venture Intelligence. Extracts:

Arun Natarajan, founder and CEO of Venture Intelligence, a Chennai–based research services firm focused on PE and M&A deals, adds that slow to non-existent reforms and lack of profitable exits continue to be the main dampeners. Says Natarajan: “Indian PE has been facing challenges which are a mix of both country-level issues and industry-level issues. The lack of economic reforms over the past several years and retrograde steps like the attempt to tax transactions retrospectively [like in the Vodafone-Hutch deal] have shaken global investor confidence. On top of that, the lack of good returns — especially the huge overhang of un-exited investments from the 2006-2007 period — is something that LPs [limited partners] have been quite critical of.”

...Natarajan of Venture Intelligence notes: “The fundamentals of the economy — whether it’s the relatively strong economic growth, especially when compared to the developed world, strong domestic consumer spending, etc. — continue to keep India attractive for multinationals and also long-term financial investors who are the most significant source of capital for Indian PE funds. Consistent government action on the reforms front, especially with a focus on implementation rather than mere pronouncements of intent, is likely to be the main positive catalyst.”

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