Private Equity Investor Appetite for India – November 2014

by Cheng Jia Ong

  • 28 Nov 2014
  • PE

In the eyes of private equity investors, India has traditionally been regarded as a strong contender for fund allocation within the emerging markets space. India’s appeal hinges on two factors: its economic outlook and the rise of a new wave of emerging nations. The economic woes (currency fluctuation and labour market inefficiency) of this South Asian giant have hopes of easing, given Modi’s pledge for ambitious reforms that center around pro-business and investor-friendly policies. Going forward, India’s long term potential has to be assessed against its peers in South America and China, as well as newcomers like Africa and ASEAN nations. 

Preqin’s Investor Intelligence currently tracks over 5,450 LPs, of which 470 LPs (8.6%) have an appetite for India-focused private equity vehicles. To put this into perspective, 10% of the global investor pool has a current preference for greater China-focused vehicles, while 9.3% and 5.7% of LPs show a preference for South America and Africa respectively. This shows that India is a considerably attractive region when compared with other emerging markets. It is worth keeping a close eye on India to see if the highly anticipated reforms take shape, and whether investor optimism manifests in its private equity industry.

In terms of investor type, public pension funds account for the largest proportion of institutions, with 21% having an interest in India-focused vehicles. Fund of funds managers (13%) represent the second most significant investor type, closely followed by foundations (11%), endowment plans (7%), insurance companies (6%) and banks (6%). As observed, there is no apparent dominant (more than 50%) investor type that expresses an interest in India, thus suggesting the country is a prevalent choice among a wide range of LPs for portfolio diversification. 

The majority of investors (54%) with an appetite for funds investing in India are located in North America, indicating that these LPs are sophisticated investors with the necessary expertise and due diligence to invest in emerging markets such as India. This is followed by Europe-based investors (15%) and India-based investors (10%). The Far East region accounts for a mere 7% of the corpus, of which the bulk hail from Japan and Singapore.

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