Private Equity in India
The Indian capital markets are now in the developing stage. Ever since the economy of the nation was liberalized in 1991, different types of investors have tried their hand in the Indian capital markets. Private equity investors are one such class of investors. Back in 1991, the industry was almost non-existent. However, now in 2019, there is a full-fledged private equity sector which invests in all stages right from seed capital to leveraged buyouts.
The sector has grown rapidly during these years. However, it still faces a lot of challenges, many of which are uniquely Indian. In this article, we will have a closer look at some of the growth of the private equity industry as well as some of the challenges that it faces.
The growth of the Indian Private Equity Industry
The Indian private equity industry has grown by leaps and bounds. The total market capitalization of the entire industry stood at a mere $2 billion in the year 2004. Within 15 years, the size of the market has grown over 20 times. The current value of the entire private equity market is estimated to be in the ballpark of $40 billion.
This massive growth in the market has been largely driven by the sudden increase in deal size. Private equity investors claim that in the year 2004, a deal valued at $100 million was extremely rare. However, now in 2019, almost 70% of the deals which happen in the private equity space are worth more than $100 million.
The reason for the increase in these private equity deals is manifold.
Issues Faced By Private Equity Companies
There are several issues which are being faced by private equity companies in India. Some of them have been listed below.
The same case has happened with e-commerce companies as well. A lot of foreign investors have already invested billions of dollars in the Indian e-commerce business. However, the government decided to change the rules suddenly. This left the private equity companies in the lurch, and they suffered massive losses. In some cases, the government of India has also introduced back taxes.
The bottom line is that there is still a lot of scope of improvement. If the Indian government is able to address some of the issues mentioned above, the size of the private equity industry may increase at an even more rapid pace.
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