India may lead global private equity recovery: KPMG

The domestic and international private equity players
see India as the second most attractive destination
after China and feel that the country may lead the
global PE recovery, according a survey.

As many as 33 per cent of investors, who participated
in the survey, ranked China as the most attractive market,
followed by India (29 per cent), other emerging markets
(19 per cent) and developed markets (20 per cent).

"India offers immense opportunities for PE investments
and India will likely be at the forefront of a global
PE recovery," said a survey by research firm KPMG.

It said investors find India attractive as a PE destination
because of its robust economic growth, tax environment,
corporate governance and investment structuring.

"The next 12 months should be viewed as an opportunity
to build value in portfolio terms and show that
PE is an integral part of India's future," the survey added.

It projected 2010 to be the year of consolidation with
focus on portfolio nurturing, fewer new deals or
fund raising, smaller investment sizes and fewer exits.

The KPMG survey, conducted along with Stanford University's Shorenstein
Asia-Pacific Research Center, covered 40 General partners
(GPs) and Limited Partners (LPs). Broadly, GPs handle investment
operations directly for PEs, while LPs invest in them.

KPMG said Indian public markets have recovered significantly
since August 2009, and initial signs are indicating that
there is considerable amount of liquidity in the market from
institutional investors for IPOs.

Exit options for PE funds include initial public offering,
public market or strategic sale.

On India's hurdle rates (the rates of return above which
the GP starts to earn the carried interest, about 8 per cent),
the survey said they were in line with developed country averages.

"This is unexpected; because Indian PE should earn higher returns
for developing country risks than developed country PE.
We would, therefore, expect hurdle rates to be higher
than developed country rates." it added.

Source: ET