PE inflows may not be affected, say experts

MUMBAI TERROR AFTERSHOCKS

Private equity investments are likely to remain largely unaffected by the terror attacks, which shook Mumbai, because the country remains a popular destination for investors in the long term, experts say.

“There will be no major impact on the private equity fund flow into the country as these funds prefer to stay invested for the longer term. There will be no dramatic change in the PE firms’ interest in India,” research firm Venture Intelligence CEO Arun Natarajan said.

Terror attacks last week have left over 150 dead and nearly 300 injured, along with huge damages to the Taj and Oberoi hotels. “The Indian economy keeps giving enough opportunity to PE investors to maximise returns. There might be some short-term pressure on hotel and tourism as a whole, but their money will keep chasing opportunities,” NexGen Capitals Equity Head Jagannadham Thunuguntla said. NexGen Capitals is the merchant banking arm of brokerage firm SMC Global.

Experts say that although the attacks might have some impact on the earnings of the hotels and other companies related to the tourism industry, the investment flow into the country would not be impacted much.

“South Mumbai, where the attacks happened, is already crowded. There is no further scope of any new investor putting up in the place. So regionally also there will be no impact of the attack on PE fund flows,” Natarajan added. PE funds had invested $3 billion in 116 Indian companies during the quarter ended September 2008, down 29 per cent from the year-ago period. These funds had put in 115 deals totalling $4.2 billion last financial year, according to data compiled by Venture Intelligence.

“Terrorist activities will not dent their investment preferences. A slowdown in PE investment in aviation firms will be because of the risky nature of the business and the weak long-term outlook,” Thunuguntla said.