PE investments in South drops 64%

Private Equity (PE) investments into South India have dropped 64 per cent between April and September, 2009, to $626 million from $1752 million, during the same period last year. The number of deals fell 48 per cent. Among the four states in South, Andhra Pradesh had attracted the highest investment, in terms of value.

According to industry experts this would be a temporary phenomena once there is stability in liquidity across the globe, South India will be an important destination for PE investors. A key factor which these states have is management teams which are conservative yet ambitious and give importance to work ethics and integrity.

Venture Intelligence, a research service focused on PE and M&A, said the number of deals dropped to 44 from 85 during the same period.

Of the four states Andhra Pradesh attracted investments of $239.7 million, followed by Karnataka $218.1 million and Tamil Nadu $168.4 million. PE investors stayed away from Kerala last year.

During the same period last year Tamil Nadu attracted the single largest chunk of $745.5 million, followed by Karnataka $621.8 million, followed by Andhra Pradesh $361 million and Kerala $13 million.

In terms of deals, a hotel project promoted by Bangalore-based Century Real Estate had attracted the single large investment worth $100 million in September 2009. The investor was Goldman Sachs.

It was followed by Share Microfin in which IFC and others invested $50 million in May 2009 and Spandana which attracted investments worth $50 million in August 2009. The other two large investments $40 million investments each were by SCI Asia and StanChart PE in Ramky Enviro Engineers and Ramky Infrastructure in June and August 2009 respectively, according to Venture Intelligence.

Metros in South India are more attractive for infrastructure projects than their counterparts in other parts of the country, according to Associated Chambers of Commerce and Industry (Assocham). The chamber noted that Hyderabad, Bangalore and Chennai had received 70 per cent of the private infrastructure investment that came into the six major metros in the country.

Assocham president Sajjan Jindal said, better state policies and high literacy rate in the southern cities attract more investors. “Even though these cities are less urbanised with a combined urban population of about 16 million, they attract private infrastructure projects primarily due to the better state policies, better talent, high literacy rates and a faster rising per capita income,” he said.