SME Times - Average Private Equity Deal Size to Increase in 2010: Survey, Private Equity Firms Will Invest More in 2010, Average Private Equity Deal Size Will Rise in 2010

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SME Times News Bureau | 04 May, 2010
Private equity firms will invest more and the average deal size in 2010 will see a rise in sectors such as infrastructure, pharmaceuticals and financial services, according to a survey released Monday.

"The deals that will be completed in the coming years are likely to continue to be growth focused, although average deal sizes are expected to rise due to the volume of capital pushing up entry multiples," according to the Private Equity Survey conducted by consulting major Deloitte.

The survey covers 31 of India's top private equity and venture capital investors.

On a scale of one to 10, respondents gave an average score of 8.2 when asked how confident they were in the long-term prospects for Indian private equity, citing an effective national growth story and the growing domestic consumer class as key drivers.

"Foreign fund managers are likely to be the most active investor group, although the introduction of the new tax code could reduce the number of foreign players entering the region, boosting local funds’ opportunities to gain market share," said the report.

Among sectors that will continue to hold interest for VCs are infrastructure, pharmaceuticals, financial services. Education is also emerging as an important sector, seeing steady growth since 2008.

Around 97 percent of the respondents expect more investors to exit their investments this year, with the return of interest in initial public offerings (IPOs).

"2010 has already seen significant increase in deal activity, but as before, expectation on valuations may prove to be a hindrance in managing the divergent expectations of investors and promoters," said Avinash Gupta, Head of Financial Advisory Services, Deloitte India.