Insight: India

India’s private equity market after

the financial crisis

The market
Coping well with
the financial crisis?
Prospects going forward
Asking questions of India’s
Private Equity model

The issues
From governance
to ownership dynamics
What investors
must know
Essential preparation

The opportunities
Where to deal,
where to exit
Which sectors
need investment?
Where to invest
 Insight India

The opinions contained in this report are underpinned by a study

undertaken by KPMG and Stanford University’s Shorenstein Asia-Pacific
Research Center in the second quarter of 2009. The aim of the research
was to talk to local and international General and Limited Partners with
direct experience of India and find out how the global financial crisis has
affected the country’s relatively young Private Equity industry.
 Welcome 

When the smoke clears

After several years of rapid growth, India’s Private Equity
industry is at a turning point as funds face up to the challenges
generated by the global financial crisis.

According to the International Monetary Fund (IMF), India’s

Contents
GDP is expected to expand to 5.4 percent in 2009 and with
its growth rate expected to accelerate as the rest of the world 2 The market
recovers from global financial crisis, India has the potential to KPMG’s Vikram Utamsingh
remain a very attractive destination for Private Equity funding. considers how far India’s Private
Equity market has come and where
However, although the Indian economy – driven by domestic demand – has to some
it’s set to go
extent been protected from the global downturn, share prices were impacted. And
despite the fact the stock market has now recovered it is more volatile which means From initial boom to post-crunch,
that high returns on exit are no longer guaranteed. India’s Private Equity market
continues to attract interest.
In terms of the Private Equity model in India, PE funds are now considering whether
KPMG’s Vikram Utamsingh offers
a model that tends to revolve around minority stakes in family firms can deliver
an overview
sustainable and reliable returns going forward. Equally important, do private equity
fund managers have the necessary skills to get the most out of their investment?
4 The issues
Aimed at global Private Equity professionals considering their first investment in KPMG’s Vikram Hosangady
India, this report looks at the issues facing the Indian Private Equity market and asks addresses investor concerns,
what the future holds. We also speak to several global funds presently active in India from standards of governance
to seek their valuable first-hand perspective. to ownership dynamics
Finally, we look beyond the current turmoil and consider how India’s Private Equity
industry may evolve in years to come. Overall, the opportunities for investors are 6 The opportunities
potentially great. As the market matures, the likelihood remains that a shifting KPMG’s Rohit Kapur considers
business culture, coupled with the demands of Limited Partners and global how India’s booming economy
institutions, will bring about significant changes in both the nature of deals transacted is encouraging Private Equity
and the relationships between General Partners and investee companies. investment prospects

KPMG’s Rohit Kapur explores India’s

most investment-ready sectors

8 Conclusion
Is optimism still justified
Rustom Kharegat
in uncertain times?
Global Head of Private Equity, Partner, KPMG in the UK
rustom.kharegat@kpmg.co.uk Can India’s Private Equity model
go the distance?

Insight India
  The Market
Surveying the landscape
Executive Director Vikram Utamsingh, Head of Private Equity Group, KPMG in India, offers an
overview of the Indian Private Equity market, its history, its development and how the industry
has dealt with the global financial crisis compared to other emerging markets
Vikram Utamsingh
Head of Private Equity
Executive Director
KPMG in India
+91 (22) 3090 2320
vutamsingh@kpmg.com
Over the past few years we’ve seen a
huge amount of Private Equity activity
in India, with increasing numbers of
domestic and overseas funds competing
for deals. In 2007, prior to the onset of
the global financial crisis, around 300
firms* had a presence in the Indian
market. Investment peaked at US$11bn.
And the Indian Private Equity industry
is still relatively young. It didn’t really
exist up to and including 2004. What
we’ve seen since then – rather than a
measured expansion over time – is an
explosion, both in investment and in the
number of funds operating in India. That
peak of US$11bn was achieved from
something close to a standing start.
But the industry has been sharply
curtailed by the global economic crisis.
The turmoil in the global financial
system made it harder for funds to
raise cash, while the fall in the world’s
stock markets – India’s included – put
downward pressure on valuations.
This trend made owners less inclined
to cut deals with equity investors. The
result was a sharp decline in deal flow.
For instance, in the first half of 2009
volumes fell by 70 percent compared
to the year before.
On one level, the impact of the credit
crunch will probably be short-term.
With valuations now stabilized and
with bank finance difficult to come
by, General Partners report a renewed
interest in Private Equity deals on
* Four-S Services
Insight India
the part of business owners. But the
financial crisis has proved something
of a watershed. International investors
are now looking beyond India’s growth
figures and asking hard questions about
the country’s Private Equity model; a
model that differs vastly from that of
the US or Europe.
India’s private equity model
In some respects, India might offer
familiarity and reassurance to fund
managers and investors based in,
say, New York, London or Frankfurt.
When compared to China, for example,
business in India operates with a
considerable degree of freedom from
political interference. Accounting
systems are similar to US GAAP and
there exists a large pool of well-trained
managers. Equally important, India’s
robust public markets provide a reliable
route to exit.
However, India also bears similarities
to other countries in the developing
world, not least in terms of regulatory
uncertainty. For instance, while the
incoming government has promised
a series of reforms aimed at producing
a simpler and more transparent tax
system, the details have yet to be
worked out. With the final shape of the
reform package unclear there can be no
certainty over the impact on business.
Uncertainty also lingers over regulation.
The new government promises to be
much more business-friendly than its
predecessor, and yet as things stand
the regulatory system remains
high cost.
Perhaps the greatest difference
between India’s investment
environment and that of the West is the
lack of debt in M&A deals. Indian law
prevents companies borrowing in order
to make acquisitions. This situation
therefore prohibits the leveraged
buyout deals that characterize the
Private Equity model in more developed
countries. If the deal is structured
outside India there can be a certain
amount of leverage, but this is likely
to come in at around 20 percent rather
than 60 or 70.
Buyout opportunities have also been
limited by the ownership structure of
Indian businesses. Most are family-
owned and although their shareholding
founders are usually willing to exchange
equity for cash, they also generally wish
to retain control. Thus, the majority
of Private Equity deals are minority
investments rather than buyouts.
With valuations now
stabilized and with bank
finance difficult to come
by, GPs report a renewed
interest in Private Equity
deals on the part of
business owners
Private equity players
The differences between business
cultures in India and the West have not
deterred overseas funds from entering
the market. The KPMG in India survey
indicates that in the second quarter of
2009 global funds accounted for 32
percent of the market. Funds based
in India and Asia Pacific comprise 42
percent and 25 percent respectively.
Forty-eight percent of India-focused
funds operate as overseas limited

liability partnerships.
As is possibly the norm for emerging
markets, fund sizes tend to be smaller
than in more developed Private Equity
markets. The greatest proportion of
respondents to our survey (35 percent)
say their preferred size was US$201-
500m. The average sum invested is
US$69m a year over three deals.
The future
While minority investments dominate
Private Equity activity today, there may
be more opportunities for buyouts in the
future. Traditionally, business owners
have looked on selling a company as an
admission of failure, but attitudes are
changing. Rather than simply handing
a business on to the next generation
– who may or may not be keen to inherit
– I expect to see more owners selling up
and using the proceeds to set up trust
funds for their children. Equally, in the case
of those who own multiple businesses,
there is more interest in selling selected
units in order to focus on others.
Therefore, we can expect the Private
Equity model in India to evolve
significantly over the next few years,
as business owners become more
aware of what funds can offer both
in terms of growth capital and exit
opportunities. Yet international funds
are on a learning curve and – as this
report demonstrates – global players
must adapt their practices to the
realities of India’s business culture.
The Market 
Tax and regulation gains tax. Under the new proposals all
India’s new government has published businesses will pay the flat rate. The
proposals for a series of tax reforms reforms will also see the tax authorities
scheduled to come into force in 2011. given more power to crack down on
The aim of the proposals – currently at tax avoidance structures.
the consultation stage – is to simplify
It is impossible to predict the final
the tax system, and in this sense the
outcome of these reforms as their
reforms are to be welcomed. However,
proposals are still at the consultation
from the perspective of both global and
stage. But this in itself makes it
domestic investors, some proposed
difficult for businesses to restructure
measures may give cause for concern.
themselves in order to minimize their
The government is committed to liability under the new rules. Those
reducing corporation tax from 35 that do run the risk of hitting tax
percent to 25 percent. They also wish to avoidance regulations that have yet
introduce a flat rate capital gains tax. In to be finalized.
the past, companies were able to claim
Generally, however, over the past
a tax holiday in the development stage
few years, the Private Equity industry
of their business. However, under the
in India has been encouraged by
new code, the government is proposing
deregulation. For example, the
an asset-based tax that will apply to all
licensing system that restricted
companies. Although only two percent,
trading within sectors to a limited
this will disproportionately hit asset-
number of companies has largely been
heavy businesses, even when those
abandoned. This has encouraged
businesses are not making profits.
competition by allowing entrepreneurs
Other losers include companies that
to challenge incumbents.
are currently exempt from capital
General Partners & Limited Partners preferred fund size
35%
30%
25%
20%
15%
10%
5%
0%
<US$100m (micro) US$101m – US$200m US$201m – US$500m US$501m – US$1bn >US$1bn (mega)
(small) (medium) (large)
General Partner Limited Partner Source: KPMG in India
Insight India
  The Issues
Rich in opportunity
From concerns over standards of governance to ownership dynamics within family-run firms,
Vikram Hosangady, Executive Director, Transaction Services, KPMG in India, considers the
specific issues facing international Private Equity fund managers with an interest in India
Vikram Hosangady
Executive Director
Transaction Services
KPMG in India
+91 44 3914 5101
vhosangady@kpmg.com
With the IMF predicting growth
of 5.4 percent in 2009 rising to
6 percent in 2010, India’s economy
remains hugely attractive to both
domestic and international Private
Equity investors, but the global
downturn has given both General and
Limited Partners pause for thought. In
the months that followed the onset of
the financial crisis, the slump in India’s
stock market meant investors could no
longer expect guaranteed high returns
– driven by rapidly rising share prices
– on exit. This new reality has required
Private Equity firms to examine both
the quality of their investments and
their own portfolio management role.
Some reservations do exist about the
quality of deals available. For instance,
our survey highlighted that both local
General Partners and their international
counterparts were concerned about
standards of corporate governance
within investee companies – concerns
that have possibly been fuelled by
the Satyam scandal which broke in
December 2008 as well as the more
recent Subhiksha situation.
Most governance worries stem mainly
from the large number of family-owned
firms in India and a perception that
at least some of these companies
lack the professional management,
transparency and modern management
systems that investors would expect
elsewhere in the world. The Satyam
Insight India
scandal also raises concerns regarding
family-managed listed firms.
To some extent, the anxieties of
General Partners are justified, but
it would be misleading to suggest
that poor governance is endemic in
family-run or managed businesses.
In fact, the rise of the Private Equity
industry in India has fostered a greater
awareness of governance issues
and the requirements of investors.
Companies seeking cash in order to
grow have often recruited independent
board members and invested in both
professional management structures
and modern systems. As such, they
have been preparing themselves for
investment while gearing up for growth.
The key to success
is to know the
company as well as
the family dynamics
However, some concerns are valid
– particularly for international Private
Equity firms. Players who have been
involved in the Indian Private Equity
industry for some time are better
placed to identify the good from the
bad – having been on the ground
and had firsthand experiences.
Newcomers won’t necessarily have
that knowledge and India is not a well-
researched market. So, the only way
for international General Partners to
make the distinction between well and
badly governed companies is to work
with those people on the ground who
have local knowledge and to undertake
detailed on the ground due diligence.
Without this information, there is a
danger that international funds won’t
be fully aware of potential governance
pitfalls.
Related to this is the challenge of
working with family firms - the bulk
of investments in India being minority
stakes providing growth capital. As a
result, General Partners have only a
limited amount of influence over the
direction a company takes and may find
it hard to drive through the measures
necessary for faster growth. This problem
may be compounded by the dynamics of
relationships within family companies and
investors should be wary of businesses
where the owners are split on future
strategy. Again, the key is to know the
company, including family dynamics
and the roles and responsibilities of
continuing family members.
Company performance
Anxiety about governance issues and
the difficulties of working with family
firms have inevitably fed into concerns
about company performance and the role
that General Partners play at the post-
investment stage. Elsewhere in the
world, Private Equity is seen as a catalyst
for change but this is a more difficult
role to fulfill when working within the
constraints of a minority stake.
According to our survey, 31 percent of
all General Partners sampled see below-
projection performance as the key issue
facing the Private Equity industry at
present. This raises the question of what
can be done to improve performance.
There is a growing perception that fund
managers should take a more hands-
on approach to driving change within
investee companies. Indeed, 40 percent
of local General Partners and 23 percent
of internationals view improvements in

portfolio management as the key issue.
Again, we see a difference in perception,
as those with entrenched experience in
the market are more likely to focus on
post-investment management issues
than their colleagues from global funds.
But even when that difference
in perception is acknowledged there
is a growing awareness that General
Partners will have to work harder with
companies within their portfolios.
According to our survey, 14 percent
of General Partners are doing this,
but the experience of KPMG in India
suggests that well-run funds are
devoting an increasing amount of time
to working with investees. Strategies
that we’re seeing at the moment include
spin-offs and the sale of non-core assets.
These are relatively new developments
in India’s Private Equity market.
For those that are taking a hands-on
approach, there are a number of
challenges - not least a shortage of
quality management information.
Large numbers of Indian firms still have
inadequate information systems and this
proves frustrating for General Partners
and Limited Partners alike. Albeit,
international General Partners with
extensive experience elsewhere are
in a strong position to advise investees
on how systems can improve.
There is a growing
perception that fund
managers should take a
more hands-on approach
to driving change within
investee companies
Limited Partners, meanwhile, have been
expressing concern about the quality of
General Partners. One Limited Partner
interviewed for our survey said it was
difficult to find skilled GPs combining the
key attributes of team depth, fundraising
skills, deal access, operational skills and
exit management. But these concerns
are not universal and our survey also
found that around a third of Limited
Partners were becoming increasingly
confident about their ability to distinguish
between high and low quality GPs in a
maturing Private Equity market. However,
those GPs taking a hands-on role should
take a similarly proactive approach to
communicating with their investors.
Crucially despite the gloom earlier in 2009
when 77 percent of local General Partners
and 71 percent of international GPs
expected investment in India to fall, we are
by no means facing a crisis of confidence.
There is real evidence that India-focused
funds are still able to raise money,
although General Partners will have to
work harder in order to drive value.
Post-Investment Key Issues / Challenges 2009/10
35%
30%
25%
20%
15%
10%
5%
0% Performance Unrelated Non-adherence
below
projection
expansion to shareholders Compliance /
agreement
The Issues 
More attention will also have to be paid
to valuations. For General and Limited
Partners alike, India is a good market
with quality companies and a deep pool
of management. Prior to the financial
crisis, valuations were high and after
a period of steep decline they have
begun to recover. In the current climate,
the challenge facing fund managers
is to strike deals at valuations that will
make it possible to generate returns
within an appropriate time frame.
The last 12 to 15 months have also
helped to identify “men from the boys”
and several funds will be wiser through
the experience of dealing with the
portfolio through troubled times
– which they will surely leverage
in their future investment strategies.
Overall, India remains a market rich
in opportunities for Private Equity.
However, it remains doubtful whether
it can sustain the number of funds
currently active in the market and we
would expect to see consolidation over
the next few years.
Ethics / Monetary Quality of Inadequate / Differences Others
Governance
leakages /
Related
management Inaccurate
MIS
between
management
issues party and investors
transactions
Source: KPMG in India
Insight India
  Opportunities
Ripe for investment
What opportunities does India offer Private Equity investors at present?
Rohit Kapur, Executive Director, Corporate Finance, KPMG in India, considers the options
Rohit Kapur
Executive Director
Corporate Finance
KPMG in India
+91 22 3090 2350
rohitkapur@kpmg.com
The Indian economy has proved itself
resilient in the face of global recession
with a growth of 5.4 percent in 2009.
While this figure represents a decline
in the pace of expansion, from peaks
of eight and nine percent, seen prior the
onset of global recession, the strength
of domestic demand within India has
insulated the country from the worst
effects of the international financial crisis.
The characteristics of the Indian market
have been well documented. As the
economy grows the middle class is
expanding and getting richer. Wealth
is trickling down through society and
spreading out from the cities to poorer
rural regions. Thus, there exists a rapidly
expanding domestic market. Meanwhile,
many Indian companies have ambitions
to become global players.
Hot sectors
Our survey indicates that growth-stage
infrastructure ventures are the most
popular investment targets for General
and Limited Partners alike, as India’s
infrastructure is not yet ready to support
the boom in the national economy. The
power sector tells a similar story with
supply presently failing to fully keep up
with demand. As a consequence, huge
growth potential exists in derivative
industries such as construction and
engineering, steel and cement.
The rise of the Indian middle class
has also created a sustained boom in
Insight India
the consumer goods, auto and retail
sectors. Unsurprisingly, the domestic
consumer goods sector remains
attractive to both General and Limited
Partners. Retail in particular has been
a hotbed of investment activity.
However, while we have seen a lot
of store openings, finding the right
model has not always been easy.
Consequently the returns from retail
investments have been mixed.
Interest in IT and telecoms also remains
strong, particularly among Limited
Partners from outside India. Local
General Partners familiar with the Indian
market tend to favor education above IT,
while their international peers see more
opportunities in healthcare. This appears
to highlight the different perspective
of local and overseas GPs. One
international fund manager we spoke
to – who preferred to remain unnamed
– pointed out that while heathcare was
a growth area, there was a great deal
of price pressure and real estate costs
were high. This may have deterred local
GPs who instead saw opportunities in
the gap between supply and demand in
the education sector.
Some sectors have not fared quite so
well. Media in particular has been hard
hit by the global recession, resulting in
a drop in advertising revenues.
The strength of domestic
demand within India has
insulated the country
from the worst effects
of the international
financial crisis
Opportunities for international funds
The old licensing system, which rigidly
controlled ownership of companies
within sectors, has now been largely
abandoned. The subsequent freeing
up of the economy has led to a surge
in entrepreneurial activity. This in turn
has created demand for capital coupled
with the expertise that can help
ambitious companies grow.
Private Equity firms provide much
of this capital and expertise, and
international firms are particularly well
placed to provide both as they are seen
as a gateway to both the international
financial markets and a range of
potentially valuable business contacts,
ranging from suppliers and customers
to potential Partners. Drawing on their
experience working with fast-growth
businesses elsewhere in the world,
international firms are also viewed as
being able to provide help and advice
on strategic issues.
However, there is a caveat here. Indian
business culture differs from that of the
US and Europe. A deal acceptable to a
business owner in London, California or
Paris won’t necessarily be acceptable
in India. Global funds recruiting
international expertise should also
prepare to work closely with Partners
in India or else set up an office staffed
(at least in part) by professionals with
experience of the domestic market.
Deal opportunities
Private Equity funds working in India
to date have been for the most part
limited to minority ownership deals.
The buyouts that have characterized the
industry in Europe and the US have been
largely absent from the Indian market,
 Opportunities 

a situation due in part to regulation Exit opportunities

A successful and long established Deal drivers
preventing companies from borrowing
stock market provides Private Equity • The credit crunch – The financial
to acquire. Therefore, as leverage in
funds with a clear route to exit. There crisis is causing many business
domestic transactions is not an option,
is also the opportunity for overseas owners to reconsider Private
neither is financial engineering. Equally
listing. Again, international funds are Equity. There is a continued need
important, India’s business owners
particularly well placed to provide for growth capital and with credit
traditionally seek to pass businesses
advice to investee companies on less available than it was, private
on to family members rather than sell.
IPOs elsewhere in the world – albeit investment offers a means to fill
On the plus side, the rapid growth in the gap.
51 percent of international General
India’s economy offers both General
Partners and 42 percent of local General • Succession issues – As business
and Limited Partners the prospect of
Partners prefer strategic sales to IPOs culture changes, some owners
healthy profits on minority stakes. Indeed,
(32 percent of General Partners and 22 choose to sell to a third party
even in the downturn, General Partners
percent of local funds respectively). rather than pass on their business
in particular are bullish about potential
to family members.
profits, with 61 percent predicting returns
of 25 percent or more in 2009. In the The rapid growth in • The need for scale – Businesses
longer term, buyout opportunities are are coming together to achieve
likely to increase as the business culture
India’s economy offers scale in the market and capital is
changes. We are beginning to see a new both General and Limited required to finance these deals.
generation of owners less constrained by
the traditional belief that selling a business
Partners the prospect • Rationalization – Conglomerates
are selling non-core units, which
is a sign of failure. Growing numbers of of healthy profits on provide deal opportunities for
conglomerates selling non-core divisions
may also boost the buyout market. minority stakes Private Equity firms.

Sectors for investment

35%

28%

21%

14%

7%

0%
Infrastructue Consumer Education Healthcare Financial Manufacturing Telecom Cleantech Media Business IT Other
Services Service
General Partner Limited Partner
Source: KPMG in India

Insight India
  Conclusion
India - Conclusion
Bolstered by an economy defiant in the face of recession, India is likely to remain of interest
to investors over the coming years. Yet success here remains a matter of understanding the
region’s business culture
Vikram Utamsingh
Executive Director
Head of Private Equity
KPMG in India
+91 (22) 3090 2320
vutamsingh@kpmg.com
The resilience of India’s economy
in the face of global recession,
the continuing high demand of its
domestic market and a predicted future
growth in the region of eight percent
per annum are guarantees that the
country will have a place on the radar
of international Private Equity firms
and their institutional investors for the
foreseeable future.
However, these are uncertain times.
The global financial crisis and the
consequent downturn have clearly
affected investor confidence. The money
that once flooded into Private Equity
funds worldwide is now in short supply
and investors have become more risk
averse. In the current climate, India –
with its buoyant economy – remains
an attractive destination for cash, but
for many Private Equity firms and their
investors it is also something of an
unknown quantity. The challenge facing
those who are looking at the country
(and its Private Equity market) from
the comfort of an office in, say, North
America or Europe is to understand
both the opportunities and the risks.
Those international funds already
operating in India are addressing the
opportunities and risks on a day-to-
day basis. They have witnessed the
explosion in investment up until 2008
and coped with the fallout from the
global financial crisis.
Insight India
There is general agreement that Indian experience. “The financial crisis has
companies will continue to generate almost no effect,” he said. “We are
healthy returns for Private Equity investing in high growth companies
investors. Indeed, a Private Equity and leverage has not been a factor.”
model based on a fast-growth economy
However, Ahuja acknowledges that the
may be more attractive to investors
appetite of General Partners to strike
than the leveraged buyout model that
deals is to some extent out of sync with
was prevalent in Western countries
the expectations of many company
prior to the financial crisis. In the West,
owners. The fall in India’s public market
buyout funds have been all about
has also had a downward effect on
financial gearing to produce returns
private company valuations. “Few deals
but in emerging markets the model is
are being completed as there is a
based on growth in the economy.
valuation gap between issuers and
This has stood investors in good stead.
investors”.The appetite to do deals
is still there but issues relating
There are still plenty of to valuation expectations needs
to be resolved.
businesses that want
On the face of it, Private Equity firms
cash in order to grow are caught in a pincer movement. On
the one hand, a reluctance to exchange
And it’s that Private Equity model,
equity for cash on the part of business
based on rapid economic growth,
owners is increasing competition for
that is likely to focus international
remaining deals. On the other hand, the
attention on India in years to come.
flow of funds from institutions has
The principle that underpins Private
slowed. Yet it’s a complex situation. As
Equity around the world is a search for
one fund manager (who preferred to
good, well-managed companies with
remain anonymous) told me, Private
the capacity to grow quickly. India has
Equity is competing for deals with
plenty of companies in this category,
hedge funds and the public markets.
their expansion driven by increasing
The financial crisis has seen a number
demand in the domestic economy.
of hedge funds withdraw and the
Private Equity firms with cash see appetite for IPOs remains sluggish. This
plenty of potential for deals in India, has given Private Equity a bigger share
even at a time when the Private of the remaining deal market and there
Equity market in the West remains are still plenty of businesses that want
depressed. As Anil Ahuja, Head of cash in order to grow.
Asia at Private Equity firm 3i has
pointed out, the financial maelstrom
experienced by companies elsewhere
in the world has had little effect on
either the growth potential of Indian
companies or the readiness of General
Partners to invest. Ahuja cites 3i’s own
 Conclusion 

However, competition for deals means
that Private Equity firms will have
to offer owners more than money.
Owners will seek out Private Equity
firms that can provide the expertise
and contacts needed to drive growth.
In a competitive market, you need
to demonstrate that you are bringing
something to the table other than
capital. There also remains the
issue of protection. If the economy
slows, adding value through portfolio
management will allow you to generate
above market average returns.
Deal profiles
As we discussed earlier in this report,
the majority of deals in the Indian
market are minority interest
arrangements, with buyouts (that staple
of the Western Private Equity market)
the exception rather than the rule.
But things are changing. For instance,
3i – a firm that came to India with
a strong track record on minority
shareholding/growth capital deals – has
diversified into both buyouts and the
infrastructure market. The secondary
deal market is also growing.
Minority interest deals can be an
issue for funds more comfortable with
buyouts, not least because driving
change with an organization tends to be
more difficult for those who don’t hold
a controlling stake. International funds
may also have problems working with
family firms who tend to do things their
own way. The processes they have in
place and the management information
they provide to General Partners may
not be up to standards expected in
Europe or North America. This in turn
has led to concerns about standards of
governance and a lack of transparency.
However, as one General Partner
working for a western fund told me, the
managers of well-run family firms are
often as committed to growth as their
Private Equity backers. “A lot of owners
are very focused on bringing value and
they work night and day”, he said.
The key for General Partners is to
identify those firms that will deliver
the best returns, although this can
be difficult for outsiders. It is important
to have a Partner on the ground who
understands the nuances of Indian
business culture and the dynamics
of the family business.
As the experience of General Partners
indicates, high growth and a pool of
strong companies means that Private
Equity investors can continue to expect
healthy returns, even if sourcing deals
is currently more difficult than it was
a year or two ago. Looking ahead, the
range of deal types available is set
to expand, but firms coming into the
market must take time to understand
India’s business community or else
work with Partners who do.

KPMG in India
KPMG in India has nearly 3,500 people across seven offices and with a dedicated
private equity group is committed to providing our PE clients with the skills and
experience they need throughout the life cycle of their investments from deal
sourcing through to successful realization.

Regardless of whether clients are local or internationally-based houses,

we seek
to provide a fully integrated and tailored service of the highest standard
– shaping our team to the individual needs of clients.

Insight India
kpmg.com

Heads of Private Equity

Private Equity is not just a local business.
KPMG member firms have teams of experienced advisors across the globe.

Heads of Private Equity in India

Vikram Utamsingh Rohit Kapur
Head of Private Equity Executive Director
Executive Director, KPMG in India Corporate Finance, KPMG in India
+91 (22) 3090 2320 +91 22 3090 2350
vutamsingh@kpmg.com rohitkapur@kpmg.com

Vikram Hosangady
Executive Director
Transaction Services, KPMG in India
+91 44 3914 5101
vhosangady@kpmg.com

Global Heads of Private Equity by Region

Global Americas
Rustom Kharegat Shawn Hessing
Global Head of Private Equity Head of Private Equity Americas Region
Partner, KPMG in the UK Partner, KPMG in the U.S.A.
+44 20 7311 8847 +1 817 339 1216
rustom.kharegat@kpmg.co.uk shessing@kpmg.com

EMA Asia Pacific

John Evans Honson To
Head of Private Equity EMA Region Partner, Head of Private Equity
Partner, KPMG in Germany Asia Pacific Region
+49 211 475 7569 Partner, KPMG in China
evanj@kpmg.com +86 21 2212 2708
honson.to@kpmg.com.cn

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Publication name: Insight India
Publication number: RRD-169340
Publication date: December 2009