This article attempts to understand the Private Equity (PE) system in India, the various factors that drive and hinder the growth of PE, risks faced and its regulatory challenges.

Of late, Private Equity (PE) investments in emerging markets are making headlines. As developed markets become increasingly saturated, markets like India among other emerging markets are attracting record commitments from the global PE funds. Fund raising in emerging markets more than tripled in 2005, crossing the $21 bn mark. The Stock markets in many emerging economies are experiencing unprecedented levels of liquidity and interest in emerging markets continues to grow.

With more money flowing into India through the PE route, competition for Mergers and Acquisitions (M&As) is accelerating and valuations of target companies are also growing. This has resulted in the opening up of new opportunities for the emerging markets like India, but potential risks associated with PE investments are also increasing at the same time. It is now becoming clear that higher valuations of target companies result in higher returns. PE funds which invested in Indian companies 2-3 years ago and divesting stakes in the booming Indian capital markets, have accrued huge profits without facing a lot of risks.

Private Equity, Wealth for India, Emerging Markets, Mergers and Acquisitions, M&As, Liberalized Economy, Foreign Institutional Investors, FIIs, Hedge Funds, European Venture Capital Association, EVCA, Public Stock Markets, Private Equity Firms, Venture Capital, VC, Private Equity Funds, Hutchison Whampoa Group, Foreign Investment Promotion Board, FIPB, Cabinet Committee on Economic Affairs, CCEA, Initial Public Offering, IPO.