Private Equity (PE) investment in SMEs took a sharp dip by almost 68% at US$ US$ 580 million in calendar 2009. It made it difficult for small firms to seek safe financial support for executing their growth plans, reveals a Paper on Private Equity on Small and Medium Enterprises (SMEs).
The total number of PE deals signed by SMEs in 2009 stood at 81, while in 2008, it was 187, highlighting a sharp decline. The fall in PE investments have largely been credit to slowdown, says Mr. D S Rawat, Secretary General ASSOCHAM while releasing findings of the Paper here today.
The report states that in year 2009 was a hard-hitting year for SMEs in India as they not only had to face losses, but also encountered difficulties in accessing adequate equity capital from investors.
The meltdown made PE investors wary of investing in small businesses as there is a great deal of risk involved when it comes to funding cash-strapped companies. Poor returns on investments in the midst of challenging times have forced fund managers to think twice when it comes to putting too much into the sector, added Mr. Rawat.
Overall, PE deals in India during 2009 numbered 287 amounting to $4.43 billion as against 502 amounting to $ 11.9 billion in 2008. The total value and volume of PE deals reduced by 50% and 40% respectively as compared to 2008.
In the year 2009, 650 Private Equity and M&A deals with a total announced value of $ 26.98 billion compared to 948 deals worth $52.33 billion in the year 2008 and 858 deals.
