Microfinance, infrastructure finance and service providers to financial services firms are among the favourite sectors of Indian private equity and venture capital investors within the banking, financial services and insurance industry, a survey by research firm Venture Intelligence reveals.
Private equity and venture capital investors are viewing investments in BFSI companies as an attractive entry point into the two key themes driving their investments in India: rising domestic consumer and infrastructure spending.
“PE investments in microfinance continued to grow right through 2008 and 2009 even as investments in other sectors witnessed a steep decline. So much so that almost all top companies in the sector are now PE/VC-backed,” says Arun Natarajan (pictured), chief executive of Venture Intelligence. “With the constant need for capital among MFIs (to meet capital adequacy requirements), the synergistic relationship with PE/VC investors seems set to continue.”
In an interview in the report, Dhiraj Poddar of Standard Chartered Private Equity points out that apart from sectors within BFSI, providers of technology and analytics services to this industry present another attractive investment opportunity for investors. Poddar says PE investors would also look forward to investing in the capital intensive and long gestation business of life insurance.
In his article on PE in financial services, Sanjay Doshi of KPMG says opportunities abound for private equity in virtually every facet of the financial services industry considering the expected growth of the Indian economy combined with rising income levels, focus on infrastructure spending, emphasis on financial inclusion, emergence of wealth managers and expected growth of the insurance industry. Among the hurdles facing PE investors, he includes regulatory restrictions on investment limits in banking and insurance sectors and uncertainty in valuations of insurance companies.
