Private Equity Sector Riding on Optimism Under New Government: Bain & Co

Around 90 per cent of private equity investors believe the improving business climate under the Modi-led government is leading to optimism in the private equity sector and that the country is expected to clock a 6 per cent growth in FY16, says a survey report. According to the Bain & Company PE Investor Confidence Survey 2014, there is buoyant optimism among private equity investors who expect robust momentum in the PE deal value and volume in the coming months.

"The survey shows the PE investor community is more upbeat now about growth in PE deal value and volume in the coming months amid the improving business climate," Arpan Sheth, head of Bain & Company's India Private Equity consulting practice, said. Sheth further said "the heightened expectations will come to fruition only if we see valuations temper and if the government follows through with reform-oriented policymaking in areas such as taxation and reducing foreign investor restrictions.

The largest number of respondents ranked clarification of regulations and taxation regime as the most important step the government can take to accelerate investments in the next six months.

Implementing GST and speedy clearance of big ticket projects were ranked highly also by respondents.

Moreover, PE industry participants expect the government to catalyse investments in key growth sectors like infrastructure, energy, and healthcare, clean tech and education. In terms of three major challenges to doing business, PE investors listed lack of clarity and uncertainty around regulation and taxation as the biggest with 50 per cent of respondents mentioning it as a major impediment.

Other significant challenges noted by PE participants were policy paralysis/poor governance (cited by 29 per cent of respondents); poor corporate governance (14 per cent) and issues around exits (14 per cent) among others.