VCCircle

This news leter from ChrysCapital is not dated, so I don't know how old is it. But the editorial seems to be relevant, and I am reproducing it here (Left: Ashish Dhawan, Senior Managing Director):

Private equity has been prevalent in India for over a decade now. In the early days private equity players were faced with a high degree of skepticism. There was initial reluctance by the entrepreneurs to take private equity due to the myths of losing control over the company, interference with day-to-day operations and abuse of rights.

After the Asian Crisis in 1997, most global investors lost interest in all of Asia even though India was not directly affected by the crisis. As the dust settled, several new private equity players entered India in 1998-2000. Several firms exited after the technology crash and the catharsis led to a maturation of the industry, as established players were then able to scale and build a long-term presence in the market.

However, we believe that the biggest change that has transformed private equity is the radical shift in the mindset of the Indian entrepreneur. In the recent past, we have observed three key changes: a) a dramatic rise in aspiration levels; b) a commitment to better corporate governance; and c) a desire to globalize and build a world class company. All of these changes have led to the acceptance of private equity players as longterm investors aligned with interest of the entrepreneur to

unlock shareholder value.

In the last two years we have seen annual private equity investments grow from a paltry $500 million in 2002, to more than $1.3 billion in 2004. This year in the first quarter alone we have seen private equity investments rise to $450 million and is expected to touch $1.8 billion in 2005. Also, most of the capital that has been invested into India by private equity players has been growth capital and buyouts have been far and few. Our view is that it would still take several years for a fullfledged buyout market to evolve in India due to unwillingness of entrepreneurs to exit, lack of corporate divestitures and infancy of LBO financing.

We believe that private equity is well poised over the coming decade. The new image of India has attracted several global funds into our market. While the equity markets have been exuberant in the recent past, we believe that those players who remain committed to India in more difficult times will capitalize on the positive dynamics in our industry. See the attachment to read the full newsletter.