Priavate equity and Venture capital investments increased by nearly ten times from $30M in 2006 to $300M by 2008, according to a recent report by E&Y. PE/ VC players invested $527 mn in the sector –which also accounts for 24% of the total transaction value in India for the period Jan 2005 and 21 July 2009.
Key PE/VC transactions include Moser Baer (investor CDC Group, Credit Suisse, IDFC, Morgan Stanley and Nomura International); SE Forge (investor IDFC); Vestas RRB India (investor Merrill Lynch); Orient Green Power Company (investor Olympus Capital); Cobol Technologies’ (investor Pangea Capital).
It also saw significant transaction activity with deals worth $2,155 million announced between January 2005 and July 2009. The average deal size (based on deals with announced value) stood at $69.5 million during the same period. Suzlon’s acquisition of REPower, worth $1,327 million accounts for 61.6% of transaction activity in value. Another significant transaction was Gammon India’s acquisition of a 50% stake in Sofinter for $101 million.
Kuljit Singh (Partner and Transactions Advisory Leader for Infrastructure, Real Estate and Government, Ernst & Young), “The recent years have seen the emergence of several funds with clean tech themes, venture capital backed development companies being set up to aggregate assets in India, growth of carbon financing, etc. With this, greater depth will emerge on the PE/ VC investments front.”
According to the report, the country has immense Renewable Energy (RE) potential, which, if harnessed, can help it control its emissions, without compromising on its economic growth, and also bridge the supply deficit to an extent. The sector-wise break of the total RE potential in India is – wind energy (48,561 MW); small hydro power (15,000 MW); and Biomass (120-150 million tonnes of surplus biomass per year can be converted into 16,000MW).
Huge demand-supply gap in power, depletion of fossil fuels and energy security have been the key drivers behind sustained investments in the sector, said the report. Government incentives such as Generation based incentives (GBI), accelerated depreciation, tax holidays and subsidies are a step in the right direction.
The Government has outlined ambitious capacity expansion and investment plans for the eleventh five year plan period (FY07 – FY12). It has proposed an addition of 15,000 MW of RE generation capacity during the period. Wind power projects form 70% (10,500 MW) of the proposed capacity addition, while Small Hydro Projects (SHP) account for 9.3% (1,400 MW). The total investments on development of RE during the plan period is expected to be about $2 billion, adds the report.
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