Slowdown has started hitting the dealflow. British private equity group 3i Group Plc has already cut down its investments by 40% in the last five months. 3i invested only £622 million ( $1.12 billion) during the five months ended 31 August, which is significantly less than the £1.012 billion it invested in the same period last year, 3i said in its pre-close briefing ahead of its half-year results.
Proceeds from asset sales fell to £560 million from £1.01 billion. This is nearly a 40% reduction in the new investments by 3i in the first five months of its financial years owing to the tougher credit situation.
In a statement issued from the company, 3i Chief Executive Philip Yea said: "In these markets, we continue to be highly selective in respect of new investment. Private equity firms, which typically finance their acquisitions mostly through debt, have been hit by an abrupt rise in borrowing costs in the wake of the credit crunch."
However, 3i Finance Director Simon Ball said the company's investment portfolio should hold up despite deteriorating economic and stock market conditions. In a conference call with reporters, Ball said: "The portfolio is as diverse as it's ever been. In terms of these interesting economic times, we think the portfolio is pretty well positioned".
3i in India
3i Group has made a few key investments in India such as Nimbus Communications, International Tractors, and International Cars & Motors, a green-field project to manufacture multi-utility vehicles. It also invested $40 million in INDIAREIT Fund Advisors, an offshore real estate fund floated by the Ajay Piramal Group.
In April, it launched 3i India Infrastructure Fund, which invested $101 million for a minority stake in Soma Enterprise Ltd, a Hyderabad based engineering and construction firm.
3i India Infrastrucre Fund's first investment in India was $227 million for a minority stake in Adani Power, which is developing a 2,640 MW coal-based thermal power plant in Gujarat.