Business Forum Private Equity Forum Private equity has made a $2 billion profit on its investments in private companies, the Securities and Exchange Board of India (SEBI) said on Tuesday, in a sign that it is becoming a popular business investment for some companies.
While the private equity sector has been gaining traction in recent years, this year has seen it flourish as a lucrative business investment option.
In February, Private Equity Investments Association of India and its affiliates had reported a profit of $1.5 billion on their investments in India, an increase of $5 million over the previous year, according to the latest report.
In its annual report on private equity, SEBI said that its private equity fund has invested in a total of 4,038 companies in 2016, a jump of 4.8 per cent from 2015.
SEBI had earlier said it had invested $2.5-billion in private equity companies in 2015.
“Investors in private equities have made a significant and positive contribution to India’s economic development and diversification, with an average return on investment of 22 per cent,” the report said.
Private equity companies are defined as investment companies with a total value of at least $100 million.
SEB said that Private Equity Investors Association of America (PEIA), a public-private partnership, had invested in about 1,600 companies, up from 732 in 2015, and PEIA had made a profit on private-equity investments of $2-billion.
Private equity companies also accounted for about 30 per cent of India’s private-sector wealth last year.
“This is a positive trend, which we are now witnessing in our private equity portfolio.
Private investment is a safe and sound investment,” SEBI Chairman Manish Mittal said in a statement.
“The private equity market in India has been growing at a high rate and has been doing so for some time now.
There is a high potential for private investment to continue to expand in India.”
The public sector investment in private enterprises was at $2,200 crore last year, up 10 per cent on the previous financial year, while the private sector investment, which includes both government and private companies has been increasing at a pace of 7 per cent per annum, the SEBI report said, adding that private equity investors had made about $2 trillion of investments in the public sector.
Private companies have been a preferred business investment in recent times, with the private-private sector making up nearly half of the investment in the country, the report found.
The government is keen to bring private firms in the Indian market, and private firms are often reluctant to invest in public-sector companies.
The government has also taken steps to encourage private-finance companies to invest, with private sector entities getting tax breaks for public projects.