(2008-07-24) PaisaWaisa
According to a latest study, about 850 million dollars have been lost by the private equity investments in the listed firms.
New Delhi (Paisawaisa) July 24, 2008: Faced with very tough market conditions and gradually picking up downfall, private equity investments in the listed firms have suffered big losses to the extent of 850 USD in the current year so far. The disappointing fact has been revealed by a study done on the subject of private investment in public equity.
As per the studies done by NEXGEN Capitals, the merchant banking wing of SMC Global securities, the losses have been caused by 'high entry valuations' and reverse revision of the 'risk appetite factor'. Till up to this date of the year, the overall return on PIPE deals have declined by 16.08 percent. An analysis of the return percentage across different sectors of the economy reveals that pattern of capital formation has been highly irregular across various wings of the economy.
In the IT and ITeS sector, there has been a 41 percent downfall in the present Market-to-Market values of the PIPE deals. While the rates of decline were 52 percent, 44 percent, and 34 percent in the infrastructure, health care and manufacturing sectors respectively.
Also the real estate sector too underwent a 46 percent downfall in the values due to the reason of correction in some of the important 'real estate pockets' across the nation. The situation has been further worsened by the gloomy capital market perception. The capital market is really disappointed over the loss making performance of the PIPE deals in the real estate sector.
Except retail sectors, telecom and BFSI, most of the other important market sectors like manufacturing, real estate, infrastructure, health care, IT and its allied sectors have witnessed negative rates of return.
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