It has been a year of extremes for private equity managers in India. If markets were euphoric in the first half of 2008, the latter half of the year saw sentiment change to downright depressing levels, a shock from which the industry has only just begun to recover.

The Indian Sensex index, for example, dropped from a historic high of 21,206.77 on January 10, to 7,697.39 on October 27, 2008. Private equity valuations, referenced to stock market performance, have suffered equally and, naturally, the number of exits has drastically declined. If 2007 saw 17 exits via the IPO route, by 2008 that number had fallen to nine, while 2009 has so far seen just one initial public offering, according to figures from Indian research firm Venture Intelligence. Deal activity has dropped from 461 transactions in 2007, to just 71 transactions closing in the year to date.

“Those funds that are still active in the market are typically the select few that still have capital available for investment as well as a number of dedicated India funds. The vast majority of funds that invested aggressively 18 months ago are focusing on their existing portfolio companies,” says Vikram Hosangady, executive director at KPMG in Mumbai...

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