Falling equity markets have trapped major private equity investors such as Warburg Pincus, Blackstone Group, Carlyle, Apax Partners, Chrys Capital and Citigroup.

Last year, when the market touched new highs, these PE funds invested in companies such as Bharti Airtel [Get Quote] and Suzlon [Get Quote], some with one-year lock-in periods. Now, the value of these investments has fallen drastically and the funds find their PIPE (private investment in public enterprises) portfolios awash in red. PIPE deals include qualified institutional placements, or QIPs, which have no lock-in and private placements.

According to a report by SMC Global, the value of PE funds' 2007 PIPE investments (as on September 30, 2008) has dropped 24 per cent to $4.02 billion from $5.29 billion. Of the 63 deals in 2007, only nine are in profit.

For instance, Blackstone had acquired 67 per cent in Gokaldas Exports [Get Quote] for $155 million at Rs 275 a share in December 2007. The value of the investment is now $51 million with the share trading at Rs 106.

Blackstone had also invested $149 million in Nagarjuna Construction in December 2007. As on September 30, this value had dropped below $50 million.

Similarly, Apax Partners acquired 12 per cent in Apollo Hospital Enterprise for $103 million at Rs 605.07 a share. The share trades at Rs 400.

Carlyle acquired a little over 5 per cent in Great Offshore [Get Quote] for around $40 million at Rs 860 a share. Last Wednesday, the share price closed at Rs 287.

Besides private placement, these investors also bought shares through qualified institutional placements. Such investments do not attract a lock-in period, but PE funds have still found it difficult to exit owing to the falling market.

For instance, GMR raised $960 million in December 2007 through a QIP when the share was trading at Rs 240. Eton Park, Credit Agricole and Deutsche Asset Management were among the participants besides government financial institutions such as Life Insurance Corporation of India, State Bank of India [Get Quote] and Canara Bank [Get Quote]. Latest data shows that the three Indian entities still hold these shares, which are now trading at Rs 60.