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While many hedge funds may have beaten a hasty retreat during the May meltdown, the appetite for Indian paper among other investor classes such as Japanese institutions and European investors continues to be strong.
"We have chosen India to launch our third fund because of a lot of reverse-enquiry on Indian products," says Arvinder S Sood, CEO of London-based private-equity firm Hanover Square.
Thanks to strong egging on from institutional investors in Japan and Europe, Hanover will launch only the third of its funds -with a target corpus of around $ 185 million- specially for Indian companies next month.
With many foreign funds expressing concerns over the recent stock market run-up and its spillover effect on valuations in the private-equity space, Sood says the correction has brought "a sense of reality" back into the market.
"Now, when we approach companies, they don't quote unrealistic valuations and they understand that it has to be a win-win partnership for both the company and the investor," he points out.
Like Sood, who expects to raise nearly most of his funds from Japanese and European investors who kept away from investing into Indian companies till now, other firms too are eyeing the 'emerging FII'.
"There is a strong investment demand from Japanese investors, where the economy is growing at around 2 to 3 per cent and compared to India, it is very slow. The population there is ageing faster than here. As a result, there is strong interest among Japanese investors to invest in India," says Kenjiro Noda, deputy president of the merchant banking arm of Japanese broking giant Daiwa Securities, which recently established a permanent office in Mumbai.
Noda points out that Japanese investors, typically cautious and the fabled last entrants to any party, are more cautious by nature due to their long term look-out.
Many Japanese investors however had to beat a hasty retreat early this year after pumping in an estimated $2 to 4 billion into the Indian equity markets in FY 2006.
Things are, points out Chris Ryan, the Asian head for the world's second largest financial corporation the ING Group, still easier on the private equity front than for those trying to attract investors to buy in the open markets.
"Three months ago, if it was unthinkable to try to sell India to my Asian investors," says the veteran of the Japanese market, "But investors will still prefer to wait and watch over the next few months for things to settle down before making any big commitments again."
