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Foreign Institutional Investors

May, 2010

Foreign institutional investors (FIIs) poured inflows heavily to bet on the India growth story.

As per data released by the Securities and Exchange board of India (SEBI), FIIs invested US$ 2.1 billion in equities in April 2010, and US$ 684.18 million in debt in April 2010.

During January to April 2010, FIIs invested US$ 6.6 billion in equity and US$ 5.94 billion in debt, of which US$ 4.4 billion in equity and US$ 2.1 billion in debt was invested in March 2010.

According to SEBI, FIIs transferred a record US$ 17.5 billion in domestic equities during the calendar year 2009. FIIs infused a net US$ 1.1 billion in debt instruments during the said period.

Data sourced from SEBI shows that the number of registered FIIs stood at 1711 and number of registered sub-accounts rose to 5,382 as of April 30, 2010.

According to a report by CNI Research, companies that could be short-listed as short-term investment targets based on interest from FIIs and as yet modest stock movement, have expanded 33 per cent for the quarter ended March 2010. As per the report FII stake rose in 299 companies in the quarter ended March 2010, as compared to 322 companies in the quarter ended December 2009. However, the number of companies which can be considered as investment picks has increased to 142 in March from 107 in December, said the report.

Moreover, India accounted for more than one-fifth of the US$ 22.1 billion private equity investments received by the emerging markets across the globe in 2009, according to a report by Emerging Markets Private Equity Association (EMPEA) released in March 2010. In 2009, emerging markets accounted for about 26 per cent of global private equity (PE) investment. The report added that global PE investment in emerging markets totalled US$ 22.1 billion across 674 deals in 2009. Asia captured 63 per cent of total emerging market PE investments by value in 2009, with India capturing US$ 4 billion, according to the report.

The amount of private equity (PE) and venture capital (VC) funding in India touched US$ 1.9 billion in the first three months of 2010, according to a report by global consulting firm, Deloitte. This funding came from 88 transactions, with an average deal size of US$ 22.1 million. The amount accounts for nearly 50 per cent of the entire funding in the previous year of 2009, i.e., US$ 4.4 billion from 299 deals with average deal size of US$ 14.6 million.

Investment Scenario

Private equity firms invested about US$ 2 billion across 56 deals during the quarter ended March 2010, according to a study by Venture Intelligence, a research service focused on private equity and merger and acquisitions (M&A) transaction activity in India.

The amount invested during the latest quarter (January-March 2010) was the highest in the last six quarters. The figure was significantly higher than that during the same period last year (January-March 2009) which witnessed US$ 620 million being invested across 58 deals and also the immediate previous quarter (October-December 2009) where investments worth US$ 1.7 billion were made across 102 deals.

The largest investment during January-March 2010 was the US$ 425 million investment into power generation firm Asian Genco by General Atlantic, Morgan Stanley, Norwest, Goldman Sachs and Everstone. Other top investments reported during the first quarter of 2010 included Quadrangle Capital Partners US$ 300 million investment into telecom tower infrastructure company TowerVision India; StanChart PE, KKR and New Silk Routes US$ 217 million investment into Coffee Day Resorts and TPG Growths US$ 115 million investment into Clean Tech firm Greenko Group.

Moreover, FIIs invested a record US$ 5 billion in Indian corporate paper in the first four months of 2010. Maximum investments have been in top-rated bond offerings at an average tenure of 18-24 months and in commercial paper. The investment limit for FIIs in corporate bonds has been raised to US$ 15 billion in 2009. According to data released by SEBI, FIIs have cumulatively invested US$ 11.24 billion in Indian debt since November 1992. This includes investment in both government and corporate bonds. During 2009-10, FIIs pumped in a record US$ 6.04 billion in corporate and government papers. This is a 12-fold rise over their investment of US$ 480 million in 2008-09.