Foreign investors including US-based private equity (PE) firms are looking at India as an investment-friendly country. The Indian Government has been liberalizing FDI Caps on various sectors and cutting back the list of prohibited sectors. Private equity accounted for 58% of the capital inflow with FDI crossing 43 USD in financial year 2017. The interest of foreign investors has also been piqued by Indian reforms like Digital India, Startup India, Make in India and Smart Cities. The development of 100 smart cities with a population of 1 million each would lead to job creation and rural to urban migration which would propel the economy.

Thus, if there is a question: Is it the right time to enter India market? We would say YES!

The introduction of a single system of taxes under Goods and Services Tax (GST) has eliminated the need for multiple taxes which has resulted in making India a single common market. Over the last five fiscals, the cumulative inflows from United States have been less than USD 10 million . In India, major US-based PE firms have established a strong presence. With India offering a lot of opportunities in several sectors, funds from the US continues to grow in India. In sectors such as infrastructure, education, manufacturing and technology, many US players are looking to partner with Indian companies and are currently considering the impacts of GST implementation.

Few challenges to be taken care of are –
  • Currently, major investors are in the wait-and-watch mode wherein they are monitoring the impact of GST implementation in the performance of Indian companies in the years ahead. The performance is said to impact the sentiments of the investors towards the Indian economy.
  • Another reason that investors generally look out for is global political volatility in emerging markets.
  • A potential challenge for PE Investments is a sequential rise in the public market valuations in key PE investments. Dealing with an optimistic market for deals, PE investors have to compete which means that deals will continue under watchful eyes.

Contact us for more information on this subject or to know how we can assist you in your plans to enter India.