At a time when global institutional investors have been heavy sellers of Indian equities, IFC — the World Bank's private equity arm — reported its single-largest country exposure to India at 8.8 per cent of total committed portfolio in fiscal 2011.
This was higher than Brazil (6.2 per cent of the total portfolio), Russia (6 per cent), Turkey (5.7 per cent) and China (5.6 per cent).
India is expected to be a frontrunner during the fund allocation for the current fiscal (year ending June 2012), when IFC's approved funding is pegged at $10 billion. Especially so, since IFC looks to scale up equity investments over debt funding in private firms in India, according to market insiders.
During the fiscal 2011 (year ended June 2011) too, IFC's funding programme approval was for $10 billion. The increased focus on India is in line with the broad investment trend being followed by IFC, all of whose loans are to private-sector entities or quasi private sector entities.
Over the last five years, the World Bank arm has been gradually ramping up its exposure to India. In absolute terms, the private sector lender held a portfolio of $3.77 billion (as of June 30, 2011) in India, making it IFC's largest country of operations with commitments of $1.8 billion in financial year 2010 alone, overtaking Brazil and higher than Russia and China.
Cumulatively, IFC had $61.1 billion in total assets at fiscal year-end 2010, of which $29.2 billion represented development-related exposure (DRE).
In September and October, foreign funds had heavily sold Indian shares, putting more pressure on the Rupee. The sharp decline in the Rupee has been driven by capital outflows amid Euro-zone worries. The Finance Ministry has attributed the stock market crash to withdrawal of funds by foreign institutional investors (FIIs) and the depreciation of the Rupee.
The Rupee has weakened more than 15 per cent since April and touched a record low of Rs 52.72 on Tuesday, making it the worst performing currency in Asia.
During the first three quarters of 2011, private-equity investments in India are reported to have jumped 31 per cent to $7.89 billion, according to data from auditing and consultancy firm KPMG. Apart from IFC, private equity biggies such as Blackstone India and KKR & Co (Kohlberg Kravis Roberts & Co.) are among players looking to scale up their India exposure.
The Blackstone India chief was quoted in an agency report as saying that he expects to do five or six deals a year in India of roughly $100 million to $120 million each. KKR has already beefed up its India team with the appointment of a Director based in Mumbai late last year.