PRINT THIS PAGE Private equity in Sri Lanka: an exploration of history, need, and opportunity11/07/2007. Source: Arvind Navaratnam.
Despite having a resilient top-performing global public equities market (in the face of a 24-year war), one of the most favorable legal frameworks in South Asia for conducting business, and with private equity flooding into neighboring India, Sri Lankan private equity is under-developed and near non-existent. At present, says Arvind Navaratnam, there are only three operational domestic corporate private equity firms (in both buyout and venture capital) in Sri Lanka: Aureos Capital, Equity Investments, and Lanka Ventures. The lack of private equity markets in Sri Lanka is in sharp contrast to the seemingly dominant presence of private equity in the rest of the global capital markets. For 2006, Morgan Stanley estimated that 2,700 private equity funds represented 25% of global mergers and acquisition activity, 50% of leverage loan volume, 33% of the high yield bond market, and 33% of initial public offerings. In neighbor India, there has been a significant influx of private equity capital.
Non real estate Indian private equity has seen investment triple in 2006 to USD $7.5 billion from 299 deals, according to a study by the research firm Venture Intelligence. In 2006 alone, Indian mega-deals have occurred like Idea Cellular's pre-IPO placement of $960 million and the Kohlberg Kravis Roberts buyout of the Indian software unit of Flextronics International for $725 million. In contrast, the largest PE investment in Sri Lanka in 2006 was South Asian fund Actis' 71 percent acquisition of industrial and medical gas manufacturer Ceylon Oxygen with only a handful of transactions occurring in total in the country. While the size of the deal is in-line with the size and GDP delta between the Sri Lankan and Indian markets, the limited transaction flow is surprising.
Click here to view the full article (pdf 200kb)
You need Adobe Acrobat to read this document. If you do not have it, you can download it free from www.adobe.com/products/acrobat/readstep.html
Arvind Navaratnam
|
