Are PE funds shying away from water in India?

Is the water industry in India losing its sheen for the private equity fraternity? Though, it is too early to say so, there are indications that PE deals are certainly drying up.

This could, though, also be due to the fact that PE funds are becoming choosy. And, good companies to make investments in are not coming up on their radar very often.

The growing water technology and management sector witnessed a sharp drop in private equity investments during 2010 as against 2009, with only two deals reported till December as against four during 2009.

Thankfully, PE funds say the sector still remains lucrative and will see more investments in the coming months.

In terms of investments, private equity funds, which include venture capitalists as a subset, invested only $23 million USD in Indian water technology and management companies. This is almost one-third of the $66 million USD they invested during 2009.

Without reading too much in the statistics (as one PE fund advised), the feeling is that the sector has the depth to productively absorb more capital and over the next several months, the industry will continue to be a growth driver.