Private Equity Invades India

Rajeev Gupta is used to living out of a suitcase. The 47-year-old managing director at Carlyle Group in Mumbai spends much of his time crisscrossing India in search of diamonds in the rough—medium-to-large family-owned companies in need of outside capital and management knowhow. "India's attractiveness to private-equity investors is not merely its sizzling economy," says Gupta, who runs the numbers on about a half-dozen deals a month. "Indian companies also have the highest return on equity in Asia." How high? The former banker says it's about 21%, compared with 9% for China, numbers that have spurred Washington-based Carlyle to invest $50 million in Indian businesses ranging from pharmaceuticals to tech consulting.

Carlyle is in good company. India's combination of 8%-plus growth and a roaring stock market is drawing throngs of U.S. and European venture capitalists and private-equity funds. In the past month alone, more than 100 foreign outfits have met with KPMG's newly created private-equity group in Mumbai, says the unit's chief, Vikram Utamsingh. "All kinds of global funds have India on their radar," he says.