Private equity flows into water sector

Mumbai: Private equity funds are eyeing investments in the country’s water sector. Singapore-based CLSA Capital Partners invested $9.2 million (Rs 55 crore) in Gurgaon-based Luminous Water Technologies in end-July, through its two funds.

Last year, the alternative asset management firm had invested $15 million in Delhi-based Earth Water Group, which is into water and wastewater treatment projects.

Similarly, Capvent AG, a Switzerland-based private equity (PE) fund, picked up 51 per cent stake for Rs 12 crore in Morf India Ltd, a Chennai-based water engineering company.

Earlier this month, Organica Water, which is into treatment and recycling of wastewater, completed a Series B round of financing. Led by the International Finance Corporation and WLR China Energy Infrastructure Fund, existing investors RNK Capital and Gamma Capital Partners also participated in the funding.

The Hungarian firm has offices in New Delhi, and has signed contracts with several Indian water companies for design and equipment supply of water treatment plants.

Currently pegged at Rs 3,500 crore, analysts estimate by 2015, private equity investment in the water sector is set to touch Rs 7,500 crore.

A report by TechSci Research has noted that India’s water purifiers market is expected to grow at a compounded annual growth rate of 24 per cent between 2013-18. Approximately 70 per cent of the country’s water purifier market is dominated by organised players such as Eureka Forbes, Hindustan Unilever, Tata Chemicals and Kent.

With the level of water contamination considerably higher in Rajasthan, Andhra Pradesh, and Odisha, the report said the demand for water purifiers was bound to increase there.

Kent, the largest water purifier manufacturer in the Reverse Osmosis (RO) segment, is not looking at raising funds through the PE route, for now. However, Managing Director Mahesh Gupta said that of late, there has been a lot of activity in the water space, with many new players entering the segment.

Hot property
“We have been approached by several players (for a stake), but we are not looking at it right now. But I am not totally against the idea too,” Gupta told Business Line, adding that some 30-40 companies in Ahmedabad and Delhi dealing in water, were indeed looking for funds.

Gupta said PEs would not provide any technical expertise to these companies, but help them expand faster.

An IDFC official told Business Line that foreign PE consider India’s water sector as “hot property” and many Indian water and wastewater companies have raised funds to fuel their expansion activities.