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News Topical, Digital Desk : The rupee's crossing the 90 mark against the dollar has raised concerns among private equity investors. The rupee has reached its lowest level ever against the dollar. This has raised concerns for PE investors, especially foreign funds, that were planning to exit investments through an IPO or secondary share sale in the near future. A weak rupee reduces dollar returns on investments in India, even if they have earned better returns in rupee terms. Experts believe that this could lead some foreign investors to pursue their monetization plans.
A weak rupee will impact PE investors.
Investors are prepared to deal with mild fluctuations in the rupee. However, this year's 5% decline was not only significant but also sharp. In a Moneycontrol report, EY India Partner Vivek Soni said that PE funds typically target a 20–25% annualized return (IRR). A slight rupee decline does not significantly harm the model. However, a significant rupee decline could cause foreign investors to recalculate and raise their return expectations.
What signals are driving expectations? Currently, the rupee is weak against the dollar. However, a trade deal with the US could potentially reverse its direction and strengthen the rupee. On the other hand, the rupee's current level will be helpful for foreign investors, as new deals will be cheaper in dollar terms. If the rupee strengthens from here, foreign investors investing at current levels could benefit from any future strengthening.
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