The volume of private equity activity in India tripled in 2006 and is on course to top $10 billion this year, research published yesterday shows, as global heavyweights like Carlyle and KKR set their sights on the fast-growing region.

Buyout firms spent a cumulative $7.46 billion (£3.8 billion) acquiring Indian companies or stakes in companies during 2006, three times the volume of business carried out the previous year, according to a new study by Venture Intelligence, which tracks private equity activity in India.

The volumes in 2006 were heavily bolstered by two large deals: Kohlberg Kravis Roberts’s $765 million take-private of Flextronics Software, and Idea Cellular’s sale of a stake to a consortium of private equity firms for $966 million.

Cash-rich private equity firms have been moving into India in recent years attracted by the region’s strong economic growth and the underpenetration of various sectors, particularly telecoms. Technology-related investments were the biggest driver in 2006, accounting for $1.47 billion of the total.

Blackstone opened an office in India and raised $1 billion to spend, while its rival Carlyle has two funds there.

So far, however, much of the private equity activity has been centred on stake-buying rather than acquisitions.

But Arun Natarajan, the head of Venture Intelligence, predicts that will change in 2007, as Blackstone and others begin to put their billions of raised capital to work.

"Even though they are big buyout guys Carlyle and Blackstone have only been doing growth investments in India as of now," Mr Natarajan said.

"But more and more of these foreign firms are looking out for big deals."

For example, Blackstone and others have been linked to the potential sale of the Indian mobile phone company Hutchison Essar, possibly tying up with corporate buyers in a deal that could be as large as $18 billion.

In total, in 2006, global private equity firms took part in 26 deals involving investments of over $50 million, up from just nine such deals in 2005.

But Mr Natarajan said that there would not be the rush of mega deals that have characterised buyout activity in the US and Europe.

"The flipside is that India, being a growth economy, does not have too many large buyout opportunities and a lot of the business here is family-controlled and they don’t necessarily look at buyouts as a growth opportunity for them," he said.