Indian PE Investments at US$2.38b Across 99 Deals

Investments in the first quarter of CY 2014 have started on a positive note. PE firms have invested US$2.38 billion across 99 deals, a growth of 14 percent in value and 15 percent in volume over the preceding quarter. In Q4 of CY13, investments were worth US$2.08 billion from 86 deals. The findings are part of the PwC MoneyTree India report, a quarterly study of private equity investment activity based on data provided by Venture Intelligence.

Even when compared against the same period last year, i.e., Q1 ’13, the value of deals has doubled despite a 7 percent decrease in the volume. In Q1 ’13, the value of investments was $1.17 billionat  from 107 deals.

With 43 deals worth $908 million in Q1 of CY14, the information technology (IT) and IT-enabled services (ITeS) sector is yet again the leader in terms of value and volume. However, the sector has shown a 7 percent drop in deal value despite two additional deals in this quarter as compared to Q4 ’13. Within the IT and ITeS sector, the online services sub-segment received the highest level of investment worth $405 million from 19 deals. The ITeS-BPO services recorded a spurt in investments this quarter with one major deal, thereby ranking second in terms of value among the sub-segments. Investments stood at $265 million from a couple of deals in this reporting quarter.

Sandeep Ladda, leader, Technology, PwC India said, “We have seen yet another quarter of PE investments dominated by the IT and ITeS sector. It has been an interesting quarter, where most of the leading e-commerce companies have received investments for expansion. The infusion of funds in the online services segment will continue for the next couple of years for the following reasons:  (i) Most companies are in the growth stage and are scaling up (ii) Newer product lines such as baby products, food, niche apparel segments and pet products are now available online (iii) Global companies in the same line of business are investing in Indian companies indicating a probable acquisition in the medium to long-term. With growing competition in the online space, inorganic growth is likely to be the way forward for some of the global e-commerce players who are keen to establish their footprint in India.”

According to Sanjeev Krishan, leader, Private Equity, PwC, “The January to March 2014 quarter was a positive one with general buoyancy in the investment outlook. With the formation of a new government around the corner, future flows (for the rest of this year and the next few years) will hinge upon the stability of the new government and its stand on various policies and regulatory matters. The general perception is that the new government will undoubtedly adopt a friendly investment regime to provide a fillip to the overall economic growth of the country.”

The energy sector has shown a surge in investments with an increase of almost eight times in value, from $52 million in Q4 ’13 to $414 million in this quarter with an additional deal. Even when compared to Q1 ’13, the value of investments has more than doubled with two additional deals. 

The engineering and construction sector too has shown an investment spurt this quarter and ranks third in terms of value. The sector witnessed investments worth $348 million from four deals; a seven-fold increase in value as against the preceding quarter with three additional deals in this quarter.

Key sectors such as healthcare and life sciences and BFSI have shown a significant drop in the value of investments in this quarter as against the previous quarter. 

The healthcare and life sciences sector had the highest drop in value of investments; from $746 million in the previous quarter to $91 million in Q1 ’14. Volume too fell by about 44 percent, from 16 deals in Q4 ’13 to nine deals in this quarter. Even as compared to Q4 ’12, the sector witnessed a drop of 40 percent in both the value and volume of deals.

The BFSI sector showed a drop of 25 percent in value; from $84 million to $63 million despite two additional deals in this quarter.

In Q1 ’14, PE investments in the growth stage recorded the highest value, seeing $846 million from 30 deals, which is double the growth in value and a 30 percent increase in the volume of deals. In Q4 ’13, investments stood at $420 million from 23 deals. Buyout deals, with an investment of $660 million from five deals, ranked second in terms of value. The value of investments has gone up by 21 percent with three additional deals in this quarter as compared to Q4 ’13.

In terms of region, Mumbai emerged as the top region with a nearly three-fold growth in the value of deals despite a drop of 7 percent in volume. Investments in this region stood at $942 million from 26 deals as against $365 million from 28 deals. The investment value is about 40 percent of the total PE investments in this quarter. With 26 deals, Mumbai leads in terms of volume too. The National Capital Region (NCR) has slipped to second position, registering funding of $531 million. Bangalore, in this quarter, sees an increase of 74 and 53 percent in value and volume, respectively, with an investment of $463 million from 23 deals.

Private equity exits

The exit activity in the first quarter of 2014 has nosedived in terms of value and volume as compared to the prior quarter. In Q4 ’13, PE exits were worth $1.45 billion from 24 deals as compared to $277 million from 15 deals in this quarter. Even when compared to the same period last year, the story is similar.. The exits have shown a decline of 76 and 60 percent in value and volume, respectively. In Q1 ’13, there were 37 exits worth $1.13 billion.

The majority of the exits in this quarter came from the IT and ITeS and the agri-business sectors which together contributed over 55 percent of the total exit value and 40 percent of the total volume.

The preferred mode of exit in the first quarter of 2014 has been through public market sale (eight exits) and strategic sale (five exits). In terms of value, exits through strategic sale rank first in this quarter with exits worth $154 million from five deals. Public market sale ranks second in terms of value, with exits worth $110 million from eight deals.