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Tuesday, September 30, 2014

PE investments in India continue the good run, up by 7% in Q2'14

PE exits surged over three times to US$ 1.06 billion in Q2'14 over Q1'14 

The private equity investments in India sustained their past performance for the second quarter of the year (April to June 2014). PE firms invested US$ 2.83 billion across 95 deals, registering a growth of 7% in value over the preceding quarter. However, there was a 20% drop in volume in this period. In the previous quarter (Jan-Mar 2014), investments were worth US$ 2.65 billion from 119 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. 

Compared against the same period last year, i.e., Q2'13, the value of deals dropped by 41% and 23% by volume. In Q2'13, the value of investments were US$ 4.83 billion from 124 deals. 

Interestingly, with just eight deals the banking, financial services & insurance (BFSI) sector dominated the second quarter of 2014 in terms of value with US$ 977 million worth of investments, registering more than a ten-fold jump compared to the previous quarter and a 14% surge from the same period last year. During the first quarter of the year, the sector saw US$ 92 million in 11 deals, while it was US$ 857 million in the same period last year. 

The IT & IT-enabled services (ITeS) sector has emerged second in terms of invest¬ment 
value with investments of US$ 728 million and top in terms of volume with 42 deals. This is a 22% decline as compared to the previous quarter in value, but a 52% rise from Q2'13. In the previous quarter, the sector attracted US$ 939 million in 49 deals, while during the second quarter of last year, it saw US$ 480 million in 42 deals. 

Unlike previous quarters, the sector saw early-stage deals with better values. The average early-stage deal value for this quarter was US$ 5.4 million as against the 1 million to US$ 3 million deals during the last two years. 

Sandeep Ladda, leader, Technology, PwC India said, "The optimism in private equity investing is visible with the strong inflow of investments, which we hope will continue in the coming quarters. Within technology, the online services segment plays the role of differentiator as some of the companies have outpaced other sectors with astounding growth prospects. The recent large deals in Flipkart and Snapdeal can be seen as a beginning of this". 

The healthcare & life sciences sector has once again captured the attention of investors, with investments totalling US$ 576 million in 11 deals, an increase of more than six fold from the previous quarter's US$ 93 million from the same number of deals. In Q2'13, the investments in this sector were US$ 270 million from 19 deals. 

Energy, manufacturing and engineering & construction are the three major sectors that recorded a considerable decline in terms of deal value. 

In Q2'14, PE investments in the late stage have outshined both the growth stage as well as private investment in public equity (PIPE) investments with US$ 1.21 billion investments in 30 deals. Growth deals, with an investment of US$ 877 million from 28 deals, ranks second in terms of value. PIPE deals have shown over twofold growth in this quarter vis-à-vis the prior quarter in value, from 255 million to US$ 627 million from 11 deals as compared to the prior quarter's 21 deals. 

Mumbai has retained its top slot among regions in terms of attracting PE investments, despite a 26% and 60% drop in terms of value as compared to the last quarter and the same period last year, respectively. The city hosted funding of US$ 705 million in 22 deals. 

Chennai has emerged as the second best investment destination with US$ 547 million from just eight deals, a growth of more than fivefold from the previous quarter. The National Capital Region (NCR) has slipped to third position, recording US$ 491 million funding in 21 deals. 

Private equity exits
 
The exit activity in the second quarter of 2014 has achieved an improvement of more than threefold in terms of value and twofold in terms of volume. Total exits were worth US$ 1.06 billion in this quarter in 37 deals while in Q1'14, PE exits were worth US$ 300 million from 18 deals. When compared to the same period last year, exits have shown a decline of 45% and 12% in value and volume respectively. In Q2'13, there were 42 exits worth US$ 1.94 billion. 

The majority of the exits in Q2'14 came from the healthcare & life sciences and manufacturing sectors which together contributed almost 80% to the total exit value and 27% to the total volume. 

In this quarter, almost 50% of the exits by value have been through public market sale (US$ 519 million from 25 deals). Exits through strategic sale reported the next highest share, with US$ 334 million from nine deals. 
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