PE investments in India in Q3 '12 exceeds US$ 2.5 billion

  • Policy pronouncements expected to revive sentiments 
  • FDI in multi-brand retail sector expected to generate substantial investments 
  • PE exits were worth US$1.5 billion from 26 deals in Q3'12.

Private Equity (PE) firms invested US$ 2.5 billion in India across 97 deals in Q3 of 2012 - compared on Y-o-Y basis. The quarterly PE investments in India increased 4% in terms of value, while deal volumes fell by 20% (US$ 2.4 billion from 121 deals in Q3'11). With 45 deals worth US$ 1.3 billion in Q3 '12, the IT and ITeS sector maintained it’s position as the leader in both value as well as volume

The findings are part of the third PwC MoneyTree™ India report, a quarterly study of private equity investment activity based on data provided by Venture Intelligence.

According to Sanjeev Krishan, Leader, Private Equity, PwC, "With the year having entered in to its last lap, it is quite unlikely that PE investments in 2012 will be on par with those in 2011. However, as we approach the year end, the sentiment seems to be reviving and this augurs well for 2013.

The lack of pick up in investments in the Infrastructure sector does not augur too well; however the opening up of multi-brand retail sector to foreign investment is expected to generate investments in due course, and the requirement for 50 per cent investment in back-end operations and 30 per cent procurement from SMEs will boost private equity investments in the logistics, agri / food and consumer goods sectors in the times to come," Sanjeev added.

The IT and ITeS sector has seen the highest level of PE funding and the highest number of deals in this reporting quarter. It attracted investments worth US$ 1.3 billion from 45 deals, constituting more than 50% of the total investment value and nearly 47% of the total number of deals in this quarter. The average deal size for the sector too has shown an increase from US$ 13 million in Q3'11 to US$ 29 million in this quarter.

Within the IT and ITeS sector, the ITeS-BPO segment saw a ten-fold growth in investments to US$ One billion from three deals in this quarter, however, a major share of the investments came from a single large deal in this segment. The Online Services segment recorded a distant second, with an investment of US$ 68 million from 20 deals, which is highest in terms of volume.

Sanjay Dhawan, Leader, Technology, PwC said, " The IT and ITeS sector typically receives a higher volume of deals but of lower value —since many deals are early-stage investments where the startup companies do not require huge funding. Moreover, with many PE firms focussing on the SME services segment, and with the industry moving towards Tier 2 and 3 cities, this trend will continue for the next few years. Hence, the sector will remain attractive to investors. The continued interest in online services companies by PE investors reflects the maturity of the products and services of these companies. One can expect a few of these companies to grow and have a global footprint in the near future.”

PE investment in the Manufacturing sector also showed over four times growth in value, while the deal volume remained constant. The sector put in US$ 215 million from eight deals in this quarter as compared to an investment of US$ 53 million from eight deals in the same quarter last year. The recent policies of the Indian government to boost investor confidence, the relatively attractive valuations and confidence of investors in the country’s long-term growth potential, has provided an opportunity for private equity players to invest in some niche manufacturing entities.

The Banking, Financial Services and Insurance (BFSI) sector received investments worth US$ 200 million from 12 deals in this quarter.

The Engineering and Construction sector, which did not report any deals in the previous quarter, is among the top five sectors this quarter, with an investment of US$ 165 million from two deals.

In Q3 '12, private investments in public equity (PIPE) deals have recorded the highest value with US$ 1.4 billion from 13 deals, a four-fold increase in value but, a 41% drop in volume as compared to Q3'11. Growth-stage deals (US$ 389 million) have shown a significant drop of 66% in value when compared to the same period last year.

By region, the National Capital Region (NCR) received the highest level of funding in this quarter surpassing Mumbai with investments worth US$ 1.3 billion (a 53% share of the total PE investments) from 26 deals. The investment received by NCR in this quarter is nearly four times the investment received in the previous quarter and about five times in Q3'11.

Private equity exits

In Q3'12, the PE exits were worth US$1.5 billion from 26 deals. Compared to the same period last year that saw US$ 809 million from 25 deals in Q3'11, there has been an 81% increase in value with one additional deal in this quarter.

Almost 75% of the exits by value in this quarter have been through secondary sale. On volume, the preferred modes of exit this quarter have been through strategic sale (nine exits); followed by secondary and public market sale (seven exits each).

The IT and ITeS sector tops the list for PE exits with a value of US$ One billion from four deals constituting 71% of total deal exit value.

The BFSI sector tops the list for PE exits in terms of volume, with six deals worth US$ 113 million constituting 23% of the total deal exit volume. For the same period last year, the sector witnessed exits worth US$ 45 million from 2 deals.

Note to editors

  • Information included in this release or related venture capital investment data should be cited in the following way: "PwC's MoneyTree™ India Report with data  provided by Venture Intelligence." After the first reference, subsequent references may refer to PwC's MoneyTree India Report. Charts and tables displaying the data are sourced to "PricewaterhouseCoopers India Pvt. Ltd/Venture Intelligence data." After the first reference, subsequent references may refer to PwC MoneyTree India Report.

  • The top 20 deals comprise 85% of total deal value in Q3 '12. There are four deals worth US$1oo million and above and nine deals with a value in the range of US$50 to 100 million.

  • The top 5 PE exits constituted close to 80% of the total exit value in Q3'12

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