Mumbai: The first quarter (January to March) of 2016 started on a strong note for Indian private equity (PE). The Q1 of CY 2016 saw investments worth 3.10 billion USD in 160 deals. The average deal size in Q1 ’16 was 19.4 million USD.
As compared to Q4 ’15 when deal value was 3.78 billion USD in 184 deals, the volume dropped by 15%, while value fell by 18%. In comparison with the year-ago period (Q1 ’15), there was a considerable decline of 24% in terms of number of deals, but the drop in value was a moderate 2%. Q1 ’15 saw 211 deals worth 3.16 billion USD.
These findings are part of the PwC MoneyTree™ India report, a quarterly study of private equity investment activity based on data provided by Venture Intelligence.
Despite a shortfall in big deals in e-commerce, the information technology & IT-enabled services (IT & ITeS) sector continued its dominance with an investment flow totaling 1.26 billion USD in 92 deals. In terms of value, the flow was 15% higher as compared to the previous quarter, with an 18% surge as compared to the year-ago period. The banking, financial services & insurance sector (BFSI) came a distant second, attracting 430 million USD—an over 50% decline as compared to the previous quarter and the year-ago period. With a single deal, the travel & tourism sector added 321 million USD to its kitty.
Sandeep Ladda, leader - Technology, PwC India said, "The Indian IT-ITeS industry is in an optimistic mood, with the government planning a number of major technology-centric initiatives, including some wide-ranging infrastructure investments. The 'Digital India' program and ongoing efforts on 'Smart Cities' are driving spending on software and IT services. Meanwhile, IT budgets in sectors such as banking and financial services, retail, telecom, logistics, continue to remain robust. We believe the expected growth in the sector will provide more opportunities for investors."
Sanjeev Krishan, leader, Private Equity, PwC India said, “Indian macros continue to gain health and this is likely to spur M&A and funding activities over the next few months - however we expect this to be sectoral. Financial Services and Healthcare continue to see significant deal momentum, as have some of the services segments. Capital Goods and Manufacturing sectors are seeing greater activity though most of this is owed to extraction of good operating assets from the not so well performing conglomerates. There has been a definite slowdown in the e - commerce / digital and consumer internet deals and the next few months are likely to see some consolidation in the sector."
As per the report, the PE appetite continued to be strong with late-stage investments of 1.32 billion USD invested into mature companies. Growth-stage investments also played a significant role, attracting 918 million USD in Q1’ CY16.
From a regional standpoint, NCR had an edge over others in Q1, with 914 million USD, whereas Bangalore saw investments of 875 million USD.
Private equity exits
The first quarter of 2016 created history by making itself the best-ever first quarter in terms of exits. It saw exits worth 2.59 billion USD in 35 deals, which is 50% higher than the previous quarter, which saw exits worth 1.67 billion USD in 59 deals. This is a 29% surge as compared to Q1 ’15 (1.94 billion USD in 68 deals).
With over 50% of the total deal value, the manufacturing sector emerged as the top sector in exits, with 1.27 billion USD in four deals. This was mainly due to the 1.05-billion USD exit of KKR from Alliance Tire Group. IT & ITeS saw exits worth 403 million USD in 11 deals.
Strategic sales has become the most preferred route for exits this quarter, with a total exit value of 1.25 billion USD in 13 deals. Secondary sales follows with a total exit value of 624 million USD in 10 deals.
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