PE investments in India in Q1’13 drop by 18%

• For the first time since Q3 2009, the aggregate Private Equity (PE) investments fell below a billion dollars in a quarter.
• PE exits were worth 1028 million USD from 24 deals in Q1 ’13

Mumbai: The first quarter of 2013 (Jan-Mar ’13) saw PE firms make investments worth 929 million USD across 66 deals.  According to the findings of the PwC MoneyTree™ India report, a quarterly study of private equity investment activity based on data provided by Venture Intelligence, the quarterly PE investments dropped by 18% and 33% in terms of value and volume respectively in comparison to Q4’12.   When compared to Q1 ’12, there has been a significant decline of 56% in terms of value and 44% in the volume of deals.

The Information Technology (IT) and IT-enabled services (ITeS) sector emerged as the  leader in terms of volume of deals accounting to 105 million USD in Q1 ’13 from 26 deals. However, the sector witnessed a decrease of 40% in value and 28% in volume as compared to the preceding quarter.

Sanjay Dhawan, Leader, Technology, PwC said, “Traditionally, the IT and ITeS sector has seen the highest value and volume of investments. However, we have seen a marked drop in the investments this quarter, which can be attributed to the uncertain macro-economic and political environment. Most of the players in the online services segment, which typically attracts most investments in this sector, continue to struggle to turn cash positive. As a result, investors are critically evaluating the existing business/revenue models and are not willing to invest in ‘me-too’ ventures.”

The  Banking, Financial Services and Insurance (BFSI) sector led the quarter  in terms of value of deals with investments worth 248 million USD from   8 deals, registering a  three-fold growth in value as compared to Q4 ’12.

According to Sanjeev Krishan, Chairperson, PwC in India, “The declining deal volumes indicate that the confidence of investors is yet to return following the regulatory and tax concerns caused by the government. There were some large deals in the pipeline during Q1’13, which took time to consummate, adversely impacting the deal values for Q1’13. The outlook for the rest of the year looks better than the Q1'13 numbers for sure.”

The energy sector witnessed the second highest investment in terms of value with investments worth 159 million USD from two deals in Q1 ’13 as compared to 47 million USD from three deals in the previous quarter (Q4 ’12) and 129 million USD from 8 deals in Q1 ’12.

The shipping and logistics and the fast moving consumer goods (FMCG) sectors have shown a spurt in the value of investments. Shipping and logistics recorded 93 million USD from three deals this quarter, which is almost double the value of investment in the preceding quarter. In comparison to the first quarter last year, the sector saw a drop of over 40% in terms of value of investments despite an additional deal this quarter.

The FMCG sector saw a four-fold growth in investments this quarter. It increased from 10 million USD in Q4 ’12 to 43 million USD from a single deal in each of the quarters. But in Q1 ’12, the sector witnessed investments worth 137 million USD from a single deal, which is three times more than the investments made in Q1 ’13.

The other key sectors other than IT and ITeS such as  food and beverages, manufacturing, textiles and garments, education, healthcare and life sciences  have reported considerable decline in the value of investments in this quarter as compared to Q4’12

In Q1 ’13, private equity investments in late-stage deals recorded the highest value of271 million USD from 16 deals. However, in comparison to the previous quarter, it witnessed a drop of 47% in value and 27% in volume of deals.  The drop is even sharper in comparison to Q1’12 with a decline of over 60% in the value of deals and 51% in number of deals.

The growth stage stands second in terms of investment value with investments worth 195 million USD from 16 deals. Private investment in public equity (PIPE) deals with an investment worth 144 million USD has shown a drop of over 30% in value and 54% in volume in this quarter. This quarter witnessed one deal in the pre-IPO stage worth 30 million USD while     there was not even a single deal in the pre-IPO stage in Q4’12 and Q1’12..

Hyderabad has emerged as the top region in this quarter, surpassing Mumbai and the National Capital Region (NCR) in terms of investments. Hyderabad witnessed investments worth 212 million USD from six deals in Q1’13, which is more than double the value of investment received in the previous quarter despite a drop of 45%  in the number of deals.

Chennai received the second highest value in funding in Q1’13 amassing183 million USD from9 deals as compared to 81 million USD from two deals in Q4 ’12, recording more  than two-fold growth.

Private equity exits

The exit activity in this quarter has shown a decline of over 40%, despite a 14% growth in the number of deals as compared to Q4’12... In Q1 ’13, PE exits were valued at 1028 million USD from 24 deals as compared to Q4 ’12 with PE exits worth 1732 million USD from  21 deals. As compared to the same period last year, the exits have shown a decline of 18% in value and 29% in volume. Q1 ’12 witnessed exits worth 1260 million USD from 34 deals.

The majority of the exits in this quarter came from the IT and ITeS and the BFSI sectors, contributing to approximately 59% of the total exit value and 38% of the total volume.

The BFSI sector tops the list for PE exits with five deals worth 393 million USD. In terms of exit value, the IT and ITeS sector stand second aggregating 213 million USD from four deals in this quarter.

The healthcare and life sciences sector witnessed almost four-fold growth in exit value this quarter ,  from 50 million USD (two deals) in Q4 ’12 to 196 million USD (three deals) in Q1 ’13.

The preferred modes of exits in this quarter have been through public market sale (nine exits) and strategic sale (seven exits), constituting 67% of the total exit volume. The other modes of exits were secondary sale (five exits), buyback (two exits) and through IPO (one exit). In Q1 ’13, the public market sale fetched the highest exit value of 815 million USD, which is about 79% of the total exit value.

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 comprised 78% of total deal value in Q1 ’13. The top three deals constituted 37% of the total value of the top 20 deals. About 95% of the deals in this quarter are below 50 million USD.
• The top two exits comprised 49% and the top 5 constituted close to 79% of the total exit value in Q1 ’13.

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