PE investments in India start on a brighter note, up by 14% in Q1’14

• PE investments in Q4’13 totals 2.12 billion USD in value terms across 76 deals. PE exits double with an exit value of 1.13 billion USD from 20 deals in Q4 ’13.
• With 37 deals worth 959 million USD in Q4 ’13, the IT and ITeS sector is yet again the leader in terms of value and volume.

Mumbai, 25 February 2013 – Private equity firms have invested 2.12 billion USD across 76 deals in the last quarter of the calendar year, i.e., Q4 ’13 (October to December’13). Since 2007 the trend for PE investments in the last quarter (Q4) is to be below 2 billion USD despite a higher volume of deals; however, 2013 has been a contrast to this. 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.

After a relatively poor third quarter, investments value was up by about 19% despite a 19% drop in the number of deals – 1.78 billion USD from 94 deals. Even when compared to the same period last year, i.e., Q4’12, there has been an increase of 74% in deal value despite a 30% decrease in the volume of deals. In Q4 ’12, the value of investments was 1.22 billion USD from 109 deals.

With 37 deals worth 959 million USD in Q4 ’13, the information technology and IT-enabled services (ITeS) sector is yet again the leader in terms of value and volume. The sector has shown a 41% increase in value with two additional deals in this quarter as compared to the previous one. When compared to the same period last year, the sector has grown over five times in value despite a 10% drop in the volume of deals. In Q4 ’12, the investments in this sector were worth 176 million USD from 41 deals. Within the IT and ITeS sector, the IT services sub-segment recorded the highest investment worth 563 million USD from five deals. The online services sub-segment recorded the second highest investment among the sub-segments, with a total of 284 million USD invested in 19 deals - which is the highest in terms of volume this quarter.

Sandeep Ladda, leader, Technology, PwC said, “With the US market showing signs of recovery and with the increased attractiveness in the e-commerce space in India, there were not only an increased number of deals compared to the previous quarter, but also a substantial jump in the value. The steady increase of investments over the past few quarters in the Technology sector reinforces that this sector continues to be very attractive to the PE/VC community, and thus hints at the risk/reward relationship that it has to offer.”

According to Sanjeev Krishan, Chairperson, PwC in India, “Q4 proved to be an exciting quarter for PE investment with total flows exceeding 2 billion USD—the first time since post—Q4 2007. Almost 80% of the deal value was in the IT and Healthcare space. Activity levels in other sectors were largely muted. Whilst it is difficult to attribute any one specific reason for this sudden surge in deals, it just proved the point that investors, whilst closely watching the run-up to the elections, remain cautiously positive about the investment thesis for India. The hope is that the momentum witnessed in Q4 will continue to remain in early 2014. In terms of sectors, IT and ITeS and pharmaceuticals will continue to attract investments given their strong export focus, particularly against a depreciating rupee.”

The healthcare and life sciences sector has shown a surge in the investments with an increase of almost four times in value, from 191 million USD in the previous quarter to 729 million USD this quarter. The volume of deals remained the same. Even when compared to Q4 ’12, the value of investments has grown by about four times with two additional deals.

The BFSI sector ranks third in terms of value and volume. The sector witnessed investments worth 88 million USD from five deals, an 8% increase in value from the preceding quarter despite a 44% drop in the deal volume in this quarter. In Q3 ’13, BFSI investments were 81 million USD in nine deals. However, as compared to the same period last year, the investment value has grown by 15% despite a 38% drop in the number of deals this quarter.

The food and beverages sector has shown a 50% growth in value quarter over quarter despite the same volume of deals. It grew from 36 million USD to 54 million USD (from three deals). However, when compared to the same period last year, the sector has shown a fall of 41% in value and 50% in volume.

Apart from the above discussed sectors, the other key sectors like energy, textiles and garments and manufacturing, have shown a significant drop in the value of investments in this quarter when compared to the previous quarter.

In Q4 ’13, private equity investments in the late stage recorded the highest value, seeing 757 million USD from 22 deals - a significant growth rate of 61% in value and 83% in volume of deals. In Q3 ’13, the investments stood at 472 million USD from 12 deals. Buyout deals, with an investment of 548 million USD from two deals, ranked second in terms of value. However, the value and volume of investments have dropped by 10 and 78%, respectively, as compared to the preceding quarter.

By region, National Capital Region (NCR) has emerged as the top region this quarter, with a nearly five-fold growth in value of deals despite a drop of 19% in volume. The investments in this region stood at 847 million USD from 13 deals compared with 173 million USD from 16 deals in the previous quarter. The investment value is about 40% of the total PE investments in this quarter.

Mumbai has slipped to the second position this quarter, recording the second highest level of funding at 331 million USD, a drop of 58% in value despite two additional deals. In terms of volume, Mumbai stands first, with a count of 25 deals, almost one-third of the total deal volume.

Bangalore, in this quarter, saw a drop of 27% and 33% in value and volume, respectively, with an investment of 283 million USD from 14 deals. Hyderabad and Chennai have more than doubled their investments in this quarter.

Private equity exits

The exit activity in the final quarter of 2013 has doubled in terms of value as compared to the prior quarter despite the same number of deals. The exits were worth 1.13 billion USD from 20 deals as compared to 518 million USD from 20 deals in Q3 ’13. Compared to Q4 ’12, the exits have shown a decline of 30% and 47% in value and volume, respectively. In Q4 ’12, there were 38 exits worth 1620 million USD.

The majority of the exits in this quarter came from the healthcare and life sciences and the IT and ITeS sectors which together contributed around 69% of the total exit value and 50% of the total volume.

The healthcare and life sciences sector tops the list of PE exits, in terms of both value and volume, with six deals worth 513 million USD. This constitutes 45% of the total deal exit value. The IT and ITeS sector stands second, in terms of both value and volume, with four deals worth 264 million USD.

The preferred mode of exit in this quarter has been through secondary sale (nine exits). The other modes were strategic sale (five exits), public market (four exits) and buyback (two deals). In terms of value, exit through secondary sale fetched the highest value, worth 802 million USD (about 70% of the total exit value) in Q4.

Note to editors

1. 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.
2. The top 20 deals comprised 78% of the total deal value in Q4 ’13. The top three deals constituted over 47% of the total top 20 deal value. About 90% of the deals in this quarter are below the value of 50 million USD.
3. The top two exits comprised 35% and the top five constituted close to 64% of the total exit value in Q4 ’13.

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