PE investments in India

• PE investments in Q3’13 totals 1280 million USD in value terms across 75 deals. PE exits too drop with an exit value of 489 million USD from 17 deals in Q3 ’13.
• With 25 deals worth 582 million USD in Q3 ’13, the IT and ITeS sector leads both in terms of volume and value.

Mumbai, 28 November 2013 – After an impressive second quarter, the PE investments in Q3 ’13 (July – Sep ‘13) have dropped by more than 50percent in value and 31percent in volume as compared to previous quarter (April – July 2013). . PE firms have invested 1280 million USD across 75 deals in this quarter. Even when compared to the same period last year, i.e., Q3 ’12, there has been a decrease of 67 percent and 40percent in value and volume respectively. In Q3 ’12, the value of investments were 3910 million USD from 126 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.

The IT and ITeS sector, yet again has emerged as the leader in terms of value and volume of investments with an investment of 582 million USD from 25 deals in Q3 ’13. The sector witnessed an increase of 24percent in the value of investments despite a 36percent drop in the volume of deals, as compared to the previous quarter. However, when compared to the same period last year (Q3 ’12), PE investments in this sector have shown a significant drop of 76 percent and 55percent in value and volume, respectively.  In Q3 ’12, the investments in this sector were worth 2403 million USD from 56 deals. Within the IT and ITeS sector, the online services sub-segment recorded the highest investment worth 293 million USD from 10 deals, the highest in terms of volume too. The IT services recorded the second highest investment among the sub-segments, with a total of 262 million USD invested in two deals. 

Sandeep Ladda, Leader, Technology, PwC said, “The IT and ITeS sector being a less capital-intensive industry typically receives higher volume of investments (not necessarily high value) as against other sectors, especially during early stages of businesses being set up.  Even in this quarter, more than 75percent of the volume of deals in this sector was in the early stage.  This quarter has also witnessed a couple of big deals in the online services and IT services segments.  With the exponential growth and importance of e-commerce, a few of the leading online (e-commerce) companies have seen success and are now looking to leap into the next phase of growth by expanding their operations and hence attracting investments.  And, with many PE firms focussing on the SME segment, we can expect more such investments in the small and medium sized IT services companies which offer niche services.”

This quarter saw a significant drop in investments in all sectors except for the IT and ITeS sector. Sectors such as energy, media and entertainment, agri-business, banking, financial services and insurance (BFSI) and fast moving consumer goods (FMCG) have all witnessed a drop of over 60percent in the value of investments as compared to the previous quarter and also against the same quarter last year.

According to Sanjeev Krishan, Chairperson, PwC in India, “Overall, the private capital investment thesis continues to remain challenging for India – the fund raising for all, but for the exceptional ones and with a pedigree of having returned capital to limited partners (LPs), is over.  Even for funds with a track record, the extent of scrutiny and diligence from the LP is far more intense than ever before.”

The manufacturing sector ranks second in terms of value and third in volume. The sector witnessed investments worth 185 million USD from nine deals – a 77percent drop in value as against the preceding quarter despite an additional deal this quarter. In Q2 ’13, the investments were worth 801 million USD from eight deals. But when compared to same period last year (Q3 ’12), the investment value has grown by 22percent with one additional deal in this quarter.

The healthcare and life sciences sector has shown a 35percent drop in value quarter-over-quarter despite a 25percent increase in the number of deals. It dropped from 242 million USD across 12 deals to 157 million USD across 15 deals.

The banking, financial services and insurance (BFSI) sector had the highest drop in the value of investments in this quarter – from 250 million USD across 16 deals to 30 million USD across five deals – a substantial drop of 88percent in value and 69percent in number of deals. Even as compared to Q3 ’12, the sector witnessed a drop of 86percent in value and 67percent in volume.

In Q3 ’13, private equity investments in the growth stage recorded the highest value, seeing 390 million USD from 13 deals. However, as compared to Q2 ’13, the investments in this stage have fallen by 40percent in value and 50percent in volume. Even when compared against the same period last year (Q3 ’12), the investment value has dropped by 28percent and the number of deals has gone down by 41percent.

Private investment in public equity (PIPE) deals, with an investment valued at 335 million USD, ranks second in terms of value. The value of investments in this stage has remained the same despite a 28percent decrease in volume. Buyout-stage deals have more than doubled their volume of deals in this quarter (seven as against three in Q2 ’13) but the value of investments have shown a 60percent drop, from 740 million USD to 296 million USD.

By region, Mumbai has retained its position at the top, recording the highest level of funding at 429 million USD, which is about 34percent of the total PE investments in this quarter. Even in terms of volume, Mumbai, with 20 deals, has the majority share at 27percent. However, as compared to Q2 ’13, investments have shown a significant decline of 65 and 23percent in value and volume, respectively. Compared against the same period last year (Q3 ’12), the drop is much steeper with 74percent in value and 44percent in number of deals. 

Bangalore, the only one among the key regions in this quarter to see growth in the value of investments, stands second in terms of value with an investment of 323 million USD from 11 deals, a 49percent growth in value despite a 42percent decrease in the volume of deals vis-a-vis the previous quarter.

Private equity investments in NCR, Hyderabad and Chennai, too, have shown a decrease in the value of investments this quarter, as against the previous quarter.

Private equity exits

The exit activity in this quarter has shown a significant drop in terms of value and volume when compared to the previous one. In Q2 ’13,  PE exits were worth 1963 million USD from 43 deals as compared to 489 million USD from 17 deals in Q3 ‘13, a drop of 75percent in value and 60percent in number of deals. Compared to the same period last year, the exits have shown a decline of 67 percent and 47percent in value and volume, respectively. In Q3 ’12, there were 32 exits worth 1515 million USD.

The majority of the exits in this quarter came from the IT and ITeS and manufacturing sectors which together contributed around 65percent of the total exit value and 59percent of the total volume.

The IT and ITeS sector tops the list of PE exits, in terms of both value and volume, with five deals worth 242 million USD. This constitutes 50percent of the total deal exit value. In terms of exit value, the education sector ranks second with a single exit worth 100 million USD. The manufacturing sector, along with the IT and ITeS sector, leads in terms of volume in this quarter with five exits worth 77 million USD.

The preferred mode of exit in this quarter has been through buyback (five exits). The other modes were public market and secondary sale (four exits each), strategic sale and exit through IPO (two deals each). In terms of value, exit through buyback fetched the highest value, worth 172 million USD (about 35percent 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 80percent of the total deal value in Q3 ’13. The top three deals constituted over 52percent of the total top 20 deal value. About 93percent of the deals in this quarter are below the value of 50 million USD.
• The top two exits comprised 38percent and top five constituted around 76percent of the total exit value in Q3 ’13.

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