PE/VC investments in February 2017 record sharp decline: EY Report

Image: Shutterstock.com (For illustrative purposes only)

Private equity (PE) and venture capital (VC) investments stood at $343 million across 27 deals in February 2017, declining by over 70 percent in value terms compared to February 2016 as well as the previous month. Deal volume declined by 50 percent compared to February 2016 and 37 percent compared to the previous month, according to data compiled by accounting firm EY.

“Investment numbers took a dive in February due to lower deal volumes and decline in large deals. There was no deal above US$100 million in February which last happened 18 months ago,” said Mayank Rastogi, partner and leader for PE, EY in a statement. The report noted that the value and volume of growth and early stage deals in February 2017 declined by more than half the month average over the past couple of years. While deal volume has been diminishing over the last few months, the aggregate deal value was supported by large deals. However, February 2017 saw just two deals of over $50 million – Fairfax’s $75.3 million investment in financial services company IIFL and Temasek’s $55 million investment in used car marketplace cartrade.com. This aside, more than 50 percent of the deals were below the $10 million value, according to the report.

The decline in deal value and volume was seen across sectors with only the financial services recording a modest performance of $136 million across four deals. Aside from the Fairfax-IIFL deal, the other big investment this sector saw was TVS Capital’s $23.5 million infusion in Suryoday Small Finance Bank. Technology recorded the highest number of deals at eight, while real estate saw just one deal – its lowest deal tally in two years. Ecommerce saw three deals worth $75 million, including the $15.2 million investment in online furniture company Urban Ladder by Kalaari Capital, SAIF Partners, Steadview Capital and Sequoia.

In his statement, Rastogi noted that even though February had seen a slump in deal activity, there were a “bunch of large deals in the making which should make up for the decline in the near term.” These “mega deals” include Canadian asset management company Brookfield’s investment in RCOM’s mobile towers business, GIC’s investment in DLF’s commercial property business, Blackstone’s investment in K Raheja’s  rental assets and app-based cab aggregator Ola’s fund raise of around $330 million by Softbank.

February 2017 also saw exits outpacing investments in value terms. “The month again saw exits outpacing investments in value terms reaffirming the sustainability of PE industry in India,” said Rastogi. Exits totalling $554 million across 24 deals were witnessed, a three-fold increase compared to February 2016 - however, that was a decline of 35 percent compared to the previous month. The report noted that the month was primarily dominated by open market exits with PE firm Providence selling it 3.3 percent stake in Idea Cellular for $199 million and SAIF Partners selling its balance 11 percent stake in online travel agency MakeMyTrip.