Private equity (PE) and venture capital (VC) investments stood at $1.2 billion across 43 deals in January 2017, declining by 6.3 percent in value terms and 6.5 percent in volume terms compared to January 2016, according to data compiled by accounting firm EY.
The decline was largely due to a drop in the number of growth or expansion funding deals. High value deals also fell short, with more than half the deal activity being of less than $10 million in value. Moreover, a single deal - Canada Pension Plan Investment Board’s acquisition of a 48 percent stake in Bengaluru-based IT outsourcing company Global Logic for $720 million from Apax Partners, accounted for more than 60 percent of the aggregate value of investments as well as exits, noted EY.
Other large deals included Warburg Pincus’s $119 million investment in multiplex company PVR for a 14 percent stake, and a Series D investment of $55 million in online health care platform Practo Technologies by Sequoia Capital, Matrix Partners and a clutch of other investors. “January 2017 investment numbers were influenced greatly by the large deal involving Global Logic, which was also one of the largest exits in recent times, reassuring the LPs about the India story,” said Mayank Rastogi, partner and leader for PE, EY, in a statement. Deal volumes had been sustained on the back of steady early stage VC activity, which has not been impacted by demonetisation, he said.
January 2017’s decline in PE/VC deal value and volume was much sharper when compared to a month ago in December 2016: 60.4 percent and 23.2 percent, respectively. This is because the largest buyout deal in the country – Brookfield’s $1.6 billion buyout of Reliance Infratel – was recorded in December last year, substantially boosting the numbers.
Other than technology, most sectors recorded a decline in both value and volume in January 2017. For instance, real estate, which was a major contributor almost every last year, saw just one deal worth $22 million. The financial services too recorded only $23 million, across four deals, according to EY. Food and agriculture with $78 million across seven deals in January 2017 posted its highest monthly performance in over two years. Education too was a bright spot with six deals recorded.
Exit values in January 2017 totalled $850 million across 13 deals - a jump of 32.4 percent in value terms over January 2016. In volume terms, however, there was a 24 percent decline. EY attributed this mismatch to Apax Partners’ sale of Global Logic, which accounted for 85 percent of the total exit value in the month. No PE-backed IPOs were seen in January 2017.
The EY report also noted that January 2017 saw $331 million in funds raised. While this represented a decline of 32 percent over January 2016, it was a 73 percent increase over the previous month of December 2016. New fund raise plans were announced by KKR’s India Credit Fund ($147 million), IDFC Alternatives ($100 million), Saama Capital India Advisors ($58 million) and Endiya Ventures ($26 million).
Going forward, Rastogi noted that while the Union Budget was “largely positive” for industry, certain provisions like “the introduction of thin cap rules, may have an adverse impact on investments in the infrastructure and real estate sectors”.