PE inflows, exits at an all-time high in H1 2017

PE/VC investments in India in the first half (H12017) and second quarter (Q2017) have witnessed a sharp increase on the back of large deals in excess of $300 million each.

H12017 and Q2017 recorded the highest investments in a half year and quarter respectively, consultant EY said in a statement. “India is clearly maturing as a PE market with bigger and more complex deals becoming more common place. Bigger size deals and buyouts are both a testament,” said Mayank Rastogi, partner and leader for PE.

“Improving exit performance, blockbuster exits over the last couple of years, further supported by buoyant capital markets has also helped PE funds reaffirm their India thesis. There is massive amount of dry powder available globally and most global funds are keenly looking for investment opportunities in India,” he said.

Investments

Investments increased 41 per cent in value ($11.2 billion as against $8.0 billion in H12016) despite a marginal decline in deal volume (298 deals versus 310 deals in H12016). Both buyout ($2.2 billion across 18 deals) and PIPE deals ($1.9 billion across 23 deals) recorded strong growth in H12017 of 76 per cent and 72 per cent respectively. The first half of 2017 saw a record high of 18 buyouts.

Aggregate investment value was led by minority growth capital deals with 41 per cent of the aggregate investments ($4.6 billion invested across 78 deals in H12017, a growth of 35 per cent over H12016). Early stage/VC deals continued to dominate the deal volumes accounting for 50 per cent of all deals in H12017.

Also, H1 2017 saw significant activity from Canadian pension funds who have been involved in some of the larger investments made during the year. In aggregate, they invested more than $2 billion across six deals in 2017. There were 26 deals of deal value $100 million and above, aggregating $7.7 billion and accounting for 68 per cent of the investments during H12017.

On a quarterly basis, investments increased 93 per cent in value ($7.1 billion against $3.7 billion in 2Q2016) with deal volumes remaining similar. The growth was driven by sharp increase of 103 per cent and 133 per cent in buyout and growth deals respectively. The second quarter of 2017 demonstrated the best quarterly performance recorded by both buyout ($1.9 billion across 11 deals) and growth ($3.1 billion across 47 deals) deals in over a decade.

From a sector perspective, financial services, technology and real estate were the leading sectors in terms of investments both in H12017 and Q22017. Financial services recorded $3.4 billion across 51 deals in H12017 and $2.5 billion across 33 deals in Q22017, the highest half yearly and quarterly numbers recorded by any sector in over a decade, mainly due to the large $1.4 billion Softbank’s investment in Paytm.

Exits

Exits grew 53 per cent by value in H12017 ($4.8 billion Vs $3.1 billion in H12016) and 50 per cent by volume (129 deals against 86 deals in H12016) - the best half yearly performance since 2009, driven by increase in open market and secondary divestments. Exits via open market recorded $1.9 billion (60 deals), five times of the value recorded in H12016 and highest ever half yearly tally. Exits via secondary sale (sale to other PE funds) recorded $1.8 billion (26 deals), eight times of the value recorded in H12016 and highest ever half yearly tally for secondary sales. IPO markets have been quite active as well with 6 PE backed IPOs in H12017 (8 in H12016).

Quarterly comparison shows a 2.6 times jump in exits value ($2.8 billion Vs $1.1 billion in 2Q2016), again driven by open market and secondary exits. There were 4 PE backed IPOs in the second quarter of 2017.

June 2017 quarter recorded 34 per cent increase in value of exits versus same period last year ($550m across 12 exits against $409m across 14 exits in June 2016 quarter). Financial services ($1.6 billion across 31 exits), technology ($1 billion, 13 exits) and life sciences ($756 million across 23 exits) were the top sectors for exits in H12017.

Fund raise

The total funds raised in the first half of 2017 stood at $2 billion, a 30 per cent decline compared to H12016, but a 54 per cent increase over H22016. Further, on a quarterly basis, funds raised declined by 24 per cent to $719 million compared to $942 million last year. The