PE deal volume declines 29% in Jan-Jun

MUMBAI: THE DROP IN DEAL ACTIVITY WAS THE RESULT OF FEWER DEALS IN THE CONSUMER TECH SPACE

Private equity (PE) investments in India have declined 29% in terms of deal volume in the six months ended 30 June, according to Bain & Co.

The slowdown was mainly caused by an approximately 50% drop in the number of deals valued under $10 million. Deals in this category fell to 108 in the first half of 2018 from 210 in the year earlier.

Overall, 224 private equity deals were reported in the sixmonth period compared with 318 in the year earlier.

The first half of the year also witnessed a 22% decline in overall deal value to $9.2 billion from $11.7 billion in the year-ago period. However, average deal size grew to $41 million from $37 million last year.

Large investors such as sovereign wealth funds and pension funds also reported subdued activity in the first half of 2018 with a maximum of one to two deals each, a revision to the mean after a very active 2017, Bain said.

The drop in deal activity was the result of fewer deals in the consumer technology space, according to Bain.

“Along with a YoY approximate 60% deal volume decline, average deal value has also dipped versus calendar year 2017, given activity spike in 2017 driven by investor interest in newly emerged consumer tech leaders like Flipkart, Paytm, Ola, with multiple big ticket investments being made,” said Bain & Co.

Sectors that continued to witness strong investor interest included banking and financial services (BFSI), energy and consumer/retail, according to the consulting firm.

“Along the lines of 2016 and 2017, H1 2018 saw several investments made in NBFCs, including a $1.7 billion investment into HDFC by a GIC-PremjiInvestKKR led consortium; Strong NBFC market performance, in segments that are either unattractive or not addressable for banks, continues to attract investors,” the firm said.

Supportive government policies drove strong interest in renewable energy, with companies such as ReNew Power and Greenko receiving large ticket investments (over $250 million) from Canadian pension fund CPPIB and a Abu Dhabi Investment Group led consortium, respectively.

PE deal activity in the consumer sector was led by three large deals in Capital Foods, Future Lifestyle and Future Retail. These deals pushed consumer activity to $1 billion, a jump of 125% over last year’s $0.4 billion worth of PE investments in consumer companies in the first half.

Even as deal activity witnessed a slowdown, exits saw a significant uptick in the first six months of 2018, indicating healthy public markets in India.