2015 saw high­est-ever pri­vate in­vest­ments in In­dia

The Pak Banker - - 6BUSI­NESS -

In­dia was the top des­ti­na­tion for pri­vate eq­uity (PE) and ven­ture cap­i­tal (VC) in­vestors in 2015. The coun­try re­ceived a record $22.4 bil­lion in in­vest­ments last year, 31.8% more than the pre­vi­ous high­est of $17 bil­lion in 2007, ac­cord­ing to a re­port by Bain & Co. In­dia Pvt. Ltd. The 2015 deal value marked a 47% in­crease over the $15.2 bil­lion In­dia re­ceived in 2014.

Con­sumer tech­nol­ogy, real es­tate and bank­ing, fi­nan­cial ser­vices and in­sur­ance top the sec­tors that at­tracted in­vestors, ac­count­ing for 65% of deal value. In­vest­ments in con­sumer tech grew 46% to $6.9 bil­lion.

Deals in bank­ing, fi­nan­cial ser­vices and in­sur­ance (BFSI) dou­bled to $3.7 bil­lion in 2015. The value of real es­tate deals in­creased 74% to $3.9 bil­lion in the year.

In­dia's at­trac­tion as an in­vest­ment des­ti­na­tion has been bur­nished by the fu­ture po­ten­tial of the world's fastest grow­ing ma­jor econ­omy, al­though the coun­try is grap­pling with its share of prob­lems, in­clud­ing wide-spread ru­ral dis­tress af­ter two back-to-back droughts, con­glom­er­ates weighed down by debt and banks laden with bad loans.

"In­dia has the fun­da­men­tals-large pop­u­la­tion that is young with ris­ing in­comes, in­creas­ingly on­line and con­sum­ing more-that make it one of the most in­ter­est­ing coun­tries to in­vest in par­tic­i­pa­tory if you have a long-term in­vest­ment hori­zon and ap­petite. The in­vestors we work with un­der­stand that long-term out­look has to be bal­anced with the po­ten­tial for volatil­ity and risk that we see to­day in ar­eas like NPAs (non-per­form­ing as­sets) in the fi­nan­cial sec­tor, ru­ral dis­tress and lack­lus­tre re­cent mon­soons," said Ar­pan Sheth, head of Bain and Co.'s PE con­sult­ing prac­tice in In­dia.

Top deals in 2015 in­cluded an in­vest­ment of $700 mil­lion in Flip­kart, In­dia's big­gest ecom­merce com­pany, by Tiger Global Man­age­ment and Stead­view Cap­i­tal Man­age­ment, and a $635 mil­lion in­vest­ment by Alibaba and SAIF Part­ners in Paytm.

A clutch of in­vestors in­clud­ing Fal­con Edge Cap­i­tal, Tiger Global, SoftBank Group and DST Global in­vested $500 mil­lion last year in ANI Tech­nolo­gies Pvt. Ltd, which runs Ola Cabs. To be sure, in­vestors have be­come more wary about in­vest­ing in start-ups, in­clud­ing e- com­merce firms, and deals are tak­ing longer to close, in a slow­down that started in the mid­dle of last year.

Apart from de­mand­ing that start-ups slow ex­pan­sion, slash costs and cut dis­counts, many in­vestors are set­ting per­for­mance mile­stones; some in­vestors are only re­leas­ing funds in in­stal­ments, Mint re­ported on 15 Jan­uary.

"Presently, val­u­a­tions of e-com­merce busi­nesses are high and there are con­cerns that the growth rate of these busi­ness does not match with the cur­rent val­u­a­tions. There are ex­pec­ta­tions that val­u­a­tion will come down and hence in­vestors are on a wait-and-watch mode," said Vikram Utam­s­ingh, man­ag­ing di­rec­tor at ad­vi­sory firm Al­varez & Marsal In­dia Pvt. Ltd.

On Fri­day, Mor­gan Stan­ley In­sti­tu­tional Fund Trust, a mi­nor­ity in­vestor in Flip­kart, dis­closed a write-down in the value of its hold­ings in the com­pany by as much as 27%. Mor­gan Stan­ley's lat­est es­ti­mate im­plies the mu­tual fund now val­ues Flip­kart at $11 bil­lion, down from the $15 bil­lion it was val­ued at when it re­ceived the $700 mil­lion in­vest­ment last year.

The top 10 deals to­gether ac­counted for $4.6 bil­lion, or 21% of to­tal PE/ven­ture cap­i­tal in­vest­ments in 2015. The av­er­age deal size in­creased to $21 mil­lion, a 12% in­crease from 2014, said the Bain & Co. re­port.

The vol­ume share of deals above $25 mil­lion in­creased to 17.4% in 2015 from 16.5% in the pre­vi­ous year, while the share of buy­out trans­ac­tions was barely changed from 2014. The num­ber of deals more than quin­tu­pled in the last 10 years, from 185 in 2005 to 1,047 in 2015. Deals worth $100 mil­lion plus made up 5.7% of over­all deals in 2015 against 4.1% in 2014.

Be­sides the in­vest­ments in Flip­kart and Paytm, top deals in 2015 in­cluded a $500-mil­lion in­vest­ment in Snapdeal led by Soft­bank Group, Apax Part­ners' $386 mil­lion in­vest­ment in Shri­ram City Union Fi­nance, Black­stone's $384-mil­lion ac­qui­si­tion of busi­ness process out­sourc­ing firm Serco In­dia and a $316-mil­lion in­vest­ment in the con­sumer di­vi­sion of Cromp­ton Greaves by Te­masek Hold­ings Pte Ltd and Ad­vent In­ter­na­tional. Ac­cord­ing to the re­port, exit val­ues have risen 57% to $9.4 bil­lion. Public mar­ket sales con­tinue to be the pre­ferred exit mode for PE firms, al­though exit value from sec­ondary or strate­gic ex­its in­creased, the re­port said.

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