Private equity investments in India are slowing down. PE funds invested $291 million in 18 deals in February 2009 compared with $1.8 billion pumped in through 23 deals in the same month last year. The average deal size decreased to a mere $16 million last month from $78 million in February 2008.
As per a study by JM Financial, infrastructure, retail and healthcare sectors witnessed the highest activities in terms of deal values accounting for 59%, 11% and 7%, respectively, of the total PE investments in February 2009. About $343 million was invested in 29 deals till February 2009.
About 78% of the private equity deals was in unlisted companies in February 2009 as compared to 86% in 2008. Only four major deals such as $161 million by 3i in Krishnapatnam Port Company, $31 million by ICICI Venture and Kotak PE in Home Solutions Retail, $18 million by India Venture Advisors in Kaveri Medical Care and $17 million by Deutsche Bank in Rama Cylinders were announced in last month.
According to Bhavesh Shah, executive director, JM Financial, the deal sizes will be improved gradually in the future. ?The deal activities, which were stopped in December 2008, gradually picked up in the middle of January 2009 and improved further in February. The activities in PE sector will pick up by August, post elections. Between August and December, the activities would be in full swing and lot of deals would be signed.? Most of the deals happening nowadays are similar to venture capital investments with investing $5-10 million, he added. PE investments in unlisted companies (by value) have increased from 89% in 2008 to 95% in year-to-date (YTD) February 2009.
The picture given by various surveys on PE investments in future is not different. A survey by Venture Intelligence of leading fund managers predict decrease in overall deal volumes, size of investments, fund raising and exits in 2009. The same survey indicated that majority of respondents expect the PE market to recover in 12?18 months.
According to KPMG, transactions in Q4 2008 were dropped by over 100% to 61 as compared to 126 transactions in Q3 2008. Global credit crisis had a direct impact on the Indian PE Industry and the fund raising fell as first time funds found it difficult to raise capital, said the KPMG survey.