IT-ITeS sector received $1.64 bn PE funding in Q3: PwC

By: | Published: November 23, 2014 12:47 PM

The largest deal during the quarter was that of Flipkart (USD 1 billion).

Driven by heightened interest of private equity investors in start-ups and online ventures, the IT & ITeS sector in India attracted USD 1.64 billion funding in the July-September period, says consultancy firm PwC.

The Information Technology and IT-enabled services sector attracted USD 1.64 billion through 56 deals, accounting for more than half the total PE investments (USD 3.01 billion) during the third quarter of 2014, PwC said in its ‘MoneyTree India Report Q3 2014’.

While this is a two-fold jump over the previous quarter from 746 million USD via 47 deals, the funding is more than 2.5 fold higher as compared to the same period last year (618 million USD in 41 deals) in the IT-ITeS sector, it added.

The largest deal during the quarter was that of Flipkart (USD 1 billion), while other deals in the sector included those in Hike (USD 65 million), Quickr (USD 60 million), Snapdeal (USD 50 million), Olacabs (USD 42 million), Freecharge.in and BigBasket (USD 33 million each).

“The third quarter of the year has witnessed a stellar performance in the IT & ITeS sector in both value and volume… The average deal size in this sector has also surged in this quarter, from USD 17.3 million in Q2 to USD 29.3 million in this quarter,” PwC said.

The average deal size in July-September 2013 period stood at USD 15.1 million for the IT-ITeS sector.

The online services subsector has received almost 85 per cent of the total deal value, with USD 1.39 billion coming in through 28 deals.

This was followed by mobile services (USD 138 million in nine deals) and enterprise software (USD 79 million in 13 deals).

“e-Commerce businesses continued to attract investor interest driven by strong growth prospects. The e-commerce market continues to be a primarily minority stake market, with the majority of deal flow driven by growth-stage deals,” PwC India Technology Industry Leader Sandeep Ladda said.

New online e-commerce business segments like classifieds, real estate, grocery and healthcare, have started to exhibit significant growth opportunities, he added.

Looking ahead, companies in m-commerce and digital technologies (SMAC) are expected to be in favour, Ladda said.

Investments in the growth stage (investments of less than USD 20 million and third or fourth round of institutional investment) outpaced all other modes during the quarter, witnessing 92 per cent of the total value.

Growth investments in this quarter stood at USD 1.51 billion, a three-fold increase from the previous quarter and a six-fold growth over July-September 2013.

However, the average deal size in early-stage investments has fallen to USD 2 million in this quarter.

Bangalore continued its run as the best IT investment destination in this quarter, attracting 72 per cent of the total investments in the sector during this quarter.

The city attracted USD 1.18 billion in 17 deals, followed by Mumbai (USD 211 million in 15 deals) and Delhi-NCR (USD 144 million in nine deals), the report said.

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