Private equity investments fell to USD 16 billion in 2016 amid slump in valuations, especially in once-venerated ecommerce sector, but the markets are hoping for hectic deal activities in the new year. According to experts, the private equity space was abuzz with deal activities throughout the year, both in terms of exits and investments, but the kitty was smaller in comparison to 2015. In fact, most of the IPOs in 2016 were offer for sale by PE owners, which were well received among investors.
According to PwC, overall PE Investments amounted to USD 16.3 billion across 652 deals, registering year-over-year 18 per cent decline in terms of value and 23 per cent in terms of volume, respectively.
The year 2016 witnessed around USD 7.2 billion worth of exits with strategic sales contributing around 42 per cent of the value, as per PwC data.
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According to another major consultancy Grant Thornton, the year saw around a 1,000 transactions contributing just below USD 12 billion in value. While the number of transactions remained almost the same as 2015, there was a fall of 25 per cent in the overall valuation.
“2016 struggled to witness large transactions in the PE space and this was perhaps because the focus for the last couple of years has been on the start-up sector where transaction sizes have been relatively small,” said Prashant Mehra, Partner, Grant Thornton India LLP.
The trend of investments has remained “difficult and different” in 2016 and the year saw many e-tailers reporting a significant decline in number of orders.
Global investment bank Morgan Stanley marked down Flipkart valuation for the third time to USD 5.6 billion. The e-retail giant was valued at around USD 15 billion in June 2015 when it last raised funds.
In a major transaction, Jabong was sold to Flipkart for just USD 70 million in July 2016. Jabong got valued at around 0.5 times of its reported 2015 topline.
Moreover, during the year hyperlocal delivery startup -– PepperTap reportedly shut operations in six large cities, while Grofers decided to close operations in nine cities.
“Many e-tailers reported significant decline in number of orders as they cut discounts leading to drop in their GMV raising eyebrows on their fresh funding rounds and valuations,” Corporate Professionals Founder Pavan Kumar Vijay said.
He further said that investors are now focusing on past performance, scalability and entry barriers and also unit economics.
However, experts believe that the deal momentum should accelerate going ahead as macro-economic factors are positive.