The year 2014 has so far been a good one for private equity deals in India, with aggregate PE investments till date at $11.64 billion, being the second-best in the past six years.
PE investments in 2014 till date stand 9% higher in terms of deal value as compared to investments in the same period last year, and are 5% higher than the aggregate 2013 investment figure as well. However, the number of deals are down by 5%, implying that PE investors continued to remain cautious in investing, while putting in more capital in select firms.
The year saw venture capital and private equity firms chasing companies in the internet and e-commerce space, which garnered nearly 40% of the aggregate PE investments. Flipkart and Snapdeal raised $ 1.71 billion and $0.86 billion, respectively, in 2014.
Dhiraj Poddar, co-head, India, at TA Associates Advisory, says the sectors or pockets that are less dependent on government action continued to generate PE interest, even as the positive sentiments and hopes of faster economic recovery played a role.
The year saw sustained deal momentum, with five of 11 months witnessing PE investment inflow of over a billion each. In fact, the current quarter has seen even greater PE interest, with deals worth $1.7 billion and $1.22 billion struck in the past two months, respectively.
In terms of deal size, the average deal size (for the January to December 11 period) stands 15% higher as compared to the same period last year. There have been 10 deals with deal size of more than $200 milllion each, collectively contributing $4.31 billion, or 37%, to overall PE capital invested in 2014, in line with the trend witnessed last year.
However, unlike last year, which saw Qatar Foundation picking up 5% stake in Bharti Airtel for $1.26 billion in one of the biggest PIPE deals, apart from some large buyout deals like KKR-Alliance Tire Group ($470 million) and Apax-GlobalLogic ($420 million), 2014 so far has seen more of growth capital and late-stage VC investment deals. The year also saw PE firms like KKR providing debt funding to Amtek Auto (Euro 235 million), GMR Holdings ($164 million) and Avantha Group ($100 million).
Looking ahead, experts believe that PE investments might look up, with companies in traditional sectors like infrastructure and capital goods expected to raise capital to fund capital expenditure.
Harish HV, partner at Grant Thornton, says the size of PE investments depends a lot on opportunities available, and if the infrastructure segment sees momentum, funding requirement will see rebound. “There’s positivity among investors, but they are waiting for actual implementation,” he added.