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PE/VC deal value up by 52%, volume up by 31% in March

Canadian pension funds manifested in high deal numbers in March quarter

T E Narasimhan  |  Chennai 

Private Equity

During the month of March, and (PE/VC) deal value rose by 52 per cent, and 31 per cent by volume, over March 2016.

entities invested around $2.6 billion across 60 deals during March. Deal activity had fallen to a three-year low of $400 million across 32 deals in February. Canadian pension funds have been actively pursuing deals in India over recent quarters and that manifested in the high deal numbers over the quarter.

Compared to the previous month, while almost doubled, the value grew by 6.5 times in March, according to consultancy EY.

The growth in March was primarily driven by large PIPE (private investment in public equity; the selling of publicly traded common shares or some form of preferred stock or convertible security to private investors) deals by Canadian pension funds. Deal activity also picked up across other deal segments from the earlier month.

From a sector perspective, telecom topped the charts due to the large KKR-investment in Bharti Infratel. Followed by financial services, which clocked $693 million across 11 deals. E-commerce did not see any equity investment in March - there was only one $4 mn debt raise by Bigbasket.

In March, with $550 mn across 22 deals, exits were lower by 59 per cent in terms of value but 120 per cent higher in terms of volume, compared to March 2016. The latter month had seen one of largest of exits, by a PE investor (KKR's $1.2-bn exit from Alliance Tire). Open market exits accounted for 70 per cent of those by value and 55 per cent by volume. Financial services dominated, with 53 per cent of the total value of exits.

Fund raising activity in March was lowest across seven months, at $106 mn.

Mayank Rastogi, partner for PE at EY, said the two trends that characterised the quarter were deal activity of Canadian pension funds and the decline in e-commerce investment. The Canadian funds' investment had a few common themes. These include their investments in companies which are market leaders in their sectors and have attained scale, companies with a high corporate governance record, most investments in partnership with other large PE investors, and, finally, deal sizes largely more than $100-150 mn.

"E-commerce is undergoing a lot of churn and most businesses are in recalibration mode, leading to low deal activity," he added.

From a quarterly perspective, investment declined marginally on a year-on-year basis during the quarter (January-March). Investment declined by two per cent in value ($4.2 bn versus $4.3 bn in the same period, Q1, of 2016) and eight per cent in volume (134 deals vs 146 in Q1 of 2016).

However, compared to the fourth quarter of 2016, investment declined 18 per cent by value and 15 per cent by volume. All segments other than PIPE investment declined in both value and volume. PIPE investment overtook growth capital deals in the quarter, earlier seen in the second quarter of 2013, mainly on account of the $952-mn investment in Bharti Infratel by CPPIB, along with KKR, for a 10.3 per cent stake. Five of the seven investments with value greater than $100 mn in 2017 were PIPE ones.

Investments by the Canadian pension funds contributed to almost a third of the total investment value in Q1. These include CPPIB's $720 mn in Global Logic for a 48 per cent stake, a $342 mn investment in Kotak Mahindra Bank by CDPQ and for a 1.5 per cent stake, and $302 mn in Bharti Infratel for a 3.3 per cent stake (KKR was the other investor, acquiring seven per cent stake in the deal).

From a sector perspective, telecom dominated with the $952 mn KKR-investment in Bharti Infratel. Except for the information technology (IT) sector, $907 mn across 31 deals, investment declined across all other prominent segments -- financial services, real estate, e-commerce. E-commerce recorded the lowest quarterly deal value and volume since Q3 of 2013. Real estate had the lowest deal value and volume since Q1 of 2014.


With regard to exits in the quarter, there was a marginal two per cent year-on-year decline in deal value. However, in volume terms, 45 per cent growth.

Compared to the fourth quarter of 2016, exits reported an increase in both value and volume of 37 per cent and three per cent, respectively.

Exits through the open market recorded their best performance in a little over five years, at $890 mn across 30 deals, the preferred mode. Second were secondary exits, with $851 mn across nine deals, mainly contributed by the $720 mn partial divestment of Global Logic by Apax to

There were fewer strategic exits in the quarter ($43 mn across 11 deals), compared to Q1 of 2016 ($1.5 bn across 16 deals. There were two PE-backed Initial Public Offers of equity in the quarter (BSE and CL Educate) versus four in Q1 of 2016. Financial services ($522 mn, 14 deals) and IT ($720 mn, five deals) were top. Followed by health care ($93 mn, eight deals) and real estate ($184 mn, six deals).

The quarter also saw $1.3 bn in fund raising, a 38 per cent decline compared to Q1 of 2016. And, new fund raising plan announcements of $1.6 bn. However, these were much smaller than the announcements of $5.7 bn combined in Q1 of 2016.


PE/VC deal value up by 52%, volume up by 31% in March