Private equity (PE) and venture capital (VC) investments hit a three-year low in both value and volume last month, at $343 million in 27 deals. Exit deals and fund raising by investment entities saw an increase.
In value terms, investments during February were 73 per cent less than the $1.29 billion reported in the same month of last year, according to the PE monthly round-up by EY, the tax, transaction and advisory services major. Deal volume declined by 50 per cent, from the 54 deals during February 2016.
While deal volume has been declining over the past couple of months, the aggregate was supported by large-size deals. However, there were only two deals above $50 mn in February and more than half were below $10 mn, it added.
More than half of the value was accounted for by only three deals. These were Fairfax's $75 mn investment in IIFL, Temasek's $55 mn in used car marketplace cartrade.com, and Xander Finance's $44 mn buyout of Express Trade Tower in Noida from IL&FS.
However, some large deals in the making should make up for the decline in the near term, says Mayank Rastogi, partner for PE at EY. Examples are mega deals of Brookfield (Hiranandani and Reliance Towers business), the GIC investment in DLF's commercial property business, Blackstone's investment in K Raheja's rental assets and Ola's fund raise of $330 mn by SoftBank.
Deal value and volume declined across sectors except for financial services, a modest $136 mn across four deals. Information technology recorded the highest number (eight), while real estate, hospitality & construction (RHC) saw only one, the segment's lowest tally in two years. There were three e-commerce deals worth $75 mn.
Exits exceeded the investments in value terms, with a total of $554 mn across 24 deals, compared to $118 mn in 15 deals in February 2016. The decline was 35 per cent compared to the $850 mn in 13 deals during January 2017.
Exit deals in February were dominated by open market exits. Providence sold its 3.3 per cent stake in Idea Cellular for $199 mn and SAIF Partners exited its balance 11 per cent stake in MakeMyTrip. There was one PE-backed Initial Public Offer in February, with an offer for sale by investors of BSE Ltd of $187 mn, in which GKFF Ventures exited its 2.25 per cent stake for $29.5 m. Collectively, in January and February, the investments totalled $1.5 billion and exits $1.4 bn.
Fund raising by PE firms saw a 11-month high of $850 mn, though 15 per cent less than the $999 mn raised in February 2016. ChrysCapital's fund raise of $600 mn was the largest in the month, while new fund raise plans announced were $913 mn.