PE deals dip 68% in 2009: Grant Thornton

Private equity transactions in India fell by a significant 68 per cent in 2009 as investors resorted to a wait and watch approach amid the slowdown.

According to a report by global consultancy firm Grant Thornton, there were 206 deals in 2009 with a total announced value of $3.44 billion (Rs 15,953 crore), a fall of 68 per cent from the year ago period (2008) when as many as 312 deals worth $10.59 billion were announced.

There was, however, an upsurge in fund raising activity through institutional placement.

"In the absence of active private equity participation, several large companies turned to qualified institutional placement (QIPs) to fund their renewed acquisition appetite. QIPs raised a whopping $8.6 billion in 2009 via 54 deals.

Elaborating on the reasons behind dwindling PE investments, the report said the global slowdown, corporate scandals and high valuation expectations by promoter companies were the major dampeners.

The largest PE deal in 2009, was Fire Capital's investment in Fire Arcor Infrastructure for a 75 per cent stake valued at $250 million, followed by 3i's investment in Krishnapatnam Port and Oman Sovereign Fund's investment in Mohtisham Estates, Grant Thornton said.

A sector wise analysis shows that the highest proportion of PE investment was made in sectors such as real estate, infrastructure and power.

The real estate and infrastructure management sector attracted 25 deals amounting to $881.85 million while in the power and energy segment there were 13 deals worth $412.85 million, Grant Thornton added.

Other sectors significantly contributing towards value of PE investment were banking and financial services (11 per cent), logistics (6 per cent) and IT & ITeS (6 per cent), the report added.

Meanwhile, smaller niche sectors such as education, microfinance and media were able to raise small yet meaningful funds from interested VC (venture capital) and PE partners.

The education sector raised close to $100 million across vocational and tutoring institutes and education IT portals, the mainstay of the sector over the past 3-4 years.

Media on the other hand saw a significant traction with 10 deals raising $210 million, the report added.