PE deals value plunge to $3.6 bn in H1 2012: E&Y

The value of private equity deals in India slumped to $3.6 billion in the first six months of 2012 amid a "number of ups and downs" on regulatory and taxation issues related to investments, global consultancy Ernst & Young (E&Y) has said.

The PE deal value plunged nearly 39% compared to $5.9 billion recorded in the first half of 2011, E&Y said.

However, the number of deals remained same at 217 during the first halves of 2012 and 2011.

"The first half of 2012 saw a number of ups and downs as regards regulatory and tax issues governing investments in India especially by private equity funds," E&Y said in a report.

However, it noted that "as we emerge from the half year, there is more clarity and positivity around the regulatory environment".

"Implementation of GAAR provisions, which though have been delayed to 2013 but as per the recent draft guidelines may have a material bearing on the way PE industry is currently organised and operating model," E&Y noted.

The government has proposed General Anti-Avoidance Rules (GAAR) as part of efforts to tackle the menace of tax evasion.

Meanwhile, E&Y said that absence of block buster transactions led to reduction in overall PE investments value.

"... The first half of 2011 saw 16 deals of more than $100 million vs nine such deals in the first half of 2012," E&Y said.

In the first six months of 2011, one of the largest PE deals was the $850 million investment by Bain and GIC in Hero Motors.

As per the data, the highest PE investment in 2012 first half was seen in infrastructure sector at $533 million, followed by retail and consumer products ($529 million).

"In terms of deal volume, technology sector witnessed the highest number of deals (40) closely followed by retail and consumer products sector (37).

"Retail & Consumer products sector had recorded the maximum number of deals during both the periods - H1 2011 (31) and H2 2011 (36)," E&Y said.

On the other hand, India-focused funds raised $2.3 billion in the first half of 2012.

Private equity players exited from as many as 53 investments in the first six months of this year as against 42 in the year-ago period.

"The exits during H1 2012 were primarily led by open market sale (26) followed by secondary sale to another PE fund (11)... In the last few months, weak Indian rupee has also added another challenge to the already beleaguered Indian PE industry as regards exits are concerned," the report noted.

Indian rupee has dropped about 25% between July 2011 and June 2012.