PE/VC deals at $4.2 bn in March quarter, e-com finds little traction

The e-commerce sector saw merely 11 deals worth $85 million

Private equity (PE) and venture capital (VC) investments largely chose to ignore India's E-commerce in the March, 2017 quarter even as the total tally during the period touched $4.2 billion, primarily driven by Canadian pension funds deals, says a report.

According to the report by EY, March 2017 reported deals worth $2.6 billion across 60 deals, recording a strong increase of 52 per cent in value and 31 per cent in volume over March, 2016.

For the preceding January-March quarter, PE/VC investments were valued at $4.2 billion across 134 deals.

The e-commerce sector, which has been struggling for some time now, saw merely 11 deals worth $85 million in the January-March period of 2017, while in the corresponding period last year there were 29 such transactions worth $764 million.

"The two trends that characterised the quarter were the deal activity of the Canadian pension funds and the decline in E-commerce investments," EY Partner and Leader for PE, Mayank Rastogi said.

E-commerce did not see any equity investment in March 2017 - there was only one $4 million debt raised by Bigbasket. "e-commerce sector is undergoing a lot of churn and most businesses are in the recalibration mode, leading to low deal activity," Rastogi added.

The Canadian Pension funds have been actively pursuing deals in India for the last few quarters which was manifest in the high deal numbers in the January-March quarter.

These include CPPIB's $720 million investment in Global Logic for a 48 per cent stake, $342 million investment in Kotak Mahindra Bank by CDPQ and CPPIB for a 1.5 per cent stake, and $302 million invested in Bharti Infratel for a 3.3 per cent stake (KKR was the other investor acquiring 7 per cent stake in the deal).

"Their investments have a few common themes including their investments in companies who 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 lastly, the deal sizes are largely greater than $100 to 150 million," Rastogi added. In March, from a sector perspective, telecom topped the chart, due to the large KKR-CPPIB investment in Bharti- Infratel, followed by financial services which clocked $693 million.

On a quarterly basis also telecom dominated with $952 million KKR-CPPIB investment in Bharti-Infratel, EY said.

Except for the technology sector, which recorded $907 million across 31 deals in January-March, investments across all other prominent sectors like financial services, real estate, and e-commerce declined, it added.