PE, venture capital investments slump to $7.6 bn in 2012: E&Y

Investments by private equity and venture capital players in the country slumped 21 per cent to $7.6 billion last year and are expected to be at similar levels in 2013 as well, according to global consultancy Ernst & Young.

Last year, PE/VC investments touched $7.6 billion spread across 415 deals, much lower than levels seen in 2011.

Investments totalled $9.6 billion in 2011, while the number of deals had touched 446, said the E&Y report - 'Second Innings - An industry in transition'.

"A key reason driving the slowdown in big deals was a significant fall in infrastructure sector investments $2.3 billion invested in 2011, compared with $774 million in 2012)," the report said.

There were only two deals of $100 million or more in the infrastructure sector last year compared to 2011.

"The sector has weakened due to a multitude of issues, including policy breakdown and consequent lack of government approvals, low funding and corruption allegations," it said.

Stating that there was an overall moderation in PE investment activitiy in the country despite a buoyant VC market, E&Y said that fund raising challenges continued, particularly for first-time managers.

"Exits remained in focus, with alternative exit routes being explored as IPO markets continued to be shut," it added.

The report said that PE/VC activity in 2013 to be at similar levels as in 2012.

Citing changes and key trends observed in 2012, Mayank Rastogi, Partner (Private Equity) at Ernst & Young said, "We may have witnessed the beginning of the consolidation phase in the industry -- the outcome of which should bode well for the industry and all its stakeholders in the long run".

He said the Indian PE industry is clearly in transition.

According to the report, healthcare, technology, travel and agriculture sectors saw significant jump in the investment values last year, though some driven by a few large deals.

Healthcare sector accounted for three out of top 20 deals in 2012.

"Sectors related to direct consumption such as consumer products, health care and financial services will continue to be the key focus sectors in 2013," the report noted.

Further, E&Y said that infrastructure can be a major swing factor in the overall activity especially if the government takes steps, both policy and administrative to boost investment activity in the sector.