M&As, VC flows dry up in first half of 2008

India Inc has attracted $7.54 billion private equity funding in the first half of 2008, an 11% jump compared to what it got in the corresponding period of the previous year.

The data in the monthly report of global auditing major Grant Thornton also reveal that there has been a 56 per cent decline in the value of total mergers and acquisitions (M&As) to $18.54 billion in the same period.

"Companies are resorting to private equity funding as raising money through the equity market has become difficult and debt has become expensive," said Dhanraj Bhagat, partner, Grant Thornton.

There were 194 PE deals in the first half of 2008 against 195 in the corresponding period of 2007, making it clear that deal size this time has increased. 
 

DEAL TRACKER Transactions in the first 6 months
	2007	2008
PE DEALS
Number	195	194
Value ($bn)	6.77	7.54
VC DEALS
Number	55	51
Value ($mn)	363	340
M&A
Number	335	265
Value ($ bn)	43.97	18.54

Dhanraj attributed the decline in the value of M&A deals to the two high-value deals struck by Tata Steel and A V Birla Group company Hindalco in the previous year.

In a separate release of data, the Chennai-based Venture Intelligence, which conducted a study in partnership with the US-India Venture Capital Association, said that the value of venture capital (VC) deals in the country in the first six months of 2008 has declined by over 6 per cent to $340 million across 51 deals.

While IT companies continue to account for a majority of investments, the proportion of non-IT investments "� both by activity and value "� increased 40 per cent. "VC investments are increasingly focusing on alternative energy, media, retail and other consumer demand-led sectors," said Arun Natarajan, Founder & CEO of Venture Intelligence.

VC investment activity as well as amounts invested during the first half of 2008 has not been affected much by the turmoil in the global financial markets, Natarajan added.