PE investments double to $386 mn in Jan

Private equity investments in India doubled in the first month of this year as deals worth over $386 million were announced amid improving signs of liquidity, a study says.

According to the monthly deal update report of VCEdge, a financial research provider, private equity deal value in India was at $386 million in January 2010, against $191 million in January 2009.

The deal volume, however, was virtually unchanged with 25 deals recorded past month, one less than what was registered in the same month last year.

Going forward, there will be reduced valuations and more deals. And there would be a flight for quality as competition to invest in high-quality portfolio companies rise, it said.

A sector wise analysis shows that infrastructure, real estate and telecom were the most targeted sectors for investment with deals worth $61 million, $59 million and $58 million, respectively. "Together, they accounted for more than 45 per cent of total private equity deal value during the month," the study stated.

Meanwhile, in terms of deal volume the most active sector was IT/ITServices with five deals in the month, followed by telecom with three deals. Other sectors contributing to the deal volume were real estate, hospitality and Infrastructure accounting for 2 deals each.

The largest private equity deal in January 2010 was the acquisition of 16 per cent stake in Hyderabad-based Coastal Projects by Barings Private Equity, Sequoia Capital, Fidelity and Deutsche Bank, the report said.

An analysis of average deal size in the last three years shows that that it is on a declining trend. On January 2008 it was at $31.31 million, while on January 2009 it slipped to $26.23 million and in January 2010 it further dipped to $16.08 million.

Quoting investors, the report said the private equity deal ticket size is likely to fall further.

The report added that with the improvement in market sentiments, "the environment for private equity exits also improved with a sharp uptick in exits across types."

The month of January 2010 saw 13 exits worth $282 million. In comparison there were only two exits in January 2009 and as many as 17 in January 2008.