PE investments touch $ 3.3 bn in March quarter

Private equity firms invested about $3.29 billion across 83 deals inIndia during the quarter ended March 2011. This is 54 per cent more than that invested during the same period last year, which witnessed $2.133 billion invested in 81 deals, and is over twice the investment seen in the previous quarter ($1.515 billion across 83 deals).

According to Venture Intelligence, a research service focused on private equity and M&As, the median size of investments during the first quarter of calendar 2011 grew to $14.5 million, from $11.5 million in the same period a year ago. (The numbers do not include PE investments in real estate.)

The largest PE investment during the frirst quarter was the Rs 4,500 crore (about $1 billion) commited by Bain Capital and Singapore’s GIC to Hero Investments, the Hero group holding firm which is to buyout Honda Motors’ 26 per cent stake in the listed two-wheeler maker Hero Honda.

This is followed by Apax Partners’ $375 million commitment to iGate to help buyout fellow listed IT services firm Patni Computers. Other top investments reported during the said quarter include three $200 million commitments — for the Hyderabad Airport operator GMR Airport Holdings, road projects firm Isolux Corsan India and non-banking finance firm Indostar Capital Finance.

“The amount invested by PE firms in Q1 2011 was the highest since Q1 2008. This combined with the rising number of exits, successful raising of new PE funds (like the $500-million second fund by Everstone) and the accelerated pace of investments in the manufacturing and infrastructure sectors, indicates strong revival in confidence for deploying long-term PE capital in the country,” said Arun Natarajan, MD & CEO, Venture Intelligence.

IT leads
The Venture Intelligence analysis revealed that the IT & ITeS industry received the biggest number of investments during the quarter (at 21 deals worth $577 million), followed by the manufacturing sector (13 deals worth $1,087 million) and BFSI (7 deals worth $423 million).

Led by big-ticket investments from infrastructure funds like the 3i India Infrastructure Fund and the SBI-Macquarie fund, energy, engineering & construction industries attracted the most dollars after manufacturingand BFSI sectors.

The share of VC type deals (in volume terms) rose to 43 per cent during the first quarter of 2011 compared to 33 per cent in the corresponding period a year ago. The share of late stage deals, at 29 per cent of the PE investments (58% in value terms), was steady as compared to the same period a year ago. The share of listed company investments (pipe deals) rose to 16 per cent (compared to 11% in Q1 of 2010).

Fewer exits
Private equity firms took exit routes for their investments in 14 Indian companies during the quarter under review, including one IPO (that of PTC Financial Services). The corresponding figure was 34 exits (including 7 IPOs) in the same period in 2010 and 38 exits (including 10 IPOs) in the immediate previous quarter.

Among the notable exits via M&A route was the acquisition of publicly listed Patni Computers by another IT services firm iGate, which fetched PE investor General Atlantic $254 million (for its 17.4% stake).

Also, UK-based Pearson’s decision to enhance its stake in education services firm TutorVista from 59 per cent to 76 per cent provided a healthy exit route for TutorVista’s VC investors, which included Sequoia Capital India, Lightspeed Ventures and SVB, who had invested about $30 million in the firm since mid-2006.

“While the correction in the public markets forced a slowdown in the overall pace of exits in first quarter of 2011, compared to the immediate previous quarter, the number of IPO filings by PE-backed companies in the first quarter suggests a potentially healthier figure in the months ahead provided the public markets are conducive,” Natarajan said.