PE investments in India register upswing trend for fifth quarter in a row: PwC

PE investments totaled US$ 3.01 billion against PE exits worth US$ 1.11 billion in July-September 2014

The private equity investments in India have recorded an uninterrupted five quarter upswing with a US$ 3.01 billion investment in Q3'14 (July to September 2014). This investment was done across 103 deals, registering a growth of 4% in value over the preceding quarter with a 3% drop in volume. In the previous quarter (April - July 2014), US$ 2.91 billion was invested in 106 deals. The findings are part of the PwC MoneyTree India report, a quarterly study of private equity investment activity based on data provided by Venture Intelligence.

Compared against the same period last year, i.e., Q3'13, the value of deals rose by 97% despite a 9% reduction in volume. In Q3'13, the value of investments were US$ 1.53 billion from 113 deals.

The IT & IT-enabled services (ITeS) sector has bounced back as the leading sector, attracting US$ 1.64 billion in 56 deals. It is more than a two-fold jump as compared to Q2'14 and two and a half times higher than Q3'13. In the previous quarter, the sector attracted US$ 746 million in 47 deals, while during the third quarter of last year, it saw US$ 618 million in 41 deals.

Sandeep Ladda, leader, Technology, PwC India said, "India's overall retail opportunity is substantial, and coupled with favoured demographics (young population, rising standards of living and upwardly mobile middle class) and growing internet user base, strong growth in eCommerce market is expected. Growth has been driven by advancements in technology - increasing adoption of devices like smartphones and tablets, and easy access to the internet has led to increase in online consumer base. The eCommerce businesses will continue to attract investor interest driven by strong growth prospects of the market."

Sanjeev Krishan, leader, Private Equity, PwC India said, "The overall market sentiment is positive with a strong and clear intent from the government on liberalisation and easing doing business in India. This is further aided by favourable macros with declining global commodity prices and declining domestic inflation. Combined with the enhanced interest in public markets, we also anticipate global strategic investors to look at India with heightened interest, in effect providing multiple routes for both capital raising and exits".

As per the report, the healthcare & life sciences sector emerged second in terms of investment value with investments totalling US$ 292 million in 11 deals, a 45% decline as compared to the previous quarter's US$ 526 million from 12 deals. In Q3'13, the investments in this sector were US$ 196 million from 16 deals.

The education sector performed remarkably well with highest investment in recent times, US$ 176 million in 4 deals, a multifold jump from previous quarters, followed by the manufacturing sector with US$ 147 million. The banking and financial sector dropped by 85% to US$ 147 million from US$ 958 million in Q2'14.

In Q3'14, PE investors preferred the growth route as this stage received investments worth US$ 1.8 billion in 34 deals. Late stage investments were valued at US$ 857 million in 15 deals during this quarter.

In Q3'14, PE investors preferred the growth route as this stage received investments worth US$ 1.8 billion in 34 deals. Late stage investments were valued at US$ 857 million in 15 deals during this quarter.

Bangalore outdid Mumbai and the National Capital Region (NCR) to emerge as the winner in terms of attracting PE investments, with US$ 1.8 billion in 29 deals, which is 60% of the total deal value for this quarter. NCR was the second best with US$ 409 million investment pushing Mumbai to third with US$ 383 million. Interestingly, Kutch in Gujarat saw a single investment worth US$ 50 million during Q3'14.

Private equity exits

The exit activity in the third quarter of 2014 has dropped by 18% with a total value of US$ 1.11 billion in 31 deals. In the previous quarter this was US$ 1.35 billion worth investment from 56 deals, while in Q3'13 the total exit value was just US$ 534 million in 25 deals.

With a single deal worth US$ 234 million, the telecom sector dominated the exit space in this quarter followed by the manufacturing sector (US$ 229 million in 2 deals).

In this quarter, almost 72% of the exits by value have been through public market sale (US$ 801 million from 20 deals). Exits through strategic sale reported the next highest share, with US$ 144 million from seven deals.

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