Summer 2011: It's raining deals

PE investments touch $4.4 bn in 2011, with a quarter of inflows coming in May.

For capital-starved companies, it’s been a summer of ‘mellow fruitfulness’. Private equity (PE) investors have invested close to $4.4 billion in the first five months of the year, of which $1.1 billion has been invested in May alone. Clearly, the deals are flowing thick and fast again.

Thirty-six deals have been closed in May, a record of sorts.

In the first five months of the year, PE players have closed 150 deals, compared to 100 deals during the same period in 2010 and 75 in 2009.
 

PE DEALS IN MAY 2011
Company	Amount invested	Listed/ Unlisted	Investor
GMR Airports  Holding	$200 mn	Unlisted	Standard Chartered  PE, Jacob Ballas,  Old Lane Capital
Joint venture  with Isolux India	$200 mn	Unlisted	Morgan Stanley  Infrastructure Partners
Diligent Power	$150 mn	Unlisted	Warburg Pincus
Oriental Tollways	$106 mn	Unlisted	Baring PE
Magma Fincorp	$98 mn	Listed	KKR, IFC
Devyani  International	$56 mn	Unlisted	ICICI Venture

Not only is there traction in deal flow, but also the average deal size has increased to $38 million in May this year, compared to $36 million last year. After the financial crisis in the second half of 2008, PE investments had lost momentum after the watershed year of 2007, when $15 billion was invested by PE players in India.

However, there is a slight difference between PE activity now and in the boom year of 2007. This year, venture capital activity is back, as is seen in the deal closures of May too. After the world into a tailspin in 2008, PE players started concentrating on PIPE (private money in public entities) deals, but “the last 12 months has seen a reversal of the trend as most deals are in the unlisted space now,” explains Srividya CG, partner (advisory services), Grant Thornton. In May this year, 81 per cent of PE deals were in the unlisted companies.

PE deal flows are likely to be around $10-12 billion this year. Interestingly, PE players are now moving away from traditional plays to sectors such as infrastructure, power & power ancillary. In May 2011, infrastructure, power & power ancillary and IT/ITES witnessed the highest activities in terms of deal values, accounting for 48 per cent, 15 per cent and 10 per cent, respectively, of total investments. Explains Srividya, “PE players are now looking at companies which can cater to the domestic market, where there is a gap in capabilities.”

This year has been good for exits too. Blackstone exited Intelenet at $418 million and SAIF Partners exited Havells India.

In May 2011, Avendus PE closed its second fund at and SREI Infrastructure Finance plans to raise $500-1000 million infrastructure fund.