PE, VC investments record best first quarter since 2008 at USD 7.9 bn: EY

Private equity and venture capital investments in India reached USD 7.9 billion across 180 deals in January-March this year, the best first quarter since 2008, mainly driven by large transactions, says a report by EY.

PE, VC investment activity was off to one of the best starts ever in Q1 2018, recording investments across asset classes worth USD 7.9 billion, eclipsing the previous Q1 high of USD 4.6 billion seen in 2008 by 72 per cent, said the report by EY.

This was also the second best quarter ever since USD 8.7 billion in the third quarter of 2017.

Continuing the momentum from last year, the record performance was led by large deals in the infrastructure and real estate sectors. Also, financial services continued to be the top sector, receiving USD 2.9 billion in investments across 31 deals, the EY's private equity monthly deal tracker report added.

"This uptick in Q1 2018 investment levels was primarily aided by USD 3.1 billion worth of investments made in the infrastructure and real estate sectors, which accounted for 39 per cent of all investments in Q1 2018, compared to just USD 305 million invested in these asset classes in Q1 2017 and USD 1.7 billion in Q4 2017. This was also the highest ever quarterly investment by the PE/VC industry into infrastructure and real estate," EY said.

Further to the trend established last year, large value deals (over USD 100 million) continued to dominate the activity.

There were 13 deals of value greater than USD 100 million made in Q1 2018, aggregating to USD 5.7 billion and accounting for 72 per cent of total investments made in Q1 2018, six of which were into infrastructure and real estate, worth almost USD 2.7 billion. Q4 2017 and Q1 2017 had 17 and six deals greater than USD 100 million, respectively, it said.

The largest deal during the quarter saw GIC, KKR and others invest USD 1.7 billion into HDFC Limited, the largest PIPE (private investment in public equity) investment since Temasek invested about USD 2 billion in Bharti Airtel in 2007.

The report further said that Q1 2018 recorded USD 1.8 billion in exits, 10 per cent lower than Q1 2017 (worth USD 2 billion, 61 exits) and 51 per cent lower compared to Q4 2017 (USD 3.7 billion, 64 exits).

"Exits in Q1 2018 were marred by volatility in the global capital markets which were rattled by fears of a trade war between US and China. Q1 2018 recorded USD 1.8 billion in exits, 10 per cent lower than Q1 2017 and 51 per cent lower compared to Q4 2017," it said.

PE/VC investment activity is clearly on a high. Q1 2018 has been the strongest first quarter in recent years and we believe this year will be strong across all asset classes of PE, infrastructure and real estate.

"Exits in Q1 2018 have been muted compared to Q4 2017 largely on account of volatility in the capital markets. However, there are strong under currents of M&A at play. If they materialize and capital markets hold fort, PE/VC exits in 2018 should end on a good note, said Vivek Soni, Partner and Leader for Private Equity Advisory, EY.

From a monthly perspective, March recorded USD 3 billion in deal value, an increase of 14 per cent compared to USD 2.6 billion recorded in March 2017.

Fund raising activity in Q1 2018 remained strong, with funds worth USD 1.3 billion raised, on par with funds raised in Q1 2017. Moreover, fund raise plans announced stood at USD 10.3 billion, a sign of strong fund raising activity to follow as the year progresses, the report added.