Startups key focus for PE/VC investors; deals value slump

Startups continue to attract highest investment from private equity (PE) and venture capitalists (VC) in 2016, but the deals value declined by more than 50 per cent this year, says a report.
According to the Grant Thornton in India's The Fourth Wheel 2017 report, produced in association with Indian Private Equity and Venture Capital Association (IVCA), startups received the maximum investment of USD 2.5 billion and constitutes 70 per cent of the transaction volumes in 2016.
While startups remain the key focus for PE/VC investors, the report says the investment values in startups declined by more than 50 per cent this year, signifying rationalisation of investments and startup valuations.

However, the government's push on digitisation and initiatives under the Startup India plan are likely to lead a rebound in this segment, according to the report, launched at the IVCA Conclave held here today.
Apart from startups, other sectors that witnessed the maximum transactions were telecom, banking and financial services, real estate, IT/ITeS and manufacturing.
These sectors along with startups contributed around 78 per cent of the overall deal value in 2016.

The report further said values and volumes of PE & VC investments were lower in 2016 due to the lack of big-ticket investments that were made in the previous year.

PE and VC investors invested USD 14 billion in 971 deals in 2016 compared to USD 16 billion in 1045 deals in 2015, registering the first decline in the PE activity in the last four years.
"Although 2016 saw a decline in the PE activity, we are hopeful for 2017," Harish HV, Partner - India Leadership team, Grant Thornton India LLP said, adding it could be the year of reckoning for the country where implementation of structural policies and reforms such as the GST and the recently announced measures in the Union Budget 2017 will drive growth.
Moreover, expected improvements in the banking sector, pick up in the rural demand, post demonetisation, a robust primary market and improving capacity utilisations across industries are likely to drive domestic economic activity.

"Amidst global uncertainties arising due to Brexit, protectionist policies proposed by the US and a slowing Chinese economy, India continues to be the bright spot. India is likely to drive resilient growth in deal activity in 2017," he said.