Value of private equity investments in India rose by 182% in July-Sept quarter

The total value of private equity investments in India witnessed a robust 182% increase in the Jul-Sept quarter on account of USD 2 billion investments, standing at USD 9.36 billion, a Grant Thornton report said.

In the same quarter last year, the country had recorded investments of USD 2.56 billion across 243 deals. This year, however, the number of investments declined to 154 deals.

As per the report, the overall mergers and acquisitions (M&A) and PE activity together declined by 32 percent to USD 9.36 billion worth of transactions from USD 13.78 billion reported for the corresponding period last year.

"While the recently concluded quarter has concluded on a tepid note, mainly because of the effects of GST, the last quarter of 2017 is expected to end on a high note and 2018 is expected to emerge even stronger demonstrating significant growth in transaction activity," Prashant Mehra, Partner at Grant Thornton India, said in the report.

The third quarter was dominated by investments in the start-up sector which, in fact, dropped to the lowest in this quarter since 2015, contributing to 57% of total investment volumes.

“Increasing investor caution towards new start-up investments is evident with angel and seed-stage investments activity recording the lowest levels in the last 10 quarters,” the report said.

E-commerce and real estate sector witnessed USD 1 billion investments in Q3, while the banking sector attracted five investments valued over USD 100 million.

One of the biggest deals that fuelled growth in deal value in the July-Sept quarter was Softbank Vision Fund’s USD 2.5 billion investment in Flipkart in exchange of a 20 percent stake in the company. In the real estate sector, one of the biggest FDI deals was pulled off by DLF Cyber City Developers, who secured USD 1.4 billion from GIC for a 33 percent stake.

In the year-to-date period till September, the number of deals sealed by Indian firms via M&A and PE investments saw a 34 percent rise at $47.8 billion, recording a six-year high. The number of transactions, however, declined in the 9-month period to 882, from 1,142 recorded in YTD 2016.

“Despite speculation that deal activity may slow down with fund managers taking a cautious approach towards fresh funding, value of private equity investments jumped by 74 percent this year compared with the corresponding period in 2016,” Mehra said.

The significant jump, he said, came on the back of over 30 big-ticket investments that were valued at over USD 100 million, compared with only 20 such deals executed in the same period last year, he added.

“Increasing efforts by the government to ease GST transitioning and other ease of doing business in India initiatives like The Code on Wages Bill 2017, is expected to boost investment sentiment, enabling companies to tap markets for fundraising. The last quarter of 2017 is expected to end on a high note and 2018 is expected to emerge even stronger demonstrating significant growth in transaction activity,” Mehra said in the report.