Q1 2012 Private Equity Investing In India Increases In Dollars But Declines In Number Of Deals, According To MoneyTree™ India Report

Exit Activity of PE Investors Rebounds, Jumping 177 Percent from Prior Quarter

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Jun 20, 2012, 09:00 ET

SAN JOSE, Calif., June 20, 2012 /PRNewswire/ -- Private Equity (PE) firms in India invested US$1.8 billion in 91 deals in the first quarter of 2012, according to the first-ever MoneyTree™ India Report from PricewaterhouseCoopers Pvt Ltd (PwC), based on data provided by Venture Intelligence. The report is a quarterly study of private equity and venture capital investment activity in India, including further analysis by industry, region and stage of development.

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While quarterly PE investments decreased 24 percent in the number of deals, the dollar value jumped 57 percent compared to the fourth quarter of 2011 when $1.1 billion was invested in 120 deals. The large increase in dollars invested in Q1 was due primarily to five deals above $100 million occurring during the quarter. However, Q1 2012 PE investing dropped 50 percent in dollars and 15 percent in number of deals compared to the first quarter of 2011.

"PE investors continue to be enthusiastic about prospects of India's future growth; however, the investment activity will likely remain volatile given an uncertain global environment," noted Raman Chitkara, global technology industry leader, PricewaterhouseCoopers LLP. "India's fast-growing market is a key opportunity for PE. As the pursuit of innovation and venture investing becomes more global, India will increasingly attract greater attention from PE investors."

Industry Analysis

The Healthcare & Life Sciences sector saw notable growth in PE investing during the first quarter, experiencing a seven-fold increase in dollars and a 27 percent increase in number of deals over the prior quarter, with $530 million going into 14 deals. Q1 investments within the Engineering & Construction sector in India rebounded strongly, with $203 million invested in eight deals, compared to $19 million in three deals during Q4 of 2011.

With the highest level of PE funding in terms of dollars during Q1 2012, the average deal size for the Healthcare & Life Sciences sector increased to $38 million in Q1. This is a significant jump for the sector compared to the average deal size of $7 million in the previous quarter and $10 million in Q1 of 2011.

The Information Technology and IT-enabled services (IT & ITeS) sector garnered the largest number of PE deals in the first quarter, with 35 deals totaling $263 million. This represents a 13 percent growth in dollars, but an eight percent decline in number of deals compared to the fourth quarter.

The Banking, Financial Services & Insurance (BFSI) sector experienced a dramatic 84 percent surge in terms of dollars, rising to $272 million, while the number of deals dropped to 11, a 27 percent decrease compared to the prior quarter. Of the total BFSI deals, 36 percent were made up of private investments in public equity (PIPE) deals.

The Textiles & Garments, Shipping & Logistics, Engineering & Construction and Fast-moving Consumer Goods sectors all experienced growth in dollars compared to the previous quarter. However, sectors including Manufacturing and Energy declined in both dollars and number of deals.

Stage of Development

While investments into PIPE deals in India showed a significant uptick in dollars during the first quarter, rising over 174 percent to $438 million, the number of PIPE deals declined by 11 percent. Conversely, Q1 saw a large number of Early- and Late-stage deals (30 and 29 deals respectively), with Late-stage deals growing by more than 135 percent in dollars to $699 million, compared to $296 million last quarter. However, there was a 64 percent decline in Late-stage investment dollar value from the same period a year ago.

Growth-stage investments came in second in terms of dollar value, with $501 million going into 15 deals in the first quarter. The total amount invested jumped 14 percent despite the number of Growth-stage deals falling to half of the previous quarter's total deals. The average deal size also doubled in Q1 over last quarter, to $33 million.

Investments by Region

Regionally, Mumbai received the highest level of funding in India during the first quarter, with $412 million, a 23 percent share of the total PE investments and an 81 percent rise in dollar value over the prior quarter. Bangalore garnered the second highest share of funding in India, at 21 percent, with $369 million going into 20 deals. Additionally, Chennai experienced a 407 percent jump in Q1 2012 compared to Q4 2011, propelled by two large deals in the BFSI space. National Capital Region (NCR), which includes Delhi, Gurgaon and Noida, was the only region in India to report a decrease in funding compared to the prior quarter.

Total PE Exits

Private equity exits in Q1 2012 accounted for $883 million from 27 deals, a major increase over the fourth quarter's exits, which totaled $318 million from 15 deals. Compared to the same period last year, there was significant growth, as well, (about 42 percent) in both dollar value and number of deals.

Almost 85 percent of the exits in terms of value and one-third in number of deals went through the public market sale during the first quarter, most of which were investments made long before the economic turmoil that began in 2008. Of the 27 deal exits in India, 10 of them went through secondary sale.

"Though deal volume was down in Q1, investors clearly used the relative buoyancy in the Indian capital markets to exit some of their investments," added Chitkara. "Continued acceleration in exit activity will contribute to a stronger environment for growth in venture and private equity investment."

MoneyTree™ India Report results are available online at www.pwc.com/globalmoneytree.

Note to Editors:
Information included in this release or related venture capital investment data should be cited in the following way: "PricewaterhouseCoopers MoneyTree™ India Report with data provided by Venture Intelligence." After the first reference, subsequent references may refer to PwC MoneyTree™ India Report. Charts and tables displaying the data are sourced to "PwC/Venture Intelligence Data." After the first reference, subsequent references may refer to PwC MoneyTree India Report.

About the MoneyTree™ India Report
The report is a quarterly study of private equity and venture capital investment activity in India including further analysis by industry, region and stage of development. It is based on data provided by Venture Intelligence. Qualifying investments include institutional investments, PIPEs, buyouts, and other special financing events. Qualifying exits include buybacks, strategic sales, secondary sales, public market sales, and initial public offerings.

The PwC Private Equity & Venture Capital Practice is part of the Global Technology Industry Group, www.pwc.com/technology. The group is comprised of industry professionals who deliver a broad spectrum of services to meet the needs of fast-growth technology start-ups and agile, global giants in key industry segments: networking & computers, software & Internet, semiconductors, life sciences and private equity & venture capital. PwC is a recognized leader in each industry segment with services for technology clients in all stages of growth.

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