Mumbai: Private equity and venture capital (PE/VC) investments in India in 2018 till the end of October has touched $25.2 billion, global audit and consulting firm EY’s Private Equity Deal Tracker report said. The figure is about one billion shy of 2017’s full-year investment. Exits, at $24 billion so far, meanwhile, have already crossed the total exit value of $13 billion for 2018. That is 1.9 times the amount of capital returned by PE/VC funds in 2017, EY said.
PE/VC investments and exits in India on par so far in 2018
This year’s exits closely match investments, a significant deviation from previous years, where exits were generally lower than investments by more than 50%, the report said. Large deals in both investments and exits have contributed to the strong performance, it said.
“While PE/VC deal activity in Q3 2018 was weak, the strong start to Q4 2018 is encouraging. Despite the underperformance in open market exits, PE/VC exit activity continues to remain robust with support from strategic and secondary deals,” Vivek Soni, partner and national leader private equity services at EY, said in the report.
Soni said 2018 is expected to be an inflection point for the Indian PE/VC industry, as exits approach the value of investments, moving towards mature market standards.
“Though this has largely been aided by the large Walmart-Flipkart deal, it nonetheless marks a significant shift in the evolution of the Indian PE/VC industry and is expected to boost LP confidence for the Indian PE/VC ecosystem,” he said.
PE/VC investments touched $3.1 billion in October, 50% more than the same period last year, the report said. This was on the back of six large deals of more than a $100 million each, accounting for 78% of investments during the month. The $1.3 billion investment in Bharti Airtel’s Africa business, led by Warburg Pincus, Temasek Holdings Ltd and SoftBank Group Corp., was the biggest deal of the month.
Other large deals include PE fund Xander’s $350 million buyout of Phoenix’s Hyderabad office project and Advent International’s $326 million buyout of Manjushree Technopack Ltd, a packaging solutions provider.
Exits worth $1.4 billion were recorded in October 2018, more than twice the value recorded in October 2017, mainly because of Blackstone exiting outsourcing services firm Intelenet Global Services for $1 billion.
Soni, however, said PE/VC investors are likely to be more cautious. “In the short term, we expect investors to be relatively more circumspect than in the beginning of the year. Increased uncertainty on account of volatility in crude oil prices, depreciating rupee, talk of trade wars, the liquidity-related issues attributed to the NBFC sector and other factors have driven up business risk premium.” he said.
Assembly elections in November and December 2018, the 2019 Lok Sabha elections, the bad loan situation at banks, and the issues around select NBFCs are prompting investors to take a cautiously optimistic approach, said Soni.