Private Equity and Venture Capital (PE/VC) investments in January declined, at $1.8 billion, a 49 per cent fall compared with January 2018. As against the previous month, the PE/VC investments fell 43 per cent, despite a 65 per cent rise in the number of deals on a year-on-year basis.
The decline was mainly on account of absence of large $1 billion-plus deals in January 2019, whereas both January 2018 and December 2018 saw one large deal each. This has effectively skewed the headline number by a wide margin, according to a study by EY.
“After a strong performance in 2018, headline numbers on PE/VC investment activity in January 2019 appear to indicate a comparatively subdued start. However, we believe this data is skewed on account of the absence of large deals in January. Underlying data indicates a robust start to PE/VC investment activity with significant increase in growth, buyout and start-up investments on a YoY basis,” Vivek Soni, Partner and National Leader - Private Equity Services at EY said.
Private investment in public equity (PIPE) and open market and IPO exits declined materially on account of weakness and volatility in the capital markets. The PE/VC investor community appears to have a strong deal pipeline in place and dry powder levels available for deployment in India are at record high, as is the confidence of Limited Partners (LPs) in the Indian market.
“In spite of the prevailing uncertainty and issues around general liquidity, we believe that 2019 should be a good year for Indian PE/VC investments. Momentum in exits, largely on the back of secondary deals and strategic M&A, is projected to continue to be strong,” he added.
Investments
January recorded four deals of $100-million plus totalling $1.1 billion, compared with five large deals worth $2.8 billion in January 2018 and six large deals worth $2.3 billion in December 2018. The largest deal in January 2019 was SoftBank’s $397 million investment in First Cry, an e-commerce platform for kids and baby products. The other large deals in January 2019 include Apax’s $230 million investment in Fractal Analytics, and AION’s buyout of BPO firm Interglobe Technologies for $230 million.
From the type-of-investments point of view, Growth investments, at $940 million, were more than twice the value recorded in January 2018. PIPE investments at $2.8 million recorded lowest monthly value since October 2014. In comparison, January 2018 had recorded $1.7 billion in PIPE investments, mainly comprising $1.7 billion investment in HDFC Limited by a group of investors including KKR, GIC and others.
Exits
At $360 million, exits in January 2019 significantly declined compared with $969 million recorded in January 2018, mainly on account of fewer large exits. The largest exit in January 2019 was that of TA Associates and Khazanah from Fractal Analytics via a secondary sale to Apax for $200 million.
In terms of number of exits, January 2019 recorded just 13 exits compared with 29 in January 2018. The lower exit deal activity was mainly on account of fewer open market exits (five in January 2019 against 15 in January 2018). Also, there were no PE-backed IPOs in January 2019 compared to two in January 2018, the study said.