Buoyed by an improvement in deal activity in listed securities, private equity and venture capital (PE/VC) investments recorded a 51 per cent year-on-year increase to $2.6 billion in February. This also represents a 41 per cent rise compared with the previous month, according to a report by EY.
“After a relatively subdued start to the year, February 2019 has been a good month, recording a strong performance in both investments and exits. As market volatility has reduced, both PE/VC investments and exits in listed companies have bounced back,” said Vivek Soni, Partner and National Leader-Private Equity Services at EY.
With large investments by Softbank and buyouts by funds such as Blackstone, True North and AION, the appetite of PE/VC funds for deals appears to be strong, notwithstanding prevailing uncertainties around global growth and the impending general elections in India. Underlying deal activity remains robust across large and mid-sized deals, although valuations appear to have corrected for many sectors compared with the pre-September 2018 levels.
“We think 2019 could well be one of the best for Indian PE/VC investments,” added Soni.
The growth was driven by a higher number of large deals ( value greater than $100 million), with the reporting month recording nine large deals of $1.8 billion, compared with four large deals of $655 million in February 2018. This is also higher than large deals worth $1 billion recorded in January 2019.
SoftBank and Carlyle’s $415-million investment in Delhivery was the largest deal in February 2019, and also the largest PE/VC deal in the logistics sector ever, the study said.
Based on the type of investments, growth investments at $1.2 billion were up by 27 per cent compared with February 2018. Private investment in public equity (PIPE) recorded a rebound in February 2019, emerging from a four-year low of $2.8 million recorded in January 2019. At $431 million, PIPE in February 2019 was the highest in the past eight months. The reporting month also recorded two buyouts worth $262 million, compared with four buyouts worth $273 million in February 2018. Start-up investments in February 2019, at $156 million across 32 deals, were 52 per cent lower compared with $325 million recorded across 31 deals in February 2018. Credit investments in February 2019, at $548 million, were the highest in the previous 12 months, on the back of the $350-million debt funding of ReNew Power by Overseas Private Investment Corporation (OPIC), the US government’s development finance institution.
From a sector point of view, financial services ($712 million across 13 deals in February 2019 vs $619 million across 13 deals in February 2018) topped the list, followed by logistics ($470 million across four deals in February 2019 vs one deal of $2 million in February 2018), which recorded its highest-ever monthly investment on the back of the large investment in Delhivery. E-commerce ($35 million across five deals in February 2019 vs $362 million across nine deals in February 2018), which is generally among the top sectors, recorded a sharp decline in deal value.
Open-market exits
Exits in February at $472 million were almost three times the value recorded in February 2018. This comes on the back of a rebound in open market exits in the wake of subsiding volatility in the stock markets. There were four open market exits in February 2019 worth $351 million, more than three times the value recorded in February 2018 and the highest in the past six months. There was one PE-backed IPO in February 2019 that saw Goldman Sachs and Kuwait Investment Authority-backed Chalet Hotels Ltd list on the bourses. The largest exit in February 2019 saw Bain Capital and GIC sell 5 per cent stake in Genpact for $324 million.
From a sector perspective, technology was on top, primarily on account of the Genpact deal.
Fundraising success
The reporting month also saw funds worth $285 million being raised and fund raise plans worth $779 million being announced. The $250-million raised by India Life Sciences for its third fund was the largest fundraise in February 2019.