The first quarter of the year has emerged as the best ever three-month period with private equity and venture capital (PE/VC) investments worth $11.4 billion, propelled by an all-time high funding of $7 billion in March.
The investments in the January-March quarter were 37 per cent higher compared with the same period a year ago, and almost a third of the value recorded in entire 2018. While buyouts and Private Investment in Public Equity (PIPE) deals remain strong, exits in March fell 34 per cent in terms of value on a year-on-year basis, according to a report by EY.
“The Indian PE/VC industry is off to a very strong start with $11.4 billion of PE/VC investments in Q1 eclipsing the previous Q1 high (2018) by 37 per cent on the back of strong investment flows recorded in March 2019 at $7 billion (61 per cent of all investments received in the first quarter of 2019),” Vivek Soni, Partner and National Leader, Private Equity Services at EY, said.
“The month (March) saw hectic deal activity, both in investments and exits in the infrastructure and real estate asset classes. With a large global buyout, sovereign and pension funds are becoming more active investors in the Indian PE/VC sector, there is increasing interest in yield generating assets (roads, pipelines, telecom infrastructure, and commercial real estate),” he said, adding, corporates and government bodies are looking to monetise passive assets as seen in the Brookfield-RIL pipeline deal.
Embassy Office Parks has become the first Real Estate Investment Trust (REIT) offering (backed by a PE fund) to be listed on Indian stock exchanges.
A notable exit event during the month was the successful IPO of India’s maiden REIT offering, backed by Embassy and Blackstone consortium. This is a ‘Lighthouse Event’ for the Indian real estate private equity sector, which over the past three-four years has seen a significant amount of PE investment in portfolios of rent generating commercial properties such as office, retail malls and industrial warehousing.
Investments
PE/VC investments in March were more than twice the value invested in March 2018 ($7 billion in March 2019 vs $3 billion in March 2018) on the back of large deals. The reporting month was the best month ever for PE/VC investments, 30 per cent higher compared with the previous high of $5.4 billion recorded in August 2017.
The number of deals in March rose by 44 per cent compared with the same period last year (89 deals in March 2019 vs 62 deals in March 2018).
There were 13 large deals (deals of value greater than $100 million) totalling $6 billion in March, compared to four large deals worth $3 billion in March 2018. Brookfield’s $1.9-billion buyout of Reliance Industries Ltd’s east-west pipeline was the largest deal during the month (which is also the largest deal ever in the infrastructure sector), the company said.
The largest PE/VC deals in March 2019 include Brookfield’s buyout of RIL’s east-west pipeline for $1.9 billion, Carlyle and CPPIB’s $817 million investment in SBI Life Insurance for 11 per cent stake, and GIC’s $726 million investment in Bharti Airtel.
In fact, the top five deals in March are also the largest five deals in 2019 till date, all of which were above $500 million in value.
From the point of view of type of investment, all segments recorded significant increase in value invested.
March 2019 recorded the highest-ever monthly value and number of buyout deals, aggregating $2.8 billion across seven deals ($2.2 billion across seven deals in March 2018, which was the previous high). This takes the total value of buyouts in 1Q2019 to $3.6 billion, which is 24 per cent higher compared to 1Q2018 ($2.9 billion) and the highest ever value of buyout deals in a quarter.
The reporting month was also the best month ever for PIPE investments, recording an all-time high of $1.9 billion ($3 million in March 2018), taking the total value of PIPE deals in 1Q2019 to $2.3 billion, which is the highest-ever quarterly value of PIPE investments, surpassing the previous high of $1.9 billion recorded in 1Q2018 by 19 per cent.
From a sector point of view, infrastructure was the top sector with $2.6 billion in investments in March 2019 on account of the large $1.9-billion Brookfield-RIL pipeline deal, followed by financial services, which recorded $1.9 billion in investments, taking the total investments in the sector in 1Q2019 to $2.9 billion, a significant rebound of almost three times from a seven-quarter low of $968 million recorded in 4Q2018.
Exits
The reporting month recorded 13 exits worth $465 million, 34 per cent lower compared with last year and the lowest monthly value of exits in 2019. The decline was mainly on account of fewer large deals (deals of value greater than $100 million). There was only one large exit worth $131 million in March 2019, compared with four large exits worth $626 million in March 2018.
After a strong 2018, PE/VC exits in 2019 have taken a breather. In 1Q2019, PE/VC exits declined by 30 per cent on a Y-o-Y basis and by 48 per cent compared to 4Q2018 to $1.3 billion, recording the lowest quarterly value of exits in over 11 quarters.
The largest exits in March 2019 saw Jacob Ballas Capital, JM Financial, Macquarie-SBI Infrastructure, Old Lane India, and Standard Chartered PE exit their 5 per cent stake in GMR Airports via a secondary sale to GIC and SSG Capital for $131 million.
Exits via strategic sale were the highest in March at $204 million, followed by exits via secondary sale at $189 million.
From a sector perspective, the infrastructure sector recorded the highest value of exits in March 2019 ($133 million across two deals). The month under review recorded a modest fund raise of $40 million, compared with $1.1 billion raised last year.