Mumbai: The private equity sector has seen robust growth in 2017 with average deal size doubling in the year although deal volume declined.

Overall deal volume fell by 22% to 570 deals in 2017 from 726 in the previous year, even as the average deal size surged to $42.8 million from $21.2 million.

India received a record $24.4 billion in private equity (PE) investments in 2017, 26% more than the previous highest $19.3 billion recorded in 2015, according to data compiled by Venture Intelligence, a researcher focused on private company financials, transactions and valuations.

The 2017 deal value marked a 59% increase over the $15.4 billion India received in the previous year.

“Investors’ confidence in India’s growth trajectory remained evident and could be owed to a number of macroeconomic triggers including the Insolvency and Bankruptcy Code (IBC), dismantling of the Foreign Investment Promotion Board (FIPB) and the introduction of the goods and services tax (GST)," said Sanjeev Krishan, partner, PE and deals, PwC India.

Among top sectors, information technology (IT) and IT-enabled services (ITeS) retained its dominant position, accounting for 46% of the investment value this year. Investments in IT and ITeS grew by 140% to $11.4 billion in 2017.

IT and ITeS was followed by deals in the financial services sector, which increased 56% to $4.4 billion in 2017. The value of healthcare deals increased 10% to $1.3 billion.

Top deals in 2017 included an investment of $2.5 billion in Flipkart by Japan’s SoftBank Group Corp., followed by another investment of $1.4 billion in Flipkart by Tencent Holdings Ltd, eBay Inc. and Microsoft Corp.

The other top deals in 2017 included a $1.4 billion investment by SoftBank in One97 Communications Ltd, which runs Paytm; a $1.1 billion investment in India’s largest cab-hailing service Ola (ANI Technologies Pvt. Ltd) by Tencent and SoftBank; and Bain Capital’s $1.1 billion investment in Axis Bank Ltd.

The top five deals together accounted for $7.5 billion, or 31% of total PE investments in 2017.

“This year has witnessed a number of big-ticket deals with Japanese and Chinese investors at the front line of the activity; this is expected to continue in 2018," Krishan added.

Private investment in public equity (PIPE) deals and pre-IPO (initial public offering) transactions witnessed a spurt in activity in 2017.

PIPE deals, which accounted for 12% of the overall investment activity, was dominated by the financial services sector.

Top PIPE deals included Bain Capital’s $1.1 billion investment in Axis Bank Ltd, a $338 million investment in Kotak Mahindra Bank Ltd by Caisse de Depot Quebec (CDPQ) and Canadian Pension Plan Investment Board’s (CPPIB), and a $260-million investment in RBL Bank Ltd by CDC Group and Renuka Ramnath-led Multiples Alternate Asset Management Pvt. Ltd.

“The current capital and asset quality challenges for public sector banks, has further accentuated the opportunity for private sector lenders. The better capitalized and agile private sector banks/NBFCs have continued to register high growth rates and deliver superior return of equity," said Ausang Shukla, managing director of Mumbai-based Ambit Corporate Finance.

Fund-raising activity by PE funds slowed this year, the data showed.

A total of $4.3 billion was raised in 2017, a decline of 21% from the $5.4 billion raised in the previous year.

The top five funds collectively accounted for $2.6 billion, or 60% of total fund raised in the calendar 2017.

Among the fund-raisers were Kedaara Capital Advisors Ltd, which raised $750 million for its second fund Kedaara Capital Fund II, and ChrysCapital Management Co., which collected $600 million for its seventh offshore fund ChrysCapital VII.

Morgan Stanley raised $500 million in 2017, while SAIF Partners and Edelweiss Alternative Asset Advisors raised $350 million each.

In terms of stage of funding, late-stage investments led the funding rounds with 46% share in overall investment. Late-stage funding more than doubled to $10.9 billion in 2017 from $4.8 billion in the previous year.

“The Indian PE landscape has developed drastically over the last 10 years, apparent from the increasing number of big-ticket transactions and growing overall investment value," said Krishan.

PE exits increased 57% from the previous year to $13.5 billion in 2017. Top PE exits accounted for nearly 20% of the total exits in 2017. They include the sale of Aricent Inc. by a group of investors led by KKR and Co. to Altran Technologies SA for $2 billion.

Other top PE exits include Tiger Global Management selling part of its stake in Flipkart for $800 million to SoftBank; Apax Partners selling half of its stake for $720 million in GlobalLogic to CPPIB; and Tiger Global selling part of its stake in Ola for $500 million to SoftBank.

Close