Mumbai: Private equity (PE) exits in India grew by more than 60% in value terms to $15.7 billion in 2017, making it the best year for PE exits, according to Bain and Co.’s India Private Equity Report 2018.
In 2016, the Indian private equity industry reported total exits worth $9.6 billion. The number of exits rose 7% to 211 in 2017.
For a long time, Indian private equity was saddled with the constraint of low exits. That trend appears to have changed now as 2017 marked the third year of strong exit momentum.
In 2015, the industry witnessed exits worth $9.4 billion, according to the Bain report.
However, even as Bain expects many more exits in the next few months, a mismatch in valuation expectations between investors and firm owners could hinder deal-making.
“Bain expects many more exits in the next few months and funds that Bain spoke to feel the number of secondary and strategic sales will increase. According to India-focused fund managers, a mismatch in valuation expectations between investors and firm owners hinders deal making and maintaining high level of returns could hinder exits," said the report.
Public markets emerged as the preferred route for exits in 2017, with over 50% coming from there, (including initial public offerings).
Big-ticket deals such as Qatar Foundation Endowment’s exit from Bharti Airtel Ltd in an open market transaction for $1.48 billion; Tiger Global’s secondary sale of Flipkart for $800 million; and Apax Partners exiting GlobalLogic for $780 million powered the exit momentum in 2017.
The top 10 exits together accounted for 40% of total PE exit value in 2017.
Consumer technology, banking, financial services and insurance (BFSI) and telecom sectors led exit activity and accounted for 50% of the total exit value.
PE investments too touched a record high in 2017 with $26.4 billion invested by PE funds, an increase of 60% over 2016.
Top deals in 2017 included an investment of $2.5 billion in Flipkart by Japan’s SoftBank Group, followed by a $1.4 billion investment by SoftBank in One97 Communications Ltd, which runs Paytm; and a $1.1 billion investment in India’s largest cab-hailing service Ola (ANI Technologies Pvt. Ltd) by Tencent and SoftBank.
Consumer technology and BFSI segments were high-growth sectors and contributed to more than half of the total deal value for the year.
Investments from sovereign wealth funds and pension funds accounted for 20% of deal value. Sovereign wealth funds and pension funds such as Canada Pension Plan Investment Board, Singapore’s GIC, Abu Dhabi Investment Authority and Ontario Teachers’ Pension Plan, increased activity in India in 2017.
At $9 billion, Indian dry powder remained at levels similar to 2016, reaffirming the potential for investments in the Indian market.
According to the report, new asset classes and fund types such as alternative investment funds (AIFs) continue to emerge in India. AIFs raised about $5.1 billion in 2017 compared to $2.4 billion in 2016.