MUMBAI: Private equity (PE) and venture capital (VC) exit deals more than doubled in 2018 from last year to a record high of nearly $33 billion, propelled by the Walmart-Flipkart deal, according to consulting firm Bain & Co.

A total of 265 exit deals were recorded last year though the top ten exits made up as much as 70% of total exit value, Bain & Co. said in its India Private Equity Report 2019. There were 211 exit deals in 2017 totalling $15.7 billion.

(Paras Jain/Mint)

Topping the 2018 list was the mega sale of Flipkart to US retail titan Walmart, which contributed almost half of the exit value last year. It was one of the best years for exits in the last decade even after excluding the Flipkart deal.

The other major deals included Blackstone’s exit from Intelenet Global Services, Apax Partners’ exit from GlobalLogic, sale of Star Health and Allied Insurance and TPG’s exit from Vishal Retail.

Exits increased in most sectors last year with consumer tech, information technology (IT) and IT-enabled services, and banking, financial services and insurance (BFSI) being the primary contributors to exit values, according to Bain & Co.

Sectors such as consumer technology, IT/enterprise tech and BFSI delivered the highest return on investments for PE funds in the last five years, the report said. The consumer technology sector delivered an average return of 5.7 times the capital invested, while the numbers for the IT/enterprise and BFSI sector were 4.6 times and 3.7 times respectively.

Public markets remained the most preferred mode for exits, though there was a surge in strategic exits, primarily driven by consumer tech, the report said.

“Given how India’s economy is poised for growth in the coming year, and with capital markets on an upswing, many more exits are expected during the next few months," said Bain & Co. referring to expectations for 2019.

However, rising valuations and interest rates continue to cause concern for most of the investors.

On the investment front, PE investors deployed $26.3 billion across 793 deals in 2018. The deal volume was higher than in 2017, but the average deal size was flat. The result was a small decline in total investment value, which still was the second-highest in the last decade.

Consumer tech and BFSI remained the largest sectors for investment by value, contributing about 40% of the total deal value in the year.

“Funds expect further investment activity in BFSI and consumer/retail, though the valuations are still perceived to be high. Healthcare is another sector of rising interest, with funds looking at players across the spectrum. Interest in technology and IT will be largely driven by rapidly growing enterprise tech (SaaS) companies that operate out of India and sell globally," the report said.

According to Bain & Co., India-focused dry powder (capital available with PE funds) remains healthy at $11.1 billion, indicating that high-quality deals are not lacking capital.

New asset classes like alternative investment funds (AIFs) and distressed-asset management have further grown in the Indian market, aided by government regulations and tax breaks.

Fundraising will continue to be a key priority for most investors in India, though most expect it to become more challenging in the next 12 months, the report said.

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