Indian PE/VC deals double to $3.5b in January led by financial services: EY report

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The private equity (PE) and venture capital (VC) sector witnessed transactions worth $3.5 billion in January, more than double the investments of $1.17 billion made in the year earlier, according to EY’s private equity monthly deal tracker.

Compared to December 2017, investments grew by 32% in value terms. Investment activity in January was buoyed by several large deals, EY said.

There were five deals of value greater than $100 million, aggregating $2.78 billion and accounting for 79% of total investments made in January, the report added.

There were five deals of value greater than $100 million, aggregating $2.78 billion and accounting for 79% of total investments made in January, according to the EY report. Graphic: Savesh Kumar Sharma/Mint

According to the report, the top deal in January was the $1.7 billion investment in Housing Development Finance Corp. Ltd (HDFC) by a group of institutional investors like Singapore sovereign wealth fund GIC, PE firm KKR & Co., Canada Pension Plan Investment Board (CPPIB), Ontario Municipal Employees Retirement System and Premji Invest, making it the largest private investment in public equity (PIPE) since Temasek invested about $2 billion in Bharti Airtel Ltd in 2007.

This was followed by Brookfield’s buyout of Equinox Business Park, a 1.25 million sq. ft commercial property, from Essar Group for $384 million.

“The trend of larger and more complex deals continues with five investments greater than $100 million being announced in the first month of 2018 itself, compared to 56 such deals across all of 2017,” said Vivek Soni, partner and leader for private equity advisory at EY.

PE activity picked up in January, with both investments and exits growing by more than a third compared to the previous month, Soni added.

Financial services sector saw the highest amount of investments—$1.95 billion across eight deals.

It was followed by real estate sector with deals worth $820 million, and healthcare accounting, which witnessed deals worth $474 million.

PIPE financing recorded the highest value of investments worth $2.1 billion, across four deals, on the back of the mega deal in HDFC, as compared to $128 million recorded across three deals in January 2017.

“In 2018, we expect to see the value of PIPE deals growing significantly, as large pension funds and sovereign wealth funds increase their India focus and as deal sizes continue to become larger,” said Soni.

There were three buyouts worth $486 million in January 2018, compared to just $81 million recorded across two deals in January 2017, the report said.

Private equity exits too saw an increase in January, with exits worth $970 million recorded in the month, an increase of 10% over January 2017 and 42% higher compared to the previous month.

“In terms of volume, there were 26 exits in January 2018 compared to 15 in January last year and 22 in December 2017. While exits via open markets were the highest in terms of number of deals (15), exits via sale to strategic buyers was highest in terms of value ($439 million),” the report said.

The largest exit in January saw Arrow Electronics, an American Fortune 500 company into electronic components and computer products, acquiring E-Infochips, a Gujarat-based company that is into chip design and embedded systems, from Gujarat Venture Finance for $281 million.

Another large exit during the month saw Sterlite Power Transmission purchase a 28.4% stake in Sterlite Power Grid Ventures, from Standard Chartered Private Equity for $158.5 million.

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