India: Startups dominate PE/VC deals space in 2016

Photo: Mint

Start-ups dominated deals in the private equity (PE) and venture capital (VC) space in 2016, making up some $2.5 billion in value and 70% in terms of transaction volume, according to the fifth edition of Grant Thornton in India’s The Fourth Wheel 2017 report.

Despite the focus in the start-up ecosystem by PE and VC investors, the investment value in start-ups dropped by over 50% this year to $2.46 billion from $4.97 billion in the previous year, signifying rationalization of investments and start-up valuations, the report said.

The report focuses on the PE/VC industry and has been produced in association with Indian Private Equity and Venture Capital Association (IVCA), an organization that works towards promotion of PE/VC firms. It was released by minister of state for civil aviation Jayant Sinha at the IVCA Conclave 2017 on Monday.

In the year, PE and VC investors invested $14 billion in 971 deals, compared with $16 billion invested in 1,045 deals in 2015. This was the first decline in PE activity in the last four years and was due to the lack of big-ticket investments of the kind made in the previous year.

“Although 2016 saw a decline in PE activity, we are hopeful for 2017. It could be the year of reckoning for the country where implementation of structural policies and reforms such as the GST (goods and services tax) and the recently announced measures in the Union Budget 2017, by way of massive push to the infrastructure sector, plans to integrate the transport architecture, renewed focus on affordable housing and a boost for ease of doing business will drive growth,” said Harish HV, partner, India leadership team, Grant Thornton India LLP.

“Also, expected improvements in the banking sector, pick up in the rural demand, post the effect of demonetisation, a robust primary market and improving capacity utilizations across industries are likely to drive domestic economic activity,” he added.

The top 10 deals of 2016 accounted for 37% of total PE deal values. Major deals of the year included Reliance Communications Ltd (RCom) selling a 51% stake in its mobile phone tower assets to Canada’s Brookfield Infrastructure Group for Rs11,000 crore; Brookfield Asset acquiring commercial and retail assets of Mumbai-based Hiranandani Group in Powai for $1 billion (Rs6,700 crore); and Blackstone India, the Indian arm of global private equity fund Blackstone Group L.P. , buying 60.5% stake in Bengaluru-based information technology services provider Mphasis Ltd.

The number of big ticket deals valued over $500 million each decreased from five in 2015 to three in 2016. While 2015 witnessed more than 40 big-ticket investments (deals valuing $100 million or more), 2016 saw only 28 such investments.

Also, 2016 attracted 150 investments valued at $10 million and above, a decline of 32% from the previous year. The median deal size of PE investments rose from $24 million in 2012 to $30 million in 2016, showing continued PE investors interest in India. One of the reasons for the increase in deal size is the higher number of majority stake or control transactions in 2016, the report added.

Apart from start-ups, telecom, banking and financial services, real estate, IT/ITeS and manufacturing were the other sectors that witnessed a large number of transactions during the period. These sectors along with start-ups contributed around 78% of the overall deal value in 2016.

Besides, initial public offerings or IPOs raised nearly $4 billion across 25 issues during the year and the ongoing year is expected to show robust growth in primary markets, with the Securities and Exchange Board of India (Sebi) approving 13 more IPOs, which are slated to hit the markets in 2017.

The report further said that fund raising activity in the PE and VC space witnessed a decline of 6% in 2016 with PEs and VCs raising closed to $24.1 billion in 2016 as compared to $25.7 billion in 2015.

Out of the total funds raised in 2016, approximately 20% were raised by India-focused funds. On a cumulative basis, PE and VC firms have raised close to $67 billion from 2014 to 2016.

Also read:

India 2016: PE/VC exit values see marginal decline

India PE/VC invesments fall 50% to $908m in November: EY report

This story was first published on Livemint

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.