PE/VC deal value down 11%; volume falls 19%

New Delhi, 05 June, 2016

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  • US$7.6 billion PE/VC investments in 1H2016 registered compared to US$8.5 billion in 1H2015
  • Exits decline 20% by value and 29% by volume year-on-year compared to 120 deals worth US$ 4.0 billion in 1H2015

The PE/ VC investments witnessed a decline during the first half (1H2016 – January-June) of the calendar year, owing to much lower investments in May and June 2016. This was driven essentially by a slowdown in e-commerce/early stage investments and a lack of big deals in these months. On a half year basis, investments declined 11% in value (US$ 7.6 billion vs US$ 8.5 billion in 1H2015) and 19% in volume (301 deals vs 372 deals in 1H2015). However, despite this decline the 1H2016 performance was comparatively better as compared to all corresponding periods over the last 5 years except 2015, which registered record investments.

Commenting on the PE landscape, Mayank Rastogi, Partner and Leader for PE, EY said, “While a slowdown in e-commerce investments was a key contributor to the decline in the activity in May and June 2016, most other sectors also saw lower deal activity in the first half. With the euphoria around e-commerce having settled, the aggregate investment values may remain lower than in 2015. The focus of early stage investors is now back on the conventional favorites, i.e., technology, fintech and healthcare. The PE activity over the past few months was characterized by an increase in buyouts, the restart of investments in infrastructure projects especially roads, PE backed IPOs and continued robustness in fund raising.”

Both, minority growth deals and buyouts increased in 1H2016, with buyouts registering a strong growth of 54%, reinforcing the robust market trend that built further since last year. Buyouts have been sequentially increasing with 11 buyouts in 1H2016 (including Blackstone’s purchase of 61% stake in Mphasis for US$825 million and TPG’s acquisition of 65% stake in Cancer Treatment Services International Inc’s for US$33 million as a few of the prominent ones).

From a monthly perspective, June 2016 recorded a sharp decline of 68% with investments worth US$569 million compared to US$1.7 billion in June 2015. It was the lowest monthly investment recorded in over 2 years. The number of deals also declined by 19% (63 deals vs 78 deals in June 2015). While investments in May 2016 totaled US$840 million across 43 deals, a decline vis-à-vis previous months, June 2016 saw a decline for the second consecutive month with deal values remaining below the US$1 billion mark. ADIA and GIC’s investment of US$230 million in Greenko Energy was the only deal above US$50 million for the month.

From a sector standpoint, except technology and infrastructure, all other sectors experienced a decline in investments in 1H2016. Infrastructure saw marginal increase in deal activity, with 8 deals worth US$498 million (no deals recorded in 2015), on account of the government’s focus on the road and power sectors. Investments in e-commerce also declined significantly both in terms of value and volume compared to last year. Deals in e-commerce declined to US$861 million across 39 deals in 1H2016 from US$1.4 billion across 95 deals in 1H2015. The decline was far more profound in the second quarter with investments worth only US$131 million across 15 deals.

Exits declined 20% in value terms in 1H2016 (US$3.2 billion compared to US$4.0 billion in 1H2015) and 29% by volume (85 deals compared to 120 deals in 1H2015), mainly due to a decline in open market divestments. However, this was in contrast with an increase in PE-backed IPOs. The IPO market was quite active with 8 PE backed IPOs in 1H2016 compared to only 4 during same period last year. The first quarter saw a mega exit of KKR from ATC Tires (US$1,179 million). The largest exit in 2Q2016 was Equitas Holdings’ IPO with PE investors selling their shareholding worth US$224m. Owing to the strong listing performance of PE invested companies over the last 12 months, a long list of IPOs is being lined up amongst PE invested companies. June 2016 recorded a minor decline in exits value and volume compared to same period last year (US$409 million across 12 exits in June 2016 vs US$487 million across 15 exits in June 2015).

The first half of 2016 witnessed US$3.2 billion fund raise, a 15% decline compared to 1H2015, but a 24% increase over 2H2015. On a monthly basis also fund raising activity witnessed a decline of 36% in June 2016 (US$312 million) compared to May 2016 (US$490 million) and 56% compared to June 2015 (US$705 million). On the other hand, new fundraise plans that were announced, increased by a remarkable 129% to US$7.6 billion in 1H2016 compared to same period last year.

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Notes to Editors

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