According to a recent report by Bain & Company, Indian Private Equity Deal activity fell from USD 14.8 billion in 2011 to USD 10.2 billion in 2012, even though number of deals increased marginally from 531 in 2011 to 551 in 2012.
On a global level, “India Private Equity Report 2013” finds that in 2012, North American market was the strongest performing market, while Asian PE deal activity saw an overall fall of 21 percent to USD 48 billion over 2011.
Though PE deal activity in India was expected to grow in 2012 compared to previous year, there were many factors that pulled down total PE activity. The report identified following 5 reasons for the drop:
- State of Political Landscape did not improve in 2012.
- Inflation remained consistently high throughout 2012 with average inflation hovering around 7.5 percent
- Dismal growth rate of Industrial production which fell to negative 1.8 percent in 2nd quarter of 2012.
- Rupee remained very weak, which hit an historic low of Rs. 57 against the dollar
- Policies and Regulatory uncertainty
Key Highlights of Indian Private Equity Activity in 2012
1.) Early stage investments played a critical role in the growth of numbers of PE deals in 2012. The number of deals nearly doubled in 2012 to 244 as compared to 125 deals in 2011.
2.) As a sector healthcare grew more than 3 times in terms of its value compared to previous year. In 2012 USD 1.3 bln worth of deals were done in healthcare sector as compared to USD 0.46 bln in 2011
3.) PE Investor exits grew marginally in 2012, but there are many investments which have had a time frame of over 5 years. Investors continue to prefer IPOs as a way to exit from their portfolio companies.
4.) Investors are reducing their Fund allocation to India – Less than half (USD 3 Billion) was mandated for investments towards Indian in 2012 as compared to USD 7 billion in 2011.
5.) Average Private Equity deal size has also dropped drastically from USD 28 million in 2011 to USD 18 million in 2012.
6.) Average Deal size of Top 25 deals also dropped from 5.9 billion in 2011 to 4.3 billion in 2012.
7.) IT and ITES sector garnered maximum number of deals and saw a steep growth over 2011. The sector attracted nearly 50 percent (225 deals) of all the PE deals in 2012. In 2011, the same number was at 135.
Overall, the scenario in 2012 was not great in India as far as the PE deal activity goes, however, the Bain report goes to suggest that 2013 will pan out much better.
Read the entire in-depth report