PE investments nosedive 64% to $3.8 bn in 2009

PE investments nosedive 64% to $3.8 bn in 2009
The Financial Express, January 12, 2010, Page 7

fe Bureau, Mumbai

Private equity firms invested $1.39 billion (around Rs 6,255 crore) in 84 deals in India during the December quarter, taking the annual investment to $3.8 billion (around Rs 17,100 crore) in 232 deals in 2009. This is around 64% less than 2008, during which PE firms had invested $10.4 billion in 443 deals.

The amount invested during the Q4 2009 was higher than that during the same period in 2008 ($1.2 billion invested across 72 deals) as well as the immediate previous quarter ($807 million across 53 deals), a study by Venture Intelligence, a research service focused on PE and M&A transactions, said. These figures include venture capital investments, but do not include PE investments in real estate.

With 56 investments worth about $617 million, information technology and IT-enabled Services (IT & ITeS) topped in both value and volume during 2009. While banking, financial services and insurance (BFSI) came next on the volume front with 32 deals, energy was the second highest in value terms at almost $500 million. The largest investment reported during 2009 was KKR increasing its stake in telecom software firm Aricent to 79% for a reported $255 million. The Aricent investment was followed by the $180 million investment by existing investors IDFC PE and Oman Investments into independent tower infrastructure firm Quippo Telecom. The third largest deal was Goldman Sachs' $115 million investment in publicly-listed healthcare firm Max India for a 9.4% stake.

Venture capital deals accounted for 37% in volume terms in 2009. Late stage investments accounted for 28% of the PE deals in volume terms and 38% in value terms during 2009. "The volatility in the public markets and continued uncertainty around the ability to raise new funds caused investment activity to be muted in 2009," said Arun Natarajan, founder & CEO of Venture Intelligence. "With just six investments above $100 million in size in 2009 (compared to 22 such deals in 2008 and 27 in 2007), the year witnessed a clear decline in the appetite for large ticket investments," Natarajan noted.

With 11 investments during the year, IFC was the most active PE investor in India during the year. IFC was active across a range of industries - including BFSI and energy. Sequoia Capital India, with nine investments, was the second most active investor during 2009, followed by StanChart PE and Aavishkaar with 8 investments each.

Private equity firms obtained exit routes for their investments in 66 Indian companies during 2009, including seven through IPOs. (2008 had witnessed 36 liquidity events including 10 via IPOs.) PE-backed companies raised about $1.31 billion through IPOs during 2009. The $604 million raised by Adani Power via its July IPO was the largest by a PE-backed firm in 2009.

The total value of M&A transactions providing exits to PE-investors during 2009 was around $1.05 billion. These included 38 sales via public markets, 13 strategic sales, 4 secondary transactions (involving sale of shares by one PE firm to another) and 4 buybacks. Firms that exploited the continued rally in the public markets to execute multiple exits via public market sales during the year included ChrysCapital, Citi, IIML, Clearwater and Spinnaker.

The largest M&A deal providing an exit during 2009 was ChrysCapital's realising of over $176 million during the year via public market sales of the shares of truck finance firm Shriram Transport Finance.