E-commerce deals drop 90% in August, says Ernst & Young

Private Equity-backed IPOs to be the prominent theme in 2016

E-commerce deals has seen a decline of around 90 per cent in terms of value at $55 million in August, this year, compared to $554 million last year, thereby recording a decrease in overall investments in August, 2016, according to a report from advisory firm EY. The exits were almost 87 per cent higher during the month compared to the same period last year and this year, the PE-backed IPOs are expected to set a record.

The total investments of Private Equity (PE) and Venture Capital (VC) investors during the month of August, this year, has seen a decline of 37 per cent to $1.01 billion across 39 deals as against $1.6 billion investments in 80 deals during August, 2015.The drop was due to the decreased investments into e-commerce, it said.

Mayank Rastogi, Partner and Leader for PE, EY said, "2015 was a year of ecommerce and 2016 is turning out to be a year of Exits. We have had some very large exits and highly successful PE backed IPOs and for the first time, exits are more than 50 per cent of the investments so far during the year".

Separately, the investment activity may have slowed down compared to 2015 but still remains quite robust. With increased activity in distressed space, the investment activity should pick up in months to come, he added.

In terms of deal volume, the drop was around 51 per cent this August, compared to the same month last year. The investments, however, saw a growth of 13 per cent during the month in value terms, over July, 2016. The total investments crossed $1 billion after remaining below it for three months in a row, said an EY release.

Investments into start-up and early stage were marginally lower with 17 deals in August 2016 as compared to 19 deals recorded in July 2016. In value terms though, investments into start-up and early stage managed to remain highest for the year, mainly on account of $175 million invested in messaging app Hike by Softbank, Tiger Global and Tencent.

Almost 30 per cent of the total investments were into technology sector and the increase in large sized deals helped the investment figures to grow in August 2016 over July. Around 61 per cent of the deal value came from larger deals of $50 million and above, primarily into technology sector.

There were three deals of $100 million and above aggregating to $440 million in August 2016 as compared to just one deal of $149 million in July 2016 and five deals aggregating to $1.1 billion in August 2015. The notable investments included $175 million investment in Hike, $140 million in TCNS Clothing by TA Associates and $125 million logistics platform of ex-Future Supply Chain CEO, Stellar Value Chain Solutions funded by Warburg Pincus, it added.

The exits grew by 87 per cent during August, this year at a value of $486 million in 20 deals compared to $260 million in 20 deals during the same month last year. However, the exits were lower in terms of value by 58 per cent compared to the exits of $1153 million in July, 2016. In July, there were large exits by KKR from Gland Pharma ($543 million) and CX Partners and Capital Square Partners' from Minacs ($420 million).

There were three PE-backed IPOs in August 2016 - RBL Bank, Dilip Buildcon, and SP Apparels. The PE backed IPO tally for 2016 so far is 12, which is highest in the past five years and we have four more months to go with a few more lined up. PE backed exits has been one of the prominent themes in 2016, it added.