 "Private equity exits down 40%")
The majority of exits in this quarter came from IT and ITeS and the BFSI sectors, contributing approximately 59 per cent of the exit value and 38 per cent of the volume. The BFSI sector tops the list for PE exits with five deals worth $393 million. In terms of exit value, the IT and ITeS sector stands second, aggregating $213 million from four deals during this quarter. The healthcare and life sciences sector witnessed an almost four-fold growth in exit value this quarter, from $50 million (two deals) in Q4 '12 to $196 million (three deals) in Q1 '13.
The preferred modes of exits this quarter have been through public market sale (nine exits) and strategic sale (seven exits), constituting 67 per cent of the total exit volume. The other modes of exits were secondary sale (five exits), buyback (two exits) and through IPO (one exit). In Q1 '13, the public market sale fetched the highest exit value of $815 million, which is about 79 per cent of the total exit value. The first quarter of 2013 also saw PE firms make investments worth $929 million across 66 deals. According to the findings of the PwC MoneyTree India report, a quarterly study of private equity investment activity based on data provided by Venture Intelligence, the quarterly PE investments dropped by 18 per cent and 33 per cent in terms of value and volume respectively in comparison to Q4'12. When compared to Q1 '12, there has been a significant decline of 56 per cent in terms of value and 44 per cent in the volume of deals.
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The information technology (IT) and IT-enabled services (ITeS) sector emerged the leader in the volume of deals accounting for $105 million in Q1 '13 from 26 deals. However, the sector witnessed a decrease of 40 per cent in value and 28 per cent in volume over the preceding quarter.
Sanjay Dhawan, Leader, Technology, PwC said, "Traditionally, the IT and ITeS sectors have seen the highest value and volume of investments. However, we have seen a marked drop in investments this quarter, which can be attributed to the uncertain macroeconomic and political environment. Most players in the online services segment, which typically attracts most investments in this sector, continues to struggle to turn cash positive. As a result, investors are critically evaluating the existing business revenue models and are not willing to invest in 'me-too' ventures."
The 'banking, financial services and insurance' (BFSI) sector led the quarter in value of deals with investments worth $248 million from eight deals, registering a three-fold growth in value as compared to Q4 '12.
According to Sanjeev Krishan, Leader, Private Equity, PwC, "The declining deal volumes indicate that the confidence of investors is yet to return following the regulatory and tax concerns caused by the government."
There were some large deals in the pipeline during Q1'13, which took time to consummate, adversely impacting the deal values for Q1'13. The outlook for the rest of the year looks better than the Q1'13 numbers for sure."
The energy sector witnessed the second highest investment in terms of value with investments worth $159 million from two deals in Q1 '13 as compared to $47 million from three deals in the previous quarter (Q4 '12) and $129 million from 8 deals in Q1 '12.
The shipping and logistics and the fast moving consumer goods (FMCG) sectors have shown a spurt in the value of investments. Shipping and logistics recorded $93 million from three deals this quarter, which is almost double the value of investment in the preceding quarter. In comparison to the first quarter last year, the sector saw a drop of over 40 per cent in terms of value of investments despite an additional deal this quarter.
The FMCG sector saw a four-fold growth in investments this quarter. It increased from $10 million in Q4 '12 to $43 million from a single deal in each of the quarters. But in Q1 '12, the sector witnessed investments worth $137 million from a single deal, which is three times more than the investments made in Q1 '13.
The other key sectors other than IT and ITeS such as food and beverages, manufacturing, textiles and garments, education, healthcare and life sciences have reported considerable decline in the value of investments in this quarter as compared to Q4'12.
In Q1 '13, private equity investments in late-stage deals recorded the highest value of $271 million from 16 deals. However, in comparison to the previous quarter, it witnessed a drop of 47 per cent in value and 27 per cent in volume of deals. The drop is even sharper in comparison to Q1'12 with a decline of over 60 per cent in the value of deals and 51 per cent in number of deals.
The growth stage stands second in terms of investment value with investments worth $195 million from 16 deals. Private investment in public equity (PIPE) deals with an investment worth $144 million has shown a drop of over 30 per cent in value and 54 per cent in volume in this quarter. This quarter witnessed one deal in the pre-IPO stage worth $30 million while there was not even a single deal in the pre-IPO stage in Q4'12 and Q1'12..
Hyderabad has emerged as the top region in this quarter, surpassing Mumbai and the National Capital Region (NCR) in terms of investments. Hyderabad witnessed investments worth $212 million from six deals in Q1'13, which is more than double the value of investment received in the previous quarter despite a drop of 45 per cent in the number of deals.
Chennai received the second highest value in funding in Q1'13 amassing $183 million from 9 deals as compared to $81 million from two deals in Q4 '12, recording more than two-fold growth.
Highlights
· The top 20 deals comprised 78% of total deal value in Q1 '13. The top three deals constituted 37% of the total value of the top 20 deals. About 95% of the deals in this quarter are below $50 million.
· The top two exits comprised 49 per cent and the top 5 constituted close to 79% of the total exit value in Q1 '13.