PE flow drops by 12% in fourth quarter: PwC report

The report said that 2015 is the best year for PE inflow

The fourth quarter (October to December) of 2015 saw a 12 per cent drop in Private Equity (PE) investments flow to $3.9 billion as compared to $4.5 billion, a year ago and a 40 per cent drop compared to the previous quarter of the year. However, 2015 was the best year for the Indian PE in history, with a total PE inflow of $19.5 billion in 159 deals, according to a latest report.

The third quarter of 2015 had witnessed 203 deals worth $6.6 billion while the last quarter of 2014 had 146 deals worth $4.5 billion.

Despite the drop, the stellar performance throughout the whole year helped 2015 to become the best year ever, with a total of $19.5 billion worth of PE inflow across 159 deals, according to PwC MoneyTree India report, a quarterly study of PE investment activity based on data provided by Venture Intelligence.

The last quarter of 2015 (October to December) provided a strong finish to the year, making it the best year for Indian private equity (PE) in history, said the report.

The information technology & IT-enabled services (IT & ITeS) sector continued to be the biggest sector, though its performance was lower compared to the previous quarter. IT & ITeS attracted $1.3 billion across 93 deals, which is down by 52 per cent as compared to the year-ago period and down 67 per cent compared to the preceding quarter.

The banking, financial services & insurance (BFSI) sector attracted $910 million in 10 deals. But the media & entertainment sector was a surprise, attracting investments worth $414 million. Late-stage investments have continued their outstanding performance with $1.7 billion, while growth stage deals attracted $1.2 billion.

Regionally, Mumbai attracted $1.9 billion, while Bangalore was a distant second with investments worth $733 million.

Sandeep Ladda, leader - Technology, PwC India in a release said that in 2015, sectors such as banking, insurance and telecom saw the stabilisation of their business and opened up their technology spend over the year, thereby driving the growth of the Indian IT & ITeS industry.

The Government revealed some new technology-centric initiatives last year including Digital India and Start Up India to accelerate India's plunge into the connected Digital world.

Sanjeev Krishan, leader, Private Equity, PwC India added Centre's focus on making it easier for foreign investors to do business in India will help from a perception standpoint and needs to be backed by real reform.

India's macros are looking good, with the current account and fiscal deficit at acceptable levels, a relatively stable rupee, inflation at below five per cent and, most importantly, a declining interest rate regime. This should encourage private investment as demand picks up.

"We believe financial services, technology and healthcare continue to see sustained activity in 2016, while e-commerce fundraising may get challenging this year atleast in the near term."

Private equity exits along with investments, 2015 was a strong year for exits too. Over all four quarters, there was a record exit of $8.6 billion in 230 deals. This is an all-time record, surpassing the exits worth $6.3 billion in 2010.

The fourth quarter of the year saw exits worth $1.5 billion in 51 deals, a 12 per cent drop from the preceding quarter ($1.8 billion in 51 deals), but recorded a 16 per cent surge as compared to the year-ago period ($1.3 billion in 54 deals). IT & ITeS emerged as the top sector in terms of exit value, with investments worth $598 million in 13 deals. The manufacturing sector saw exits worth $257 million, while telecom, with a single deal worth $250 million, secured the third spot.

Secondary sales picked up the top position as the preferred exit route, with $696 million in nine deals. Further, public market sales saw 22 deals worth $539 million.