PE investments down 10.5% at $841 mn in May: EY

Private equity investments in India moderated in May, with 43 deals worth $841 million registering a decline of 10.5%, says an EY report.

After a spectacular show in 2015 which also continued in the January-March quarter of this year, EY said PE investments worth $841 million were announced last month, down from $940 million in May 2015.

"Subsequent to a record year for PE investments in 2015, we have witnessed a progressive decline in deal volumes in 2016. Slowdown in e-commerce investments has been the major reason for this decline," said Mayank Rastogi, EY Partner and Leader for PE.

"However, both the global and local funds are flushed with dry powder and given the unique position of India in the global economy today, we do expect the PE activity to improve in the future months," he added.

The PE activity was driven by minority growth capital deals, in line with the historic trend, albeit with reduced deal sizes, while, buyouts which had found favour in the past few months recorded muted activity.

TPG's acquisition of 65% stake in Cancer Treatment Services International for $33 million was the only buyout deal in the month, which had significantly enhanced last month's deal value to $2.2 billion from 49 deals.

From a sector perspective, automotive sector dominated in terms of value, with Cartica Capital's acquisition of 4.25% stake from Eicher Motor's promoters for $308 million deal that contributed 37% of the total deal value for the month.

In terms of volumes, with 10 deals and 23% of the total number of deals in the month, Technology sector continued to be the preferred sector for PE investments.

Meanwhile, e-commerce continued a declining trend in both value and volume terms due to increasing focus on cash flow sustainability and these firms found it difficult to raise fresh funding in 2016.

Furthermore, fund-raising witnessed a pick-up of over 38% in May 2016 at $490 million as compared to $355 million in the same period last year.

"Fund-raise announcements continued to remain healthy at more than $1 billion, as investors continue to remain optimistic about the India growth story," the report said, adding that "India seems to be one of the very few bright spots in the global economy and that shows in the Limited Partner interest in India".