PE/VC investments, exits hit record in 2017 at $26.8b, $13b

Investments by private equity/ venture capital firms touched a record in 2017 at USD 26.8 billion, as against USD 16.2 billion in 2016, and pulled out a record USD 13 billion from the country, says a report.
According to data collated by EY, Softbank's USD 2.5 billion investment in online retail major Flipkart led the PE investment pack, making it the highest-ever in the country. According to the data, PE/VC exits almost jumped two-fold to USD 13 billion across 257 deals, driven by record level of exits via open market, secondary sale and IPOs.
The year just gone-by was also the best for PE-backed IPOs featuring the largest IPO exit ever with Fairfax selling its 12 per cent stake in ICICI Lombard for USD 558 million.

According to EY's private equity deal tracker, 2017 was the best year for both investments and exits, surpassing their respective previous highs. While investments rose 37 per cent to USD 26.8 billion across 589 deals, the year also saw 257 exits worth USD 13 billion, almost double the previous high recorded in 2016.
"Apart from some unforeseen global macroeconomic risks in 2018, the PE/VC sector is likely to continue to see a growth in investments as well as exits. Capital markets are expected to stay buoyant and IPOs should continue to be a compelling exit story for the year," the report noted.

In terms of investments the deals saw a sharp increase in value with 19 deals coming in excess of USD 300 million including four deals of over USD 1 billion.

Growth, startups and pipe deals witnessed multifold increase in investment inflows compared to 2016 and 2017 was the best year for growth deals at USD 13.8 billion which was 2.4 times the value recorded in 2016.
This was primarily driven by four mega deals accounting for 46 per cent of the value of growth deals, three involving Softbank's investments in the e-commerce and fintech space and another involving GIC's investment in DLF.

Startup/early-stage investments at USD 3.5 billion across 311 deals was 1.7 times more than the value compared to 2016 and other deals at USD 3.7 billion across 38 deals was 2.4 times more.
In comparison, debt and buyout deals had a rather muted performance in 2017, falling 19 per cent and 14 per cent respectively. The year saw USD 3.4 billion worth of buyouts across 26 deals and US D2.4 billion in debt investments across 55 deals.
In terms of sectors, e-commerce investments led by Softbank (USD 4.8 billion across 63 deals), financial services (USD 7.1 billion in 103 deals), and real estate (US D4.8 billion in 50 deals) led the pack. Technology was the top sector with 125 deals in terms of volume.

"With lots of dry powder awaiting deployment, need for corporates to deleverage and rise of a new business class are expected to drive the PE/VC story well past the highs seen in 2017," EY said in the report.
In terms of exits, the sharp rise was driven by a 3.7 fold increase in open market exits compared to 2016 (US D6.2 billion as against USD 1.7 billion in 2016), thanks to buoyant capital markets.
From a sector perspective financial services saw the maximum exits at USD 3.9 billion in 51 exits, telecom saw USD 1.9 billion in three deals, e-commerce saw USD 1 billion across eight exits and technology saw USD 1.5 billion across 24 deals.

In terms of fund raising through exits, the year saw USD 4.9 billion, up 15 per cent from 2016. Kedaara's USD 750 million and Chrys Capital's USD 600 million sector agnostic fund raises were the largest. New fund raising plans announced declined by 43 per cent to US D12.2 billion.