 "PE/VC investments in October drops by 25%")
Investments by private equity (PE) and venture capital (VC) funds declined around 25% to $1.19 billion across 58 deals in October 2016, compared to $1.63 billion in 65 deals in the year-ago period. However, sequentially, this was a 5.3% increase in value terms.
The year-on-year (y-o-y) decline was mainly due to a fall in large deals of $100 million and above. There were only three deals worth $440 million in October this year against five deals of $1,078 million in the same month in 2015.
Mayank Rastogi, partner and leader for PE at EY, said: “We saw a number of positives during the month. PE/VC investment activity improved marginally in October 2016, but was the strongest since May this year.” According to him, early-stage VC deal volumes rebounded in October 2016 with 30 deals.
Buyouts as a theme are finally starting to play out, leading to robust investment numbers. Also, there is continuing interest from large pension funds, especially from Canada with about half-a-dozen investments made during the year so far.
US-based fund Argand Capital’s buyout of Sigma Electric for $250 million from Goldman Sachs, CDPQ’s $155-million investment in TVS Logistics providing exit to KKR and Goldman Sachs, and Everstone Capital’s buyout of C3 Inc for $150 million in partnership with Sunrise BPO were the top three deals in October 2016.
With regard to the deal types, buyouts ($474 million, six deals) accounted for 40% of the deal value in October 2016. So far, this is the highest number of buyout deals recorded in a month.
Industrial products ($253 million, three deals) and logistics ($179 million, three deals) sectors emerged as leading contributors to the aggregate deal value for the month, both driven by one large deal in these sectors. Financial services, which was among the top contributors in the past few months as well as in October 2015, recorded only $17 million across six deals ($158 million across nine deals in October 2015). Real estate continued to be among the top contributors ($229 million, five deals) for the month.
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Regarding the exits, October 2016 recorded $765 million across 16 deals – an increase of 112% and 79% in value terms, compared to September 2016 and October 2015, respectively. This was mainly on account of two large transactions – Goldman Sachs’ exit from Sigma Electric for $225 million and HDFC Property Fund’s exit from World One, a luxury residential project by Lodha Group in Mumbai. The exit deal volumes, however, declined 20% and 33%, compared to September 2016 and October 2015, respectively.
October 2016 has witnessed $335 million in fund raise, a moderate increase of 16% over September 2016, but a 42% decline compared to October 2015. On the other hand, new fund raising plans that were announced stood at $1.1 billion compared to $1.62 billion in October 2015 and $2.6 billion in September 2016. A large portion of the fund-raising and announcements were targeted at the real estate sector, which has been the preferred sector for most of the fund raising/announcements over the past few months.