PE deals touch a new high in 2015

$12.7 bn of transactions in less than six months, against annual high of $10.8 bn in 2008; momentum expected to continue

Private equity (PE) firms are working at full throttle. Be it fund raising, fresh investment, exits or secondary transactions, all seem to be heating up. From Bloomberg data, the little less than six months this year has seen 350 PE transactions worth $12.7 billion, higher than the previous annual record of $10.9 bn in 2008 with 195 transactions.

While Bloomberg data counts every deal in a year, it counts deal value of only those who disclose it. So, their data vary from others who count estimated values for the deals where transaction amount is not disclosed. A report by Bain & Co last year had put the PE deal record for India at $17.1 bn in 2007. This includes the estimates for deals where value is not disclosed.

“Limited Partners are keen to invest large funds to finance the growth in India, now visible through its leading indicators, and that has helped in deals rising this year,” says Rajeev Gupta, managing director at Arpwood Capital. His firm advised in the $1.1-bn acquisition of Suzlon Energy’s European subsidiary, Senvion SE, by Centerbridge Partners, the largest ever among Indian PE buyouts.

“The spurt is also because Indian e-commerce has found backers from among big global VCs (venture capital entities),” says Gupta. From Bloomberg data, nearly a third (108 deals worth $4.1 bn) are from the internet sector. Chinese firm Alibaba Group’s $986 million investment in Snapdeal.com was the second-largest PE transaction this year.

 

Other e-commerce transactions for the year include ANI Technologies, owner of Ola Cabs and Flipkart Online Services, attracting $500 mn each from PE and VC investors.

“PE deals are gaining traction as the macro economic picture has become clearer, which has accelerated decision making at the company level,” says Renuka Ramnath, managing director and chief executive officer at Multiples Alternate Asset Management. It has raised $400 mn for its second fund, with a target corpus of $600 mn. She is expecting the momentum to continue, with $70 bn of PE investment in the next five years. “The PE industry in India has matured, providing a full spectrum of applications from early-age investment to buyouts, and that will see rise in investments,” she says.

The spurt in transactions also comes as a record number of PE players were able to make and exit from their earlier investments, some of which was again picked by peers. While the year has so far seen 30 exits worth $2.2 bn, secondary transactions in this period have been seven deals for $1.23 billion. “These exits are the tip of the iceberg, as a large amount of invested capital is waiting for returns,” says Sanjeev Krishan, transaction services and private equity leader at PWC India.

“PE deals will also accelerate as investors are expecting four to eight years of a growth cycle in the country, which is ideal for fresh investment and their timely exits.”