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Private equity (PE) investments into the automobile and components segments has seen a slow down during 2016 till date, with the comparable period of last year. The exit deals have also seen a decline in terms of total exit value, according to data available.
Number of deals in the sector during the current year till date was five and value was worth only $8.11 million as against eight deals worth $110.56 million reported during January to August, 2015. Number of exits reported was five during the current year, worth $96.46 million as against three exits of $137.11 million, a year ago.
According to VCCEdge data, the number of deals and the total investments in 2016 year to date indicates a slowdown in investments since 2013. The peak was in 2013, during January to August, total investment attracted by the sector was $534.24 million across seven deals, followed by 2015 during when the space attracted $110.56 million across eight deals.
Some of the major deals in 2015 includes Kedaara Capital Fund's investment of $48.44 million in Bill Forge, Westbridge Crossover Fund LLC's investment of $32.13 million in Ceat Ltd, Tiger Global Management LLC's investment of $12.04 million in Ather Energy and Nexus India Captal's investment of $6.39 million in Sedemac Mechatronic.
As far as number of exits are concerned, 2016 has been the lowest since 2013. During the current year total exits reported was five and value of these exits was $96.46 million. During the same period last year total number of exits was three with a total value of $137.11 million. The peak was in 2013, when investors have managed to exit with $437.15 million across six deals, followed by in 2014 with a value of $355.02 million across eight deals.
Top exits in automobiles and components space in the last two years was in Hero MotoCorp. In April 2016, GIC Pte Ltd partially exited from the two-wheeler major and exit value was $83.86 million. A year back, Bain Capital sold its entire stake in Hero MotoCorp for $116.68 million.
While industry sources said that this is one of the best exits, it could not be validated since investment numbers were not available.
However, going by the other two deals, the investors have made good return. For instance, India Business Excellence Fund sold its partial stake in Minda Industries. While the company invested $8.8 million the exit value was $12.6 million. Clearwater Capital partially sold its stake in Jamna Auto Industries in July 2015. The fund invested $26.16 million, while the exit value was $67.88 million.
A senior offical from a PE firm said that investors are positive on the automotive space and companies, especially the auto-component manufacturers also believe a fund infusion can help them expand their bandwidth not only within the country, but also outside India.
The auto component industry registered a turnover of $ 38.5 billion in 2014 - 2015 with a growth rate of 11 per cent.
He agreed that auto and auto Components sector has not been favourite for investors for many years now, but during the recession period, distress in automotive sector opened lots of opportunities for investors at cheaper valuations. Some of those PE exits have happened in the last 2-3 years and have generated stellar returns for the investors.
Some of the successful exits will open more doors going forward.
The investors have focused mainly only on OEMs and Tier- I suppliers and going forwarding key things that would determine the future of includes consolidation in the Indian Auto Ancillary space, expanding global businesses of Indian OEMs/ Auto Suppliers and emergence of niche growth segments.
