With the initial public offerings (IPO) market drying and debt getting dearer by the day, private equity (PE) has become the lender of last resort for companies. Deals in the space are increasing and getting bigger, as promoters are willing to take a few steps more on the road to reasonable valuation.
Avinash Gupta, head, financial advisory, Deloitte India, also feels promoters are more eager to strike deals than in the past. “Promoters feel fundraising will be tougher in the next six months, due to factors such as increased borrowing interest rates and soft share market. They feel this could be the right time for fundraising.”
Even funds have become more reasonable in their expectations, leading to more transactions. “Given the fact of high valuation in pre-recession times and thereafter a lack of general conviction to transact, the current time offers a sense of reasonableness for both, the buyer and the seller, resulting in a greater deal flow,” said Abhijit Joshi, senior partner and CEO, Western Region, AZB & Partners..
A frenetic first half had a fitting finale in the big bang deal between Apollo Global and Welspun earlier this week. Apollo’s $290-million investment is the fifth deal of $200-million or more in the April-June quarter, according to a report by Four-S Services, a financial research firm.
“The year is witnessing an increase in appetite for large- ticket transactions. There have been five deals above $200 million in size during the second quarter of the year, compared to just one such deal during the same period last year. Thus, the average deal size for the quarter went up to $33.4 million, compared to $27.1 million during the same period last year,” the report said.
The increased activity in the second quarter has taken the total number of deals this year to 207 worth $6.65 billion in Indian companies, a 65 per cent jump over same period last year. In all 159 deals worth $4.03 billion were inked during January-June 2010.
The infrastructure sector got the lion share, with 37 per cent of investments happening in this space. Infrastructure companies, including those from the power sector, received $1.28 billion this quarter. The manufacturing sector saw 10 deals worth $563.5 million (16.4 per cent). BFSI (8.9 per cent) and real estate (9.7 per cent) were other significant sectors.
