A round-up of the activity that has happened in the Indian private equity scene through the first half of 2017
Words by: Preeti Nambiar Photographs from: Various Sources
The first half of this year has been an interesting period for players of our economy – the companies, investors and the policy makers. The last few months have seen changes in every aspect of the country from social to economic, shifts in policies, uncertainties attached to new taxation system and the overall international climate adding to the dynamics. The resultant effect has been a mix of wait and watch and clear shifts in investment behaviour and risk profile. There has been a defined upward shift in the size of investor commitment and bigger bets being made.
In the quarter ending March 2017, investments increased 36% on a year on year basis and 24% over the quarter ending December (Source: Venture Intelligence). However, the transaction volume has reduced over the same period, indicating an increase in big ticket deals. The increased levels of activity from sovereign wealth funds /pension funds ($15 billion invested over the last three financial years), indicate the improved comfort of global investment managers with the Indian economy’s risk – return profile.
THE BIG TICKET DEALS
- Xander Group’s acquires Shriram properties’ Gateway IT SEZ in Chennai for $350 million.
- Macquarie’s invests $0.6 billion in Hindustan Power Projects.
- KKR and Canadian Pension Fund CPIB invests $0.9 billion investment in Bharti Airtel.
During the first half of 2017, the sectors that have been winning investor attention include the IT and ITES at the top of the league’s table. Nevertheless, the Consumer and retail sectors, BFSI, healthcare and life sciences and the real estate sector also accounted for some notable deals.
Some of the bigger deals in this year have been Macquarie’s $0.6 billion in Hindustan Power Projects and KKR and Canadian Pension Fund CPIB’s $0.9 billion investment in Bharti Airtel.
The improving regulatory environment and several states setting up a real estate regulator and REITs coming up as well as improving investor confidence were being reflected in the increased activity in the realty segment. One of the largest foreign direct investment (FDI) in the ongoing year was in the real estate sector, with Xander Group’s acquisition of Shriram Properties’ Gateway IT SEZ (special economic zone) in Chennai for $350 million. Real estate sector accounted for approximately 40% of the value of deals made in May 2017.
In terms of size, the startup end of the firm size scale has accounted for a significant share of the investments made. In the month of May 2017 alone, startups accounted for 68% of the total investment volume during the month. (Source: Grant Thornton). In the startup segment, investors have been making commitments across a diversified set of sectors including enterprise application and infrastructure, travel, transport and logistics, and fintech.
While investors and companies are closely watching the highly dynamic Indian economy and the attendant factors before making any big decisions, there is a clear upward shift in investor confidence, perceived robustness of the public markets, and belief in the regulatory and policy framework being put in place. The private equity activity reports for the last quarter are yet to be released, but the transactional volume and size over the last two quarters definitely indicate that investment activity momentum will be reviving itself in 2017-2018.