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Private Equity deals continue downward spiral in Q3 in India

aircelIndia saw a sharp decline in the value and number of deals by private equity funds in the third quarter of 2016 compared to last year, said News Corp VCCEdge.

Total value of PE deals by funds fell to $1.2 bln, the lowest since third quarter of 2013. During the same quarter last year, the number was 3.4 bln.

The number of deals too fell to 29 from 51 last year.

Total private equity investments too dipped significantly by 63% to $2.3 billion in the Q3 CY16 as compared to $6.3 billion a year ago and 3% higher than the already dismal previous quarter.

For the year so far, total private equity deal value is down 47.3% at $ 8.8 billion.

Angel/ Seed investments – With 152 deals amounting to $ 49 million, angels and seed funds are seen shoring up deals activity during the quarter. This is against 245 deals worth $ 121 million registered in the corresponding quarter in CY2015. For the 9 months ending September 2016, Angels have pumped in $ 179 million from 541 deals (as against 590 deals amounting $ 273 million for the corresponding period in CY 2015).

Venture Capital investments – These saw a decline of 39% in terms of number of deals and 58% in terms of deal value for the 9 months ending September 2016 having registered 267 deals worth $ 1,988 million. On a Q-o-Q basis, deal value fell from $ 1878 million from 151 deals in Q3 CY2015 to $ 803 million from 69 deals in Q3 CY2016.

M&A

Q3 CY2016 witnessed 232 M&A deals to the tune of $24,673 million, an increase of 242% when compared to $ 7,206 million raised from 254 deals in Q3 CY2015.

Deal value picked up for domestic M&As from $ 1.5 billion to more than $ 20 billion, while outbound deal value slipped by 58% during the quarter.

 The top 3 domestic M&A deals recorded in Q3 CY2016 were HDFC Standard Life’s purchase of Max Life Insurance for $ 9,730 million in August 2016, the Reliance Communication –Aircel merger deal of $ 7,300 million in September 2016 and Nirma buying into the cement business of Lafarge India Pvt. Ltd. for $ 1,400 million in July 2016.

“Trends suggest that median deal values have dropped by more than 70% over the last 5 years with average deal sizes remaining under $ 13.87 million,” said Nita Kapoor, Head – India New Ventures, News Corp and CEO, News Corp VCCircle.

“Hence not only was raising capital difficult this year, the amount raised was also small as investors started writing smaller cheques. While domestic M&A and IPOs making a stellar comeback are the silver lining this quarter, investor money will continue to back those enterprises that are strong on revenue models and create discernable impact on the consumers they serve.”

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