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Private Equity investments, exits both rise in Q2 2014 – PwC report

The private equity investments in India sustained their past performance for the second quarter of the year (April to June 2014). PE firms invested 2.83 billion USD across 95 deals, registering a growth of 7 percent in value over the preceeding quarter. However there was a 20 percent drop in volume in this period. In the previous quarter (Jan-Mar 2014), investments were worth 2.65 billion USD from 119 deals. The findings are part of the PwC MoneyTree India report, a quarterly study of private equity investment activity based on data provided by Venture Intelligence.

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Compared against the same period last year, i.e., Q2 ’13, the value of deals dropped by 41 percent and 23 percent by volume. In Q2 ’13, the value of investments were 4.83 billion USD from 124 deals.

Interestingly, with just eight deals the banking, financial services & insurance (BFSI) sector dominated the second quarter of 2014 in terms of value with 977 million USD worth of investments, registering more than a ten-fold jump compared to the previous quarter and a 14 percent surge from the same period last year. During the first quarter of the year, the sector saw 92 million USD in 11 deals, while it was 857 million USD in the same period last year.

The IT & IT-enabled services (ITeS) sector has emerged second in terms of investment value with investments of 728 million USD and top in terms of volume with 42 deals. This is a 22 percent decline as compared to the previous quarter in value, but a 52 percent rise from Q2 ’13. In the previous quarter, the sector attracted 939 million USD in 49 deals, while during the second quarter of last year, it saw 480 million USD in 42 deals.

Unlike previous quarters, the sector saw early-stage deals with better values. The average early-stage deal value for this quarter was 5.4 million USD as against the 1 million to 3 million USD deals during the last two years.

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Sandeep Ladda, leader, Technology, PwC India said, “The optimism in private equity investing is visible with the strong inflow of investments, which we hopewill continue in the coming quarters. Within technology, the online services segment plays the role of differentiator as some of the companies have outpaced other sectors with astounding growth prospects. The recent large deals in Flipkart and Snapdeal can be seen as a beginning of this”.

The healthcare & life sciences sector has once again captured the attention of investors, with investments totalling 576 million USD in 11 deals, an increase of more than sixfold from the previous quarter’s 93 million USD from the same number of deals. In Q2 ’13, the investments in this sector were 270 million USD from 19 deals.

Energy, manufacturing and engineering & construction are the three major sectors that recorded a considerable decline in terms of deal value.

In Q2 ’14, PE investments in the late stage have outshined both the growth stage as well as private investment in public equity (PIPE) investments with 1.21 billion USD investments in 30 deals. Growth deals, with an investment of 877 million USD from 28 deals, ranks second in terms of value. PIPE deals have shown over twofold growth in this quarter vis-à-vis the prior quarter in value, from 255 million to 627 million USD from 11 deals as compared to the prior quar¬ter’s 21 deals.

Mumbai has retained its top slot among regions in terms of attracting PE investments, despite a 26 percent and 60 percent drop in terms of value as compared to the last quarter and the same period last year, respectively. The city hosted funding of 705 million USD in 22 deals. Chennai has emerged as the second best investment destination with with 547 million USD from just eight deals, a growth of more than fivefold from the previous quarter. The National Capital Region (NCR) has slipped to third position, recording 491 million USD funding in 21 deals.

EXITS

The exit activity in the second quarter of 2014 has achieved an improvement of more than threefold in terms of value and twofold in terms of volume. Total exits were worth 1.06 billion USD in this quarter in 37 deals while in Q1 ’14, PE exits were worth 300 million USD from 18 deals. When compared to the same period last year, exits have shown a decline of 45 percent and 12 percent in value and volume respectively. In Q2 ’13, there were 42 exits worth 1.94 billion USD.

The majority of the exits in Q2’14 came from the healthcare & life sciences and manufacturing sectors which together contributed almost 80 percent to the total exit value and 27 percent to the total volume.

In this quarter, almost 50 percent of the exits by value have been through public market sale (519 million USD from 25 deals). Exits through strategic sale reported the next highest share, with 334 million USD from nine deals.

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