PE/VC investments hit 10-year high at $3.1 bn in May

Private equity and venture capital (PE/VC) investments have recorded the highest monthly investments in the past 10 years at $3.1 billion in May 2017. For the third consecutive month in a year, the investment flow crossed the $2-billion mark.

The financial services sector topped the table on account of the $1.4-billion investment by Softbank in Paytm. This deal accounted 46 per cent of aggregate deal value for the month.

According to Ernst & Young (EY) data, the month recorded a 264 per cent increase in terms of value and 23 per cent in volume over May 2016. PE/VCs have invested $3,064 million across 55 deal in May this year as against $843 million across 45 deals in May 2016.

There were five deals of more than $100 million aggregating to $2.3 billion, accounting for 75 per cent of the aggregate deal value in May 2017. 

Another important deal during the month was the $500-million investment by Canada Pension Plan Investment Board (CPPIB) in Indospace (a real estate platform for industrial and logistics parks) for a majority stake, thus taking the investments by Canadian pension funds in 2017 close to $2 billion.

Mayank Rastogi, partner and leader for PE, EY said that Indian PE/VC market has significantly matured over time. Five to seven years ago, the classic growth capital was the only meaningful capital pool available with limitations such as investment horizon and return expectations, and could not have suited some specific situations.

There are a variety of capital pools available ranging from angel/VC to buyout funds, family offices, pensions and sovereigns, corporate funds, debt funds, sector-focused funds providing solutions that address specific needs. This is one of the key drivers for continuing buoyancy in the PE/VC investments in India despite slow growth capital investing.

Financial services ($1.6 billion across 11 deals) emerged as the most active sector on account of the Paytm-Softbank deal, the largest deal in the financial services sector till date. The real estate sector bagged four deals worth $709 million, followed by e-commerce sector's six deals worth $211 million in terms of activity.

May 2017 recorded $1 billion in exits and was the second consecutive month with more than $1 billion in exits.

The strong buyout trend established over the past two years continued into 2017 with $2 billion invested across 18 deals till date.

Between January and May, there was a significant increase of over 60 per cent compared to 2016 and over 100 per cent compared to 2015, both, in terms of value and volume. 

Debt deals recorded the biggest monthly volume since 2014 with $377 million recorded across 12 deals.

Given the buoyancy in the public markets, open market deals emerged as the preferred mode of exit, accounting for 36 per cent of exits by value and 50 per cent by volume, similar to the trend seen in the previous month.

Till date, open market exits have accounted for 49 per cent of the total value of exits in 2017 compared to 25 per cent for the whole of 2016. 

There was one PE-backed initial public offering (IPO) in May 2017 (S  Chand, a publishing company, primarily in the education space), which saw Everstone exiting a 13.9 per cent stake for $48 million. Till May 2017, PE-backed IPO tally stands at four compared to eight during the same period in 2016.

Financial services emerged as the leading sector with exits worth $466 million across six deals followed by the healthcare sector with exits worth $260 million across three deals.

May 2017 recorded $90 million in fund raise, a decline of 82 per cent and 76 per cent as compared to May 2016 and April 2017 respectively. The plans for fund raise announced during the month stood at $908 million.

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