In the period from 2015 to the first half of this year, the financial services sector has secured the highest share of private equity/venture capital investments, with $16.6 billion received through 311 deals, says a report filed by EY-IVCA titled ‘PE/VC Agenda — 1H18’.
The first half of this year has also seen the highest investment by PE/VCs, with $4.2 billion spent in 74 deals, the highest-ever such half-yearly investment in the financial services sector.
Various segments, including pure play banks, specialised NBFCs, small finance banks, online credit platforms, insurers, and payment solution companies have basked in the generosity of PE/VC investors.
"Financial services have witnessed significant interest from PE/VC investors over the past three-and-a-half years. Given the vast unbanked population and low penetration of financial products, coupled with a diversity of investment options available across banks, NBFCs, microfinance institutions, insurance companies and payment companies, the sector is expected to continue attracting PE/VC investments," said Vivek Soni, partner and national leader for private equity services EY India. Banking witnessed 28 transactions in the period between 2015 and the first half of 2018 (1H18). A bulk of these deals (15) took place in 2017 compared to three in 1H18, six in 2016 and four in 2015. Last year saw 55 deals, each of which was valued over $100 million, aggregating to $19.1 billion and accounting for 72 per cent of the total value of investments in 2017.
NBFCs attracted 107 PE/VC investments in the same period (2015-1H18). The sector has seen a sustained PE interest with 24 deals in 2015, 26 in 2016, 26 in 2017 and 31 in 1H18.
The insurance segment received a total of 29 PE/VC investments in the period under consideration. The average ticket size for investments in insurance companies was high - $226 million for life insurance and $60 million for general and health insurance. PE funds, which drew the maximum investment in the space, were Temasek, KKR, Warburg Pincus, SoftBank, etc.
Fintech reported 96 deals during 2015-1H18, pointing to the high PE/VC interest in the space. There was a marked spike in the deal count after demonetisation as the true potential of digital payments was brought to the forefront. About 70 per cent of these deals (68) in the fintech space during the period were announced after demonetisation, with an average deal size of $7.8 million. Housing finance saw 18 transactions in 2015-1H18, with total deal value of $2.3 billion and average deal size of $135.5 million.
This was mainly skewed by a single large deal of $1.7 billion wherein GIC, KKR and others invested in HDFC for a 3.9 per cent stake. Excluding this, the average deal size over the same period worked out to $40 million (not including the deals with undisclosed values).