According to EY data, on a half yearly basis, investments increased by 41 per cent to $11.2 billion from $8 billion in first half of 2016 despite a marginal decline in deal volume (298 deals v/s 310 deals in H1CY16).
Both, buyout deals ($2.2 billion across 18 deals) and PIPE deals ($1.9 billion across 23 deals) recorded strong growth in first half of 2017 of 76 per cent and 72 per cent respectively, the best half yearly performance for buyout deals and the second best for PIPE deals in over 10 years. Buyout deal volumes have been sequentially increasing with a record high of 18 buyouts in H1CY17.
Aggregate investment value was led by minority growth capital deals with 41 per cent of the aggregate investments ($4.6 billion invested across 78 deals in H1CY17, a growth of 35% compared to H1CY16). Early stage / VC deals continued to dominate the deal volumes accounting for 50 per cent of all deals in H1CY17 similar to last year.
Also, first half of 2017 saw significant activity from Canadian pension funds which have been involved in some of the larger investments made during the year. In aggregate, they invested more than $2 billion across six deals in 2017.
First half recorded 26 deals of value $100 million and above, aggregating $7.7 billion and accounting for 68 per cent of the investments during the period.
On a quarterly basis, investments increased 93 per cent in value ($ 7.1 billion v/s $ 3.7 billion in Q2CY16) with deal volumes remaining similar. The growth was driven by sharp increase of 103 per cent and 133 per cent in buyout and growth deals respectively. Second quarter of 2017 demonstrated the best quarterly performance recorded in terms of both buyout ($1.9 billion across 11 deals) and growth ($ 3.1 billion across 47 deals) deals in over a decade.
From a sector perspective, Financial Services, Technology and Real Estate were the leading sectors in terms of investments both in first half of 2017 and second quarter of 2017. Financial services recorded $3.4 billion across 51 deals in first half and $2.5 billion across 33 deals in second quarter of 2017, the highest half yearly and quarterly numbers recorded by any sector in over a decade, mainly due to the large $1.4 billion Softbank's investment in Paytm. Technology recorded $1.9 billion across 69 deals in H2CY17 and $1 billion across 39 deals in Q2CY17.
E-commerce investments declined further after recording a muted performance in 2016. At $617 million across 26 deals, investments in e-commerce declined 42 per cent in value and 51 per cent in volume terms in H1CY17 compared to H2CY16. In terms of value, e-commerce recorded the lowest half yearly numbers since H2CY13.
Mayank Rastogi, Partner and Leader for PE, EY said, "India is clearly maturing as a PE market with bigger and more complex deals becoming more common place. Greater numbers of big size deals and buyouts are both a testament to this. It is clearly visible in the H1CY17 investment numbers. Improving exit performance, blockbuster exits over the last couple of years, further supported by buoyant capital markets have also helped PE funds reaffirm their India thesis. This can have a multitude of positive benefits as the country searches for big investments to rev up its growth engines. PE-owned companies are globally known to drive greater revenue and margin growth leading to a multiplier effect on their larger eco-systems. There is massive amount of dry powder available globally and most global funds are keenly looking for investment opportunities in India."
Exits grew 53 per cent by value in H1CY17 ($4.8 billion as opposed to $3.1 billion in the corresponding quarter, last year)and 50% by volume (129 deals Vs 86 deals in H1CY16), best half yearly performance since 2009, mainly driven by increase in open market and secondary divestments. Exits via open market recorded $1.9 billion (60 deals), five times of the value recorded in H1CY16 and highest ever half yearly tally. Exits via secondary sale (sale to other PE funds) recorded $1.8 billion (26 deals), eight times of the value recorded in H1CY16 and highest ever half yearly tally for secondary sales. IPO markets have been quite active as well with 6 PE backed IPOs in H1CY17(8 in H1CY16).
Quarterly comparison shows a 2.6 times jump in exits value ($2.8 billion Vs $1.1 billion in Q2CY16), again driven by open market and secondary exits. There were 4 PE backed IPOs in Q2CY17.
June 2017 recorded 34% increase in value of exits compared to same period last year ($550mn across 12 exits vs $409mn across 14 exits in June 2016). However, on a month-on-month basis, there is sharp decline of over 50% in both value and volume terms.
From a sector perspective, financial services ($1.6 billion across 31 exits), technology ($1 billion across 13 exits) and life sciences ($756 million across 23 exits) were the top sectors for exits in H1CY17.