Venture Capital segment however registers 3 year low in terms of investment activity, Venture Intelligence data shows.
Private Equity firms invested about $5.44 Billion across 117 deals during the quarter ended March 2017, according to early data from Venture Intelligence (http://www.ventureintelligence.com), a research service focused on private company financials, transactions and their valuations. The investment amount was 36% higher than the amount registered in Q1’16 (which had witnessed $4 Billion across 198 transactions) and 23% higher than the immediate previous quarter ($4.4 Billion across 179 transactions). The volume (or number) of investments was however lower by 41% compared to the year ago period and 35% lower compared to the previous quarter. (Note: These figures include Venture Capital investments, but exclude PE investments in Real Estate.)
“Interestingly, almost $3.6 Billion – or 2/3rds of the total value of the investments during the period – were announced/reported in just March,” noted Arun Natarajan, CEO of Venture Intelligence. (The research firm expects a few more large ticket deals, which were closed at the fag end of March, to be announced this week.)
The latest quarter witnessed 11 PE investments worth $100 million or more compared to 12 such transactions in the same period last year and 8 during the immediate previous quarter. Many of the larger deals during Q1’17 involved secondary sales by either promoters or existing PE investors, the Venture Intelligence analysis showed. Telecom tower firm Bharti Infratel saw parent firm Bharti Airtel sell a 10.3% stake to KKR and Canadian pension fund CPPIB for almost $952 million. CPPIB also invested $720 million in IT Services firm GlobalLogic providing an exit route for existing PE investor Apax Partners. True North (formerly India Value Fund) exited one hospital chain (Manipal Health via a $215 million sale to Temasek) and entered a new one (KIMS Group via a $200 million investment that gave an exit to Ascent Capital and OrbiMed).
Internet & Mobile sector Unicorns Flipkart and Ola are back in fund raising mode in 2017 – however at significantly lower valuation than what they had attracted in 2015. While Flipkart is reported to have attracted $1 billion in commitment as part of an ongoing $1.5 billion round from China’s Tencent and others, Ola is reported to have received commitments of $330 million led by SoftBank and other existing investors.
IT & ITES companies accounted for 53% of the PE investment value pie in Q1’17 attracting almost $2.9 Billion across 64 transactions. The value of IT & ITES investments in Q1’17 was up 106% from the $1.4 Billion across 115 deals in the same period in 2016. BFSI companies attracted $498 million across 17 PE investments, followed closely by Healthcare & Life Sciences companies which attracted $496 million across eight transactions.
VC Investment Activity falls to 3 Year Low
At 68 investments (worth $314 million), Venture Capital investment activity in Jan-Mar ‘17 fell to a three year low, Venture Intelligence data shows. VC investment activity (i.e., number of investments) fell 47% compared to Q1 2016 and 43% compared to the immediate previous quarter. The previous low in terms number of VC investments was 63 investment in Q2 2014. (Venture Capital is defined by Venture Intelligence as Seed Capital to “Series D”/Fourth round of investment of up to $20 million in companies that are less than 10 years old.)
The VC investment amount in Q1’17 dipped 17% compared to Q1 ‘16 and 26% compared to the immediate previous quarter. The fall in investment value was cushioned by a few large Growth Stage investments. (As many as 15 VC type investments in Q1’17 were over $10 million – versus 10 in Q1’16).
Early Stage investment activity (Seed Capital, “Series A” and “Series B” deals) fell by as much as 50% compared to the same period in 2016.
Notable Shift Away from Consumer Internet & Mobile deals
While IT & ITeS companies continued to account for 74% of the investments (by activity), the value VC investments in IT companies fell sharply to 53% (from 74% in Q1’16). Industries like Education (e.g. Cue Learn), Healthcare (iGenetics Diagnostics) and Microfinance (RGVN NE Microfinance) are grabbing increasing attention from VC investors. Within IT & ITeS, Enterprise Technology and B2B focused startups (with 29 investments) attracted more investments than Consumer Internet & Mobile companies (25 deals) during Q1’17, Venture Intelligence data shows. (In Q’16 the number of Consumer Internet & Mobile investments at 66 were over double the B2B/Enterprise Tech deals at 32.). “Entrepreneurs from Enterprise Tech and Non-Tech sectors complain – often with justification – that VC investors favour consumer focused companies. Given the nervousness around expensive Consumer Internet & Mobile bets and the significant un-invested capital available with VC firms, this is probably the best time for non-consumer focused startups to get VC attention,” remarked Arun Natarajan of Venture Intelligence.
IDG Ventures emerges Most Active VC
While investors like Accel India, Aarin Capital and the Ratan Tata Family Office – who were very active last year – slowed down their pace of investments significantly in Q1 2017, IDG Ventures India stood out as an exception announcing eight investments during the period.
About Venture Intelligence
Venture Intelligence, a division of TSJ Media Pvt. Ltd., is the leading source of information on private company financials, transactions and their valuations in India. For more information, please visit http://www.ventureintelligence.com