PE investments declined 67 per cent to $1.3 billion in Q3’13; While IT deals claimed 45 per cent of the investments, buyouts were on the rise in the manufacturing sector  

VENTURE INTELLIGENCE

Private Equity firms invested about $1,300 million across 75 deals during the quarter ended September 2013. The investment amount was 67%  lower than that invested in the same period last year ($3,910 million across 126 transactions) and less than half that invested during the immediate previous quarter ($2,661 million invested across 109 transactions). Note: The above figures do not include PE investments in Real Estate. (Please see special section below for data on PE-RE investments).

The latest numbers take PE investments in the first nine months of 2013 to $5,059 million (across 281 investments) down 38% compared to the corresponding period of 2012 ($8,152 million across 373 investments).

There were only two PE investments worth over $100 million during Q3’13 compared to five such transactions in the same period last year and eight during the immediate previous quarter, the Venture Intelligence analysis showed.

Baring Private Equity Asia catapulted itself to the top of the PE investment charts in 2013 with its INR 1,687 crore ($260-M) buyout of 41.8% stake in publicly listed IT Services firm Hexaware Technologies (from its promoters and existing PE investor General Atlantic). Including the mandatory open offer for an additional 26% stake, the deal value could go up by another INR 1,058 crore. The second largest transaction reported during Q3’13 was e-tailer Flipkart’s raising of an additional $200 million from existing investors including Tiger Global, Accel India, Iconiq Capital and South Africa-based strategic investor Naspers.

Led by the Hexaware and Flipkart deals and accompanied by the $75 million commitment by Softbank to another e-tailer Snapdeal.com, IT & ITES companies grabbed almost 45% of the PE investments (by value) in Q3’13. (Outside of these three transactions, all the other IT & ITES investments during Q3’13 were lower than $10 million in size.)

IT & ITES ($582 million across 25 investments) was followed by Manufacturing ($185 million across nine investments) and Healthcare & Life Sciences ($140 million across 14 investments) as the most favoured industries for PE investments in Q3’13.  Buyout deals accounted for the top three Manufacturing industry investments: the INR 444 crore ($74 million) purchase of a 97.9% stake in Agile Electric by Blackstone; the INR 338 crore ($56 million) purchase of a 51% stake in Sansera Engineering by Citi and the other spin out of the general lighting business of listed auto lamps maker Halonix via a INR 160 crore ($24 million) investment by Halonix’s existing PE investor Actis.

VC type investments accounted for 52% of the investments during Q3’13 (in volume terms) compared to 54% in the corresponding period a year ago. The share of Buyout deals rose to 9% of the deals (in volume terms) from just 3% in the same period in 2012. Late Stage deals declined to 12% from 19%, while the share of listed company investments showed tick up to 17% (from 14%).

Apart from Private Equity investment in IT & ITES and buyouts in manufacturing, Private Equity-Real Estate firms made seven investments (amounting to $199 million across 5 deals with disclosed values) during the quarter ended June 2013, according to data from Venture Intelligence. The volume of investments was down from the ten investments in the same period in the previous year (which witnessed $394 million being invested across nine transactions with disclosed values) and also the 15 investments ($339 million across 14 deals) during the April-June 2013 quarter. PE-RE investments in the first nine months of 2013 at 33 transactions ($1,115 million across 28 deals with disclosed values) are still down by about 6% compared to the 35 investments in the corresponding period in 2012 ($1,053 million across 31 investments).

The largest PE-RE investment during Q3’13 was the real estate investment unit of StanChart entering into a joint venture with publicly listed Mahindra Lifespaces that is to invest INR 1,000 crore across various projects beginning with two premium residential developments totalling 1.55 million square feet in Gurgaon and Bangalore. This was followed by Red Fort Capital’s INR 365 crore investment into an unit of 3C Company that is developing a over 100 acres of contiguous land parcel in Gurgaon’s Sector 89-90 into a township. The township, costing INR 1,489 crores, is expected to be launched in October-December 2013, will comprise of 2.18 million sq ft of residential and 2 lakh sq ft of commercial space.

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