Private Equity Investment Up by 64% in India


June 21, 2017

Private equity investment in India is booming, according to the latest report by Grant Thornton. The report shows PE investment jumped by 64% in value terms in May. The region attracted $663 million worth of private equity investment during the month, driven by big-ticket investments.


Deal value improving, but deal numbers declining


While the deal value increased in May compared to $587 million PE deals in May 2016, the number of deals dropped. In 2016, the month witnessed 74 private equity transactions. However, this year’s figures were down to 67 private equity deals.


Furthermore, the surge in deal value in May was showing improvement earlier this year as well. However, the number of PE deals declined even during the January-May period. The five months witnessed 421 deals in 2016 but the figure was down to 349 deals in 2017. The declining deal numbers weren’t enough to result in declining deal value. January-May period attracted $5,487 million worth of deals in 2016 and in 2017, the smaller number of deals was worth $6,402 million.


According to the report, the figures indicate investors are beginning to bet on the Indian economy more openly. This is especially indicative when you consider the sectors attracting the biggest deals – namely startups in fintech.


For M&A, there was a slight 4% increase during the period from last year. These were driven by domestic activities. On the other hand, cross-border deal values fell by nearly 49% as inbound investor interest in India continued to decline.


Focus on startups


Indeed, private equity investment in the country was largely driven by startup investments in May. Startup investments contributed to 58% of the total investment volumes. Over half of startup investments went into sectors such as enterprise application and infrastructure, travel, transport and logistics, and fintech.


In terms of the overall sector spread, the technology sector continues to hold its ground. The sector contributed nearly 60% in the deal value. Real estate is one of the growing sectors for private equity investment in the country. Investment in the sector accounted for nearly 40% of the total deal value.


All eyes on the reforms


Investors are now focused on the economic reforms the country has promised to undergo. While the latest figures show investor appetite in taking a bet on the economy and the opportunities it offers, PE deals could quickly turn direction if the reforms don’t go as the investors want.


Prashant Mehra, a partner at Grant Thornton India LLP, told Live Mint, “All eyes seem to be now on GST (Goods and Services Tax) implementation and its impact on not only trade and economy, but more importantly on investor interest. Since there is now clear visibility on this, we should see good traction in both M&A and PE”.


Considering how the cross-border deal activity was down, the reforms could have a big impact in returning deal activity to normal in terms of inbound investor activity. India is still likely to remain one of the go-to investment opportunities for private equity, as the growth potential in the emerging economy is still lucrative.

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