Private Equity Players Putting Their Trust in India


August 17, 2015


Private equity players’ love for India seems to be growing stronger. According to a new study, private equity funds are increasing their bets on India and remain confident over the country’s growth outlook.


Findings of the Study


The Associated Chambers of Commerce & Industry of India (ASSOCHAM) looked at the Indian private equity industry during the first half of the year and found it to be on a strong footing. According to its report, private equity funds committed $7.1 billion for Indian markets during the first six months of the year.


More importantly, the funds have increased their investment by 38% year-on-year. Deal value stood at $5.11 billion in the first half of 2014. The increase from last year is even more impressive, as value last year dropped from the $5.64 the year before. It is a strong indicator that private equity has found its trust in the markets again.


In addition, the increase is not just in terms of more equity being poured in to the country, but deal numbers have also improved. The first half saw a 62% increase in the number of deals.


In terms of the industries private equity players are betting on the most, the usual suspects – finance and pharmaceuticals – remain at the top, while the IT sector also continues to boom.


The interest in India’s private equity market has been lagging behind in recent years. While venture capital funds have been performing strongly in terms of equity raised, PE funds have struggled.


But the latest report suggests that trust in the PE growth funds is growing. Just last month, India Value Fund Advisors (IVFA) announced it raised $700 million with its fifth India-focused fund. At the time, IVFA’s managing partner, Vishal Nevatia, told LiveMint, “Limited partners are more positive today about India’s macroeconomic environment than they were 12-18 months ago.”


Strong Mergers and Acquisitions Activity


Furthermore, in terms of mergers and acquisitions, the numbers have increased, although the value of these deals has dropped. During the first half of 2015, there were 277 M&A deals in India, with 269 deals made the previous year. The deal value dropped from $17.2 billion in 2014 to $15.8 billion this year. Last year, the deal value was increased by the mega merger of Sun Pharma and Ranbaxy, which alone was worth $3.2 billion.


On the other hand, inbound M&As were able to improve the value of the deals. During the first half of 2014, inbound M&As generated $4.8 billion, while the deal value during the first half of the year stood at $7.4 billion. This highlights the increasing global interest in the Indian market.


According to the report, the increase in global activity is partly due to the “increased opportunities in the Indian markets”, but pointed out “some amount of credit is due to the pragmatic policies being followed by the Narendra Modi Government”.


The strength of the finance and pharmaceuticals was also highlighted by the M&A deals. The top sectors for mergers and acquisitions during the first half were IT & ITES, Banking and Financial Services and Pharma, Healthcare & Biotech.


If you are interested in finding deals in the emerging markets, head down to the DealMarket platform.

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