IT-ITeS Sector Attracts Huge PE investments
The private equity (PE) investments in India have recorded a dramatic five quarter upswing with a 3.01 billion USD investment in the third quarter from July to September 2014. According to the recent PwC MoneyTree India report the investment was done across 103 deals, registering a growth of 4 percent in value over the preceding quarter with a 3 percent drop in volume. In the previous quarter (April–July 2014), 2.91 billion USD was invested in 106 deals. The study notes that compared to the same period last year, the value of deals increased by 97 percent despite a 9 percent reduction in volume. In the third quarter of 2013, the value of investments was 1.53 billion USD from 113 deals.
The report notes that the IT and IT-enabled services (ITeS) sector has bounced back as the leading sector, attracting 1.64 billion USD in 56 deals. It is more than a two-fold jump as compared to second quarter of 2014 and two and a half times higher than third quarter 2013. In the previous quarter, the sector attracted 746 million USD in 47 deals, while during the third quarter of last year, it saw 618 million USD in 41 deals.
“India’s overall retail opportunity is substantial, and coupled with favored demographics (young population, rising standards of living and upwardly mobile middle class) and growing internet user base, strong growth in e-commerce market is expected,” says Sandeep Ladda, leader, Technology, PwC India.
He states that growth has been driven by advancements in technology – increasing adoption of devices like smartphones and tablets, and easy access to the internet has led to increase in online consumer base. “The eCommerce businesses will continue to attract investor interest driven by strong growth prospects of the market,” he states.
“The overall market sentiment is positive with a strong and clear intent from the government on liberalisation and easing doing business in India. This is further aided by favourable macros with declining global commodity prices and declining domestic inflation. Combined with the enhanced interest in public markets, we also anticipate global strategic investors to look at India with heightened interest, in effect providing multiple routes for both capital raising and exits,” states Sanjeev Krishan, leader, Private Equity, PwC India.
As per the report, the healthcare & life sciences sector emerged second in terms of investment value with investments totaling 292 million USD in 11 deals, a 45 percent decline as compared to the previous quarter’s 526 million USD from 12 deals. In the third quarter of 2013, the investments in this sector were 196 million USD from 16 deals.
The education sector performed remarkably well with highest investment in recent times, 176 million USD in 4 deals, a multifold jump from previous quarters, followed by the manufacturing sector with 147 million USD. The banking and financial sector dropped by 85 percent 10 147 million from 958 million USD in the second quarter of 2014.
In the third quarter of 2014, PE investors preferred the growth route as this stage received investments worth 1.8 billion USD in 34 deals. Late stage investments were valued at 857 million USD in 15 deals during this quarter.
By region, Mumbai is back at the top this quarter, recording the highest level of funding at 1193 million USD, more than 50 percent of the total PE investments. Even in terms of volume, Mumbai, with 20 deals, has the majority share at 24 percent. Even though the National Capital Region (NCR) has retained its place in the top three regions on the basis of the number of deals (16 deals), the volume has fallen by 6 percent and 24 percent as compared to first quarter of 2013 and the second quarter of 2012 respectively. However, the value of investments has shown a 95 percent growth this quarter as compared to the preceding one. Private equity investments in Bangalore and Chennai, too, have shown an increase in the value of investments this quarter, as against the previous quarter.
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