PE invests decline for second straight year to $4-B

Q4’09 however shows up-tick in both volume and value; Quarter accounts for 36

Chennai, India: Private Equity firms invested $1,392 million over 84 deals in India during Q4 2009, taking the annual investment numbers to $3,824 million over 232 deals, according to a study by Venture Intelligence (http://www.ventureintelligence.in), a research service focused on Private Equity and M&A transactions. (These figures include Venture Capital investments, but do not include PE investments in Real Estate.) The amount invested during 2009 was significantly less than that during the previous year during which PE firms invested $10,468 million across 443 deals.

The amount invested during Q4’09 however was higher than that during the same period in 2008 (which witnessed $1,215 million invested across 72 deals) as well as the immediate previous quarter ($807 million across 53 deals).

“The volatility in the public markets and continued uncertainty around the ability to raise new funds caused investment activity to be muted in 2009,” noted Arun Natarajan, Founder & CEO of Venture Intelligence. “With just six investments above $100 million in size in 2009 (compared to 22 such deals in 2008 and 27 in 2007), the year witnessed a clear decline in the appetite for large ticket investments,” Natarajan noted.

The largest investment reported during 2009 was KKR increasing its stake in telecom software firm Aricent to 79% for a reported $255 million. The Aricent investment was followed by the $180 million investment by existing investors IDFC PE and Oman Investments into independent tower infrastructure firm Quippo Telecom. The third largest deal was Goldman Sachs’ $115 million investment in publicly-listed healthcare firm Max India for a 9.4% stake.

* By Reported Deal Size                                                                                                        Source: Venture Intelligence

With 56 investments worth about $617 million, Information Technology and IT-Enabled Services (IT & ITES) topped in terms of both value and volume during 2009, the Venture Intelligence study indicated. While BFSI came in next on the volume front with 32 deals, Energy was the second highest in value terms at almost $500 million.

Venture Capital deals accounted for 37% of the pie in volume terms in 2009. Late Stage investments accounted for 28% of the PE deals (in volume terms) and 38% in value terms during 2009. Companies based in South India lead both in terms of total number of investments as well as total value of transactions. Whereas companies from Western India rank second in terms of the number of investments, North-based companies received the second highest investments in term of value.

Among cities, Mumbai based companies retained the top slot with 49 PE investments worth $850 million, closely followed by Bangalore with 42 investments worth $450 million and NCR with 36 investments worth about $1.08 billion. Hyderabad and Chennai attracted 25 and 22 investments each in 2009.

With 11 investments during the year, IFC was the most active PE investor in India during the year. IFC was active across a range of industries – including especially BFSI and Energy. Sequoia Capital India with 9 investments was the second most active investor during 2009, followed by StanChart PE and Aavishkaar with 8 investments each.

Liquidity Events

Private Equity firms obtained exit routes for their investments in 66 Indian companies during 2009, including 7 via IPOs. (2008 had witnessed 36 liquidity events including 10 via IPOs.) PE-backed companies raised about $1.31 billion via IPOs during 2009. The $604 million raised by Adani Power via its July IPO was the largest by a PE-backed firm in 2009.

The total value of M&A transactions providing exits to PE-investors during 2009 was around $1.05 billion. These included 38 sales via public markets, 13 strategic sales, 4 secondary transactions (involving sale of shares by one PE firm to another) and 4 buybacks (by either the company or its promoters). Firms that exploited the continued rally in the public markets to execute multiple exits via public market sales during the year included ChrysCapital, Citi, IIML, Clearwater and Spinnaker, the Venture Intelligence study indicated.

The largest M&A deal providing an exit during 2009 was ChrysCapital’s realizing of over $176 million during the year via public market sales of the shares of truck finance firm Shriram Transport Finance. (Chrys had invested $13.3 million in Shriram Transport in 2005.)

About Venture Intelligence

Venture Intelligence, a division of Chennai, India-based TSJ Media Pvt. Ltd., is the leading provider of data and analysis on Private Equity and M&A transactions in India. For more information, please visit http://www.ventureintelligence.in