PE investments vault to $3.3-B in Q1’ 11

Amount invested more than doubles over previous quarter; Median Deal Size jumps to $14.5-M

Private Equity firms invested about $3,296 million across 83 deals in India during the quarter ended March 2011, according to a study by Venture Intelligence (http://www.ventureintelligence.in), a research service focused on Private Equity and M&A transaction activity in the country. The amount invested during the quarter was higher than that during the same period last year (which witnessed $2,133 million invested across 81 deals) and over twice that of the immediate previous quarter ($1,515 million across 83 deals). The median size of investments during Q1 ’11 was $14.5 million, compared to $11.5 million in the same period a year ago. (Note: These numbers do not include PE investments in Real Estate.)

The largest PE investment during Q1 ’11 was the Rs.4,500 crore (about $1 billion) commitment by Bain Capital and Singapore’s GIC to Hero Investments, the Hero group holding firm which is to buyout Honda Motors’ 26% stake in listed 2-wheeler maker Hero Honda. This was followed by Apax Partners’ $375 million commitment to iGate to help buyout fellow listed IT Services firm Patni Computers. Other top investments reported during Q1 ’11 included three $200 million commitments - for Hyderabad Airport operator GMR Airport Holdings, road projects firm Isolux Corsan India and non-banking finance firm Indostar Capital Finance.

“The amount invested by PE firms in Q1 2011 was the highest since Q1 2008. This combined with the rising number of exits, successful raising of new PE funds (like the $500 million second fund by Everstone) and the accelerated pace of investments in the manufacturing and infrastructure sectors, indicates strong revival in confidence for deploying long-term PE capital in the country,” noted Mr. Arun Natarajan, MD & CEO of Venture Intelligence.

The IT & ITES industry received the most number of investments during Q1 ’11 (at 21 deals worth $577 million), followed by Manufacturing (13 deals worth $1,087 million) and BFSI (7 deals worth $423 million), the Venture Intelligence analysis revealed. Led by big-tickets investments from infrastructure funds like the 3i India Infrastructure Fund and the SBI-Macquarie fund, the Energy and Engg. & Construction industries attracted the most dollars after Manufacturing and BFSI during Q1’11.

The share of VC type deals (in volume terms) rose to 43% during Q1 ’11 compared to 33% in the corresponding period a year ago. The share of Late Stage deals, at 29% of the PE investments during Q1 ‘11 (58% in value terms), was steady as compared to the same period a year ago. The share of listed company investments (“PIPE” deals) rose to 16% (compared to 11% in Q1 ’10)

Exit Activity

Private Equity firms obtained exit routes for their investments in 14 Indian companies during Q1 ’11, including one IPO (that of PTC Financial Services). This compares to 34 exits (including 7 IPOs) in the same period in 2010 and 38 exits (including 10 IPOs) in the immediate previous quarter. Among notable exits via M&A during the period was the acquisition of publicly listed Patni Computers by fellow IT Services firm iGate, which fetched PE investor General Atlantic $254 million (for its 17.4% stake). Also, UK-based Pearson’s decision to enhance its stake in education services firm TutorVista from 59% to 76% provided a healthy exit route for TutorVista’s VC investors - including Sequoia Capital India, Lightspeed Ventures and SVB - who had invested about $30 million in the firm starting in mid 2006.“While the correction in the public markets forced a slowdown in the overall pace of exits in Q1 ‘11 compared to the immediate previous quarter, the number of IPO filings by PE-backed companies in Q1 suggests a potentially healthier figure in the months ahead provided the public markets are conducive,” Mr. Natarajan of Venture Intelligence remarked.

Real Estate

Private Equity-Real Estate firms made 10 investments (amounting to US$883 million across 9 deals with disclosed values) during the quarter ended March 2011. The pace of investments during the quarter was lower than that during the same period last year which witnessed 17 investments (with $293 million being invested across 15 deals with disclosed values) and also lower compared to the immediate previous quarter which witnessed 16 deals (with $397 million being invested across 11 deals). South India-based deals account for 5 investments during Q1 ’11 followed by 3 deals in Northern India and 2 in Western India.

PE-RE firms, led by India dedicated ones like Kotak Realty, HDFC Venture, Indiareit and Red Fort Capital, announcing a total of 11 exits during Q1, 2011. This compares to a total of just 8 exits announced during the entire of 2010.

About Venture Intelligence

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