Powered by mega bets on eCommerce, 2014 was the second biggest year for PE investments after 2007: Report

After plunging to a four year low in 2013, Private Equity (PE) investments in India bounced back by 47.3% during 2014 to touch $10.9 billion (across 436 deals) – the second highest figure ever, behind only the $14.5 billion (across 529 deals) invested in 2007, according to data from Venture Intelligence, a research service focused on private company financials, transactions and valuations.

The surge was led by mega deals in eCommerce firms – that accounted for almost $4.1 billion (across 106 deals) or 37.6% of the investment pie during the year (excluding investments in real estate)

Ecommerce majors, Flipkart and Snapdeal, snapped up almost $3 billion between them in 2014. Flipkart, via its Singapore-based holding company, rounded up $1.91 billion across three rounds – starting with a $210 million round in May, jumping to $1 billion in July and topping up with a $700 million round in December. All three deals figured in the Top 10 largest investments for 2014 and helped take the total funding raised by the company to about $2.7 billion.

Apart from return backers – hedge fund Tiger Global, South African media firm Naspers and global multi-family office Iconiq Capital, new investors flocking to Flipkart in 2014 included Singapore’s GIC, Russia’s DST Global, Qatar Investment Authority, hedge funds Steadview Capital and Greenoaks Capital and other traditionally public market oriented investors like T.Rowe Price and Baillie Gifford.

With the number of stakeholders in the Singapore-based Flipkart Limited’s roster crossing the 50 mark, the company has filed for conversion into a public limited company.

Japan’s SoftBank Corp led a $627 million round for Snapdeal to become the biggest investor in the company. In May 2014, Snapdeal had attracted $100 million including from new investors Premji Invest, Singapore’s Temasek, the typically public markets focused Blackrock, and hedge funds Tybourne and Myriad.

This had followed a $134 million raise in February from the company’s existing Venture Capital investors and strategic investor eBay.

Softbank also led a $210 million round in for online taxi aggregator Olacabs with participation from the company’s first investor - and key Flipkart backer - Tiger Global, new investor Steadview Capital and existing investor, Matrix Partners India.

In contrast, 2013 had witnessed PE investors committing a total of $7.4 billion (across 433 deals) with only Flipkart featuring among the top 10 investments. Including Flipkart’s two rounds - of $200 million and $160 million - Online services companies had raised $786 million (across 86 deals) or less than 11% of the PE investment pie in 2013.

Average Deal values climbed steadily with each passing quarter during 2014 - beginning with $2.2 billion (across 129 deals) in Q1 to end with almost $4.1 billion (across 100 deals) in Q4.

 By Industry

With 224 investments worth about $5.8 billion, Information Technology and IT-Enabled Services (IT & ITES) companies topped in terms of both investment value (accounting for as much as 53% of the pie) and volume (52%) during 2014.

Led by the Intas Pharma and Laurus Labs investments, the Healthcare & Life Sciences industry was the next largest destination for PE investments in 2014 attracting $874 million across 44 transactions. Pharmaceuticals firms accounted for six out of the top investments in HLS during 2014.

The BFSI industry came in next attracting $752 million across 32 transactions with the $100 million investment led by TPG in microfinance company Janalakshmi as the top investment, followed by Apax Partners’ $83.2 million in listed non-banking lender Cholamandalam.

By Stage

Late Stage deals accounted for 50% of the investments in value terms and about 20% in volume terms during 2014, the Venture Intelligence research showed. Venture Capital investments accounted for 56% in volume terms and 10% in value terms. Acquisition of minority stakes in listed companies (“PIPEs”) accounted for 8% in volume terms and 7% in value terms. Despite the $260 million buyout of Minacs BPO, buyouts in total constituted just 6% of the pie in value terms (13% in volume terms) during 2014.

By RegionCompanies based in South India (which attracted $4.8 billion across 158 deals) accounted for almost 44% of the PE investment pie in value terms (36% by volume) during 2014. West India-based companies ($3.2 billion across 141 investments) followed with a 29% share (32% by volume). Companies in North India attracted investments worth almost $2.4 billion across 102 deals (22% by value and 23% by volume).

Related read: Over $5 billion were invested in Indian startups in 2014 across 300+ deals