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PE investments in India down 14.7 per cent in 2012

Private equity firms invested USD8,853m over 406 deals in India during the 12 months ending December 2012, compared to the USD10,378m across 483 deals during the previous year, according to analysis by Venture Intelligence.

These figures – which include VC investments and exclude PE investments in real estate – take the total investments by PE firms over the past five years to about USD41.4bn across 2,036 transactions.

The latest Venture Intelligence data reveals that PE investments in October-December 2012 declined by over 32 per cent to about USD1,010m (across 82 deals) compared to the USD1,490m invested (across 121 deals) in the same period in 2011 and USD3,849m invested (across 108 deals) in the immediate previous quarter.

“PE managers are more being judicious and taking longer period to deploy their funds,” says KEC Raja Kumar, founder and chief executive of Bangalore-based PE firm Ascent Capital. The fact that the environment has continued to be challenging for new fund raising has also contributed to the investment slowdown. Limited partners interest in Indian PE funds continues to be lukewarm. This would change provided the current rally in public markets results in exit realisation for PE funds.”

The two largest PE investments announced during 2012 were both in the BPO sector: the USD1,100m buyout of medical transcription specialist M*Modal (formerly CBay Systems) by JP Morgan unit One Equity Partners and the USD1,000m investment by Bain Capital and GIC in Genpact (by buying out the stake of existing PE investors General Atlantic and Oak Hill). The next largest investment was Morgan Stanley’s USD210.5m commitment to Continnum Wind Energy, a Singapore headquartered firm developing wind assets in India’s Kutch region.

With 162 investments worth about USD3,243m, information technology and IT-enabled services (IT & ITES) companies topped in terms of both investment value and volume during 2012. The USD150m fourth round investment raised by e-commerce leader Flipkart was the next largest after the two mega BPO deals in the IT industry.

Powered by four investments worth USD100m or more in the hospitals segment (Manipal Health Systems, Care Hospitals, DM Healthcare and Vasan Eye), the healthcare and life sciences industry absorbed USD1,225m across 48 deals. Led by Warburg Pincus’ USD145m buyout of listed NBFC firm Future Capital, the BFSI industry was the third favourite accounting for USD890m across 43 deals. Energy companies – powered by the interest in wind power development companies in the first half 2012 – came in next attracting USD478m across 20 investments

Late stage deals accounted for 24 per cent of the investments in volume terms and 26 per cent in value terms during 2012, the Venture Intelligence research shows. Buyout deals accounted for four per cent in volume terms and 22 per cent in value terms. Venture capital investments accounted for 51 per cent in volume terms and nine per cent in value terms. Listed company investments accounted for 13 per cent in volume terms and 25 per cent in value terms.

While companies in South India attracted the most number of investments (162 deals worth USD2,460m), companies based in Western India attracted the maximum PE capital in terms of value (USD3,799m across 126 deals) during 2012. Companies in North India attracted investments worth USD2,370m across 92 deals.

Among cities, Bangalore-based companies attracted the most number of investments (88 investments worth USD1,170m), followed by companies in the National Capital Region (with 87 investments worth USD2,319m). Mumbai-based companies attracted 85 investments worth USD2,856m).

With 17 investments each during 2012, Sequoia Capital India, IFC and Accel India were the most active PE investors in India during 2012. Among seed level funds, Blume Ventures was especially active investing across 23 transactions during the year.

JP Morgan vaulted to the top of the value charts for the year with USD1,265m (across M*Modal and toll roads firm Nandi Economic Corridor Enterprises), while Bain Capital followed next with its USD850m investment in Genpact. IFC came in third with investments worth USD495m.

Private equity-real estate firms made 43 investments in the real estate segment during 2012, the Venture Intelligence analysis shows. Of these, 35 transactions had an announced value of USD1,145m. The activity level was almost 38 per cent lower compared to the 69 investments (USD2,693m across 54 announced deals) in 2011. Residential projects accounted for 65 per cent of the investments (by volume) during 2012, followed by commercial projects with a 16 per cent share of the pie.

Blackstone’s proposal to acquire a stake in the office space portfolio of Bangalore-based developer Embassy Property Developments for a reported USD230m (Rs.1,300 crore), was the largest reported during 2012. The other large PERE investments during the year included Morgan Stanley’s USD94m (Rs.500 crore) investment in Supertech’s township project in Noida and the same investor’s USD90m commitment in Sheth Developers.

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