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Slowdown in private equity continues

Private equity firms invested about USD1,848m across 102 deals during the quarter ended June 2012, according to a study by Venture Intelligence, a research service focused on private equity and M&A transaction activity in India.

The investment amount was 34 per cent less than that invested in the same period last year (USD2,798m across 126 transactions) and also 10 per cent less than that during the immediate previous quarter (which had witnessed USD2,050m being invested across 103 transactions). The figures do not include PE investments in real estate.

There were only four PE investments worth over USD100m (with one above USD200m) during Q2’12 compared to 10 such transactions in the same period last year (and six during the immediate previous quarter), the Venture Intelligence analysis shows.

The largest PE investment during Q2’12 was Morgan Stanley Infrastructure Partners’ investment of Rs.1,200 crore in Continuum Wind Energy, a Singapore-headquartered developer of wind assets in India. The second largest investment during the period was Fairbridge Capital acquiring a 77 per cent stake in publicly listed travel services firm Thomas Cook (India) for Rs. 817.4 crore. Warburg Pincus’ acquisition of a 53.67 per cent stake in publicly listed consumer finance company Future Capital Holdings for Rs.563 crore was the third largest.

IT & ITES companies attracted USD379m (21 per cent of the value pie) across 42 reported investments during Q2’12, snatching the lead from healthcare and life sciences industry (that topped the immediate previous quarter) as the favourite sector for PE investments during Q2’12. Powered by five renewable power project deals (that attracted about USD299m between them), the energy industry claimed the second spot. HLS companies came in third attracting USD243m across 12 investments. It was followed by BFSI firms with USD232m across 10 investments.

The IT & ITES investments were dominated by follow-on rounds at various VC-backed online services companies – including local listings firm JustDial (USD60m from existing investors Sequoia Capital and SAP Ventures); advertising focused Pubmatic (USD45m led by new investor August Capital) and classifieds focused Quikr (USD32m round led by new investor, Warburg Pincus).

In energy, the Continuum deal was followed by IFC’s investment of USD40m in equity (apart from USD90m in debt) in wind energy firm Inox Renewables. The third largest investment in the sector was AMP Capital’s USD29m investment in Shalivahana Green Energy which operates a portfolio of power generation assets across the agri-waste, hydro and wind sectors.

VC type deals (in volume terms) accounted for 54 per cent of the investments during Q2’12 compared to 44 per cent in the corresponding period a year ago. The share of Late Stage deals, at 23 per cent of the PE investments during Q2’12, was slightly lower than compared to the same period a year ago (at 25 per cent). The share of listed company investments was flat at nine per cent.

Private equity-real estate firms made seven investments (amounting to USUSD162m across 6 deals with disclosed values) during the quarter ended June 2012, according to the data from Venture Intelligence. The volume of investments was less than half the 18 investments in the same period in the previous year (which witnessed USD553m being invested across 14 transactions with disclosed values) and also the 17 investments (USD573m across 15 deals) during the Jan-Mar 2012 quarter.

Morgan Stanley Real Estate Investment’s Rs.500 crore commitment to Supertech’s township project in Noida, Cape Town, was the largest during the latest quarter. Supertech also attracted a Rs.100 crore commitment from US-based Walton Street Capital towards the residential towers that will come up at its mixed-use project Supernova at Noida. Government of Singapore Investment invested Rs.100 crore to enable listed real estate developer Brigade Group to buy land in Bangalore’s Whitefield to develop a premium residential project.

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