PE deals rise 20% in Q4 on increased e-commerce bets

Blockbuster deals in the e-commerce space pushed up private equity investments by 20% in value terms during the fourth quarter ended March 2015.

The deals stood around $2,646 million as compared to $2,212 million, a year ago. However, the number of deals fell 36% to 124 deals compared to 132 transactions in the immediate previous quarter. (All figures in this note are exclusive of PE investments in real estate).

According to Venture Intelligence, a research service focused on private company financials, there were six PE investments worth $100 million or more during Q4 compared to four such transactions in the same period last year and eight during the immediate previous quarter.

The largest investment was IFC’s $260 million funding to microfinancier-turned-bank license holder Bandhan Financial Services. Another microfinance firm Ujjivan Financial Services attracted a $100 million (Rs 600 crore) investment from a clutch of investors including CDC Group, IFC and CX Partners. 

Hospital operators – Manipal Health Enterprises and Medanta Medicity – attracted $100 million plus rounds. While Manipal attracted Rs 900 crore ($150 million) from TPG Capital, Medanta attracted Rs 700 crore (about $114 million) from Temasek (via a secondary purchase from Punj Lloyd). 

The largest e-commerce deal reported during Q4 was the $100 million fourth round raised by ShopClues.com, which was led by Tiger Global (a key investor in rival Flipkart).

The power sector too witnessed a return of interest, with IDFC Alternatives committing Rs 500 crore (about $81 million) to an SPV of Diligent Power executing a 1,200 Mega Watt (MW) thermal power project in Chhattisgarh and Actis announcing a SPV of its own – Ostro Energy – to focus on renewable power projects. Transactions like Carlyle’s buyout of financial services firm Destimoney (from erstwhile majority owner New Silk Route) as well as Ujjivan (in which half of the investment went to exiting investors including Sequoia Capital India) marked a return of significant sized secondary transactions between Private Equity firms.

Sector break-up

While IT & ITES companies accounted for 32% of the value pie, attracting $836 million across 71 deals, during Q4, BFSI (Banking, Financial Services and Insurance) companies followed closely at 31% (attracting $816 million across 12 deals). 

BFSI was followed by healthcare & lifesciences companies ($392 million across nine transactions) and energy companies ($207 million across 6 transactions).

Venture Capital firms account for 55% of deals

Venture Intelligence data showed that the venture capital segment (defined as investments of up to $20 million in companies that have been active for less than 10 years) accounted for 68 of the PE transactions or 55% of volume pie during the first quarter of 2015. 

Late stage companies (including mature companies like Bandhan, Manipal Health, Medanta and Ujjivan) attracted 27 investments and accounted for 45% of the pie in terms of value during the period. 

Listed company investments (PIPE deals) accounted for 8% of the pie in value terms (and 6% in volume terms). 

Venture Capital investments during the quarter were dominated by follow-on rounds in companies like online video content firm Culture Machine ($18 million round led by Tiger Global), food ordering app Tinyowl ($16.25 million led by Matrix Partners India) and QSR chain Faasos ($16 million round led by Lightbox). Listed companies that attracted PE investments were topped by BFSI companies like Magma Fincorp (INR 500 crore or about $80 million from India Value Fund, Leapfrog and KKR) and M&M Financial (about $42 million from Temasek).