Private equity (PE) investments clocked $2.8 billion in the first quarter of the current financial year, an increase of 50% compared to the corresponding period in 2007-08. This is even as the PE deal activity in terms of number of deals have gone up only marginally.
The biggest investment this year has been made by Aditya Birla Telecom, a subsidiary of mobile telephone services provider Idea Cellular, which raised $640 million from Providence Equity Partners.
The first three months of FY’09 has registered 77 deals as against last year when 74 deals worth $1.9 billion were signed during the first quarter, according to Venture Intelligence which tracks private equity and venture capital sector in India.
Telecom, infrastructure, power and healthcare sectors have seen the most number of deals last quarter besides attracting the big-ticket investments. These sectors attracted large number of deals at a time when funds have been wary of investing as the global economy is expected to slow down and there is a sharp correction in corporate valuations across sectors.
This could be linked to the nature of these sectors all of which have a significant domestic consumption and growth story and are not dependent on the export market. “The fundamental of Indian economy has been very strong and the outlook is very positive. Sectors which cater to the domestic market have seen major investments,” said Venture Intelligence CEO Arun Natarajan.
Domestic sectors such as infrastructure and power among others have witnessed almost 30% growth in terms of deal size this year with the average deal being pegged at $36 million compared to $28 million during the same period last year. However, analysts said there will be a marginal slowdown in overall PE investment activity during the second half of the year.
Already the figures of the first quarter of FY’09 are significantly lower than that of the last quarter of FY’08. Between January and March 2008, 115 PE deals worth $3.6 billion were signed in India.
The steep fall in the stock markets has resulted in a marked decline in the number of PIPE (private investment in public equity), Pre-IPO and late stage investments during the last quarter. “A large part of PE deals last year were PIPE deals and with the stock markets correcting, pre IPO and PIPE deals will slow down,” said Natarajan.
Source: Economic Times