Big-ticket private equity investments are set to see a revival in 2010, driven by an improved business environment and increased investor confidence.
In fact, the trend seems to have already begun, if one looks at the deals closed in the first couple of months of the year.
In mid-January 2010, a consortium of private equity firms, including Baring, Sequoia Capital, Fidelity and Deutsche Bank, acquired a 16% stake in infrastructure-EPC company Coastal Projects for $54.8 million.
Early February saw the largest investment of the year so far, with Quadrangle Capital and a few others pumping $300 million into Towervision India. And that’s not all —the market is abuzz with more such deals that are in the final stages of negotiations and are expected to be closed in the coming months.
“Last year we saw transactions happening, but a large proportion of them were really small. The investment in Towervision India is one example of a large-ticket deal. We should see quite a few large deals materialising in this calendar year, more so in the next 3-4 months,” said Mohit Khullar, vice-president, Equirus Capital Pvt Ltd.
PE investments in calendar year 2009 were down 62.2% to $4.22 billion (across 249 deals, including secondary market transactions) compared with $11.16 billion (344 deals) in 2008, a recent report by Four-S Research and Indian Venture Capital Association (IVCA) showed.
“Average deal size also declined 46.1% to $20.9 million in 2009 from $38.8 million owing to the absence of big-ticket transactions,” said Mahendra Swarup, president, IVCA.
The advisory fraternity feels PE firms are now more serious about making an offer and more term sheets are coming on the table in 2010 as compared with last year.
Some advisory firms said investment activity is likely to revolve around growth equity, late-stage and buyouts lead by financial institutions such as TPG, Blackstone, Advent and Actis.
“Investee companies engaging in PE deals have been awaiting monetisation of their respective businesses at the right time. In fact, I see some momentum in the buyout space already. Sectors like IT/BPO and consumer are some of the areas that should see some action in the coming months,” said Deepesh Garg, director, Ozone (O3) Capital Advisors.
Similarly, exits have been touted to be a big phenomenon in calendar year 2010. The year till date has seen some really good momentum on the bourses, with a host of companies hitting the public market.
“A significant proportion of these exits are driven by their respective investors. Like for instance, the Jubiliant Food and D B Corp IPOs that saw PE firms like JP Morgan and India Private Equity Fund and Warburg Pincus exit. I think this process will continue as long as the investors see good value / returns from the planned IPO exits irrespective of the volatility in public markets,” said an official from one of the leading investment advisory firms in Mumbai.
The sentiments are true for secondary exits as well. Advisory firms are seeing quite a few deals getting active all over again.
Source: DNA India